The following is designed to provide accurate and useful information to educate and help in the initial stages of the estate planning process. Please know that we are happy to meet and clarify for you how this information would relate to your personal situation. Feel free to contact our office to schedule a free, no-obligation initial consultation.

Estate Planning, Wills, & Trusts

What can a Living Trust do for me?
 When properly created, a Living Trust can:

  • minimize estate and inheritance taxes,
  • avoid death probate (even in multiple states),
  • determine who will handle your affairs, should you become incapacitated,
    in order to avoid having to go to court,
  • control distributions to minor beneficiaries beyond the age of 18,
  • provide for special needs beneficiaries without creating benefit ineligibility,
  • protect monies from creditors or divorcing spouses of beneficiaries,
  • maintain financial privacy,
  • minimize the stress that can be placed on family or friends,
  • expedite access to and distribution of resources, and
  • provide you with control even in the event of your disability or death.
What is a Revocable Living Trust?

A Revocable Living Trust (or "inter vivos trust") is a contract between you as a Trustor and you as a Trustee. The Trustor of a trust originates the creation of the trust and provides the assets used to fund the trust. The Trustee of a trust manages the assets of the trust according to the provisions determined by the Trustor. You are also the initial beneficiary of your own trust. This means that all the resources in the trust must be used and invested in order to take care of you in the best way possible until your death.

What is a Trustor?

The Trustor is the originator of the trust. The Trustor provides the assets used to fund the trust. The Trustor of the Revocable Living Trust has the ability to amend or revoke the Trust.

What is a Trustee?
The Trustee manages the assets according to the provisions of the Trust.
Who is the Beneficiary of my Revocable Living Trust?
The initial Beneficiary of the Revocable Living Trust is the you, the Trustor.
What is a Will?

A Will is a document which states what you want to happen to your belongings at your death. A Will can list guardians for minor children, which can be extremely important. A Will also should name a Personal Representative, or person that you want to handle your affairs at your death. A Will should also state whether the Personal Representative must post a bond or not in order to be appointed and be able to administer your estate.

What is a Personal Representative (also called executor or executrix)?
A Personal Representative is the person responsible for administering an estate at a death.
What is a Pour-Over Will?

A Pour-Over Will should always be created in conjunction with a Living Trust. It is a "safety net" device created in the event that any assets are not titled in the name of your Trust at the time of your death. This type of Will establishes the beneficiary of your Probate Estate to be your Living Trust.

Does a Will have be probated?

While assets titled in a Living Trust do not have to be probated, any Will must go through a court process called "Probate." Probate varies greatly in complexity from state to state based on state law. Probate is basically court supervision of the retitling of assets out of the decedent's name into his or her beneficiary's name. Because of the different legal requirements, costs and time can be significant. Difficulty of the process depends greatly on the complexity and nature of the resources involved.

What is Probate?
Probate is basically court supervision of the retitling of assets out of the decedent's name into his or her beneficiary's name. Because of the different legal requirements, costs and time can be significant.
How many people in the US die without doing any estate planning?
The latest CNN report states that 66% of people in the US die without creating a Will or Living Trust stating their wishes at their death. This is about 2 million people per year.
What does 'Intestate' mean?

'Intestate' is the legal word which means there is no valid document stating your wishes at your death. Each state legislature has tried to anticipate what they think most people may want to happen at their death if they die 'intestate.' Each state has its own intestate succession statutes which take effect for any individual who has not done his estate planning. As you can imagine, these 'one size fits all' statutes can create some very interesting and often undesirable results.

What if I have been advised that I don't need a Trust?
Sometimes a Trust may not be advisable, but in a majority of situations it can be very beneficial. If you have been advised that a Trust is not advantageous in your specific situation, ask your advisor to project the anticipated costs at a death or incapacitation. Our experience indicates that more thorough planning on the front end almost always pays off. Make sure your advisor is not just anticipating future Probate fees with the understanding that this Probate process is very familiar to him. Make sure that you are receiving this advice from someone qualified and experienced to give you advice in this area of the law.
What are 'guardianships' or 'conservatorships'?

