by Lisa Paine | Feb 26, 2025 | Estate Planning, Trusts, Wills
Divorce is an emotional and complex process, but one important aspect that often gets overlooked is your estate plan. If you don’t update it, your estranged spouse could still inherit your assets or make crucial financial and healthcare decisions on your behalf. In Arizona, unless you specify otherwise, your spouse remains a beneficiary until your divorce is finalized.
To protect your interests, here are key steps to updating your estate plan during a divorce:
1. Update Your Will and Trust
One of the first things you should do during a divorce is review and update your will or trust. Many estate plans automatically designate a spouse as the primary beneficiary, executor, or trustee. If these documents aren’t revised, your assets could unintentionally pass to your estranged spouse.
While Arizona law revokes provisions for a former spouse once a divorce is finalized, these provisions remain in effect during the divorce. That means your spouse may still inherit from your estate unless you update your documents in advance.
2. Understand Arizona’s Community Property Laws
Arizona is a community property state, meaning most assets acquired during marriage are jointly owned and subject to equal division in a divorce. This can impact your ability to transfer assets or update beneficiary designations before your divorce is finalized.
Before making any changes, consult both your divorce attorney and an estate planning attorney to ensure you’re following Arizona law and protecting your financial future.
3. Review and Update Beneficiary Designations
Certain accounts—such as life insurance policies, retirement plans, and payable-on-death bank accounts—have designated beneficiaries. If you don’t update these designations, your estranged spouse may still inherit these funds.
However, some changes may require spousal consent while the divorce is ongoing. For example, in some cases, retirement account beneficiary changes need written consent from your spouse. Always check with your divorce attorney before making any updates.
4. Update Powers of Attorney and Healthcare Directives
Estate planning isn’t just about assets—it also covers financial and medical decisions if you become incapacitated.
If your estranged spouse is listed in your power of attorney or healthcare directive, they may still have the legal authority to make medical and financial decisions for you. If that’s not what you want, you should update these documents as soon as possible to appoint someone you trust.
5. Remove “Right of Survivorship” on Jointly Owned Property
If you and your spouse own property jointly with “right of survivorship,” the property automatically passes to the surviving spouse, regardless of your will or trust. You may be able to terminate this designation during your divorce, ensuring your share of the property is distributed according to your wishes.
6. Protect Your Children’s Future
If you have children, updating your estate plan is especially important.
- Review and update guardianship designations in your will to reflect your current wishes.
- Consider setting up or modifying a trust to protect your children’s inheritance and provide for their education, healthcare, and living expenses.
Stay Proactive with Your Estate Plan
Divorce brings a lot of legal and financial changes, and your estate plan should not be left behind. By updating your documents, you can ensure that your assets go to the right people, the right decisions are made on your behalf, and your children’s future is protected.
To navigate this process smoothly, work with a qualified estate planning attorney in Arizona. They can help you make the right changes while staying compliant with state laws and the terms of your divorce.
Disclaimer: Any changes to your estate plan, asset transfers, or beneficiary designations should be reviewed with both your divorce attorney and an estate attorney. This ensures compliance with Arizona’s community property laws and the terms of your divorce.
Lisa is well versed in challenges faced by small businesses and their owners. Her unique prospective benefits her business clients with agreements, employment advice, copyright violations and succession planning. She also assists families with estate planning not only guiding them through the estate planning process but also understanding why this is so vital to their families.
by Lisa Paine | Jan 8, 2025 | Estate Planning, Tax, Trusts, Wills
As we enter 2025, it’s important to stay informed about the current federal estate and gift tax laws, including annual exclusion limits and significant changes anticipated by the end of this year.
Annual Exclusion Amount
The annual exclusion amount for gifts in 2025 allows individuals to give up to $19,000 per recipient without incurring gift tax or needing to file a gift tax return. This exclusion is a valuable tool for wealth transfer and estate planning, as gifts within this limit do not count against your lifetime exemption amount.
