protect your assets | locked gate

Four Ways to Shield and Protect Your Assets

If you have substantial assets, come into sudden wealth, or are in a risk-prone business, you really should consider how you can protect your assets against possible lawsuits. Fortunately, there are several ways you can keep your financial holdings secure.

1. Liability Insurance

Your first line of defense against any type of litigation is to have insurance that covers claims. We recommend that you have a personal umbrella liability policy in the amount equal to your net worth. This may provide another big layer of protection if your primary coverage is not enough. If you own a business, the business should also carry adequate liability insurance to protect those assets.

2. Jointly Held Accounts

Any money you deposit in a joint account with children, elderly parents, roommates, business partners, or spouse can be at risk. In short, if the joint owners of any of your accounts file for divorce, incur tax liens, or are involved in a lawsuit, your account is vulnerable.

Depending on your family or martial situation, to protect your assets, you might want to keep your assets separate from your spouse. In many states, a joint account becomes joint property.

If you wish to ensure that only your children from a previous marriage inherit, then a separate account is in order. In the case of a divorce, you could lose a substantial portion of those assets should the money be commingled.

3. Informal Partnerships

You are responsible for the actions of your business partners, so be sure a lawsuit against a partner can’t put all of your assets at risk. You’ll need to create business entities that shield assets. It’s also not a bad idea to compartmentalize your assets. We call this the “silo” technique. For example, an owner of rental properties (rental properties generally carry a high risk of liability) can place each separately leased property in its own LLC or corporation. If one rental results in liability, a creditor will be forced to pursue liability against only one entity and will not be able to reach either the owner or her other properties. Keep in mind, though, that this technique will not shield you from your own personal liability, which is another reason why you need insurance to protect your assets.

4. Property Exemption Laws

Every state shields certain classes of assets through property exemption laws. These laws serve a dual purpose. First, they denote types and amounts of property that are unreachable by creditors. Second, these statutes also denote types and amounts of holdings that cannot be lost by a debtor in bankruptcy.

Learn the laws in Arizona and shield as much as you can. Before thinking about “off-shore” trusts and other such exotic ideas, you should be funding retirement plans and life insurance policies as a first stage to protect your assets.

Protect Your Assets

Protecting your assets now is critical. Too often, attorneys get a call from a client or potential client who has been sued or is about to be sued. At that point, it is often too late. Any transfers at that point are subject to being set aside as a “fraudulent conveyance.” Unless you receive good value for a transfer, if you do it to avoid having to pay a judgment, it is unlikely to stand up in court.

Contact Poulos Law to learn more about how we can hep you protect your assets.

proper estate planning

9 Steps for Proper Estate Planning

No matter how large or small your estate, your assets and family should be protected when you die. Creating a proper estate plan is vital for that eventuality. Here are some easy steps you can take to ensure your estate plan is in place and your assets will be protected and passed on appropriately. Plus, you and your family will have peace of mind.

1. Create a Basic Estate Plan

An estate plan should include a will, assignment of powers of attorney, a living will (medical power of attorney), and for some people, a trust might also make sense.

2. Take Inventory of Your Assets

Create a list of your investments, retirement savings, real estate, business interests, insurance policies, and property assets. Figure out which family members and friends you want to inherit each asset.

3. Create a Will

Proper estate planning starts with a will. This document tells your family and friends how you want your assets to be distributed when you die. This is an important document if you have young children because you will name guardians for them here.

4. Determine If You Need a Trust

You may require more than just a will to protect your assets. Trusts allow you to put conditions upon how and when your assets will be distributed. For example, a child might receive maintenance fees until the age of 30, when he or she will inherit the management of the trust.

5. Discuss the Plan

Be sure your heirs understand the estate plan. This may help prevent disputes or confusion later on.

6. Be Aware of Federal Estate Tax Exemptions

In 2020, estates under $11.18 million for singles and $22.36 for couples were exempt from the tax. Amounts above that are taxed up to a top rate of 40%.

7. Tactics

While your proper estate planning may allow you to leave all your assets to your spouse tax free, this may not be your best option. It could mean your children will likely play more when you spouse dies, and in many cases, it just defers the decisions about inheritance and distribution of assets.

8. Tax-free Gifts

Take advantage of tax-free gifts. You may give up to $15,000 a year to an individual (or $30,000 if you’re married and giving the gift with your spouse). You may also pay an unlimited amount of medical and education bills for someone if you pay the expenses directly to the institutions where they were incurred.

9. Charitable giving

A donation or charitable gift fund or community foundation can be created that will invest your funds and allow distributions to various charities each year.

Questions about Proper Estate Planning?

Armed with this information, you know what you need for proper estate planning. However, knowing is different from building the right plan. Don’t go it alone and risk forgetting an important aspect that will leave your family and heirs in a bind. Instead, trust the professionals at Poulos Law Firm. Schedule your appointment now to learn more.

college students powers of attorney

College Students Powers of Attorney and Healthcare Directives: Necessary?

In today’s world, in the midst of a global pandemic, you may be looking at your paperwork for your business and your life. That’s a good idea. When the possibility of severe illness and even death are possible, it’s important to revisit your estate plan. But do your college-aged children need to worry? Is it important to have college students powers of attorney and healthcare directives?

What if you have to step in?

This is a commonly overlooked item in estate planning. Most people think about taking care of their children financially but almost never think about if something bad happens to their adult child. Without college students powers of attorney, you may be blocked from assisting your child in their medical, education, and legal issues.

