By Laura Latzko
Estate planning may seem like a grim topic that can be put off until it is necessary.
Avoiding it, however, can have financial and emotional implications. Deb Smith and her family have been proactive about wills, trusts and power of attorney documents.
The whole family
Smith, her husband, their daughters and parents have taken steps to protect their assets and/or name powers of attorney in case anything happens to them.
The Chandler resident even teaches juniors and seniors in high school about estate planning through her company OutLoud Marketing Studio.
She is following her parents’ example, as they are on top of their documents.
“My mom is remarried to my stepdad,” Smith says.
“It is important when you have mixed families like that, being specific on how things are inherited, if one person dies, making sure that kids aren’t cut out of the wills. It goes back to general financial planning and retirement planning. My parents have been a really good example.”
Smith wants to set a similar example for her 14- and 19-year-old daughters. Her oldest daughter arranged power of attorney documents before she entered college at age 18.
Smith says it’s difficult to imagine her daughter being ill or injured, but she feels more secure knowing power of attorney documents are in place.
“Let’s say she is incapacitated, and she can’t get to the bank, and she has bills to pay, or I need access to her ASU college stuff online. I don’t have that password. I wouldn’t have access to that. So, if I didn’t have paperwork that says, ‘My mom is allowed to act on my behalf and do these things on my behalf,’ that’s a big deal…That’s an extreme example, but why gamble?” Smith says.
“The medical side of things, being able to have access to their medical records, to know what is going on with them, to be able to assist and direct them, that’s important.”
A good attorney
The importance of a good attorney can’t be overlooked.
Andre Pennington of Pennington Law PLLC of Surprise and Sun City says families should first hire an attorney with whom they feel comfortable and is schooled in estate administration and legislation.
“General practitioners just don’t know what they don’t know,” Pennington says. “This won’t be common, but when mistakes are made, it’s not the clients who find it out. It’s the family who finds it out. So, a lot of times, little things, if done correctly, can avoid lots of time and lots of money being wasted.”
Smith, who has worked with attorneys over the years, says that has been important for her.
“The person you go to, their temperament and their process are important,” Smith says. “I think it’s important to choose a professional, and someone who has good reviews and a good process.”
Wills vs. trusts
One important consideration in estate planning is whether to go with a will or a trust.
A will is a document used to express a person’s wishes for how property, such as heirlooms, real estate and money, are bequeathed. It goes into effect after an individual dies.
Trusts can often be used for more specific purposes, such as putting conditions on how assets are distributed to family members, leaving property to a special needs person without affecting their benefits; holding pension payments to be able to qualify for government services; avoiding tax consequences; providing for a second or third spouse while still giving assets to children from a first marriage or protecting assets from being taken by the state in exchange for care.
Trusts go into effect when they are created and allow for managing assets both while a person is alive and after death.
Wills go through a process called probate in which the court authenticates the document, while trusts usually do not if they are set up properly.
Pennington says people often want to avoid probate because of the toll it can take on their families. It can cost thousands of dollars and can take anywhere from four months to a year for a simple estate.
“Those who are left going through probate are grieving at a higher intensity than those who can avoid probate,” Pennington says.
“They can’t get to the next stage of grief until the estate is closed out. Because probate takes a long time, they are stuck grieving.”
Lessening the burden
Estate planning puts less of a burden on families when they are grieving.
“There’s all of the emotional stuff that comes with it, like what would they want, how they want to be taken care of and remembered. It’s less stressful for people to have that taken care of ahead of time,” Smith says.
Smith has a good friend whose father-in-law unexpectedly died with no estate-planning documents in place.
“He was dying in the hospital,” Smith says. “He couldn’t speak for himself. They had to go through that whole thing of, ‘What do you think he would want?’ Would he want to be a ventilator? Would he not want to stay on a ventilator?’ It was just a terrible time for them. Who wants to have to do that? Nobody. Just being proactive with your medical directives and having a living will, it’s really important.”
Real estate considerations
With trusts, families should make sure that property, such as real estate, isn’t left out. While this may not seem complicated, many individuals forget to update their trusts to include new houses or properties.
Smith’s family organized estate planning documents after her second daughter was born. They update regularly, like when they moved to Arizona a few years ago.
One issue that can arise with estate planning in Arizona is owning real estate in a retirement community such as Sun City.
“A lot of times, they will have age restrictions,” Pennington says.
“So, you can’t leave the home to somebody who is not that age, or a fee has to be paid. So, then all of a sudden, the estate pays this fee for no reason. The person still can’t live there, and now they have to sell it.”
Those with wills and trust should update them after significant life changes happen, such as a marriage or divorce.
“An estate plan is a conversation over years. We think of it as one thing, but it’s many many documents that work with a person’s situation to make sure that they are protected and that their estate gets administered smoothly,” Pennington says.
Pennington recommends looking at estate planning documents every year to five years, depending on the age of the person and stage of life.
Powers of attorney
General durable and health care powers of attorney ensure trusted friends or family members can handle financial and health care matters, should anything happen.
“I’m most concerned about what’s most likely to happen,” Pennington sys. “Barring some ongoing medical issue, what is most likely going to happen is an accident that incapacitates us. Or we are going to get older and lose capacity to take care of ourselves.
“Those powers of attorney are super important. If there is an accident, you want to make sure that your client is going to be taken care of and that the hospital knows who to call.”
Estate planning can also involve making arrangements such as pre-planning funerals.
In her estate planning documents, Smith has included provisions or her funeral arrangements and for her dogs. She says that these little details need to be considered.
“You should definitely make sure that you advocate for them and have them in your estate plan. They need to be cared for, too,” Smith says.