Arizona Estate Planning Lawyer & Attorney : Stephen Follett Law Firm : Probate Law and Trusts : Gilbert, Phoenix, Arizona

Suppose you could deposit your money into two different accounts, which would you choose?

• Bank account (A) is safe from lawsuits, creditors, divorce, bankruptcy, etc.; or,
• Bank account (B) could be wiped clean by lawsuits, creditors, divorce, bankruptcy, etc.

I assume that you would choose account A for YOUR money.  Believe it or not, estate plans that I review much more commonly offer account B to their children and grandchildren.

Whether assets or money are passed by a will or by a trust, they can be placed into a protected account.  That "account" is actually a specialy designed trust for the benefit of each child or grandchild designed to give protection.

There is little downside, because the child or grandchild can become trustee of their own trust at an age that is appropriate under the circumstances.  Consequently, the child has control over their "account."  Truly, in this age where litigation and divorce are rampant, an inheritance protection trust is a very powerful tool to preserve YOUR money for the benefit of the people you love. 

It would also be an appropriate time to include your children in your planning process.  Consider asking your children which account they would rather have for their inheritance and legacy.

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The family dynamics after the death of a parent can change dramatically.  Parents often do not truly understand their own children and family.  If you are a parent, you may be saying to yourself:

He is right some families are really messed up.  I am glad my kids get along.

The problem is, this is what many other parents have said before World War III breaks out after their death.  Karen S. Gerstner, a member of the Houston, Texas, firm of Karen S. Gerstner & Associates, P.C. wrote the following in her article in the Property and Probate Magazine of the ABA.

When I was a young lawyer, I attended a meeting with several attorneys to discuss certain “contested matters” that had arisen after the death of a widower who died survived by four children. I was shocked to hear one of the seasoned attorneys say, “If all decedents had only one child, my workload would decrease to nothing.” Whether you go back to Cain and Abel, or only as far back as the Smothers Brothers (“Mom always liked you best”), sibling rivalry is the chief factor in many disputes arising after a parent dies. Many laypeople attribute all litigation to greed, but in the case of family situations, often much more is involved than simply greed. Sometimes children hold deep-seated resentments, which may be based on perceived unfair treatment by a parent or sibling, often going back many years. Sometimes the last living parent is the only “glue” holding the children in the family “together” (if they ever truly were, in fact, “together”). Sometimes parents have unrealistic expectations about family.  

I have seen children try to impose their view of "fairness" to their parent's estate plan.  In some situations it comes to theft and in others subtle manipulations.  As Ms. Gerstner stated, sometimes the last parent is the only reason for children to hold back deep-seated resentments and emotions.

Proper advanced planning is the best way to mitigate the potential for court challenges in the family.  Hopefully, enough can be done during life to address some of the underlying issues that give rise to court challenges.

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The latest installment of Do-It-To-Yourself Estate Planning comes from the Florida Probate & Trust Litigation Blog.

In this case, a husband tried to give his second wife the right to live in the home until she died.  But, he wanted to ensure the home went to his children from his first marriage.  He executed a deed, that clearly stated his intentions.

After his death, his second wife transferred the deed to herself and her grandson, trying to ensure the property went to her family rather than his.  The husband's daughter listed in the deed objected.

However, the problem wasn't with his stated intentions.  The problem was that he did not comply with Florida law.  Ultimately, the deed didn't work as intended and it cost much more that paying a competent attorney.  Sometimes, we can be pennywise and pound foolish.

I have taken this to heart.  Now, when I go to my mechanic, I listen to him a little more carefully because he is the expert and I do not want to be left stranded in the Arizona desert.  I understand that good protection is worth its price.

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Parents' brains are like supercomputers that constantly update with information about their children.  This information is vital to start kids in the morning get them to the end of the day.

Parents:  What would happen if you do not return from a date?  What does your babysitter know?  Who would be called?  What about allergies or medicine?  Imagine someone trying to peice together all the information that is in your brain.

This post on the Massachusetts Estate Planning and Elder Law Blog makes the following important points:

Whether you're going out for the evening and leaving your children with a babysitter, or going away for a week and leaving your children with your parents, it's a good idea to keep a binder handy with all of the important information: 

• Each child's full name, date of birth and social security number.
• Any allergies (these should be in large, red lettering) to foods, medicines, soaps, etc.
• Name and phone number of pediatricians and other doctors seen regularly.
• Any recent or chronic illnesses.
• Name, dosage and location of any medications for each child.
• Name of each child's teacher and grade at school.
• Name of people allowed to visit child, and name of anyone you don't want visiting your child.
• Photocopies of the front and back of any health insurance or dental insurance cards.
• Copy of emergency guardianship proxy document.
• Recent pictures of each child. 

Because a working estate plan is important to me, I assist parents to collect this information and give them an easy way to keep it updated.  After all, if you create an estate plan, it fails in large measure if it does not keep continuity for the emotional, psycological, financial, and practical aspects of children's lives.

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I just finished a compelling article found here that discusses what can happen when elderly parents begin to become forgetful.  The authors L. Joyelle DeFelice and Jane L. Harness expertly discuss the need for appropriate advanced planning.

You cannot control your parent's decline in cognitive function, but you can take steps to put some basic protections in place for the difficult journey that may be ahead. Your parent will need help; this means that legal papers [power of attorney] will have to be signed to authorize you to act on his or her behalf.

This power of attorney allows your parent to grant you authority to act for him or her in a broad array of matters, from handling finances and real estate to filing tax returns.
If done correctly, a durable power of attorney will remain in effect after your parent is no longer capable of handling his or her affairs, and should be carefully tailored to meet present and future needs.

You should also consider a health care power of attorney so that you can assist your parents with their healthcare.  Without a health care power of attorney, you will not have access to important health information and you cannot make decisions for your parents or other loved ones.

If you are in the situation where you observe the first signs of decline, it is appropriate and important to act now.  You can put in place the necessary measures to ensure continutity of care. 

If  you fail to take action now, it could cost thousands of dollars to petition propate court to appoint a guardian and/or conservator.

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Arizona is a community property state for married couples.  It is not available for unmarried couples.  Community property is an ownership status that is favored for estate tax and capital gains tax (step up in basis).

It also allows for much more flexibility in planning with trusts.  In other common law states, it is necessary to divide assets for estate tax planning purposes before death.  However, with community property, it is possible to divide assets for tax planning purposes after death. 

This means there is a tremendous amount of flexibility for the surviving spouse.  This can be important because the assets may be split differently depending on which spouse dies first.

If you have moved to Arizona, and have two trusts designed in other states, it may make sense for you to explore and consider the benefits of changing ownership to community property.  However, this is a highly individualized decision and it will be important to discuss this with a qualified Arizona estate planning attorney experienced and educated in tax planning.

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If you have real property (land, houses, etc.) in more than one state then you need a trust.  When you have property in more than one state, you are subjecting each parcel of property to probate in each state. 

When you place property in a trust, you enable your trustee to sell or manage the property without passing through probate.

In Sun Lakes, Apache Junction, Casa Grande, and other communities with large "snow bird" populations it is common to own a winter home here and a summer home in another state.  If you are in this situation, then you should consult with a qualified estate planning attorney in your principal state in order to address the potential of two probates.

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This blog was featured as the blog of the day at Inter Alia.  Inter Alia is self described as "an internet legal research weblog, among other things".

How Tom Mighell manages to find as much information and can post as much as he does is a mystery to me.

Thanks Tom.

Stephen

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