You May Not Have the Rights You Think You Do

Most parents assume they have more rights to their student’s information than they really possess. Even though your student is on your health insurance plan and you pay all of his or her medical bills, that does not entitle you to make medical decisions for them in case of an emergency or to get full details of their health crisis or injuries. You are probably not entitled to any information about their medical records—even for such things as a claim dispute. If you pay all of the costs of a child’s college expenses, that does not entitle you to see their grades or discuss their education with a counselor. If your child is out of the country or just a long distance away, you probably cannot act on their behalf.

What Documents Should You Have?

Without these documents, you may not step in when your child needs you most. Encourage your college student to get these powers of attorney and other forms before heading off to school.

  • Durable Power of Attorney: This will allow your child to authorize you to manage his or her financial affairs should he become mentally or physically unable to do so. You will be authorized to handle tasks such as paying bills, applying for social security or government benefits, and opening and closing accounts.
  • Medical Power of Attorney: This allows your child to authorize you to make medical decisions if he or she is incapacitated and unable to do so. An agent acting under a medical power of attorney may see the principal’s medical records to make informed medical decisions on his or her behalf.
  • HIPAA Release: HIPAA (the Health Insurance Portability and Accountability Act of 1996) requires healthcare providers and insurance companies to protect the privacy of patients’ healthcare information. Those who violate HIPAA are subject to civil and criminal penalties. This may include jail time. Therefore, providers will be reluctant to share protected health information without authorization.
  • FERPA Release: You also might want a FERPA release, which allows you to have access to your child’s educational records.

How to Talk About College Students Powers of Attorney

You child is transitioning into adulthood. They may be reluctant to provide what they perceive as continued authority. They are adults and want you to treat them that way. Explain what might happen if they have a medical emergency or need you to help with financial matters. Let them know that college students need powers of attorney and to plan ahead. Also, remind them that they can revoke these documents. Lastly, discuss with them how and why such documents will be used.

Putting these documents in place can be one of the best things you can do for your child. It does not have to be expensive, but it must be done correctly.

Contact us to learn more about setting your college students up with powers of attorney.

COVID-19 estate planning: sign on playground

Take Your Power Back from COVID-19: Estate Planning Steps to Protect Yourself and Your Loved Ones

News about the coronavirus is everywhere. And even if we are completely healthy, all of us have been affected by the situation in some way. Although it may seem as though circumstances are spinning beyond our control, we are not powerless. There are some COVID-19 estate planning steps we can take to protect ourselves and our families, both physically and financially.

Step 1: Stay Safe

The first, and perhaps most important, step is to exercise caution in our interactions with others to ensure their health as well as our own. This includes taking care to stay the recommended distance away from others, especially those who are more susceptible to illness. Washing our hands is key to avoid spreading germs.

COVID-19 is a dangerous virus for some people, but the good news is that a large majority of people have not been infected. And most of those who have become ill are recovering fully.

Step 2: Review Your Estate Plan

Constant news reports about this year’s novel coronavirus have brought our wellbeing and that of our families into a sharper focus. This pandemic has highlighted the importance of planning for the unexpected. A second concrete step you can take to ensure the welfare of your family is to review your COVID-19 estate planning documents. Take a close look to verify that they still reflect your wishes and are able to accomplish your goals.

As you review your documents, ask yourself a few important questions:

Would your last will and testament and/or revocable living trust still achieve your goals?

In your will, you have specified how you want your money and property distributed to the beneficiaries you have chosen. In addition, if you have children, you probably named a guardian in your will to care for them. Perhaps you even specified a caretaker for your pet.

In your revocable living trust, you likely named a trusted person to be your co-trustee or successor trustee. This person will step in to manage the money and property held in the trust if you are unable to do it yourself. In addition, you specified how the money and property in the trust should be distributed to beneficiaries when you die.

Life is constantly changing. Now, as you consider your COVID-19 estate planning, it is important to review not only the people you have named as beneficiaries, but also whether the people you named to act as your executor or trustee are still your top choices. Even if you are still comfortable with your previous choices, are the individuals you selected currently available to act in those roles? Is the person you chose to be the guardian of your children still available and willing to care for them?

If several years have passed since you drafted your documents, your executor or trustee may have moved away or may otherwise be unwilling or unable to serve. In the current crisis, the person you have selected may be unavailable due to illness, quarantine, or a stay-at-home order, and if he or she lives out of state, may be subject to travel restrictions.

Are you still comfortable with the people you have named to be your agents under your medical and financial powers of attorney?

In your medical power of attorney, you named a person you trust to make medical decisions for you if you are too ill or unable to speak for yourself. In your durable financial power of attorney, you designated an individual to make financial and property decisions for you should you become unable to manage your own affairs.

Because of the prevalence of stay-at-home orders, travel restrictions, and self-quarantines, make sure the person you have chosen is currently available to act as your agent. Consider designating individuals you trust but who also live close by to act in these roles. [Consider also if you have young adult children who might need medical and financial powers of attorney.]

Does your living will or advance directive still accurately reflect your wishes?

The legal document that spells out your wishes concerning end-of-life care is crucial to have updated. Make sure family members have a copy of it or know where it can easily be found to ensure that they will not have to guess about what you would want if you become very ill and are unable to communicate your wishes.

Do you need to modify or update the beneficiary designations of your retirement accounts and insurance policies?

If you have already named beneficiaries, now is the time to make any changes that are necessary to reflect your current wishes.

