Checking Your Lists

While we wait to see what Congress is doing about the fiscal cliff and the estate tax exemption, this is a good time to make sure that you have properly listed your beneficiaries for your IRAs, 401ks, life insurance and annuities. Even with a trust, if you have not filled out your beneficiary forms, your estate could need to be probated. Also, be sure you have all the updated addresses and contact information for your agents for health and finances. Most health care powers of attorney have the contact information of the agents on the documents.

Do No Contest Clauses work? Not too well. Previously, if an omitted heir could establish that he had probable clause to challenge the no contest clause (such as because the writer of the Will was under mistake or undue influence) the court would allow a challenge to the Will and not enforce the no contest clause. In a recent case, In Re Estate of Stewart, the Arizona Court of Appeals stated that if the no contest clause prohibited devisees or beneficiaries from assisting the omitted heir, the court would interpret this as enforceable as long as the beneficiary was deposed or subpoenaed. The beneficiary could not "voluntarily" give information to the omitted heir where the no contest clause prohibited it.

Trusts and Agreements help balance family and new relationships

We live so much longer now, many of us start a second adulthood in our 59s and 60s. Sometimes with a new career. Sometimes with a new love. Estate planning, such as with a trust or domestic partnership agreement,can balance the need to provide for a new love and the desired gifts to adult children. A domestic partnership agreement is similar to a pre-nuptial agreement and used when couples do not marry. If a couple is planning to marry or has married than pre-nuptial or post-marriage agreements are great tools to ease family relationships.

Gun Trusts Can Limit Taxation Upon Death And Help with Multiple Users

Gun Trusts are revocable trusts different and separate from a revocable living trust normally used for estate planning. With a Gun Trust, multiple owners (spouses or parents and adult child) can own firearms together, and when one dies, the other remains the Trustee and additional transfer tax should not be needed. Also, Gun Trusts allow guns to be distributed without violating federal law. That is, if a beneficiary is a minor or otherwise unqualified to have a firearm, the Trustee cannot distribute the firearm but has instructions for sale or alternative distribution. Also, for spouses where one uses the firearms occasionally only, the Gun Trust would allow the spouse as Trustee or designated beneficiary to use the firearm without violating the limitations of use to owners which apply to NFA firearms. Gun Trusts are helpful for both NFA firearms (such as automatic weaponry) and non-NFA firearms. For more information, feel free to contact me.

Changes in Revocations of Beneficiary Deeds

Revocations of Beneficiary Deeds now need to reference the name of the Grantee that was listed on the beneficiary deed, as well as the recording instrument number of the beneficiary deed in order for the Maricopa County Recorder to accept the Revocation. This changes was not done by rule and adds a requirement to the statutory form. It is likely the new requirement helps the Maricopa County Recorder index the beneficiaries.

Pay on Death Designation for Vehicles

The Arizona Revised Statutes now allow for a Beneficiary Designation for Vehicle Transfer upon Death. The designation can be signed and kept with the title of the car, mobile home or other applicable vehicles. Since the law is new, it is not clear how effective it will be if the the vehicle is being financed.

Obama proposes $3.5 estate tax exclusion

President Obama's current proposal in his budget is a permanent the estate, and gift tax parameters as they applied during 2009. The top tax rate would be 45 percent and the exclusion amount would be $3.5 million for estate and $1 million for gift taxes. As reflected in the Administration’s adjusted baseline projection, the portability of unused estate and gift tax exclusion between spouses would be made permanent. The proposal would be effective for the estates of decedents dying, and for transfers made, after December 31, 2012.

This may be a position to negotiate. That is, the administration may agree to the $5 million of estate and gift tax but a 45% tax rate. That was a the Democratic party's position in the last election. Only time will tell, but generally, this is good news because it looks like we will not be going back to the $1 million exemption.

Premarital is needed to make earnings sole and separate

If you need to protect your fiancee or spouse from your creditors, then simply titling assets as separate property is not enough. A pre-marital agreement or post-marriage agreement is the only way your earnings can be considered separate property under Arizona law. Otherwise, if you use earnings to pay the mortgage or add to an investment in your spouse's name, you risk changing that asset to community property which your creditors can reach.

Common error: We will die at the same time

One of the most common error in the trusts is that couples assume they will die at about the same time. When one of the couple survives by years and the survivor needs to have access to the assets without family interference. It is amazing how many times an adult child will say she wants her deceased's parent's half of the funds and wants to keep money from the surviving parent -- or argues about how the money was spent after they both died. A trust needs enough flexibility to protect the couple whether one survives the other for years or if they pass at about the same time.

New Year Time for Resolutions to Have Powers of Attorney

The courts have made guardianships and conservatorships more complicated and expensive with new rules which were intended to limit court costs and attorneys fees. Avoid having the court in your business or health care, by having your own health care powers of attorney and financial durable powers of attorney. When I prepare powers of attorney, I cover concerns that have arisen with other clients such as when we deal with banks and hospitals, not just the the statutory requirements.