Tempe Arizona Estate Planning

Estate Planning for Singles

Single people with no children sometimes feel like they might live forever. We know that’s not true, but children do seem to serve as markers of the passage of time. The protections offered by an estate plan for singles while they are living, is especially important.

Single people need to have an estate plan just as much, if not more so, than married people with children. That’s because an estate plan includes naming people to handle financial and health decisions, if you become incapacitated due to illness or injury. If retirement is on the horizon and you still don’t have an estate plan, it’s really time to get this done, says this recent article from Forbes, “5 Estate Planning Strategies For Singles.” Here’s what you need to know:

Financial and health care powers of attorney. These are used while you’re still alive. They let you name who will make important financial and medical decisions for you, if you can’t make them for yourself. A single person must be sure that she’s named someone she trusts to make these decisions. When you die, the financial and health care powers of attorney are no longer valid, so you also need to create a will and trust.

Will. You need to designate a personal representative (called executors in other states) of your estate. This individual will take care of your affairs after you die, probate your will if necessary, and pay any income and estate taxes you owe. The devisee of your will can also be a revocable trust that you create during your lifetime.

Revocable trust. While you are alive, you are usually named the primary beneficiary of your own trust. You may also want to provide benefits for your significant other, especially if you live together and you’re the primary breadwinner.  Within your trust, you will also name beneficiaries who inherit assets at your death. You also need to name a successor trustee to manage the trust assets, in the event you are unable to manage them yourself. The successor trustee will play an important role, if you’re incapacitated. As a single person, naming someone to manage your assets for you is an important part of your estate plan. If you fund the trust during your lifetime and are later incapacitated, the successor trustee can use the funds for your care.

Estate taxes. Many singles don’t mind if their beneficiaries receive less, and the government receives more. However, if you do care, there are many planning options to consider, such as charitable giving, as a way to reduce taxes and give back to those charitable institutions that have played an important role in your life. You can also make lifetime gifts to family and friends.

There is no time like the present to put your estate plan in place. Consider the people you’ll leave behind: do you want to fund a favorite niece’s college education or make sure your nephew gets your record collection? Without an estate plan, the court decides who is in charge and what happens to your assets. Think of an estate plan as a way for you to create a legacy for loved ones.  Contact the Soto Law Firm today to discuss with us how we can help you create your legacy.

Reference: Forbes (March 15, 2019) “5 Estate Planning Strategies For Singles”

How to Select a Health Care Proxy

You’ll need a brave soul with a backbone to make the hard, sometimes unpopular decisions on your behalf, if you become incapacitated.

Designating a health care proxy is like picking a guardian for your children, only it’s for yourself. Who would be the best person to make a decision on your behalf? Who would be able to follow your wishes, even when they are different from their own?

Many people get stressed when asked to supply a name for their healthcare proxy. As a result, they end up making a bad selection. They can also fail to share that information with the person they selected.

Forbes’ recent article, “How To Select A Healthcare Proxy,” says that while the odds of being called into service are low, the person we choose for such a role should be picked with great thought, as to their availability and their suitability. Let’s look at these guidelines that can help with the selection.

Your healthcare proxy should know you well, understand your values, and be able to distinguish them from his or her own. The person must also be willing to discuss sensitive topics in depth, in order to gain a true understanding of what you want and don’t want.

If you have close family, it may seem obvious to pick your spouse or your first-born child or your closest sibling as your proxy. However, ask yourself if this person is the best person for the job. He or she may have to deal with push-back from other members of the family or conflict among family, friends, and medical personnel. Can they handle this?

Age. Your proxy should be available long into the future. If you want someone in that position who’s close to your age, be sure to also select back-ups, and be select a person who’s much younger.

Geography. The person in first position on your healthcare proxy should live close by, because hospitals frequently require a live human being to make critical care decisions. Your proxy needs to be able to get to the facility quickly.

Choose multiples. Select more than one person named as a proxy. If the person in first position can’t get there or is incapacitated, someone else will have to take their place.