Do you have a list of legal, financial, and medical professionals who have performed or are still performing services for you? If you do, is this list up to date?

The list should include contact information so your family can easily reach them in the event their help is needed if you become ill or pass away. In addition, ensure HIPAA authorizations are in place with medical professionals so your family members are able to obtain needed information.

Do you have a current list of all your accounts and important documents?

The list should include bank and investment accounts, titles to vehicles and homes, credit card accounts or loans, digital accounts (e.g., Facebook, LinkedIn, and Twitter) and passwords, Social Security cards, passports, and birth certificates. All of these may be needed to manage your property if you become ill, or to settle your estate if you pass away.

Is Your COVID-19 Estate Planning Ready?

If you have all of these documents in place, you are well prepared! If your estate plan needs updating or if you don’t have an estate plan, this is something you can do today to prepare for the future. We have put procedures in place aimed at safeguarding your health during the current health crisis and are happy to meet with you over the phone or via a videoconference. Our primary goal is to help you have peace of mind about the future—regardless of the circumstances.

Eventually, this crisis will be over (and that day can’t come too soon!). Right now, though, know that we are still here for you. Please give us a call to take action to ensure the best COVID-19 estate planning is in place to provide for your care and for your family.

transferring assets

Transferring Assets to Yourself as a Trustee

When thinking about estate planning, many people think of a trust—and rightfully so. A trust is an excellent way to avoid probate and ensure your assets go to the people you want to have them. But many people unfortunately forget about transferring assets to the trust. Even if you are the trustee, you still need to move those assets. Why? Because if the titles to certain assets remain in your name, and not within the trust, your estate will likely end up in probate court.

A formal transfer of title to a trustee—even if the trustee is you—is needed to avoid the inconvenience of probate. Here are some things to consider:

Your Primary Place of Residence/Vacation Homes/Other Real Property

If you plan to hold your primary residence in trust, you should transfer the title to the trustee, whether that is you, you and your spouse, a child, or a trusted friend. The same thing applies to vacation homes or other real property. For each piece of property, you must create a new deed transferring assets and ownership to the trustee, even if that’s yourself.

Checking Accounts

Changing your checking account can be very inconvenient, and most people don’t keep large amounts of cash in these types of accounts. Therefore, there is no need to transfer the account to a trustee. Most states permit the transfer of funds (under a certain amount) without formal probate.

Savings Accounts

Banking or savings and loan association savings accounts should be held by the trustee of a revocable trust. Financial institutions will work with you to complete the necessary paperwork for transferring assets to the trust.

Securities/Marketable Securities

A broker will help you prepare a new account agreement for transferring assets and securities into a trust. To transfer a stock certificate, you must submit the certificate, along with an executed assignment, with your signature guaranteed by stockbroker or bank, to the transfer agent with instructions to reissue the certificate to the name of the trust.

Life Insurance/Retirement Plans/Annuities

You are not required to transfer ownership of certain assets such as life insurance, retirement plans, and accounts or annuities to a trustee since the beneficiary designation form filed with the respective organization will designate who receives the proceeds. To change a beneficiary, simply reach out to the agent or company and ask for a beneficiary designation change form.

Be sure to review your beneficiaries regularly so you don’t end up leaving assets to an ex-spouse or someone who has predeceased you.

Seek Professional Advice

It can be a hassle to manage transferring assets to a trust. However, if you want your estate to pass on with the least amount of issues, it’s an imperative. Instead of going it alone, trust and experienced estate planning attorney to help you establish a trust and work through all the necessary documentation. Poulos Law Firm has been working with clients and their estate plans for 30+ years, and we are happy to answer all your questions. Contact us to get started.

single female

As a Single Female, Who Will Protect Your Assets?

As an estate planning attorney, I receive all kinds of questions regarding passing on and protecting assets. Recently, I received a question from an older, single female. Jen is 57 years old, not married, has no children, and isn’t close to any extended family members. For now, she manages her own assets and affairs, but she wanted to know how to structure an estate plan to ensure she and her estate are cared for should she become incapacitated. While she has a brother, she is unsure if he’ll be in a position to look after her affairs in the future.

Changing Family Dynamics Mean Changing Estate Plans

As medical practices improve, people are living longer. According to CNN, an American single female (or married woman, for that matter) will have a life expectancy of 81 years. In addition, our social dynamic has changed, and “married with kids” is no longer the norm. In short, I am seeing more and more “solo agers,” especially that single female. And they aren’t quite sure how to structure an estate plan to ensure they are cared for and their assets are passed on according to their wishes.

How a Single Female Can Protect Herself

In answer to Jen’s questions, and to help any solo ager, I recommended that she create a revocable trust and name herself trustee for now. She can transfer all her assets into a trust and still manage her own affairs. In addition, she’ll change the beneficiaries of her life insurance, annuities, and retirement plans to reflect her current wishes. For now, those assets go to her brother.

Last, but not least, as part of the revocable trust, I also recommended that she name a team of trustees—like her brother, an accountant or financial institution, and an attorney—who can take over and administer the trust in case something happens to her.

Have Estate Planning Questions?

If you are a single female and need to structure your estate plan to ensure your assets are properly cared for, contact us. We have more than 30 years of estate-planning experience to help you craft a plan that will work for you.

how to create an estate plan

15 Steps for How to Create an Estate Plan

Have you created an estate plan that lays out how you’d like your assets to transfer to your heirs when you die? If you’re like 68% of Americans, you likely haven’t. And that could leave your loved ones wrestling with probate court, which can be agonizing when they are already grieving your passing. Not to mention the cost that’s associated with probate. Instead, let’s look at how to create an estate plan and the 15 things you should consider along the way.

