Estate planning is one of the best ways to protect your loved ones after you are deceased or are incapacitated. It helps ensure that your administrator will distribute your assets according to your wishes after your death. It is also the best way to ensure that your loved ones know—and will respect—your wishes if an illness or injury incapacitates you.
Despite its importance, there are several common issues with estate planning that people in Phoenix encounter. From legal complexities to oversights, understanding these potential pitfalls can help individuals avoid costly and stressful complications. At Dayes Law Firm, our seasoned estate planning attorneys help you avoid these pitfalls, making things easier for you and your loved ones.
Lack of Proper Documentation
A frequent issue in Phoenix estate planning is the failure to prepare essential legal documents. A comprehensive estate plan typically includes a last will and testament, healthcare power of attorney, financial power of attorney, and advanced healthcare directives. It may also include revocable or irrevocable trusts. Without a will or trust, the deceased’s wishes will not dictate the distribution of their assets. Instead, Arizona’s intestacy laws will apply.
It is not enough to have the correct documents—they must be executed appropriately. Many of these documents need signatures, witnesses, or even notaries to be valid. Failure to comply with those requirements can render an estate plan invalid—leading to disputes and probate delays.
Failure to Update Estate Plans
Life circumstances change, and people need to update their estate plans to reflect those changes. Events that should trigger an estate plan update include:
- Marriage
- Divorce
- Birth of children or grandchildren
- Deaths
- Acquiring new assets
- Changes in state law
Failing to revisit estate plans is a common estate planning issue that someone might encounter. Outdated beneficiary designations can lead to unintended heirs, thus conflicting with a testator’s wishes. Even if someone’s wishes do not change, changes in state law or federal tax laws can impact a testator’s wishes.
Inadequate Consideration of Community Property Laws
Phoenix is in a community property state, which can create unintended problems in estate planning. Community property means that both spouses usually jointly own any assets acquired during marriage, a legal framework that can significantly impact estate planning decisions.
Many individuals fail to account for how these laws affect their asset distribution, potentially leading to unintended consequences where a surviving spouse does not receive the expected share of an estate. Community property laws can also have a negative impact on children from prior marriages if their parent fails to designate them as beneficiaries under their will.
Overlooking the Probate Process
Probate is a legal process where the court system oversees the administration and settling of a deceased person’s estate. It can be time-consuming and costly, especially for estates valued above $75,000 in personal property or $100,000 in real property. Failing to consider the time and money involved in probate can lead to substantial hardship for loved ones and other beneficiaries.
Fortunately, this issue is almost entirely avoidable. Through proper estate planning, individuals can take steps to minimize the probate process. For example, transferring property into trusts—revocable or irrevocable—allows grantors to transfer those assets to beneficiaries without going through probate.
Mismanagement of Trusts
While trusts are a valuable tool for avoiding probate and protecting assets, they must be adequately established and maintained. Common issues include
- Failure to fund the trust
- Naming the wrong trustee
- Choosing the wrong type of trust
- Not understanding the tax implications
It is not enough to establish a trust—people have to fund it. Moving personal possessions like household goods or furniture into a trust is relatively easy. However, when a third party—like a bank or a county—is involved in ownership, the grantor needs to change the title of the property.
Trusts can come with substantial tax implications. Many people think about the estate tax (which only applies to extremely wealthy individuals) but fail to consider capital gains taxes or the increase in tax rates that can accompany income in trusts. Understanding these implications can help people choose the correct type of trust.
Get Help Avoiding Issues with Estate Planning by Calling a Phoenix Attorney
Estate planning in Phoenix can lead to various complications, but careful planning and professional legal assistance can help you avoid these issues, protect your loved ones, and ensure your wishes are respected. Schedule a free consultation with Dayes Law Firm to find out more.
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