Everyone should have an estate plan. If you own anything of value, you will need a plan for you how to pass it on. The thing often overlooked is that a plan can make life a lot easier for your loved ones, who won’t want to be thinking about financial and legal matters as they grieve and handle your funeral arrangements.

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Your estate is the collection of everything you own — money, property, and other personal belongings. No matter how much you own, those things will need to go somewhere after you pass away. That’s where estate planning comes in.

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Estate planning allows you to prepare for what happens to your estate when you pass away. Many people feel an estate plan is only for rich people, but that isn’t the case. If you own anything of value or if you have dependents who need to be cared for if you were to pass unexpectedly, you should have a plan. 

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Importantly, an estate plan also describes the kind of care you want should you become incapacitated (unable to care for yourself), and who will handle your affairs if you can’t. This is important to plan for no matter how much money you have.

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What is an estate plan?

 

An estate plan is a collection of legal documents that lay out your intentions and expectations for two general situations:

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• What happens to your assets after you pass away

• What happens when you can no longer take care of yourself or your estate

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Your estate is the collection of everything you own. That includes cash, investments, real estate, business interests, and other personal property. When you pass away, all of those assets need to go somewhere. An estate plan lays out who gets what.

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An estate plan explains what you want loved ones and caretakers to do if you become incapacitated and can no longer take care of yourself. That covers health care, long-term care, who will manage your finances, and who will look after your children if necessary.

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Unsure why it’s necessary to plan for becoming incapacitated? Consider that according to the U.S. Centers for Disease Control and Prevention (CDC), two in five Americans age 65 and older live with a disability, which can affect their day-to-day lives. More than half of Americans aged 65 and older also suffer from Alzheimer’s or a related form of dementia. Even if this never affects you, it’s better to be prepared.

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What actually happens to an estate after you die?

 

 

It’s easier to understand the estate-planning process if you know what happens to your estate when you pass away.

Everything you own at the time of your death becomes your estate. Then, the estate goes through the probate process, where a probate court decides what happens to your assets.

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If you had a will, the court uses the will as their guide. If you didn’t have a will or if it was invalid for some reason, you are considered to have died intestate, and the court uses local intestacy laws to decide who inherits your assets.

Read more about intestacy. Also, see five celebrities who died without a will and what happened to their estates.

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What is probate?

 

Probate is the process of verifying that your will is legal and that your final wishes are carried out. A will does not help your estate avoid probate. It simply makes the process smoother because the court can use it as a guide to what you wanted.

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For most small estates, probate is a simple process that can be completed relatively quickly. However, things may slow down if someone contests your will, which means they challenge what’s in it. Perhaps they feel they were wrongfully excluded or that they deserve something other than what the will says they'll receive. Contesting a will can drag out the probate process for months, potentially costing a lot in lawyer or court fees.

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Your estate still goes through a probate court if you don't have a will. The difference is that a judge will appoint someone to handle disbursing your assets.

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Who handles your estate?

 

Ideally, you have created a will that names someone as your executor. The executor of your estate, also called a personal representative, manages your estate through probate. They handle tax bills, debts you hadn’t paid off, and other matters affecting your estate. The executor also oversees the disbursement of your assets to beneficiaries.

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Most people nominate their spouse or child of legal age as an executor, but you can choose anyone. However, the person you nominate is allowed to decline, so make sure to choose a contingent executor or two.

The probate judge will choose an administrator if you don’t name an executor before you die.

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Why use an Arizona estate planning attorney?

 

An estate planning attorney is a professional with knowledge and experience in estate planning. They can help you determine what you have, what you need a plan for, and who should be part of your plan. An attorney will help you write legally binding documents that people won’t be able to contest after your death.

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Working with a professional is particularly useful because even though there are online guides available, estate laws can vary greatly from one state to the next. A local lawyer will know the rules specific to your area.

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If you have a large or complicated estate with many assets, definitely get professional help. An attorney will help you create an ironclad will that ensures your estate is disbursed as you wanted. People who think they may need to pay the estate tax can get help creating a plan that minimizes their tax bill. In this case, the expertise of a tax accountant may also help. You may even be able to plan ahead to help your beneficiaries limit or avoid inheritance taxes.

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Also, look for an attorney with knowledge of elder law, which covers legal matters related to old age, like long-term care, other health care, retirement, Social Security, Medicare, and Medicaid. An estate planning attorney should be able to help you with this, but some people may prefer the help of a specialized elder law attorney.

Learn more about elder law and whether you need an elder law attorney.

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What cost of an estate planning attorney in Arizona?