1. Create a will.

A will is a basic part of an estate plan. Essentially, it provides instructions on how to disperse your assets when you die if you have not named beneficiaries. Without a will, your probate property will pass to your survivors based on your state’s laws of intestacy. Generally, that means that your assets will be split between your spouse and children. That might not be an issue—unless your spouse is not the parent of your children or you have a blended family. If you are single when you die, your assets will go to blood relatives, even if you would have preferred a friend to inherit them.

2. Consider a trust.

When thinking about how to create an estate plan, one of the keys that many individuals don’t consider is a trust. However, this is one of the strongest ways to ensure your wishes are carried out. If you transfer your property into a living trust, your survivors won’t have to go through probate court. The trust will allow you to direct how your property should be managed in the event of your mental incapacity or disability, as well as how your assets should be disbursed upon death.

3. Protect your children.

For most parents, protecting their children is their #1 goal while they’re alive and long after they’re gone. To designate who will care for your minor children when you die, part of how to create an estate plan should include naming a guardian. This is the person who will be responsible for raising your children. If you don’t state the person you would like to raise your children, the court will make that decision for you—and them.

In addition, you need to designate a trustee to manage the assets that your children will inherit. Parents can choose for the guardian and trustee to be the same person, but they may designate different people. After all, the person who is the best caregiver for your children may not be the best choice to oversee their financial future, and vice versa.

4. Review your beneficiaries.

Any investments you have, such as life insurance policies, annuities, and retirement accounts, use a beneficiary designation form to assign where assets will go when you die. When you create an estate plan, it is important to keep your beneficiaries up to date. You should also plan to review these policies regularly as life events occur.

5. Create advance healthcare directives.

Part of how to create an estate plan should include advance care planning, namely healthcare directives. The documents that are included in this plan are:

  • Living will: provides instructions if you are dying or unconscious and cannot voice your decisions about emergency treatment
  • Durable power of attorney for healthcare: names a healthcare proxy to make decisions on your behalf when you are unable to do so
  • HIPAA authorization: allows someone else to have access to your medical records

6. Create a financial power of attorney.

With a durable power of attorney for finances, you can give a trusted person authority to manage your finances and property if you become incapacitated and unable to handle your own affairs. That person is called your agent or attorney-in-fact (but doesn’t have to be an attorney).

7. Consider life insurance.

Life insurance provides financial support for your loved ones when you die. If you have small children or significant debts, a life insurance policy is a smart way to help your family avoid financial challenges when your income is no longer available.

8. Understand estate taxes.

Estate tax is a tax on property transfers when you die. The federal government uses fair market value, the total of which is called the gross estate. This may include cash, securities, real estate, insurance, trusts, annuities, and business interests.

In 2020, combined gross assets and prior taxable gifts exceeding $11,580,000 will need to file an estate tax return. Also, married couples can transfer up to twice the exempt amount tax free, and all assets left to a spouse (as long as the spouse is a US citizen) are tax free.

9. Anticipate the cost of funeral expenses.

In addition to the emotional challenges your loved ones will face when you pass, there is the cost of the funeral. In the US, the National Funeral Directors Association states that the average funeral cost is $7,360 and a cremation costs $6,260 on average.

Instead of leaving your family to worry about these costs, part of how to create an estate plan may include a payable-on-death bank account that has the funds needed to pay for these expenses.

10. Make final arrangements.

Let your heirs know now, verbally and in writing, what you would like to happen when you die. Whether you want to donate your organs, be buried, or be cremated are important considerations to share.

11. Protect your business.

One of the things that many people forget to include in their estate plan is their business. If you are the sole owner of a business, you should have a succession plan in place. And if you own a business with others, you should create a buyout agreement.

12. Store your documents.

The people you name to take care of your property, whether an attorney in fact, your executor, or trustee, will need to know about your property and where to access your documents. To avoid making that person spend unnecessary time and effort trying to figure out what to do, consider keeping a folder or notebook with your important documents, a list of your assets, and the names and telephone numbers of your professional advisors. Remember to include a list of your online accounts and passwords as well. Get a home safe or firebox for these documents and make sure someone else knows where the key or combination is.

13. Leave a letter.

When you look at how to create an estate plan, one of the things those who are left behind will miss most is you. Some people choose to leave a letter (or several letters) or video to say goodbye to their family and friends. Not only does this allow you to share your thoughts and feelings, but it can provide much-needed closure during a time of deep grief. Though not a legal document, those last words can mean a great deal to your loved ones.

14. Review your plan.

While it may seem like a one-time effort to write an estate plan, it truly is a living document. It should be reviewed every five years as well as following any major life changes, such as births, deaths, marriages, and divorces. During that review process, you can ensure that your documents are current with your wishes, your beneficiaries are up to date, and your designated guardians and proxies are still living and able to fulfill your wishes.

15. Don’t do it yourself.

One of the most important things to remember is that how to create an estate plan can be complicated. The problem with using DIY estate plans on line is that you do not know what you do not know – that is the consequences of your choices. Those forms are created to service millions of people and so are very generic. Certainly, if you have a lot of assets, a business, or a blended family, you may need professional assistance.

