Many people generally postpone estate planning, thinking they will get to it later or believing the process is too expensive or cumbersome. For most people, their home is their largest asset, so it is essential to ensure it is titled properly so your heirs can avoid probate if something happens to you.
On average, only 1 out of 3 of us have any level of estate planning. That leaves most people unprotected. If you don’t have any planning and are without a will, Arizona law will dictate who gets your personal and real property. And that probate process can take years.
Here are some things to consider:
Do:
Look at how you hold the title to your home. If you have no will, trust, or beneficiary deed, it may not go to who you want it to go to.
Do:
Look at how you hold title to your investment property or rentals. Will you be liable if there is an accident and there is a judgment against you? Do you hold the title in a limited liability corporation (good!) or in your personal name (not so good)?
Do:
Consider setting up an LLC for each non-owner-occupied property you own to minimize your personal liability.
Do:
Consider what might happen if you remarried with children from a prior relationship. Who will get your assets? Real estate, bank accounts, grandma’s silver... Does your new spouse also have children from a prior relationship? Why do we avoid talking about this?
Do:
Review the stated beneficiaries of your real estate and other titled assets with every life change: marriage, divorce, death, babies, grandchildren, incapacity.
Do:
Review the direct beneficiaries of life insurance, IRAs, 401Ks, pensions, and other qualified accounts with every significant life change.
Do:
Understand what community property is and what the exceptions are. Inheritance, gifts, separate property, and assets you had before marriage are not community property and are excluded from division upon divorce (unless you commingled them).
Don’t:
Hold title to rentals or investment properties in your personal name.
Don’t:
Hold multiple investment properties in one single entity. To do so, you are creating more liability. Consider holding each asset in its own entity.
Don’t:
Put it off. You can always amend your estate plan. But once you are no longer of sound mind, or become incapacitated, you cannot create or amend your plan.
Don’t:
Be afraid to discuss an estate plan upon re-marriage. Believe me, your new partner is also thinking about the elephant in the room.
Don’t:
Purchase a property as joint tenants with an unstable partner.
Know:
Arizona statutes dictate who will get your personal and real property if you have no estate plan, and it may not be who you want it to be. To the nearly 80% of us who have no estate plan in writing — avoid this, and write it down.
Know:
All wills get probated. You can avoid probate by using living trusts or beneficiary deeds.
Know:
If you have no estate plan and no living heirs, the state will end up with your assets.
Know:
A disclaimer deed is an effective vehicle to assure that a piece of property is your separate property and not subject to community property laws.
Know:
A notarized and recorded beneficiary deed is a simple, quick method of avoiding
probate on a property by naming your beneficiaries directly on the deed itself.
Know:
James Dean, who died in a car crash at the age of 24, had no will and his entire estate passed to his father, who had abandoned him as a child. The estate earns about $5 million per year.
BJ Gibbons is a Tucson real estate broker, attorney, and instructor. She teaches continuing education classes to realtors through the Hogan School of Real Estate, the Arizona School of Real Estate, and business courses on ‘Real Estate in Estate Planning: Is Your House in Order?’ And on ’10 Ways to Take Title to Real Estate in Arizona’, and another on ‘The Truth About Estate Planning in Real Estate.'