Don’t miss this step of health care proxy designation: the conversation. Sit down with the people who you have chosen for this role, one at a time and in a private setting. Ask their permission to be named in this role. Discuss your wishes, and your reasoning behind them. Be honest—you need this person to be able to act in your stead, and to do so, they need to really understand what you want. Give them a copy of your proxy. Tell your family members, so they know who has been selected for this task.

Reference: Forbes (April 10, 2019) “How To Select A Healthcare Proxy”

Divorce and Your Estate Plan: Don’t Make Mistakes Here

With or without children, divorce is a complicated transaction, with many moving parts. Things happen during a divorce, which can sometimes take years to complete. One part that is often overlooked is the estate plan, which should be updated as early in the process, as possible.

What would happen if your soon-to-be ex-spouse became very sick or died during divorce proceedings? If his or her estate plan wasn’t updated, you could be the one making health care decisions or inheriting everything. That’s why the recent article, “5 Estate Planning Moves If You Are Getting Divorced” from the Journal Enterprise, says not to forget about getting your estate plan updated.

Medical Power of Attorney. This is also called a healthcare proxy. This person is named to make decisions on your medical care, if you’re ill or injured and can’t state your medical care decisions. Unless you make the change, your soon-to-be ex-spouse will have this right.

Financial Power of Attorney. Like a healthcare proxy, this is someone you select to take charge, if you become incapacitated. This person has authority over your financial decisions, and it means they have the authority to pay your bills, access your bank and investment accounts, collect and cash your paychecks, and make financial decisions for you. You want to be certain that your assets are protected and your financial obligations are met, while you’re unable to act on your own behalf. Most people name a spouse, but if you are in the process of divorce and don’t switch this designation, your soon-to-be ex-spouse will still be your financial power of attorney and will retain access to your finances.

Create a List of Things to Change After Your Divorce. A divorce can freeze some assets and accounts, which remains in effect until it’s finalized. Therefore, you won’t be able to change the beneficiary on life insurance policies, pensions and other types of accounts. Ask your estate planning attorney to find out exactly what accounts will be affected. Once you know which ones are frozen, you should make a list to ensure you won’t neglect to change them, when the divorce is finalized.

Modify Your Will. In some states, you may not be permitted to create a new will, but your attorney should still be able to help you make the necessary changes. You’ll want to review your heirs. If you do have minor children and you have sole custody, you may want to designate another person as their guardian.  If you named your spouse as the personal representative of your will, you may want to consider changing this designation.

Modify Your Trust.  In addition to a will, you may have a revocable living trust . One of the advantages of a revocable trust is that it doesn’t go through probate, so your heirs avoid the costs of probate and keep your affairs private. If you have a revocable trust, talk to your attorney about how you can transfer assets out of the old trust, revoking it if was a joint trust with you ex-spouse, and creating a new individual trust for your needs.

Divorce is an overwhelming process, and one that feels like it will take forever. You might feel like estate planning is the last thing you want to deal with, but it may be wisest to make it one of the early tasks in the process.

Contact the Soto Law Firm today to schedule a free consultation to discuss what options are right for you following your divorce.

Reference: Journal Enterprise (March 20, 2019) “5 Estate Planning Moves If You Are Getting Divorced”

What You Need to Know About Powers of Attorney

If you are asked to serve as someone’s power of attorney, you’ll need to understand what they are asking you to undertake. If you are asking someone to be your power of attorney, you should know what it is you are asking them to do. Don’t be surprised if someone is reluctant; it’s a big responsibility.

A person acting as agent under a power of attorney plays a significant role in helping a principal avoid incapacity issues, and that agent acts as the principals fiduciary to make decisions on their behalf when they are unable to do so for themselves.  A recent article from the Lubbock Avalanche-Journal, “Five common myths about powers of attorney” addresses some misconceptions.