Poulos Law Firm has extensive experience drafting estate plans for individuals. Contact us to learn how we can help ensure that your legacy is designed according to your wishes.

sole proprietor

Sole Proprietor? What Happens to Your Business without You?

As a sole proprietor, you and your business are the same. When you die as a solopreneur, so does your business. It may sound harsh, but it’s the truth. When you die, your family will have to sell any assets of the business (if you have any) to pay off debts. Anything left will be distributed according to your will. There will be no more income to support your family, and if your debts are substantial, your family gets nothing. That is a horrible result.

But you can change that outcome with some proper estate planning.

Create a Business Estate Plan

If you own a business yourself, all of your assets will be tied to the business. Not only do you need to determine now what will happen to your business when you die, you need to provide for your family—especially if they rely on your business income and salary.

That’s where a business estate plan comes in.

There are certain components you should include in your plan to protect your family and your business once you’re gone.

Life Insurance

Life insurance can be a game changer for a sole proprietor, especially if your revenue is the primary income source for your household. A life insurance policy provides funds for your family to live on once your income is no longer available. In addition, if you have a business partner, the money from insurance can be used to pay your partner or buy out your interest.

Important Documents

Don’t make your family wonder where all of your documents are, what’s in your queue in your business, or how to get things done. Organize your paperwork now. Include:

  1. Operations manual that outlines everything you do in your business as a sole proprietor.
  2. Organized customer list and database, whether in a note program, Excel, or CRM.
  3. List of your passwords for banking and any websites, such as your business website.
  4. Folder of important business documents and legal documents, including contracts, leases, or operating agreements.
  5. Durable financial power of attorney in case you are unable to make business finance decisions yourself.
  6. Complete personal and business estate plan. A trust can be a lifesaver for those a sole proprietor leaves behind.

Emergency Bank Account

When you die as a sole proprietor, your assets may be tied up for weeks or even months. Leaving an emergency bank account for your family to access for cash to pay immediate bills will provide much-needed comfort during their time of grief. That financial cushion also provides time to make decisions calmly without having to rush around trying to figure out how to keep things in place until decisions can be made about what to do with the business.

Instructions

This may be the simplest thing to do but the hardest to get done. Sit down and take the time create an instruction document for your family. Tell them where your important documents are. Leave them information about what must be taken care of immediately. Avoid leaving your family in the dark about what to do at a time when they are in the middle of grieving. If they have such a document or checklist, it will make it easier for them to step in and keep things running until they can get a handle on what to do.

For a Sole Proprietor in an LLC

All LLCs should have an operating agreement. Even single-member LLCs. In the state of Arizona, if you do not have an operating agreement, the state will provide one for you. That state mandate may not be what you want, though, especially if the LLC needs to be immediately dissolved and the assets disbursed.

Your operating agreement should say what happens in the event you or another member of the LLC (if there are others) dies. A sole proprietor needs an operating agreement just as much as a larger business does.

Get Help with Your Business Estate Plan

As a sole proprietor, your business means everything to you and your family. Make sure you protect it and them by planning now for your passing. Contact us. We have extensive experience in developing plans and ensuring that your wishes are fulfilled.

Arizona divorce law

How Does Arizona Divorce Law Affect Your Estate Plan?

Many people come to me with questions about Arizona divorce law and what happens to their assets in the case of a divorce.

Before anything else, I always suggest people change their beneficiary designations and rewrite wills, trusts, or estate plans in the case of divorce. However, accidents can and do happen, and someone may pass away before they are able to make the changes, but after a divorce is finalized. In that case, Arizona has specific laws that apply.

Arizona Divorce Law and Your Will

In the event you divorce and something happens to you, your will remains valid. Your ex-spouse, however, is no longer considered a potential beneficiary, fiduciary, executor, guardian, or trustee for your estate. You must be careful here because a separation decree will not disqualify your spouse. In addition, an ex-spouse is removed as an agent for financial or healthcare power of attorney documents, although a power of attorney remains valid unless another person is willing to service in that role.

Life Insurance Following Divorce

What happens to life insurance benefits? Arizona divorce law will automatically disqualify the ex-spouse as a beneficiary unless specifically stated otherwise in a new beneficiary designation filed after the divorce.

The same is true for pay-on-death, transfer-on-death, or in-trust-for designations. With these, the ex-spouse is disqualified. Therefore, it is important to change all your beneficiary designations once the divorce becomes final, just in case your ex tries to collect before any changes are made.

Divorce and Estate Planning

When it comes to profit sharing plans, 401(k)s, and other ERISA plans, the person named as the beneficiary will receive the assets. In short, if an ex-spouse remains as beneficiary, he or she will receive the benefits. Again, it is important to remember to update all beneficiary designations on everything after a divorce.

That being said, the distribution of IRAs assets is more confusing. The IRA custodian will treat the ex-spouse as the beneficiary if there has been no knowledge of the divorce. Despite Arizona divorce law disqualifying the ex from receiving benefits, there has been precedent for an ex-spouse to contest the matter in court and win.

Living Trusts

A living trust has similar rules as a will. For a joint marital property trust, each spouse will be treated as having predeceased the other. That means if one spouse passes away before the divorce settlement is final, half the community and separate property would be distributed to the beneficiaries. For separate property trusts, the ex-spouse is disqualified as a potential beneficiary or trustee.

As for property held in joint tenancy, it will automatically convert to tenancy-in-common. In short, the property will no longer go automatically to the survivor. The property will now be subject to probate, and the court will decide how to award it.

Questions about Your Estate Plan and Arizona Divorce Law?

