Probably the only person who does not need a Will is an unmarried person without children who doesn’t care who ends up with his or her assets following their death. As to why all other individuals should have a Will consider the following:
- Because Arizona inheritance laws provide a “pecking order” for who receives your assets if you die without a Will, your assets might be distributed to individuals you never would have chosen to receive your assets.
- If you died while your children were still minors a court would have to appoint a guardian or conservator for them. The person or persons appointed by the court to look after their personal needs and financial well-beings until they reached adulthood might not be the same persons you would have chosen for this very serious task.
Under Arizona trust law there are two classes of trust beneficiaries. The one class is very broad, and the other is more limited. These two classes of beneficiaries are defined in subsections 2 and 14 of Section 14-10103 of the Arizona Revised Code. Because these definitions are fairly difficult to understand, hopefully the following example will illustrate these differences between these two classes of beneficiaries. Consider the following example of a married couple who create a typical revocable living trust and name themselves, their son, and their granddaughter as beneficiaries. If the husband dies first, an irrevocable trust comes into existence with the following conditions:
1) The surviving wife receives all of the trust income and discretionary distributions of trust principal.
2) When the wife dies the remaining trust assets are to be distributed outright to the their son. However, if their son is not living at that time, his share is to go to his daughter (the granddaughter of the couple who created the original trust).
During the surviving spouse’s lifetime, she is considered a “qualified” beneficiary because she is currently entitled to receive trust income and principal. The son is also a “qualified” beneficiary because he would be entitled to receive income and principal upon his mother’s death. However, the granddaughter is not a “qualified” beneficiary because she would only be entitled to receive assets from the trust if her father is not living at the time of her grandmother’s death.
Note: Whether a person is or is not a “qualified” beneficiary is important only insofar as the duties owed to them by the trustee administering the trust. Those duties can be found at Notice and Reporting Provisions – Arizona Trust Code.
Fortunately, there is a way an Arizona resident’s health care documents can be available and accessible 24/7 anywhere in the world via the Internet. The Arizona Secretary of State’s Office has a registry in which copies of an individual’s health care documents can be filed. It is known as the Arizona Health Care Directives Registry. For additional information on how to file your health care documents in this registry go to Arizona Advance Directive Registry.
The requirements to make a Will in Arizona are dependent on the type of Will.
In Arizona two witnesses are required to establish the validity of a Will. The witnesses must see the testator sign or be informed by the testator that the signature is the testator’s. The witnesses must sign in the presence of each other and the testator. Arizona state law does not require a Will to be notarized. However, if the Will is also notarized it will automatically accepted as being valid.
In Arizona an individual can make a valid Will without witnesses if he or she prepares a “holographic” Will. A holographic Will is a document that is in the testator’s own handwriting directing the disposition of his or her assets and is signed by the testator. The Arizona law authorizing holographic Wills reads as follows:
14-2503. Holographic will
A will that does not comply with section 14-2502 is valid as a holographic will, whether or not witnessed, if the signature and the material provisions are in the handwriting of the testator.
In Arizona the term “community property” refers to property acquired during the marriage as a result of the earnings of either the husband or the wife while they were residents of Arizona or another community property state. If the property acquired was the result of the husband’s earnings, the wife is nevertheless considered as owning one-half of the property. Of course, the same result would apply if the property were acquired as a result of the wife’s earnings. This “half and half” community property concept applies even if the husband or the wife deposited their paychecks in bank accounts registered solely in their own names. It would also apply if the husband or the wife purchased an automobile or parcel of real estate titled in their name alone.
This community property concept only applies to “earned” income. It does not apply to property that is acquired by the husband or the wife by gift or inheritance. Property acquired by gift or inheritance is considered the “separate” property. However, the spouse who receives the gift or inheritance can convert his or her separate property into community property at any time if they so choose. The Arizona statutory law on community property reads, in part, as follows:
25-211. Property acquired during marriage as community property; exceptions; effect of service of a petition
A. All property acquired by either husband or wife during the marriage is the community property of the husband and wife except for property that is:
1. Acquired by gift, devise or descent.
2. Acquired after service of a petition for dissolution of marriage, legal separation or annulment if the petition results in a decree of dissolution of marriage, legal separation or annulment.
A “pour-over” Will is a Last Will and Testament designed to transfer a Testator’s assets into an existing living trust. It is used to insure that the Testator’s probate assets are transferred or “poured-over” to the trust for distribution in accordance with the terms of the trust. Of course, if all of the Testator’s assets are already in trust, there is no need for the Will to be probated. In this sense, a pour-over Will is similar to a spare tire in an automobile. It is available if needed. If it is not needed, it is not used.
Almost every person should have both a financial and a health care power of attorney as illustrated by the following:
- If you were unable to manage your financial affairs because you became incompetent or incapacitated, someone would have to be appointed by a court to handle your financial affairs. This could easily cost many thousands of dollars, and your finances would become a matter of public record.
- If you were dying or in an irreversible comatose state and did not want to be kept alive by extraordinary measures a Health Care Power of Attorney is necessary for you to give another person the authority to terminate your medical treatment.
A living will is a legal document a person uses to make known his or her wishes regarding life-sustaining measures that he or she wants or doesn’t want, such as mechanical breathing (respiration and ventilation), tube feeding, or resuscitation. Living wills are also referred to as health care declarations, medical directives, or health care directives.
The only sure way to know if you need a trust is to consult with a competent estate planning attorney. Some examples of why you may need a trust are:
- You have minor children and want to provide for their care and financial support.
- You own real estate in a state other than your state of residence.
