One critical component of your overall financial well-being is having a proper Estate Plan in place. Whether you are seeking to avoid excessive taxes, ensure that your hard-earned legacy passes to your loved ones, facilitate your families continuing financial success, or simply avoid a probate upon your passing, Arete Financial Solutions is here to help.
Having a properly prepared estate plan will ensure that your hard work over a lifetime will continue to benefit those whom you choose to receive the ongoing fruits of your labor. Having your documents in place minimizes the likelihood of contention amongst your chosen beneficiaries and family members, reduces or eliminates the necessity of a probate process and minimizes the likelihood of costly and time-consuming litigation. Having this completed will provide you and your loved ones significant peace of mind.
Who needs an Estate Plan:
There is a common misconception that only those with significant assets or a very high newt worth need to have an estate plan in writing. In fact, it is strongly recommended that every adult have at least a basic estate plan in place to ensure that their property will pass outside of probate when they die.
A few things to consider when determining what estate planning tools will best fit your needs are, marital status, do you have children, are any of your children or beneficiaries still minors, what property do you own, do you own real estate, where is your property located, is any of your property held by custodians (bank accounts, investment or brokerage accounts, etc., and what are your wishes/desires when you pass.
If any of these considerations apply to you, or more simply stated . . . if you are an adult and have a pulse, you need to consider working with a licensed professional to ensure that you have a sufficient estate plan in place as soon as possible.
What is probate:
Probate is the legal process whereby a court names someone to serve as the executor or personal representative of a decedent’s estate. This will give the person named the legal authority to administer the estate of the decedent (the person who passed). All property owned by the decedent at his or her passing becomes part of the estate. As the authorized individual, you will be able to collect all the assets of the decedent, sell or transfer the assets, pay or negotiate any liabilities or debts of the decedent, distribute the remaining assets to the individuals who are legally entitled to receive them, and file the necessary court and other legal documents to probate and then finalize the decedent’s estate.
Probate is often looked at as a four-letter word in the law! Why is this? Well, even in a simple uncontested probate there will be significant legal fees, generally $4,000 plus, and time required, at least a period of six months, to finalize the estate. Oftentimes families will spend thousands and sometimes tens of thousands of dollars probating a decedent’s estate, even when they are all cooperating and on the same page. Now, imagine if the estate is contested! As soon as two parties don’t agree on how the assets should be distributed or what the status of the debts of the estate are, you’re in for a serious ride . . . and serious costs! Many have spent well over $100,000.00 in contested probate litigation matters.
The process itself really isn’t terrible if everyone is getting along. On the other hand, when families don’t get along, it can cause lifelong misunderstandings and destroy relationships. So, if the probate process can be avoided entirely while simultaneously ensuring that your desires are properly documented, isn’t that something you should seriously consider? Well, of course it is!
What Should I Consider When Creating My Estate Plan:
Your estate plan can be custom tailored to fit your unique needs and desires. With that said, there are a few things considerations that should be discussed in every estate plan. First, who will make decisions and take care of you while you are still living but unable to administer or manage your own affairs? Second, what do I want to have happen with my property when I pass? Third, do I want to maintain control of the management of my assets even after my passing?
These questions, and many more, are addressed by the documents that make up your estate plan. I will briefly discuss some of the most common estate planning documents here in very general terms. But rest assured that the professionals at Arete Financial Solutions are here to answer your specific questions and address your unique needs on a very personal basis.
- Powers of Attorney: A power of attorney is an authorization that you give to another person to act on your behalf. These can be for financial purposes, healthcare purposes or any other general or limited purpose that you may elect. The most common powers of attorney included in estate planning are the General Durable Power of Attorney, which discusses your financial and business affairs, the Durable Healthcare and Durable Mental healthcare Power of Attorney, which address your health and mental healthcare decisions, and a HIPAA release form which authorizes the release of your medical information to your agents under your healthcare power of attorney. In addition to these there are other supporting documents which are generally helpful as well such as the Living Will or Healthcare Directive, among others.
- Wills: A Will addresses your desires for the transition of your property at your death. In general, a will discusses your family composition and notes who you would like to be the beneficiaries of your estate. IT IS CRITICAL TO UNDERSTAND THAT A WILL ALONE WILL NOT ITSLEF AVOID THE PROBATE PROCESS. A will simply states what you want to happen with your property. Any property that has a title (vehicles or real property) or is held by a third-party custodian (bank accounts, investment or brokerage accounts, safety deposit boxes, etc.) will require some form of probate process to transfer to the designated beneficiaries. However, a Will in conjunction with other documents that deal with these assets may be sufficient. It is important that you seek the advice of a licensed professional to ensure that not only are your desires written down, but that they are able to be realized in the most efficient and effective manner possible.
- Trusts: A Trust is a document formed under the law of the State where you live which, in general, creates a relationship where an individual or individuals (the Grantors, Trustors or Settlors) convey property to another (the Trustee or Trustees) who have the right to hold title to the property or assets and utilize them for the benefit of a separate party or parties (the Beneficiaries). There are a multitude of Trust types that may be utilized depending on the Grantors wishes, needs, and circumstances. Some of the most common are the Revocable Living Trust, the Irrevocable Trust, the Special Needs Trust, the Testamentary Trust, the Charitable Trust, and the QTIP Trust. Although these are some of the most common, there are a myriad of different options depending on your personal circumstances. A Trust, in conjunction with a Will and Powers of Attorney, can be a very useful tool to document your wishes in greater detail, provide for how you want the Trust property to pass and ensure that you avoid probate. Trusts can additionally be very useful in minimizing taxes assessed against an estate on the passing of the Grantors. A Trust is a much more comprehensive and complex document than a Will alone and thus is quite a bit more expensive. The decision on whether to utilize a Trust or a simple Will is based on your unique circumstances and desires. Working with a qualified professional at Arete Financial Solutions, you can be assured that your needs and wishes will be addressed in the manner that is best for you individually.
- Other Documents: There are many other documents that can play a role in your estate planning portfolio. In Arizona one that is commonly used is a beneficiary deed. This is a document that provides for your real estate holdings to pass to your designated beneficiaries upon your death. Transfer on Death or Payable on Death elections are documents that can be put in place at your financial institutions to ensure that your financial accounts can transfer upon the death of the account holder to the individuals specified. Finally, taking the time to ensure that your beneficiary elections are in place for any brokerage or investment accounts, life insurance policies or other financial accounts is critical. A failure to properly provide for the distribution of any asset could require some form of probate process.
Considerations Where a Trust may be Appropriate:
There are many considerations that you will want to discuss with your attorney when determining if a Trust is appropriate for you. Some of the major considerations are family composition, minor children, type and value of assets, real property holdings, dependents or beneficiaries with special needs, provision for pets, charitable contributions, and desire to minimize tax consequences. If any of these items are applicable in your personal situation, a Trust may be the right estate planning vehicle for you.
While we have tried to provide a basic overview and some helpful information regarding the estate planning process, ultimately, your estate planning needs are unique to you and your family. That is why Arete Financial Solutions provides a no cost initial consultation for all potential estate planning clients. We encourage you to come into our office and spend some time with a qualified professional who will review your personal circumstances, desires, and needs. From there they can recommend a custom-tailored estate plan that will help you reach your overall goals and set you on the path to greater peace of mind and the knowledge that your hard work and efforts will benefit those whom you love after your passing. We look forward to speaking with you soon!