At the Poulos Law Firm, we recommend clients review their estate plans annually. This way, if there are any issues, you’ll be able to manage them in a timely manner. Otherwise, you may end up having an estate plan that doesn’t suit you or your family.

If you have questions about how Arizona divorce law affects your estate plan, please schedule an appointment with our office. We’re happy to talk with you about your unique needs and ensure your legacy is protected.

getting divorced

Getting Divorced? 8 Estate Planning Steps

There are no two ways about it: getting divorced is an exceptionally emotional time. In addition to the emotional highs and lows, there are the legalities to address. You have an overwhelming number of decisions to make and things you should think about it.

It’s hard to even consider that list of tasks when all you really want to do is crawl into bed and pull the covers over your head.

However, taking certain steps now will help prevent even more potential pain down the road. We’ve all heard the horror stories of angry, soon-to-be-ex-spouses cleaning out bank accounts, moving assets, and destroying documents. You don’t want to be a statistic.

Though your spouse has certain rights throughout the divorce process, you do want to control your assets as much as possible. Here are 8 steps you should and can take immediately while getting divorced:

Step 1: Review Pre- or Post-nuptial Agreements

You set up these documents for good reason. Now is the time to unearth them and start to take a look at them. Be sure that you are sharing any agreements with your attorney as soon as possible so that your rights are protected.

Step 2: Determine What You Can—and Cannot—Change Now

Although you may be ready to make all kinds of changes as soon as you’ve determined you’re getting divorced, you must ensure you’re within the limits of the law. While some documents can be altered now, others cannot.

For instance, you cannot change the beneficiary designations on life insurance, retirement accounts, pension plans, or 401K plans. You also cannot remove family members from your health insurance. You can, however, file a complaint for divorce which will put a hold on all assets.

Step 3: Healthcare and Power of Attorney

While you are getting divorced, you can immediately change the name of the person you’d like to look after your health and finances (power of attorney documents) in case of accident and before the divorce is final. You are required to revoke the power of attorney and execute a new one and provide notice to your soon-to-be-ex of the change.

Step 4: Update Your Will, Estate Plan, and Trusts

If your state allows you to execute a new will, trust, or estate plan during the divorce proceedings, you should do so. Usually in a divorce, the court will issue a preliminary injunction, which requires that certain things such as assets and moving are prevented. Until you are divorced, you are obviously still married, so this injunction may prevent you from changing your estate plan documents and requires a conversation with your divorce attorney first.

However, once the court enters a judgment of divorce, spouses are automatically disqualified as a beneficiary and as a fiduciary (e.g., trustee, personal representative). This does not, however, apply to pensions, 401(k), profit sharing, and other retirement plans. Arizona law does not protect you, so you must notify them of your divorce and change beneficiaries.

IRAs are a little different. Even though Arizona law protects you, IRA custodians may not be willing to follow that law if they are not notified of the divorce. You should also probably immediately change death beneficiaries on life insurance and bank accounts, just to be sure.

Step 5: Decide What to Leave Your Ex

In some cases, you may not wish to disinherit your spouse from all assets or benefits. This is particularly true if you share joint care of a special needs child who will require care and support into the future.

Special needs estate planning is an in-depth topic and one that cannot be fully covered here. Be sure to consult your estate planning attorney for assistance if this relates to your situation.

This is just one instance where you might choose to leave assets to an ex-spouse, particularly if the divorce was fairly amicable, but there may be others. Now’s the time to consider.

Step 6: Revisit and Review

Once the divorce is final, you should go back and review all beneficiary designations, draw up a new will, trust, or estate plan, and make any final changes to power of attorney documents. At that point, you’ll be able to designate beneficiaries and draw up new documents.

If You Are Getting Divorced, Trust Your Estate Planning to Poulos Law Firm

While the emotional aspect of getting divorced is tumultuous, and you have many aspects to consider legally, now is not the time to neglect your estate plan. Poulos Law Firm has years of experience assisting individuals and families through this trying time to ensure that your loved ones’ future is secure.

Contact us to schedule your initial consultation and learn how getting divorced affects your estate.

what is a trust protector

What Is a Trust Protector?

A trust is a way to help you control who will receive distributions of your wealth—on your terms. A well-crafted trust can preserve your legacy after you die, as well as help your family avoid the hassle of probate court. While you now understand this important legal document, the next question is: what is a trust protector?

What Is a Trust Protector?

Generally, when you create a trust, you name a trustee, or trustees, to help enforce the terms of the document. It’s always a good idea to have extra protection to ensure your wishes are carried out. In addition to a trustee, you can also name a trust protector. What is a trust protector? It is an independent third party or institution who provides oversight of the trustees and funds.

Sadly, where money is concerned, trustees are not always trustworthy. Often, the more money, the more likely a trustee is to abuse his or her responsibilities.

When you name a protector, it has to be someone other than a trustee. In fact, a trust protector can never be named a trustee. This is a good way to prevent the protector from becoming greedy.

The Job of a Trust Protector

The third-party trust protector can be granted limited or expansive duties. At a bare minimum, the protector should have the power to remove and replace existing trustees. Failure to do so means that if a trustee dies and no replacement has been designated, the court will step in and pick one. And as you’re likely well aware, when the courts get involved, they don’t always choose the person or people you might have designated.

In addition, the trust protector can be given the power to settle disputes among co-trustees, or between trustees and beneficiaries, and even to alter trust provisions due to unanticipated circumstances (for instance, changes in the economy or tax laws), and even dissolve the trust.

