By Samuel C. Richardson | Phocus Law
Probate. Many times, we’ve probably heard this word and let it go right past because the only thing we know about it is that it applies to the dead, and we’re not dead. Right? No. Unfortunately, probate is not an affliction that plagues the dead, it’s a legal proceeding that haunts the living. Probate is a court proceeding used when a person dies and leaves behind assets whose ownership succession hasn’t already been addressed. The court tries to determine if there’s a will, what assets belong to the estate, and to whom those assets now belong. If your estate is small, the process is relatively cheap, quick, and easy. In Maricopa County, what counts as small is $100,000 in real estate and $75,000 in personal property. Because most of us have estates that easily surpass those limits, you’re looking at the possibility of a lengthy legal process. The good news is that probate is completely avoidable!
For instance, a revocable living trust is a solution to the probate process for many Arizonans. A trust is a legal relationship in which a trustee holds ownership of property for the benefit of a beneficiary. The property is supplied by a trustor/grantor/settlor. In a revocable living trust, the trustor, trustee, and beneficiary are all the same person(s), at least until that person dies. The person owns and uses the property as they normally would during their lifetime, but because of the trust agreement that directs how the estate property is to be disposed of, the property held in trust is not required to go through probate.
Setting up a trust requires putting together a trust agreement that names the trustee and beneficiaries, and then funding the trust by moving personally held assets into the trust. When Phocus Law puts together a trust, we start by filling out a questionnaire that identifies your spouse, your primary assets, as well as your children, and other possible beneficiaries. In addition, we also identify who you want to manage your assets as your trustee. One of the important steps along the way is determining how you want your assets distributed among your beneficiaries. Do you really want your 19-year-old to receive full control of your entire life’s savings when you die? Probably not. Many times, you can exercise significant control over your estate through a trust by providing specific distribution instructions that your trustee MUST abide by. You may also want to include specific instructions as to how your young children are to be provided for. Not only does a trust help you avoid probate, but it affords a greater amount of control over your assets than simply leaving your assets to your heirs.
Once set up, maintaining your trust requires periodic review to ensure that it still works for you and your family. For example, as your children get older, you may want them to step into the trustee role. In addition to periodic review, there are four life events that mandate review: Birth, Death, Marriage, and Divorce. These events almost always change the outlook for the distribution of assets and in many cases, the funding of the trust estate. Because of these reasons, make sure you stay on top of your trust after you’ve set it up, and it will take care of your loved ones when you’re gone.
As the lead attorney in the estate planning group at Phocus Law, I assist our clients in all aspects of their estate planning. If you’d like to discuss how I can help you, please don’t hesitate to reach out to me. I can be reached by email at Sam@PhocusCompanies.com or by phone at 602-457-2191.