A 'guardianship' is a court proceeding that can be undertaken to appoint an individual for you and give that individual the legal ability to make any decisions involving your person, such as where you should live, any medical care and treatment decisions, etc. During this court proceeding your competency is brought into question and evidence must be presented. This can be a very time-consuming, expensive, and frustrating process to embark on within an overburdened court system. A "conservatorship" is a court proceeding that is undertaken to appoint a person with the legal ability to make financial decisions for you if you have become incapacitated. The appointed conservator may be required to post a bond, restrict accounts, and give account to the court in order to take each or any action. The Court must review and oversee every step in this process.

How does a Living Trust work if I am disabled?

A properly drafted Living Trust should define incapacity and how it is to be determined. When that determination is verified according to the terms of the Trust, the person you designated will take over and manage the Trust as the Successor Trustee. It is important to have a list of Successor Trustees in order of priority to accommodate for the inability of an individual to serve at any given time. These incapacity provisions, if properly drafted, should avoid any need to pursue a guardianship or conservatorship through the court system.

What is a Successor Trustee?

The person you designate to take over the Trust for you after death or upon a disability, is the Successor Trustee. It is important to have a list of successor Trustees in order of priority for appointment.

What are the disadvantages of a Living Trust?

Usually a Trust requires more time to draft and will cost more than a Will. The key element is that the Trust must be 'funded' for it to work. If the assets are not retitled in the name of the Trust or 'funded,' the terms of the Trust do not control the assets. Therefore, it is vital to transfer title in all of your assets to the Trust in order to make your estate plan work. Deeds to real property must be executed and recorded. Investment accounts must be transferred to the Trust. Life insurance is changed over to the Trust. Tax-deferred and retirement accounts may have the beneficiaries changed to the Trust if that is determined to be in the best interest of the plan. This requires some work, but once completed the maintenance is minimal. After the initial funding you must continue to title newly acquired assets in the Trust name. Your estate planning attorney should help you through this process and answer questions for you in the future as they emerge. Another important element involves financing assets within the Trust. Most of the time mortgage companies will require a retitling of property in your individual name to guarantee the financing. Then you can transfer the property to the Trust once the finance process is complete.
Be sure the asset is returned to the Trust when the financing is completed. These are merely inconveniences and some invested time on your part to make your estate plan work.