The Importance of a Well-constructed Trust

If you are setting up a trust that will continue for decades, designating a protector can be critical. If given broad powers, the trust protector (most likely an institution) will be able to adapt the terms of the trust through the generations. In addition, in some states, including Arizona, the trust protector may exercise these powers without the need for court approval.

Beyond Designating Your Protector

A trust protector is entitled to be compensated for the service he/she/it provides on behalf of the trustees and beneficiaries. Therefore, it is your responsibility to determine how that will occur and to clearly document the process in the trust. That means you’ll need to designate the funds for this role.

If you have already created a trust and it does not have a protector, the trust can be reformed. The consent of all parties is required to do so, but it certainly is possible.

As you are creating (or amending) your trust, you will be best served by utilizing the services of an experienced estate attorney. At Poulos Law Firm, we understand all aspects of creating a trust to ensure your heirs are protected and your estate goes where you want it to go. Contact us to schedule an appointment to learn more about trusts as well as in-depth information on what is a trust protector.

leave assets to minor children

How Do I Leave Assets to Minor Children?

What would happen to your young children should something happen to you? Have you named a guardian in your will? Have you created income streams or designated specific assets to see to their well-being into the future? If you want to leave assets to minor children, you need to plan for it now.

Common Mistakes Parents Make

One of the most common mistakes parents make is to assume that, by naming a guardian for their minor children in their will, the guardian will automatically be granted access to the estate assets to take care of the children. Unfortunately, that’s not what happens.

Unless you have your wishes clearly—and legally—outlined, the court will control how your estate is to leave assets to minor children. The guardian isn’t the one to control that inheritance. And this control is enforced until the child reaches the age of majority, either 18 or 21.

Upon achieving that magic age, your child will receive the entire inheritance. If you think back to how much sense you had at age 18, you might have some serious reservations about placing a lot of money at your child’s disposal.

Legal Requirements for Bequeathing to Minors

When the court is involved in distribution of assets to your children, they will have requirements. Every time your child’s guardian wants to use money from the fund, they’ll need to document it. Those expenses will then be audited and approved by the court.

In addition, each time money is requested from the estate, an attorney has to be appointed to represent the minor child in court. Naturally, the attorney’s fees will be deducted from the funds you’ve left behind. That can eat away at their inheritance quickly.

If relatives leave assets to minor children, the same rigamarole will occur. The court will step in to protect the child’s interests—even when the parents are still alive. This happens when a minor child is named as a direct heir, especially of high-dollar assets.

How to Properly Leave Assets to Minor Children

Children’s Trust

There has to be a better alternative, right? One option is to create a children’s trust as part of your estate plan. In the trust, you will designate a person who will manage how you leave assets to minor children. That takes power back from the court and keeps it with a trusted friend or family member.

Of course, in this scenario, you can still decide when or if your child will inherit, as well as the conditions under which they will do so. Keep in mind, however, that this provision won’t go into effect until you die. It will not occur if you are incapacitated.

Revocable Living Trust

Another option—and probably the best—is to create a revocable living trust.

A revocable living trust is extremely flexible and allows you to take each of your children’s needs and circumstances into account. You don’t parent all of your kids the same, so why would you leave assets to minor children in the same way? Here, you’ll appoint a trustee, who will manage the inheritance until your children reach the age you want them to have full access to the funds.

Plus, with a revocable living trust, all of the provisions hold when you are incapacitated as well.

When you choose a smart way to leave assets to minor children, they are protected from the courts, creditors, divorce, and even their own excess. And your revocable trust can be amended at any time. If you have second thoughts about a provision or change your mind about the trustee, making modifications is easy through a trust amendment document. In the unfortunate instance that your child predeceases you, you can also dissolve the entire document.

Poulos Law Firm Helps You Leave Assets to Minor Children

It can be disconcerting to think about dying and leaving your children. But it can be even worse for them to leave them ill prepared for their future should you pass away unexpectedly. Being prepared is the best gift you can leave to your minor children.

At Poulos Law Firm, we help you make plans that protect your children and family. Contact us to schedule a consultation and learn more about how to properly leave assets to minor children.

I Signed a Deed Disclaimer and my Spouse Died – Oh No!

I Signed a Deed Disclaimer and my Spouse Died – Oh No!

What are we talking about here? In Arizona, any assets purchased during the marriage are presumed to be community property. One exception is when one spouse signs a disclaimer deed as part of a real estate transaction. This situation usually arises when the couple purchases a home, and one spouse has much better credit than the other spouse. It can also happen when one spouse is putting up all of the money from their own separate funds and want to keep it that way.

We recently received a question from a person concerned about a spousal disclaimer signed by a relative. This involved the effect of a disclaimer deed after death. The man had signed a spousal disclaimer so his wife could purchase a house under her name. He did this because the wife had good credit and he had poor credit. The home was purchased during their marriage. The wife recently died from a stroke and the concerned person asked if the man still has any rights to the house as a surviving spouse. There was no Will and they have two adult sons.

Probate is different than divorce.
• In a divorce the husband would probably not be entitled to the house because it is separate property unless he could prove other factors that might entitle him to some of the house such as the source of the funds or other financial considerations.
• Probate is Different.
o Where there is a will. If there was a Will, that would control what happened to the estate (and the house). The wife could leave the house to whomever she wanted, but the husband might be entitled to a certain percentage of her estate as you cannot totally disinherit your spouse.
o Where there is no Will, probate is guided by intestate rules. In short, the husband receives half of any community property and all of his spouses separate property. This true unless the wife had children from another relationship. In that case the husband gets half and the step children get the other half.