1. There’s just one uniform power of attorney document. No, there are many types. However, they can vary by state. Talk to an experienced estate planning attorney to draft a document to meet your specific needs.
2. It’s OK to sign a power of attorney, even if I lack mental capacity. No, to be valid, the person granting the rights (the principal) must have mental capacity to execute the document. A power of attorney can be valid for an individual with mental incapacity, provided the document was signed before the occurrence. That’s a key reason to have a durable power of attorney in place.
3. A durable power of attorney and healthcare power of attorney are the same thing. No, a durable power of attorney grants rights to an agent to act on your behalf, regarding your assets or other personal contracts. These rights can be general to all assets for an unlimited time, or the POA can be limited as to the time frame and assets included. A medical power of attorney grants an agent the authority to make medical decisions on your behalf.
4. Senior citizens are the ones who need a power of attorney.   Because accidents and unforeseen illness can strike at any age, all individuals should have a power of attorney. You need to have a plan in place to ease the burden of one aspect of an already stressful and complicated situation. Don’t assume your spouse has automatic power to make decisions on your behalf.  Unless you have given your spouse the authority to act as your agent under a power of attorney, many otherwise simple issues can become unnecessarily complicated.
5. A power of attorney can be used to handle my relative’s estate at death. Again, not true. Although there are other ways to structure an estate to avoid probate, a power of attorney isn’t one of them. A power of attorney lets the agent to stand in the place of the principal to make decisions. It doesn’t continue beyond the death of the principal.  Once the principle dies, their last will and testament governs the administration and access to their assets.

A power of attorney can be an important tool in your estate plan. However, it has to be used correctly, and the right person has to be selected to handle the tasks. Talk with your estate planning attorney about your selection; they will have insights that will make the selection process easier.

Reference: Lubbock Avalanche-Journal (March 15, 2019) “Five common myths about powers of attorney”

New Parents Need an Estate Plan to Protect Young Families

It is better to have a plan in place for the unimaginable, than to leave a family without guidance and protection.

Experienced parents smile at memories of how tiny babies, especially first-borns, completely turn households upside down. Welcoming a new baby means that parent’s lives change, and in addition to diapers, a cribs and onesies, parents need an estate plan, as reported in the article “5 Legacy Planning Basics for New Parents” from ThinkAdvisor.

Take time to talk through high-priority items. Create a staggered checklist—starting with today—and set attainable dates to complete the rest of the tasks. Here are five things to put on that list:

1. Last Will and Testament.  A Last Will and Testament gives the probate court your instructions on who will be your children's guardian, the individual or individuals who will be in charge of and care for your children, if something happens to both you and your spouse.  Parents also should think about how they want to share their personal belongings and financial assets. Without a will, the state decides what goes to whom. Lastly, a will must name an executor or personal representative, the person you trust to properly carry out the instructions set forth in your will and administer your estate.
2. Beneficiary Designations.  Review your beneficiary designations associated with your financial accounts when you create your will, because you don’t want your will and beneficiary designations (such as for life insurance policies and investment accounts) telling two different stories. If there’s an issue, the beneficiary designation overrides the will. All accounts with a beneficiary listed automatically avoid probate court.
3. Revocable Trust. Created by an experienced estate planning attorney, a trust has some nice benefits, particularly if you have young children.  All property and assets titled in or owned by a trust avoids the need for probate, and the accompanying fees and hassles of probate.  A trust also provides some flexibility and customization to your plan. You can instruct that your children should only receive distributions for specific purposes, or you can allow your children to become the trustees of their own separate trust shares, which can afford creditor and divorce protection for the assets they inherit. 
4. Powers of Attorney .  Financial and health care powers of attorney are very useful in the event of incapacity. These documents designate individual you trust who can make important financial and medical decisions when you’re incapable of doing so.
5. Life Insurance. Usually people don’t purchase life insurance until they have a child or purchase a house with their spouse. If you already have life insurance, that’s a start. Consider the cost of raising a child to adulthood, including college costs. Do you have enough life insurance in place? Every time you welcome a new family member, your life insurance needs increase. Make sure that your life insurance coverage is enough to protect your family.

If you are a new parent, contact the Soto Law Firm today to speak with attorney who can help you get the process started.

Reference: ThinkAdvisor (March 7, 2019) “5 Legacy Planning Basics for New Parents”

Why You Need a Power of Attorney

Accidents and injuries occur all the time. That’s why every adult needs a power of attorney, in the same way that everyone needs a will. A power of attorney lets you name a person who can step in to conduct your affairs, if you are unable to.

