Not at all! Estate planning just means putting a plan to do the following:
• Manage your affairs and take care of you if become incapacitated. (What if you are in a car accident or have a stroke? Who will see that your bills are paid?)
• Make it easy for your beneficiaries to settle your estate – however big or small it happens to be.
Your estate plan should address all of these things:
• Who will make healthcare decisions for you if you can’t?
• What care do you want if you are terminally ill or in a vegetative state?
• Who will take care of your finances and manage your property and estate if you can’t?
• Who will settle your estate when you are gone?
• Who will get your property after you are deceased?
A Will alone won’t transfer your property to your heirs or other beneficiaries. Your home is titled in your name, and your heirs have to retitle it before they own it or before they can sell it. The same is true of your bank accounts and stock accounts. If all you have is a Will (or if you don’t have a Will) your heirs are required to file a court proceeding called probate.
Probate is a court proceeding filed after a death to settle the estate of someone without a Will – and to settle the estate of someone who only had a Will.
Probate can be time consuming and expensive for a personal representative (or executor, as it’s named in many states). It can be very burdensome for the person you have chosen to take care of your affairs.
In addition, probate is a public proceeding. I didn’t realize just how public and how easy it was to get information until I asked my administrative assistant to check on a case. A few minute later he came in and said “since it was only $2.00 I went ahead and got a copy of the will. The clerk will email it to me later today.” Wow. I don’t know about you, but I don’t want people to know what my estate plan says!
In many cases, not only is the Will public, but a list of assets and the appraised amount must also be filed. If maintaining your privacy and that of your heirs is important to you, then you want to avoid probate with a Revocable Living Trust.
It is possible to file an informal probate on your own. The Maricopa County Superior Court has probate court forms for your use. But it can be complicated. Here is a list of some of the demands of probate:
1. Locate the current Will. If you can only find a copy, the procedure is going to be much more difficult.
2. Take the online training required of a personal representative.
3. File the paperwork to apply to the Court to be appointed as personal representative of the estate and give notice to the other heirs. There are 7 different documents that must be filed just to start the probate – and that’s for a simple “informal” probate.
4. Obtain permission from the Court to pay a support allowance to the family (if needed).
5. Prepare an inventory and obtain appraisals of estate assets including brokerage and bank accounts, realty, mobile homes, automobiles and other vehicles, furniture, jewelry and other possessions.
6. Send a Notice to Creditors to known creditors and publish the Notice in a newspaper acceptable to the Court.
7. Review any claims filed and approve them; Oppose claims that are invalid or incorrect.
8. Petition the Court for approval to sell real property or perform other duties if necessary.
9. Prepare detailed final accounting which is acceptable to the Court, sending copies to the beneficiaries.
10. File the plan of distribution with the Court.
11. Prepare the Report of Final Distribution.
12. Petition the Court for discharge of the personal representative.
If you own property in other states, a similar probate case must be filed in those other states as well.
The cornerstone of our estate planning services is the revocable living trust. As the name implies, revocable trusts are fully revocable at the request of the trust maker. This Trust may be amended, changed, completely revised or revoked as long as you have the capacity to make the changes and you are still living.
Here’s why I recommend a Revocable Living Trust (RLT) for many, many clients. When you create a Revocable Living Trust to hold your assets, you are the creator of the trust, the trustee and the beneficiary. Assets transferred (or “funded”) to a revocable trust remain in your control while you are still living, and the income from assets in the trust are reported under your social security number and on your tax return. You may sell property from the trust, buy property in the trust and add and remove assets from the trust as will.
Then, if you become incapacitated, your hand-picked successor Trustee steps in to manage things for you. This happens without any court intervention. On your death, the trustee is again steps into your shoes to manage and distribute your estate as you direct in your trust document. This avoids court intervention in the form of probate. Using a trust maintains your privacy and lowers the cost of administration of your estate.
For an adult, a conservatorship is a proceeding in which a person is declared unable to manage their affairs and another person is appointed to step in to manage them. This is an expensive, public and often emotionally draining procedure.
If the children determine that Mom is not able to handle her affairs, usually one of the children files with the court to be her conservator. This really does require an attorney (I don’t do these proceedings, so I can say this and you can trust it!). Not only do you have to hire and pay for an attorney, but Mom gets an attorney too. Due process requires that, to assure that Mom is represented and not being bull-dozed by an ill-intentioned relative.
There will be a hearing and it’s public– I’ve sat through some as I waited my turn to present a case, and sometimes they are not pretty. After the conservator is appointed, they must file regular reports and account for the assets. Again, it’s a public proceeding, and anyone can sit in to see what’s going on.
A Revocable Living Trust will avoid conservatorship in most every case. You want to provide in your trust for when someone will take over because you can’t manage your affairs. In our office, we protect you by having you decide in advance how your incapacity will be determined. You can develop your own “incapacity panel.” It might be your spouse and primary physician who make the determination. Maybe it will be your sister, your husband and your physician. The point is, you decide in advance who can make that determination. Then you can avoid a public court proceeding while still providing a fair means for someone else to take over when it’s time.