The short answer is, “Yes!” We often spend time planning for our financial future, making sure we have adequate funds to put our children through college and to support us in retirement. We may even plan to provide for our children, other family members or charities once we are gone. Most of us don’t want to think about serious illness and death, let alone plan for our finances and estate after death. However, it is very important to include estate planning in our financial planning.
The Importance of Having a Will
Estate planning does not have to be complicated and begins with making sure you have the proper estate planning documents in place. Let’s consider what we can do to protect our assets and make sure they end up in the hands of the proper beneficiaries. The most basic estate planning document is a will. If you don’t have one, make this a priority for 2020! Having a will in place can alleviate much stress and anxiety for your family as well as provide for your wishes upon your death. What happens if you die intestate (without a will) in the state of Arizona? The consequences can be damaging to you and your family. State law will decide who gets your assets and a judge may determine who will raise your children.
Most of your assets can avoid probate if you have them titled correctly. What is probate, you ask? It is the state court process of proving that a will is valid, identifying the deceased’s assets, and verifying the correct beneficiaries for the assets. It can tie up the assets for months or longer than a year, and probate court costs, on average, around 5% of your estate value.
The two main property titles used are Joint Tenancy WROS (with rights of survivorship) and Community Property WROS. Joint Tenancy WROS allows the property to pass to the other owner(s) without going through probate. Only married couples can title property as Community Property WROS, and this is a great option for married couples in Arizona. This titling allows the property to pass to the surviving spouse and avoid probate as well as receive estate tax advantages.
If you are a sole owner, you can deed your property to beneficiaries. This can be accomplished through a Transfer-On-Death Deed or Beneficiary Deed. You can also name a Transfer-On-Death Beneficiary for your vehicles if your state allows this titling. Arizona allows TOD Beneficiaries for sole vehicle owners. Your vehicles will avoid probate with this titling. Bank accounts can avoid probate as well by designating a Payable-On-Death (POD) Beneficiary. Your bank should have the appropriate forms for you to fill out and designate a POD Account.
Make sure all your retirement accounts and life insurance policies have the correct beneficiaries listed. Review these annually and make changes immediately when you have big life changes such as marriage, children, divorce, etc. These assets will also avoid probate and the funds should be available relatively quickly to the beneficiaries. These accounts do not need to be listed in your will because the beneficiaries listed have legal precedence.
Finally, you will want to put your Health Care Directives and Powers of Attorney in place. At a minimum, you should have a Living Will, a Durable Health Care Power of Attorney and a Durable Financial Power of Attorney. The Living Will is a document that details what health care services you want or don’t want if you become incapacitated. It makes your wishes known if you are no longer able to speak for yourself. The Durable Health Care Power of Attorney designates a person of your choice the authority to make health care choices for you, and to make sure the health care providers are following your health care directives. The Durable Financial Power of Attorney designates a person of your choice to make financial choices for you if you become incapacitated.
The suggestions provided here are the basics of your estate planning and the items you should accomplish or complete at minimum in 2020. There are many additional complicated and intricate ways to control your estate from the grave, including trusts. That is a conversation we can have another day. Wishing you a safe, happy and well-planned year in 2020! FBN
By Emy Tice
Emy Tice is a Certified Financial Planner (CFP) professional for WT Wealth Management. Tice is also a Senior Lecturer of Finance at Northern Arizona University (NAU). Tice’s career in finance and passion for education provide her the background and desire to educate WTWM clients and help them plan for their financial future.