Estate Planning Tips for Beginners

Thinking about death, uncomfortable as it may be, is an important part of life. Doing so can allow a person to make plans that can protect and provide for his or her loved ones. Estate planning, however, can also be relevant prior to a person’s death. With a few helpful estate planning tips, a person can plan not only for death but also for situations that may arise while he or she is still alive, such as becoming incapacitated. If you have not begun planning your estate, consider contacting an estate planning lawyer at Harrison Law, PLLC, by calling (480) 320-2310 to discuss your circumstances and learn more about what your estate plan may include.

What Are the Main Objectives in the Estate Planning Process?

When beginning estate planning, most people have three main objectives that guide the decisions they make throughout the process. The first objective is to protect family or other loved ones after the person’s death. Most people want to ensure that their loved ones will be taken care of and assets distributed in the way they intend. They would rather not rely on the Arizona Probate Court and laws created by people who do not know them to distribute their assets.

The second objective, which applies while the estate owner is still living, is to protect loved ones in the event that the estate owner becomes incapacitated. For this objective, the estate owner wants to ensure that someone reliable can make decisions on his or her behalf, which can reduce stress on loved ones. The third objective applies upon the estate owner’s death and is meant to ensure that his or her affairs are resolved and to provide financial support for a spouse and children without additional stress. Most estate owners also want to help their loved ones avoid unnecessary probate expenses, minimize estate taxes, and transfer assets to beneficiaries with as little difficulty as possible.

What Are the Main Priorities To Ensure With an Estate Plan?

Once the objectives are clear, it becomes easier for the estate owner to prioritize what needs to be included in the estate plan. Typically, there are three priorities that most estate owners want to address in their estate plans:

• Authorize a healthcare power of attorney. Most estate owners want to authorize someone as their medical or healthcare power of attorney whom they can inform of their desires and trust to carry out those wishes.
• Ensure asset distribution. While Arizona has laws that distribute a deceased person’s assets if the person dies intestate, without a Last Will and Testament (will), most people have specific preferences about where, how, and to whom they want their assets distributed. By using the right estate planning tips, estate owners can ensure their assets are distributed exactly as they desire.
• Clearly define beneficiaries. From homes to vehicles, retirement accounts to life insurance proceeds, real estate to antique jewelry, there can be a plethora of assets to be distributed upon a person’s death. Ensuring that the beneficiaries of these different assets are clearly defined will help make sure the assets go to the proper recipients.

The Five Components of Estate Planning

Wills, trusts, and beneficiaries are the parts of an estate plan that come to mind for most people, but there are additional components to a comprehensive estate plan that should be carefully considered. A knowledgeable estate planning attorney at Harrison Law, PLLC, may be able to help you create a complete estate plan.

Wills and Trusts

A will is a document in which a person outlines who to give their assets to upon his or her death. In this way, the person can ensure that others know how he or she wants certain assets distributed. This document must have an executor and will go through probate before the beneficiaries can receive their bequests. A person’s will becomes a public document after probate, can be contested, and can incur probate expenses, such as probate attorney fees, court filing fees, certificate fees, accounting fees, and fees to notify beneficiaries and heirs.

A trust is another way to distribute assets to loved ones. Trusts can be revocable or irrevocable, funded immediately upon creation or upon the grantor’s death. Trusts can also benefit the beneficiaries before or after the grantor’s death. A trust must be funded with assets, but it will be private and avoid the expenses associated with probate. Arizona does not have an estate tax, but the Arizona Department of Revenue does require that trusts pay state income taxes based on the trust’s taxable income.

Durable Power of Attorney

From paying bills to signing documents and managing bank accounts, most people have many day-to-day responsibilities related to finances. If an individual becomes incapacitated, not taking care of those responsibilities can create significant complications not only for the individual but also for his or her loved ones. A durable power of attorney ensures that there will be someone who can step in to take care of those day-to-day responsibilities and keep things running smoothly and handled the way that the incapacitated individual would have done.

Medical or Healthcare Power of Attorney

If an individual is incapacitated, he or she will not be able to make medical or healthcare decisions. However, the person may have very clear ideas about what he or she would want in certain circumstances, such as not being kept alive by artificial means or not wanting nutrition or hydration withheld. By naming a medical or healthcare power of attorney, individuals can inform that person of their wishes. In the event that the individual becomes incapacitated, the named medical or healthcare power of attorney can then tell medical providers how to provide care based on what the incapacitated individual would want.

Living Wills and Advance Directives for Medical Decisions

Living wills and advance directives are legal documents that outline an individual’s wishes for medical care if he or she becomes incapacitated. These documents are not a replacement for a medical power of attorney, nor is a medical power of attorney a replacement for these documents. Both are important parts of an estate plan. These documents allow an individual to specify his or her wishes for many medical decisions, but there are still some decisions that would need to be made by the medical power of attorney.

Beneficiary Designations

Life insurance policies, retirement accounts, bank accounts, and some types of property are just a few things that require naming a beneficiary. In some cases, naming a primary and contingent (secondary) beneficiary may even be required.

Death, marriage, divorce, or other life changes may have made a previous beneficiary designation inappropriate. Keeping these designations up to date and correct will ensure that the assets will go to the person intended.

Common Estate Planning Mistakes

In some cases, people may have an estate plan that includes mistakes that mean the estate plan will not work the way they intend. Six of the most common estate planning mistakes are:

• Procrastination—Because incapacitation and death are generally unexpected events, putting off planning or updating an estate plan can mean that a person will not be able to communicate his or her wishes.
• Outdated documents—Review estate plans at least every five to seven years to ensure that everything is current and correct. Documents may have become outdated by moving to a different state, divorce, death, marriage, or the birth of a child.
• Uncoordinated beneficiaries—Because divorce, death, marriage, or other circumstances may have made some beneficiaries incorrect or inappropriate, check beneficiary designations regularly.
• Unfunded trusts—A trust has many benefits, but if it is not funded with assets, it cannot provide any of those benefits. There are many types of trusts and many ways to fund them, and estate owners should make sure any assets they do not want to go through probate are included in a trust.
• Estate taxes triggered with life insurance—In some circumstances, an individual’s life insurance policy may create a taxable event for the loved one who is named beneficiary. One way to avoid this is to make a trust the owner of the life insurance policy. Grantors may want to talk with an attorney to determine the best course of action for their circumstances.
• Adult children named as joint owners of assets—Some people attempt to avoid probate by naming their adult children as joint owners of assets like their home, vehicle, or bank account. While this can help avoid probate, if the adult child has debts, making the child a joint owner means that the child’s creditors can take the parents’ assets to pay the child’s debt. Estate owners may want to discuss other options, such as payable-on-death designations, to protect their assets.

Put These Estate Planning Tips Into Action Today

Having an estate plan is crucial for anyone, regardless of their level of wealth or to whom they want to give their assets when they die. With these estate planning tips, it may be possible to create an estate plan that is comprehensive, does not leave the estate open to probate, and ensures that loved ones will not endure any added stress if you were to become incapacitated or die. If you are ready to move forward with an estate plan, consider contacting an experienced estate planning attorney at Harrison Law, PLLC, by calling (480) 320-2310 to schedule a consultation today.