 

If you’re working with a lawyer, make sure that you plan for the cost. Creating a will is likely to cost $500 to $1,000. This isn’t an unreasonable price since you should be getting a rock-solid will, but prices go up as your situation becomes more complex. If you want to set up a trust, you will probably spend at least $1,500.

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And while this cost may seem high, it could save your loved ones from a costly situation where someone contests your will in probate.

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5 essential estate planning documents in Arizona:

 

Whether you work with a professional or go the DIY route, knowing which documents every estate plan should have is good.

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Each estate is different, but there are five documents you should consider:

• Last will and testament

• Letter of instruction

• A living will or advance medical directive

• A durable power of attorney

• Life insurance policy

Everyone needs a will!

 

A last will and testament, or more simply a will, states who gets your money, assets, and property. Everyone should have a will.

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The exact contents of your will depend on what assets you have and what you want to do with them. Your will should also name an executor, who will oversee the probate process and disbursement of your assets once he or she has received letters of testamentary.

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In the will, you can make specific bequests to your certain heirs. Anything left over becomes part of the residue of the estate and is distributed to a beneficiary you named in your will.

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A trust:

 

A trust is a legal arrangement in which you can put assets so your chosen heirs can access them. In particular, a living trust allows you to avoid probate for the assets in the trust. This can save time and money if you know that you want to pass certain assets to certain beneficiaries.

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Assets you move into some kind of trust are also no longer part of your estate, which means your taxable estate is smaller.

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Since a living trust covers the distribution of your assets, some people create one instead of or in conjunction with a will. Learn more about whether you would benefit most from a living trust or will. A will can even create a trust by “pouring over” into a revocable living trust or creating a new testamentary trust.

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Letter of instruction:

 

The letter of instruction, sometimes called an ethical will, is a plain-English summary of your will. This document isn’t strictly necessary. You should include a statement saying it has no official legal standing to avoid having it treated like an addition to your will. However, it allows you to simply explain your personal wishes and hopes for your heirs. No one legally has to follow what’s in your letter of instruction, but it can help answer people's questions about your exact wishes.

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This is especially useful if you created a will yourself and either forgot to include something or your language was unclear.

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A living will or advance medical directive:

 

Not to be confused with a regular will, a living will is important because it details what kind of treatment and health care you want to receive if you become incapacitated and can no longer take care of yourself.

For example, it covers how you want your loved ones to handle a situation where you become terminally ill and are on life support. A living will is also called an advance medical directive.

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(You can further protect yourself with short-term or long-term disability insurance).

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A durable power of attorney:

 

A durable power of attorney allows you to name someone to make financial, legal, and perhaps medical decisions on your behalf. They can manage your bank accounts, make mortgage payments, or change the details of some trusts.

Without this document, a court will have to appoint someone. This person is legally required to act in your best interests, but you may want to name someone yourself for the peace of mind that comes from knowing that someone you already trust will be handling your things.

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Why consider life insurance?

 

Do you need to help pay the monthly bills? Do you help pay for children? Do you share any debts, like a mortgage? Do you have a credit card or student loan debt? You could benefit from life insurance if you answered yes to any of these.

A life insurance policy is a way to protect your loved ones financially after your death. For most people, when they pass away, their spouse is left paying for everything: the mortgage, utilities, grocery bills, childcare, and medical bills. They may also have to pay personal debts their spouse left behind. When a couple is used to covering these bills with two incomes, it’s difficult to cover them with just one.

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Life insurance protects your spouse (or other loved ones) by providing them with a payment — known as a death benefit — upon your death. The benefit allows them to continue covering their financial obligations without having to completely alter their lifestyle.

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Are worried about the life insurance payout adding too much to the value of your estate? Some people put it in an irrevocable life insurance trust.

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And while many people have a small amount of life insurance from their employer, the benefit from an employer policy is normally far below what you will actually need.

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You can compare life insurance policies to see how much you need and what it would cost you.

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Estate planning checklist in Arizona:

 

Estate planning is daunting because it requires you to plan for your own death. And while it’s very easy to ignore, a solid plan can really make things easier for you and your loved ones both before and after your death.

When you create an estate plan, some essential things must be considered. During your planning process, make sure you answer these questions:

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• What kind of care do I want to receive if I become unable to care for myself?

• Who will handle my financial, medical, and legal affairs if I become incapacitated?

• Is my estate worth enough to trigger estate or inheritance taxes?

• Whom do I want to manage my things directly after my death?

• Whom do I want to receive my assets, and how much do I want each person to receive?

• You can address the questions above with a few main documents. So make sure that, at the very least you

• Create a last will and testament,

• Make a living will that details the health care you want to receive in case you’re incapacitated,

• Give power of attorney to someone who can handle your affairs,

• Get a life insurance policy to protect your loved ones financially.

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