Many people assume that if something unexpected happens to them, like a sudden illness or an accident, their spouse or a family member will be automatically able to handle everything for them. That’s not always the case.

The Tri-County Times explains in its article, “Power of attorney protects loved ones,” that a POA is granted to an "attorney-in-fact" or "agent." It gives that individual the legal authority to make decisions for an incapacitated "principal." The laws for creating a power of attorney vary based on the state.  However, there are some general similarities.

If no one has been named as an agent or granted legal access to financial, medical and other information, family members may be left out of making decisions for their loved ones. Further, the government may appoint someone to make certain decisions for an individual, if no agent has been is named.  The court process involved for a loved one to be appointed as your agent to  act on your behalf for financial or heath care purposes can be expensive, time consuming, and overwhelming for most people.

Almost everyone can benefit from establishing a power of attorney.

A signed power of attorney will remove the legal obstacles that may arise in the event that a person is no longer physically or mentally capable of managing certain tasks.

A power of attorney is a broad term that covers a wide range of decision-making. The main types of POA are a general or financial power of attorney, a health care power of attorney, and special power of attorney.

The responsibilities of some of these overlap, but there are some legal differences.  The general or financial power of attorney gives your agent authority to perform transactions in your name for business or contractual purposes.  A financial powers of attorney can be effective immediately or upon the occurrence of incapacity.  A health care power of attorney allows your agent to make health care decisions on your behalf in the event you are unable to do so on your own.  Both of these powers of attorney should be "durable", meaning the endure and are effective once you become incapacitated.

An agent appointed through a POA may be able to handle many tasks, depending on what powers are granted in the document. They include banking transactions, filing tax returns, managing government-supplied benefits, deciding on medical treatments and executing advanced health care directives.

A financial power of attorney and health care power of attorney should both be discussed with your estate planning attorney, as part of your overall estate plan. Doing this with an attorney ensures that you will have the documents prepared correctly, so that if and when you need them, they will be accepted by financial institutions or health care providers.  Contact the Soto Law Firm today to find out how to get the process started.

Reference: Tri-County (MI) Times (January 24, 2019) “Power of attorney protects loved ones”

Blending Families? Be Mindful of Your Estate Plan

An estate plan is the perfect solution to making sure that your assets are passed on to your children from a prior marriage—if you make sure that is addressed in your estate plan. If you neglect to do this, you could disinherit your own children.

Here are some interesting statistics: the rate of remarriage has decreased over time for all age groups, except those who are 55 and older. In 1960, only 42% of those 55 and older remarried, and in 2013, that number jumped to 57%. About 17% of people who divorce, eventually remarry. If you are among those who take that leap of faith and marry for a second (or third) time, you’ll want to be sure to have an estate plan that protects your children from prior marriages, says CNBC in a recent article, “Remarried after having kids? Here are tips to avoid accidentally disinheriting them.”

Many people don’t have even a basic will. The risk can be higher, if you have no estate planning when you remarry—your children could unintentionally be disinherited.

The older you are when you remarry, the more apt you are to be bringing assets into the marriage, such as retirement savings, life insurance, brokerage accounts, real property and family heirlooms. Estate planning helps to avoid family conflict.

If you die without a will (intestate), Arizona state statutes who the heirs of your estate will be and how much each heir will recieve. Of course, everyone’s situation is different, and some estates can be more complex than others. However, here are some keys to consider, when thinking about how to make sure your heirs end up with the assets you want them to have.

Account beneficiaries. It’s easy to miss this when you remarry. Update the beneficiary designations on retirement accounts, life insurance policies and other accounts. This designation supersedes any intention stated in your will.

Your home. Remarriage frequently involves a jointly-owned home. Depending on state law and how the property is titled, your intention for your children to inherit your share of it could be thwarted.  If the house is deeded as "joint tenancy with right of survivorship" or "tenancy by the entirety," the property typically automatically belongs to the surviving spouse, regardless of what your will says. If you own the house in "tenancy in common," you can leave your share to a person other than your spouse, if you want.