- You are in a second marriage and want to provide for your spouse for his or her remaining lifetime but want to insure that your assets will be distributed to your children following your spouse’s death.
- The value of your assets requires a trust coordinated with applicable estate and gift tax laws.
The validity of a Will or trust is determined by the laws of the state in which it was prepared. If your Will or trust was valid in the state in which it was prepared, it would likewise be valid in Arizona. However, because different states have different laws (for example, community property versus separate property) it is always wise to have your documents reviewed by a competent estate planning attorney in your new state of residence.
You should have your estate plan documents reviewed whenever there is a change in your family situation, your estate plan desires, or a change in the law, such as:
- a divorce or remarriage
- the birth or death of a child
- a move to another state
- you want to add or remove beneficiaries from your documents
- you want to name different persons as fiduciaries in your estate plan documents
- you learn of a change in the law pertaining to estate planning (Examples: Arizona made a major change in its trust laws on January 1, 2009. The federal government made a major change in its gift and estate tax laws on January 1, 2013.)
An estate tax is a tax that is based on the net value of all property owned by a decedent at the time of death and is imposed on the decedent’s estate. An inheritance tax is a tax imposed on the beneficiaries who receive property from the decedent. States that have inheritance taxes frequently tax the decedent’s surviving spouse and children at lower rates than other beneficiaries.
In Arizona a person can leave specific items of tangible personal property to specific beneficiaries by creating a Personal Property Statement or List as long as that property is not specifically disposed by their Will. For example, a person may have a family heirloom that he or she wants to go to a paricular family member. Preparing such a statement or list does not require the services of an attorney or a revision of their Will. Moreover, the statement or list can be redone or changed at any time without having to redo or change their Will. The Arizona statute authorizing this means of disposing of tangible personal property appears below.
14-2513. References to separate lists
A. Notwithstanding section 14-2503 relating to holographic wills, a will may refer to a written statement or list to dispose of items of tangible personal property other than money and not otherwise specifically disposed of by the will.
B. To be admissible under this section as evidence of the intended disposition, the writing shall either be in the testator’s handwriting or be signed by the testator and shall describe the items and the devisees with reasonable certainty.
C. The writing may be:
1. Referred to as one to be in existence at the time of the testator’s death.
2. Prepared before or after the execution of the will.
3. Altered by the testator after its preparation.
4. A writing that has no significance apart from its effect on the dispositions made by the will.
The Arizona Trust Code, commonly referred to as the ATC, was enacted on January 1, 2009. It is a comprehensive set of laws applicable to trusts created and administered in Arizona. Among the many items relating to trusts covered by the ATC are the following:
- A trustee’s duty to furnish information and reports to trust beneficiaries
- The legal effect of spendthrift and creditor protection clauses in trust documents
- Extending the Arizona Rule Against Perpetuities from 90 years to 500 years
- Specifying which state laws are applicable to administering a trust
- Providing remedies and damages for wrongdoings by trustees
- Eliminating the need for creators of a trust to provide complete copies (or extensive portions) of their trust to third parties
The duties of Arizona trustees are spelled out in the notice and reporting provisions of the Arizona Trust Code. In addition to the general duty of acting in good faith and in accordance with the purpose of the trust, the trustee of an Arizona based trust has very specific notice and reporting duties as a result of the Arizona Trust Code that came into existence on January 1, 2009. The extremely detailed notice and reporting requirements (and to whom they are owed) can be found at Notice and Reporting Provisions – Arizona Trust Code.
A deceased joint tenant’s name can be removed from a joint and survivorship account by presenting the account holder with a certified copy of the decedent’s death certificate.
Probate is the term that describes a court proceeding in which the court appoints a personal representative of the estate of a deceased person. The personal representative is responsible for “wrapping up” the decedent’s final affairs by performing the following functions:
- Inventorying and valuing all of the assets owned by the decedent.
- Paying all the legitimate claims of the decedent’s creditors and and paying all expenses related to administering the decedent’s estate.
- Preparing, filing, and paying all of the decedent’s final tax returns and all of the estate’s tax returns.
- Distributing the decedent’s assets to those persons entitled to receive the assets in accordance with the provisions of the decedent’s Will or in accordance with Arizona law for those decedents dying without a Will.
The Arizona Probate Code has two different proceedings to probate an Arizona decedent’s estate. Arizona has a process known as an “informal” probate that is used for uncontested probate proceedings. Because an informal probate does not require court hearings or a judge to be involved in the proceedings, most informal probates can be concluded in approximately five months. If the proceedings become contested or unusual issues are involved, a “formal” probate is required. Formal probates require court hearings and judicial involvement and will last until all issues are resolved. Fortunately, in Arizona, most probates are informal probates. Also see Estate Administration – What is Involved.
What is a Ward? — a Protected Person? — a Guardian? — a Conservator? — a Testator? — a Personal Representative? — a Fiduciary?
Some of the various fiduciary designations used in connection with legal proceedings are:
- Fiduciary – a generic term describing an individual or institution under an obligation to act in the best interest of another party. §14-10002 of the Arizona Revised Statutes reads, “′Fiduciary′ means a personal representative, trustee, agent acting under a power of attorney, or other person authorized to act as a fiduciary with respect to the property of another person.”
- Ward – an individual who has been declared incapacitated by a court
- Protected Person – an individual who is not declared incapacitated but needs assistance
- Guardian – an individual or institution responsible for the well-being, medical, and personal decisions of a ward or protected person
- Conservator – an individual or institution responsible for the assets of a ward or protected person
- Testator – a individual who makes a Will
- Personal Representative – an individual or institution responsible for handling the assets of a deceased individual