Estate planning has a couple of constants and always will. The first is changes in your family and circumstances will always happen. Whatever plan you put in place will, over time need to be adjusted and changed based upon various factors such as state or federal law changes, tax law, family, assets, relationships with the persons chosen for certain roles and responsibilities and aging family members. The second constant is a variety of seemingly overwhelming options on how to properly plan for your estate. Some people will use last will and testament based plans, others trust based plans and some no plan at all, relying upon the operation of law, intestacy, or beneficiary designations to administer their estates. As an experienced estate planning attorney let me explain what options you have to best fit your family’s needs.
Becoming versed in the myriad of options available is important because you are not relying upon being told how to plan for your family by a third party (even a well meaning person), but instead you are able to make an educated decision based upon your family’s circumstances as they exist at this time, understanding that such circumstances will change in the future.
This article will focus on last will and testament based estate plans and the various options available to you and what each type of will is and how it works.
- Simple Last Will and Testament: A simple will is a document created by a Testator (person who’s will it is) whereby an executor is nominated, guardians and or conservators for minor children are nominated, burial or cremation provisions are discussed, and dispositive provisions of who gets your assets (usually in a direct distribution) and in what amounts are detailed. Simple wills are usually inexpensive to create, but are limited in how your beneficiaries will receive their inheritance. A simple last will and testament will have to go through the probate process in order to be administered by your executor. The probate process usually takes between 6 months and a year, assuming no major complications.
- Testamentary Trust: A testamentary trust is a last will and testament based estate plan whereby the beneficiaries do not necessarily inherit as a direct distribution. Rather, a trustee is nominated and appointed for the beneficiaries, and estate assets are distributed to the trustee, who then holds, administers and distributes such assets for the benefit of the beneficiaries listed pursuant to the instructions left behind by the Testator. A testamentary trust can have the same instructions (simple to complex) as a revocable living trust does, with the only exception being that the only assets subject to the testamentary trust will be those considered probate assets. Additionally, to be administered and the trust share created, probate proceedings will need to be initiated to probate the will and distribute the estate’s assets to the beneficiary listed (who happens to the be the Trustee of a trust share created under the will). All other provisions from a simple will are also included in a testamentary trust based estate plan.
- Pour-Over Will: A pour-over will is a back-up plan to a living revocable trust. This type of will is not anticipated to ever really be used to pass property to loved ones or even be probated, but may still contain final memorial wishes and identify and nominate who can serve as the guardian of your minor children. If you left assets titled in your own individual name rather than in the name of your living trust, then the pour-over will would identify that the sole residual beneficiary of your probate estate is the then serving Trustee of your revocable living trust. If you have a living trust based plan, it is vital that you still have a last will and testament, which should be a “pour-over” type will.
- Holographic Will: A holographic will is a last will and testament prepared and signed in the Testator’s own handwriting. To be safe, a holographic will should be completely in the Testator’s own handwriting, but Arizona law only requires that the dispositive and material provisions be in the Testator’s handwriting. A holographic will usually fails to document many of the important decisions and contingencies that should be addressed in someone’s estate plan. If silent in a holographic will, the Testator’s affairs and decisions will be left to the intestate statutes of the Arizona Probate Code.
- No Will (Intestate): There are many individuals who pass away without a last will and testament. A misconception is that the State of Arizona will take over their affairs. This is incorrect. A person who dies without a will is considered to have passed away “intestate” and thus, Arizona’s intestate statute will kick in and make decisions on the decedent’s behalf. Arizona’s intestate laws will dictate who can serve as a guardian or conservator of minor children, who will be the executor, who are the beneficiaries of the estate and so forth. Many problems can arise in intestate administrations especially if there are multiple family members, a blended family, second or third marriages, disgruntled heirs or minor children. I strongly urge everyone avoid intestate distribution and work with a qualified estate planning professional to prepare your own unique estate plan based upon your family goals and circumstances.
A last will and testament based estate plan, with proper medical power of attorney, mental health care power of attorney, financial power of attorney, tangible personal property memorandum is a simple, inexpensive estate plan that everyone should have. If you or your family have any unique issues (which most families do) such as being a blended family, minor children, beneficiaries needing protection, promoting educational goals and so forth, a revocable living trust based estate plan may be a better alternative to a last will and testament based plan.
If you have any questions regarding family based estate planning, living trusts, probate administration, guardianships, conservatorships or any other legal issues, please call the estate planning attorneys at Rowley Chapman & Barney, Ltd. (480) 496-2103.
Kenneth C. Barney is a partner and an Arizona Estate Planning Attorney, practicing in all the areas of the law shown above, since 1999.