What is 'funding'?
"Funding" is the process of retitling assets into the name of the Trust out of your individual name.
Do I pay more income or property taxes when I have a Revocable Living Trust?
Most Living Trusts are established as 'grantor' trusts. This means that the tax ID number associated with your trust is your social security number. If you are married, income from the trust assets may be reported to either social security number if the trust allows for it. You may need to complete a W-9 with your social security number as you 'fund' your trust. This tells the financial institution that you have a 'grantor' trust and how to report any income to the IRS.
Who should draft my Living Trust?
You should always consult with a qualified estate planning attorney to help you accomplish your goals. These decisions are too important take a risk. The estate planning attorney should meet with you and should be able to assess your needs based on your desires, as well as to quote you a fee. Estate planning is very personal. Make sure you feel comfortable working with the attorney. You are always entitled to be treated with respect and dignity as the attorney sets about to solve your concerns. The Living Trust is a legal document which should only be prepared by a qualified attorney. These personal decisions are significant and no room should be left for error. Before retaining an attorney you should know what her qualifications are. Ask how much of the practice is devoted to estate planning. Ask if she merely creates documents in her practice, or if she also administers those documents and will assist when there is a death or disability. It is absolutely necessary to determine whether there are any underlying financial incentives to sell you a Living Trust. It is unfortunate, but true, that some sellers of questionable financial products use estate planning services as a way to gain private financial information of their clients. A Living Trust can be 'given away' as an 'enticement' by offices not staffed with competent estate planning attorneys. It is also true that some estate planning attorneys make commissions on financial products sold to you during this process. Be informed. Estate planning attorneys are hired regularly to settle disputes arising because of poor wording done on the planning end. The old saying definitely applies in estate planning: 'You usually get what you pay for.' A little money paid on the front end of a situation can prevent a whole lot of money being needed to clean up an unnecessary mess on the back end of the situation.
Are all Living Trusts the same? Isn't there just a form?
No two trusts are alike. A "good" Trust is one that will do exactly what you want and accommodates for any unforeseen situations. Because no two people are exactly alike, a good estate planning attorney will never create two trusts exactly alike. Yes, there is always some necessary boiler-plate language to handle any unanticipated situation, but you are totally unique and this must be considered when you do your estate planning. There is no 'one-size-fits-all trust.
My estate is simple and small. Do I need to do anything?
You have worked hard for your achievements and there are things that you can do to protect yourself and your hard work. A good estate planning attorney is just as enthusiastic about solving problems for a person with modest assets as a person with significant assets. Anyone can benefit by consulting with an estate planning attorney. Be willing to discuss your situation and concerns with her and put your mind at ease.
What should my estate planning attorney do for me?
You can contract with your estate planning attorney to work for you on an hourly basis or on a flat fee basis. Most people are more comfortable working on a flat fee. The legal service agreement or engagement letter presented to you by the attorney should clearly outline services to be provided, costs and terms of payment. Usually an estate planning attorney will include in her charges a review of your assets and their present title, a discussion of your wants, wishes, and desires with you, preparation of your documents to your satisfaction, supervision of the execution of the documents, and assistance with the funding of your trust.
What is a Living Will?
A Living Will gives direction about one's desire for medical life-support in the event of a terminal illness.
What is a Health Care Power of Attorney?
A Health Care Power of Attorney allows you to appoint someone to make health care decisions for you if you're incapacitated.
Is my estate big enough to worry about Estate Taxes?
This year, 2012, each individual has a $5,000,000 exemption for Federal Estate Tax purposes. Below is a current table listing the exemptions. Every dollar owned beyond the exemption amount at your death is taxed at about 35%. The estate tax does not affect most people, but when it does it needs to be addressed. There are multiple options to discuss with an estate planning attorney to minimize your estate taxes.

Federal Estate Taxes

Exempt Year Rate on Amount Excess
2004 1,500,000 45-48%
2005 1,500,000  45-47%
2006 2,000,000  46%
2007-2008 2,000,000  45%
2009 3,500,000 45%
2010 5,000,000 or zero 35% or 0%
2011 5,000,000  35%
2012 5,000,000  35%
2013 1,000,000  35%


