Reasons Everyone Needs an Estate Plan
Written by Jacque Mingle
Whether a person has millions of dollars or more modest assets, there are multiple reasons to get and maintain an effective estate plan. An important reason for everyone is to ensure that the estate is administered as efficiently as possible, maximizing the funds that ultimately reach loved ones. There are some common reasons an estate plan is necessary, here are a few:
- If you have debts, obligations, and assets.
An “estate plan” is more than just a Will; it also includes powers of attorney for both finances and health care. A durable financial power of attorney is absolutely critical for every adult. Without it, if you were to become unable to handle your financial affairs, no one would have the authority to keep your financial life afloat during incapacity. Most people associate this with getting old and demented, but young people sometimes get sick, injured, get stuck while traveling, or want to spend time living abroad. If proper planning is not done, an expensive, intrusive court proceeding would be needed to appoint a conservator just to obtain access to your accounts to pay your electric bill. For married couples who have their assets in joint accounts, this is less of an issue because either account owner can control the account, BUT even they often have accounts that cannot be held jointly, such as IRAs or 401(k)s, or real estate which requires both owners to take action. To adjust investments, take distributions, or other actions, your spouse (or other loved one) would need legal authority granted by you to do it.
- If you have medical treatment preferences.
If you are unable to make your own medical decisions, Arizona law picks who can do that for you (spouse, followed by adult children, then parents, and others, according to A.R.S. § 36-3231). Even if Arizona’s list of those who may be your decision maker is fine with you, a written Power of Attorney is easier to implement than having to argue with doctors or nurses about what the statutes say. Additionally, the person might not know what decisions you would want made. An “advance directive” or “living will” spells out what you want – and don’t want – so that your decision maker knows what to do.
- If you have a preference for cremation or want to designate who carries out your funeral and burial plans.
Arizona has a specific law (A.R.S. § 32-1365.01) allowing you to state your wish to be cremated so that funeral homes do not have to seek approval from next of kin. Further, your power of attorney can designate the person you want to carry out your plans or make them for you. Any kind of disagreement among loved ones can not only cause emotional stress and strain, it can create additional expense, particularly if the court is called on to decide. Even in less contentious cases, your loved ones knowing your wishes is easier than having to guess what you would have wanted.
- If you make regular gifts to family members or charities.
If you become what might be considered “vulnerable” (A.R.S. § 46-451(A)(9)) or incapacitated to the degree that you cannot handle your own financial affairs, it can be completely inappropriate for your loved ones to make gifts on your behalf, whether to family members or charities you have supported all of your life. A financial power of attorney (and your Trust, if you have one) can give your agent specific instructions to make such gifts.
- If you want to make charitable donations at your death.
We’ve made it a third of the way through this list without even getting to what happens to your property after death. If you die without a Will or Trust, then, with some exceptions (including jointly owned property and assets with beneficiary designations), your estate will be distributed as the State of Arizona guesses you would want. (Start with A.R.S. § 14-2101 and keep going.) It doesn’t matter if that’s not what you want. A prime example is charitable gifts. Arizona law makes no provision for charities, so if you want a charity to receive even one cent of your estate after you die, you need to say so.
- If you made loans or gifts you want to forgive or off-set at your death.
Loans and gifts during lifetime are common, and so Arizona law (A.R.S. § 14-2109) has very specific provisions dealing with how they should be handled at death. Generally, no adjustments or offsets are made unless you specifically indicated during your lifetime that you want that. The best way to do this is with a clear statement in your Will and/or Trust.
- If you are married and have children from prior relationships.
In this circumstance, Arizona guesses that you would want your children to receive something, so generally your children from your prior relationships – regardless of whether you are close or completely estranged – would split your estate with your spouse and any common children. (A.R.S. § 14-2102.) This often comes as a big surprise to a surviving spouse, especially if the decedent was estranged from those distant children. If this is not what you want, you need an estate plan.
- If you don’t want a family member to inherit from you.
Arizona also does not know if you have decided one or more of your blood relatives shouldn’t receive a portion of your estate. For the state’s purposes, all of your children are treated the same. Say you are single with no kids, and have four siblings, two of which you adore and two of which you can’t stand. If you don’t want the two “bad siblings” to get your money, you need to specifically exclude them.
- If you want a non-family member to receive something.
Arizona assumes you only want your spouse and blood relatives (which includes adopted children) to receive your property. Stepchildren? Nope. Friends? Also no. You need to specifically include them.
- If you have minor children.
The Will is where Arizona law allows you nominate someone to act as guardian for minor children (A.R.S. § 14-5202). Your nomination is not the final word, but courts take it very seriously.
- If someone to whom you might leave money has a disability or other difficulties.
Again, Arizona doesn’t know if any of your beneficiaries have special needs or addictions or tends to run up credit card bills – or, is a doctor and vulnerable to lawsuits. If crafted well, an estate plan can help protect inheritances for those who have special needs or vulnerabilities.
- If you have pets.
Pets are not blood relatives, even if we love them just as much (or more). Specific provisions for them need to be included in your financial power of attorney to permit expenditures for their care during your incapacity, and after your death if you care about how a pet is placed and/or cared for after you are gone.
- If you have items of tangible personal property, like jewelry, clothing, furniture, collectibles, etc.
Under Arizona law, your stuff is to be divided among your heirs, whoever they might be. (A.R.S. § 14-3906) So if you have no Will and leave a spouse and children from a prior marriage, your spouse will get half of your things and your kids will get half. Practically, how will that happen? It can get messy, with potential disputes over which spouse owned which table or television. Messy can mean expensive. It works much better if you spell out who gets what or even provide a method for the division. Conflicts over personal property can be an issue even if you have an estate plan; make a point of directing how it should be handled. This reasons are just the beginning. A qualified attorney can help spot additional issues that may be unique to you and your family.