Estate and Gift Tax Exemption
The federal estate and gift tax exemption for 2025 remains historically high at $13.99 million per individual. This exemption permits significant wealth transfers without triggering federal estate or gift taxes. Married couples can combine their exemptions, effectively shielding up to $27.98 million from taxation.
Sunset of the Current Exemption
The current exemption levels are set to sunset at the end of 2025. If no legislative action occurs, the exemption amount will revert to pre-2018 levels, estimated at approximately $7 million per individual (adjusted for inflation). This reduction could significantly impact estate planning strategies, potentially exposing more estates to federal estate tax liability starting in 2026.
Planning Considerations
Given the scheduled sunset, 2025 presents a strategic window to utilize the historically high exemption amounts. Potential strategies include:
- Lifetime Gifting: Maximize the use of your lifetime exemption through substantial gifts before the reduction.
- Irrevocable Trusts: Consider establishing irrevocable trusts to transfer wealth outside of your taxable estate.
- Spousal Planning: Use spousal lifetime access trusts (SLATs) to preserve wealth while maintaining indirect access to gifted assets.
- Charitable Planning: Consider charitable donations and charitable remainder trusts to support causes you care about while reducing your taxable estate.
Review your current estate plan with our office to see how these changes may impact your financial goals. Proactive planning can help minimize tax liability and protect your legacy for future generations.
For questions or to schedule a consultation, contact Lisa Paine today.
Lisa is well versed in challenges faced by small businesses and their owners. Her unique prospective benefits her business clients with agreements, employment advice, copyright violations and succession planning. She also assists families with estate planning not only guiding them through the estate planning process but also understanding why this is so vital to their families.
by Lisa Paine | Dec 12, 2024 | Estate Planning, Trusts
Many people create a revocable living trust to avoid probate, maintain privacy, and ensure smooth estate distribution. However, these benefits only apply if you properly “fund” your trust, meaning you must transfer assets into it. Establishing a trust without funding the trust is like installing a safe but never placing your valuables inside.
What Is Funding a Trust?
Funding involves changing ownership or beneficiary designations of your assets—such as real estate, bank accounts, or investments—so that the trust, rather than you personally, owns them. You can also name the trust as beneficiary on life insurance policies and retirement accounts; however, you must consult with your attorney prior to naming a trust as a beneficiary to a retirement account to discuss potential tax implications.
Why Funding Matters
- Avoiding Probate: Assets inside the trust avoid probate, saving time, costs, and hassles. Unfunded assets still face probate, undermining your plan.
- Privacy: Unlike probate, trust assets remain private, shielding your family’s financial affairs from public view.
- Control Over Distributions: Trusts let you dictate how and when beneficiaries receive their inheritance. Without funding, state laws and probate courts decide.
- Incapacity Protection: If you’re unable to manage your affairs, a successor trustee can step in to handle trust-owned assets without court intervention.
Common Mistakes
Many forget to transfer all their assets to their trust. Neglected real estate, bank or brokerage accounts, and outdated beneficiary designations can bring the estate back into probate or undermine your estate planning intentions.
How to Fund Your Trust
You should consult with your attorney regarding your individual estate plan and circumstances prior to funding your trust.
- Real Estate: Execute and record a new deed transferring title to the trust.
- Bank & Investment Accounts: Contact financial institutions to retitle accounts.
- Personal Property & Business Interests: Follow proper legal steps to transfer ownership.
- Retirement Accounts & Life Insurance: Consider naming the trust as a beneficiary (often as a secondary beneficiary) to optimize tax and distribution rules. However, you must consult with your attorney prior to naming your trust as the beneficiary of a retirement account.
Ongoing Maintenance
Each time you acquire new assets, remember to update titles or beneficiary designations. Review your trust regularly with an estate planning attorney to ensure it stays fully funded.
Bottom Line
Funding is crucial to a trust’s effectiveness. An experienced Arizona estate planning attorney can guide you through the process, ensuring your trust works as intended, from avoiding probate to protecting loved ones and preserving your legacy.