Your personal property. If you want your children to get some particular items when you pass away, be as detailed as possible in your will, so there is no room for confusion.

Power of Attorney. Select someone to handle your finances, if you reach a stage where you can’t. A durable power of attorney for your finances allows your agents to be in charge of paying bills and filing tax returns. A durable power of attorney over health care permits the named person or persons to make important health-care decisions on your behalf, if you are unable to make your own decisions.

Living Will. A living will expresses your wishes if you’re placed on life support or suffer from a terminal condition. It helps guide your proxy's decision-making regarding life support and comfort care at the end of your life.

The process of updating your estate plan starts with a conversation with your spouse and your estate planning attorney. Make sure that your will reflects your wishes. Don’t leave it to chance, or hope that your kids will somehow work it out with your spouse or their step-siblings. Put it in writing, and make it legally enforceable with an estate planning attorney.  Contact the Soto Law Firm today for a free consultation to start the process to protect your family.

Reference: CNBC (January 17, 2019) “Remarried after having kids? Here are tips to avoid accidentally disinheriting them”

Top Five Estate Plan Epic Fails

The problem with mistakes to an estate plan, is that many are irreversible and cannot be fixed. Those that can be fixed are often expensive. It is best to do it right the first time.

Many of the top reasons for estate plans to fail, are a matter of maintenance. Just as your home or car needs ongoing care, so does your estate plan. The simple things often lead to the biggest problems.

Investopedia’s article, “5 Ways to Mess Up Estate Planning” gives us a list of these common issues.

Not Updating Beneficiary Designations. Be certain those to whom you intend to leave your assets are clearly named on the proper forms. Whenever there’s a life change, update your financial, retirement, and insurance accounts and policies, as well as your estate planning documents.

Forgetting Key Legal Documents. Revocable living trusts are the primary vehicle used to keep some assets from probate. However, having only trusts without a will can be a mistake—the will is the document where you designate the guardian of your minor children, if something should happen to you and/or your spouse.

 

Bad Record Keeping. Leaving a mess is a headache. Your family won’t like having to spend time and effort finding, organizing and locating your assets. Draft a letter of instruction that tells your executor or personal representative where everything is located, the names and contact information of your banker, broker, insurance agent, financial planner, attorney, etc. Make a list of the financial websites you use with their login information, so your accounts can be accessed.

Not Funding Your Trust.  A Trust can be thought of as a legal container into which you fund your assets during your lifetime.  Your trust then controls your assets in the event of disability or death.  Just like a shiny new car, a new trust is a great thing to have, and just like a car that won't be going anywhere without gas in the tank, your assets are the fuel for your trust.  If you don't properly fund, coordinate, or re-title assets into the trust, it will be much more difficult to get where you want to go.   You should also keep up to date with funding as you sell or acquire new assets.  Keeping your trust properly funded is a moving target that needs to be constantly reviewed and kept up to date.

Not Creating a Plan. This last one is one of the most common. There are plenty of stories of extremely wealthy people who lose most, if not all, of their estate to court fees and legal costs, because they didn’t have an estate plan.

The solution is simple: make a recurring appointment with your estate planning attorney every two or three years, or when something big in your life changes. Follow through on the instructions, like funding a trust or talking with heirs about your thought processes for asset distribution.  Contact the Soto Law Firm today to make sure that your estate plan will be an epic success.

Reference: Investopedia (September 30, 2018) “5 Ways to Mess Up Estate Planning”

Complete Your Estate Plan While the Year is Still New

A new year brings all sorts of new opportunities. Promises that we make to ourselves don’t always get fulfilled, but one that you can do, with the help of an estate planning attorney, is complete or update your estate plan. It’s good for you and your family.