Is There a Solution? Yes. The best alternative is when the spouse’s credit is repaired to ask the bank to add the spouse to the title and mortgage. In some cases, with appropriate counsel, a quit claim deed putting the spouse on the title may be appropriate. A review of the mortgage or deed of trust would be in order to do this properly.

Don’t Forget about this. We see many instances where this is forgotten and only comes up when the spouse dies creating unnecessary legal issues about the effect of the disclaimer deed after death. We also see people use self-help with on-line forms only to create title nightmares. Don’t be that couple.

Your Estate Plan May Be Worthless

WHAT!? Why? There are eight reasons why the estate plan you thought was fine may not ensure that your wishes are carried out.

1. Missing Parts of the Plan

You may be missing some critical parts of an effective estate plan. At a minimum, all clients should have a Will, financial power of attorney, and an advanced medical directive, that have been reviewed by an attorney within the last few years or after any major recent life event changes.

2. Outdated Information

You have not updated your beneficiaries or executors since you created the plan. We get it! Thinking about dying is depressing, but you have to if you want to make sure that your wishes are carried out. That means adding grandchild or removing beneficiaries who may have passed away. Certainly, you want to make sure the executor of your estate is someone you trust, able to serve and still alive and kicking.

3. Forgotten to Allocate Ownership of Valuables

You may have forgotten to include the ownership of jewelry, family heirlooms, paintings or even recently acquired valuable items in your estate plan. Not detailing who gets what is likely to end up with the family embroiled in a war on who gets ownership of your engagement ring or that Monet painting.

4. Neglected Life Insurance Beneficiaries and IRA’s

You may have forgotten to review your life insurance policies and IRA’s for years. What happens if you’ve divorced and remarried, but your old insurance policy names the first spouse as beneficiary? What happens if the policy hasn’t been funded properly and has lapsed? What if your beneficiary should not receive an outright distribution

5. Named a Family Member or Close Friend as Trustee

Naming someone you trust to be your executor or trustee is good idea, however, you must also make sure the person is aware of what the role requires and the fiduciary responsibilities it entails. We often see people named as executors or trustees who are unprepared to accept the role or are even incapable of carrying it out. You might consider appointing a third party, such as a Licensed Fiduciary or trust company to administer your estate. Yes it hurts to pay for this service, but you may save money and hurt feelings instead.

6. Tax Laws Have Changed

It should come as no surprise that tax laws change all the time. Estates created, but not amended to take these changes into account, can cause significant loss of wealth for your beneficiaries.

7. Passing Retirement Accounts to the Estate Rather Then to the Individual

There are significant benefits to passing on retirement savings through a beneficiary designation. Passing directly to a beneficiary avoids the probate process, which saves time and costs and beneficiaries are permitted to keep the majority of the assets in the tax-advantaged accounts.

8. You Moved to a New State

Every state has different laws for governing estate plans. If you move to a new state, it is critical you have an estate planning attorney review your documents to ensure you are in compliance with specific state laws.

In short, estate planning isn’t a one-time process. In general, you should review your estate plan after any major life event, or every few years to make sure your estate remains in compliance with local, state and federal law.

Eight Things to do When a Person Dies

When someone passes away, it is always an emotional time for family members. Unfortunately, it is also a time when someone in the family should think clearly, because there are things you should do immediately that will help make the experience easier for everyone in the family.

#1: Get Access to the Home

Gaining access to the home or apartment may be tricky, especially if you don’t have keys. A landlord of a rental property may or may not allow you access without court approval and you may need to enter the premises in the presence of a municipal employees.

Once you are there, you may only be allowed in once, so get everything you need immediately. Gather everything valuable – jewelry, family heirlooms, artwork, etc. Maybe even find that coffee can of money stashed under the mattress, and put it all in a safety deposit box or turn it over to the executor of the estate. Make a list of all valuables that you removed or put that iPhone to work and take pictures.

#2: Find the Documents

Once in the home, gain access to all the important documents you might need … that includes banks accounts, tax returns, insurance documents, financial statements, credit cards, retirement plans and more. That might means digging through tons of paperwork in the home to find what you need.

#3: Change the Locks

Once you have access to the property, you should have the locks changed. You never know who might have a key.

#4: Freeze all Financial Accounts

Protect the assets by freezing all financial accounts. This will stop any automatic payments of bills, and prevent scammers from stealing mail, accessing credit card info and more.

#5 Forward Mail

Go to the post office and have the deceased mail forwarded to you or to the executor of the estate. This is the best way to get information about accounts and other matters. You may require a letter from the administering attorney stating your authority.

#6: Deal with Utilities

If the deceased owned a home, you’ll need to decide what to do about utilities (turn off gas, water, electric, phone, etc.). If the deceased rented a property, work with the landlord to make decisions about the apartment. Keeping the property maintained during this time is important.

#7 Hire an Attorney and Accountant

Unless you want to do all the legal work and prepare the tax returns personally, hire an attorney and an accountant to help you prepare all the documents that will be needed to close out the estate.

#8 Talk to Family

It is important to talk to other family members and heirs so that you all agree on a course of action to take with the estate. Working together in probate matters saves time and money; contesting an estate can lead to huge legal fees, long wait times, and severe disruption of the family.