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Common Trusts Used In An Arizona Estate Plan

The following article will cover:

  • An overview of the most common types of trusts used in estate planning.
  • The necessary documents needed to provide care for minor children in the event of parental incapacitation or death.
  • The healthcare-related documents that should be included in an estate plan.

What Are The Most Common Types Of Trusts Used, And What Are Their Purposes?

In the realm of probate avoidance and estate planning, the most common trust is likely a simple probate avoidance trust. There are several types of Revocable Living Trusts, with the three most common being:

  • Simple Probate Avoidance Trust: This is a basic living trust. If you're a married couple, the trust continues for the benefit of the surviving spouse with no changes when the first spouse dies.
  • Disclaimer Trust: This is the same as the first trust, but it provides the option to disclaim assets upon the death of the first spouse. The surviving spouse has nine months to decide whether they want to create an irrevocable trust and fund it with a portion of the deceased spouse's assets.
    They then become the beneficiary of it during their life. They can't touch the principal, but the income from it goes to them. This trust was primarily designed for estate tax planning, but with the current state exemption so high, it's more often used for its flexibility. There might be reasons to execute a disclaimer, such as needing to qualify for long-term benefits or to avoid some creditors.
  • AB Trust: This trust automatically divides into two upon the death of the first spouse. The surviving spouse's trust remains revocable, and the deceased spouse's assets go into an irrevocable trust or possibly two (an AB or ABC trust). This type of trust is usually used for larger estates or blended families.
  • For example, in the case of a blended family, a biological parent may want to guarantee that their children will inherit, so they could arrange for their assets to go into an irrevocable trust. Their spouse is the beneficiary during their life, but when they die, the original principal is preserved and goes to the biological parent's children.

Each type of trust serves a distinct purpose and offers different benefits depending on the specific circumstances of an individual or couple's estate.

What Documents Are Needed To Provide Care For Minor Children If Both Parents Become Incapacitated Or Die?

The first step in providing care for minor children is to nominate guardians in your will. By doing this, your personal representative can approach the probate court, file a petition for guardianship over the minor children, and have the individuals you nominated considered as a priority for appointment. While these nominated individuals still have to undergo an investigation to ensure they're suitable, this process offers them a higher likelihood of being chosen, as they were named by the parents.

In cases of parental incapacitation, it may be slightly more complicated. In Arizona, it's possible to grant a power of attorney over a minor child, but this needs to be renewed every six months, thereby avoiding the court process only temporarily. Even in this scenario, it would likely be necessary to establish guardianship.

If a copy of your will is accessible, your desired guardians could still claim "priority of appointment." If this isn't possible, it's advised to make your wishes known to close relatives, like your parents if they're still alive. In Arizona, there's a pre-established hierarchy that lists people who have priority of guardianship in such situations.

What Healthcare-Related Documents Should Be Included In My Estate Plan?

In Arizona, there are three healthcare documents recommended for inclusion in every estate plan:

Medical Power of Attorney: This document allows you to appoint someone to make medical decisions on your behalf when you're incapacitated or unable to make those decisions yourself.

Mental Health Power of Attorney: Arizona distinguishes between medical and mental health issues, thus necessitating a separate document that appoints someone to make decisions in cases of mental health concerns, such as Alzheimer's and dementia. It's common for the same individuals to be appointed in both powers of attorney.

Living Will: This is an end-of-life directive that outlines your wishes in terms of healthcare if you're unable to express them yourself. The doctor is obligated to follow your directives as listed in this document, which ensures that the decisions being made align with your prior wishes.

While Arizona has been progressive in the area of mental health for many years, other states, like California, only added a mental health power to their advanced healthcare directive in 2023.

For more information on Common Trusts Used In An Arizona Estate Plan, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (480) 378-3543 today.

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