Having an up-to-date estate plan, before filing this year’s tax returns, is still a possibility. Putting an estate plan in place might be a significant factor in your tax planning, as well as protecting your family from future events. A few key tips come from an article in Utah Business, “5 Estate Planning Tips For 2019,”

Your Will. If you have a will, you’re ahead of more than half of the people in the U.S. Remember, however, that estate planning isn’t a one-time thing. It’s an ongoing process that requires making sure your plan reflects your current wishes and financial situation. You should review your will at least every few years. However, there are also some life events that should trigger a review, regardless of when the last review occurred. These include marriage, divorce, the birth or adoption of a child or grandchild, an inheritance, a large financial loss and the loss of a spouse.

A Trust. Anyone can create a trust, and it has real estate planning advantages. You can use a trust to pass assets to heirs and other beneficiaries, just like you could with a will. However, assets passed through a trust don’t need to go through probate. Using a trust to transfer assets provides privacy.

The Current Tax Breaks. The 2017 Tax Cuts and Jobs Act gives us some significant tax cuts in 2019, such as a temporary doubled lifetime exclusion for the gift and estate tax, temporary exemptions from the generation-skipping transfer tax, higher annual gift limits and charitable contribution deductions. To see if you can use of any of these tax benefits, speak to an experienced estate planning attorney.

Talk to an Attorney for a Review of Your Estate Plan. It’s important to remember that estate planning is complicated. You should, therefore, develop a comprehensive estate plan with the help of an experienced attorney. Don’t be tempted to use an online legal do-it-yourself service to save a few dollars, because any mistakes you make could have a big impact on you and your family’s financial future.

Don’t overlook the importance of sitting down with an estate planning attorney. Estate planning law is based on state law, and every state has its own laws and procedures to be followed. If your estate plan is not done correctly, you run the risk of a will that is declared invalid during the probate process. Such a result could mean that your assets will not be distributed, according to the wishes you expressed in your will.  As a result, decisions will be made according to the laws of intestacy.  An estate planning attorney will ensure that your wishes are properly documented.  She or he will also be able to help you work through the details, based on years of experience in helping others through this process.

Contact the Soto Law Firm today for a free estate planning consultation with an experienced attorney.

Reference: Utah Business (February 5, 2019) “5 Estate Planning Tips For 2019”

Four Fast Financial Fixes

Some financial tasks take a long time, so we put off doing them until they become bigger in our minds than they are in reality.  However, in one hour, you can actually get a lot of good stuff done.

You know how setting up a system that is intended to save you lots of time always takes less time than you thought?

The Washington Post’s recent article, “Got an hour? Chalk up 4 quick financial wins,” gives us a couple of financial tasks that could save you a lot of money and stress in the future. Each of these can also be accomplished in 15 minutes or less, once you’ve decided on a plan and have your information ready.

Adjust Your Withholding. With the tax reform legislation passed last year, you should look at the new tax brackets and the elimination of deductions. It could mean that you’re withholding too much or too little. Don’t wait for April for an unpleasant surprise: do this now!

Draft Powers Of Attorney. You should have at least two estate planning documents. You grant the authority to those you name to make decisions for you, if you become incapacitated. With a medical power of attorney (also known as an advance health care directive), name your toughest advocate—the person who’s devoted enough to carry out your wishes and stand up to doctors or any of your relatives who disagree. With a financial power of attorney, you designate the individual who’s good with money and extremely ethical.  You should also name backups to both positions.

Start College Saving. If you have children, they’re going to need some schooling or post-secondary training to succeed. Consider a state-run 529 college savings plan to save. You don’t have to use your own state’s plan, so if you don’t qualify for a tax benefit in your own state, look at one of the plans Morningstar named as best in the country. These were Illinois’ Bright Start Direct-Sold College Savings Program, Nevada’s The Vanguard 529 College Savings Plan, Utah’s my529 and Virginia’s Invest529 plan.

Roll Over A Retirement Account. Is your current 401(k) plan better than the one you had at your old job? If so, ask if they’ll accept a rollover from the previous account. Ask for help and let them guide you through the process so you don’t make any expensive mistakes.

Don’t overlook another option. You are allowed to roll that old 401(k) into an IRA, which may have more investment options.  You should also ask for help with these transactions. They can be complicated, and mistakes can be costly.

Reference: Washington Post (September 10, 2018) “Got an hour? Chalk up 4 quick financial wins”