Do Your Business Entities and Investments Actually “Speak” to Your Estate Plan?

By Michael J. “Mick” McGirr, Esq. | Phocus Law

For most of my contributions to AZREIA, I focus on the nuts and bolts of dealmaking: contracts, LLC structures, lending terms, and all the fun (or sometimes not-so-fun) mechanics of real estate transactions. That’s where I spend the vast majority of my time.

But one of the most important services we provide at Phocus Law sits on the personal side of your financial life - estate planning. And in the last couple of years, we’ve seen a huge increase in Arizona investors who realize that building wealth is only half the battle. Keeping it protected and passing it on correctly is just as important.

What Is Estate Planning, Really?

In the simplest terms, estate planning is the legal strategy behind what happens to your assets when you pass away. That typically involves a will, a trust, or both.

A will alone requires your estate to go through probate, meaning a court oversees the administration of your property, debts, and distributions. Probate is slow, public, more expensive than people expect, and, most importantly, completely avoidable for most investors.

A trust, when used properly, operates like a legal container that survives you. Your successor trustees step in and carry out your instructions without court involvement. The trust continues to own the estate; it doesn’t “die” the way an individual owner does. For anyone with a meaningful amount of assets, including investment properties, a trust is usually the most cost-effective and efficient planning tool you can use.

Here’s the Gap Most Investors Still Have Wrong

Setting up a trust is step one. Funding the trust, actually titling assets in the name of the trust, is step two. And in practice, step two is where many estate plans fall apart.

If your trust isn’t funded, or is only partially funded, your estate may still need probate. That means your carefully crafted plan doesn’t actually accomplish what you intended. In Arizona, we commonly see the following issues:

• Investors form a trust but never move their bank accounts, brokerage accounts, or personal residence into it.

• A trust is created years after LLCs were formed, and the LLC membership interests were never assigned to the trust.

• Old entities still list the individual as the owner, even though that person now expects the trust to control everything.

A trust only protects what it owns.

How Should Real Estate Investors Actually Use Their Trusts?

The good news: funding a trust is far easier than investors expect.

• Personal assets like your home and bank accounts should be retitled into the trust.

• Investment properties held in LLCs do not require you to retitle each individual property. Instead, you simply update the LLC’s member from yourself to your trust. With one assignment, every asset in that entity is now trust-owned.

• Businesses you operate can typically be transferred the same way; by changing the ownership interest to the trust.

If you’re still holding rentals or flips in your personal name, we should talk about liability protection first, because a trust is not a shield against lawsuits (that’s what properly structured LLCs are for). But once your entity structure is tuned up, your trust should sit at the top of the ownership pyramid.

Why This Matters More Now Than Ever

Arizona real estate investors today are building substantial portfolios and are doing so often faster and earlier in life than prior generations. With the increase in private lending, partnership deals, creative financing, and rapid acquisitions, it’s critical that your estate plan actually matches the complexity of your investing life.

A proper estate plan can help:

1) Avoid unintended tax consequences;

2) Prevent probate and the cost and chaos that comes with it;

3) Ensure properties and businesses transition smoothly;

4) Protect surviving spouses, children, and partners; and

5) Provide clear instructions that limit conflict and confusion.

Estate planning is not simply a “later in life” exercise. It is a wealth-preservation strategy that matters during your growth years just as much as it does at retirement.

Let Us Help You Make It Simple

Estate planning can feel overwhelming, but it shouldn’t be. We’ve built our process at Phocus Law to be practical, understandable, and tailored to real people - especially investors with layered entity structures and active deal flow.

If you’d like help setting up a new plan or reviewing an existing one to ensure it actually accomplishes what you think it does, please reach out. Sam Richardson, who leads our estate planning group, can walk you through the entire process. You can contact Sam at 602-457-2191 or by email at [email protected].