Estate Planning for Singles

By Kent Phelps, Esq.

A single adult commonly has 4 primary estate planning objectives:

Avoid Probate 

Individuals we meet with don't want to rely on the state to divide up their property.  They want to choose who will manage their property and avoid the expense of costly court proceedings following their death.

Provide for Children / Heirs

After their death, an individual wants propety to be divided up and distributed in the way decided on during their lifetime. 

If there are any children / heirs who are minors at the time of the individual's death, they want the person(s) they designated during their lifetime to be the legal guardians of their children.

Designate Who's in Charge

Single clients want to choose someone they trust to distribute their property to their children/heirs in the amounts and under the circumstances they decided on during their lifetimes.  

Avoid Unnecessary Taxes

Single clients don't want their heirs to hand over money to the government if it can legally be avoided.  

The Living Trust for 1 estate plan achieves an individual's objectives:

Avoid Probate 

When your property is transferred to a valid revocable living trust ("living trust" for short) you no longer own legal title, your trust does. 

 

Because you don't technically "own" your property when you die (since your trust is the legal owner) you no longer have an "estate".

 

Now your heirs don't have to go to probate court to get ownership of your property as they would have to do if your estate plan consisted of a last will and testament instead of a revocable living trust.

 

Even with a revocable living trust, you still need a "pourover" will to designate legal guardians of minor children and incapacitated adults.

Your pourover will also serves as a safety net so that if you forget to transfer property (in Arizona, > $75,000 in personal property and > $100,000 in real estate) to your trust before your death, the probate court will transfer ("pourover") your property to the trust.  

So even though your heirs will have to go to probate court because you forgot to transfer some of your property to the trust, the pour over will ensures your property will eventually end up in the trust and back in control of your family.  

This underscores the importance of the process referred to as "funding your trust", something we take very seriously as reflected in our free Concierge Trust Funding Service for your first year with us.  We work with you to make sure all your property gets transferred to the trust.  

Provide for Children / Heirs

An individual's pourover will names the person(s) to be the legal guardian(s) of minor children. 

 

This prevents uncertainty and family infighting over who will care for the minor children if the individual dies before all the children reach adulthood.  

The trustee of the trust (who may or may not be the children's legal guardian) is responsible for making sure the trust provides for the financial needs of the minor children.

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As for adult children, the successor trustee(s) divides and distributes trust assets consistent with the instructions in the trust decided on by the individual during his lifetime.

For young adult children, the individual typically designates the ages at which certain distributions will be made rather than give a young adult their full share all at once.

If the individual has a child with special needs, the trust contains language allowing the trustee to keep that child's share in trust so as not to disqualify the child from receiving government benefits.  Limited trust funds may be used to supplement those benefits.

The individual will also want safeguards in the trust to protect against use of trust assets to feed drug, alcohol and gambling addictions.  The trustee will have the discretion to withhold distributions from a child / heir who would use the funds to pursue self-destructive behavior.

Designate Who's in Charge

When someone creates a revocable living trust, he or she serves as trustee of the trust during their lifetime. 

 

The individual is in full control and is accountable to no one for use of trust funds.  There are no restrictions on the individual for how they use or manage trust funds. 

The individual can change ("amend" or "revoke") the trust anytime during his lifetime.  This is why it is called a revocable living trust.

When they create the trust, the individual designates a successor trustee(s) (usually one or more of the children / heirs) to manage the trust when the individual has become incapacitated or passes away.  

The successor trustee is a fiduciary, meaning she is legally responsible to the beneficiaries (heirs) of the trust for management of trust assets.

The successor trustee carries out the instructions written in the trust that were decided on by the individual during his lifetime. 

 

Trust instructions ("terms") cannot be altered ("revoked") by the successor trustee.  The trust becomes "irrevocable" after the individual passes away.

The successor trustee serves until all trust assets have been distributed to the beneficiaries and the trust is terminated. 

The successor trustee may of course resign at any time in which case the next successor trustee in line named in the trust by the couple would serve as trustee.

"Durable healthcare and financial powers of attorney are also included"

The Living Trust for 1 package includes healthcare and financial powers of attorney giving authority to those you choose to make medical and financial decisions for you if you become incapacitated and are unable to make decisions for yourself.  

A living will is also included telling your medical providers what type of treatment you do or don't want at the end of your life.

**This all takes place outside the court system.  By having a revocable living trust with accompanying documents like a pourover will, powers or attorney and a living will, you keep control of your property in the hands of those you love and trust both during your lifetime and after your death**

"You are your own trustee during your lifetime"

Avoid Unnecessary Taxes

Estate tax (aka "death tax" or "inheritance tax") laws right now are very generous.  As a single individual in Arizona (which has no estate tax) you do not have a federal estate tax issue unless your total net worth exceeds $5.6million.  

This means your heirs will not pay estate taxes (even without a trust) unless your net worth (value of assets minus liabilities/debt) exceeds $5.6million.

If your net worth does or may in the future exceed $5.6million, you may require advanced estate planning which incorporates other planning tools in addition to a revocable living trust.  

If you are in this situation, we are happy to talk to you about advanced estate planning options available to you to ensure your heirs do not incur an estate tax liability.

Mail

estateplanningUS.com

1820 E. Ray Road

Chandler, AZ  85225

Call

T: 800-674-3582

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