What is HIPAA?
The Health Insurance Portability and Accountability Act of 1996 restricts access to health care records or medical information without specific authorization. A general HIPAA document lists who can have access to your medical record information.
Can I just use joint tenancy to avoid probate?
Joint tenancy will avoid probate on the first death, but merely postpones the probate until the second death. Assets titled in joint tenancy are owned completely by both parties and the surviving joint tenant wins the entire assets. Joint tenancy can create some unanticipated consequences. Joint tenants must unanimously agree to any action pursued. Therefore, if one joint tenant does not want a house to be sold, it cannot be sold. The property is exposed to the debts of all joint tenants. For example, the house with a mom and daughter on it as joint tenants is exposed in its entirety to the creditor and divorce proceedings of either party.
Do I lose control of my assets in a Living Trust?
You do not lose control of your assets in a Living Trust. As the Trustor and Trustee you have complete control. The only difference is that title to your assets has changed to the Trust. The Trust is revocable and changeable by you at any time you wish.
How long should it take to do a Living Trust?
Generally it should take only a couple of weeks to complete your Living Trust. Sometimes this is delayed if you are having difficult time making the necessary decisions or gathering your asset information.
Does a Living Trust avoid probate?
If a Living Trust is completely and properly funded then there are no assets left in your individual name. Thus, the Court does not have to oversee any title transfers, and therefore no probate is needed.
What is a Durable Power of Attorney?
A Durable Power of Attorney is a legal document that allows another to act in your place. The Durable Power of Attorney must list specifically what powers you are giving your agent. A Durable Power of Attorney may be 'springing,' which means that it will take effect upon your incapactity as defined in the document. A Durable Power of Attorney may also be 'immediate,' which mean that as soon as it is executed the agent has power to act for you. There are now criminal penalties in Arizona for anyone misusing a Durable Power of Attorney. Because of liability, financial institutions may refuse to honor a Durable Power of Attorney (if they feel it is too old, if they feel it does not specify the right powers, if they feel it does not release the institution from liability, or for any other reason). Once an asset is titled in the name of the Trust the financial institution is bound by the terms of that Trust and must grant your successor access upon appropriate documentation of your incapacity. If there is no acceptable Durable Power of Attorney in place, or Trust with incapacity provisions, the Institution will require court documentation appointing a Conservator in order for an agent to gain access to the account upon your incapacity.
What kind of updating needs to be done regularly on a Living Trust?
Laws change. These changes will not make your estate plan invalid. Most of the changes do not affect the majority of people. However, changes in the law may provide you with some additional benefits or options if you should decide to adopt them into your Living Trust. Usually changes in the law can be added in with an amendment to your Living Trust. Be sure to ask your estate planning attorney if she will notify you of any changes and how she will handle amendments to your Living Trust.
Will my estate planning documents be valid if I move to another state?
As long as the documents are validly executed, any state will honor estate planning documents from another state. It is always recommended, however, to have them reviewed in the new state to determine if there are additional benefits for you to take advantage of under the new state law. Living Wills vary greatly from state to state.
How does a POD (payable on death) or TOD (transferable on death) account work?
You can have a POD or TOD beneficiary on most accounts. At your death the POD or TOD beneficiary inherits that account and takes precedence over your Will. This can create a problem when a person forgets that they have put a POD beneficiary on an account and later creates a Will to direct the account to a different individual. There may also be some undesired results if multiple POD or TOD beneficiaries are listed. If one of the multiple beneficiaries predecease, the line of succession to that individual's children will not usually continue as may be desired. A POD or TOD designation does not solve the problem of a disability.
Does a Living Trust give me asset protection?
If you establish a Revocable Living Trust you do NOT have additional asset protection beyond what is statutorily afforded any person. Arizona has an automatic homestead exemption allowance of $150,000. For most purposes retirement accounts are protected. To gain additional protection further steps must be taken beyond the Living Trust. This may include an umbrella policy, Family Limited Partnership, Limited Liability Company, Irrevocable Trusts, or Gifting. The Living Trust is the initial building block in an estate plan. It is purposely created to provide maximum flexibility to you, but with that flexibility additional asset protection is not granted. The Living Trust can provide complete asset protection to your successor beneficiaries.
What is a Testamentary Trust?
A Testamentary Trust is a trust that is created through a Will. Assets are not put into the Trust until your death. This avoids the hassle of having to retitle assets during your lifetime. However, the Testamentary Trust must be funded through a probate, providing the attorney with double fees for the creation of the Will and the probate of the estate.
What is an Irrevocable Trust?

An Irrevocable Trust is generally just that–unchangeable. It is generally used for asset protection or tax purposes. It can be a very valuable tool in the right situation. You should discuss its appropriateness with your estate planning attorney.

This information is not intended as legal advice and does not create an attorney/client relationship.  The information provided on this site is as current and reliable as possible.  No general information can replace a one-on-one conference with an attorney to discuss your particular and individual situation.  This information by itself is not to be relied on to do legal estate planning.

© 2012 – Johnson and Associates, P.L.L.C.