Lisa is well versed in challenges faced by small businesses and their owners. Her unique prospective benefits her business clients with agreements, employment advice, copyright violations and succession planning. She also assists families with estate planning not only guiding them through the estate planning process but also understanding why this is so vital to their families.
by Lisa Paine | Jun 21, 2021 | Estate Planning, Trusts, Wills
Many people think that estate planning is just about what happens when someone dies. However, an equally-important part of estate planning is ensuring that you are cared for while you are still alive. If you become incapacitated, even for a short period of time, who will pay your bills or decide where you should live? Who will determine what doctors will care for you, or what treatments and medicines you will receive?
A comprehensive estate plan will include powers of attorney for both your finances and health care to ensure that the persons making decisions on your behalf are the ones that you want. You can select different people – and backups – for your financial and health care powers of attorney. Without these powers of attorney, if you become incapacitated, your family may have to go through the court process of having a guardian and conservator appointed for you and that can be expensive and onerous.
Besides the routine responsibilities that your agent under a financial or health care power of attorney may have, you can also give specify directions regarding different situations. For example, if you are incapacitated, do you want to continue making charitable donations or paying for a grandchild’s piano lessons? Can your health care agent make mental health care decisions on your behalf?
The clearer you are with your wishes, the better your loved ones will be able to care for you during any periods of incapacity. So, when you are thinking about your estate planning, be sure to consider how you will be cared for during your lifetime as well.
Lisa is well versed in challenges faced by small businesses and their owners. Her unique prospective benefits her business clients with agreements, employment advice, copyright violations and succession planning. She also assists families with estate planning not only guiding them through the estate planning process but also understanding why this is so vital to their families.
by Lisa Paine | Jun 14, 2021 | Business/Corporate, Estate Planning, Trusts
Whether I’m working on a business transaction or assisting business owners with their estate planning, I always look at how the ownership of the LLC is structured. While many business owners have set up a revocable living trust in order to direct how their assets are managed and to avoid probate, it is common to find that their LLC interests have not been put into the trust. This means that even if everything else in the estate plan were done perfectly, the family would still likely need to open up probate to access and manage the LLC interests. Obviously, this is not ideal in any situation.
Fortunately, putting an LLC interest into a trust is often a simple and affordable solution. If the LLC is a single-member LLC, including an LLC owned by a married couple, the change can be made by signing an Assignment of Membership Interest and filing Articles of Amendment with the Arizona Corporation Commission. If there is more than one member, the operating agreement will control the steps necessary to transfer the LLC interest into the trust. Often there are provisions in the operating agreement allowing a member to make such a transfer. However, if there is no provision, or no operating agreement, the consent of the other members would be necessary to make the transfer. With either a single-member LLC or a multiple-member LLC, the operating agreement should be updated to reflect the change of membership. This is most often not a big change, and can be done by updating a Schedule which lists current members and their addresses. As a side note, if you do not have a written operating agreement for your LLC – get one!
Since I am a lawyer, I must include a few caveats. First, if the LLC is treated as an S-Corporation for federal income tax purposes, or could be in the future, it is imperative that the trust contain language necessary to qualify the trust as an S-Corporation shareholder in the event the business owner becomes incapacitated or passes away. Second, you want to make sure that the transfer of the membership interest is not prohibited in any financial or other agreements that have been entered into by the LLC. Third, I really mean it about the operating agreement – you really do need one, but I’ll save that for another blog post.
Lisa is well versed in challenges faced by small businesses and their owners. Her unique prospective benefits her business clients with agreements, employment advice, copyright violations and succession planning. She also assists families with estate planning not only guiding them through the estate planning process but also understanding why this is so vital to their families.
by Lisa Paine | May 10, 2021 | Estate Planning, Trusts
Adding an adult child as a joint owner of a parent’s bank account seems like a simple and straightforward solution that allows the child to help care for mom or dad without the expense or hassle of preparing powers of attorney or other legal documents. Naming a child as a joint owner also allows the account to avoid probate at the death of the parent. However, there are many dangers that account owners, and the children, may not realize.
Most bank accounts are set up so that once a child is added as a co-owner to a parent’s bank account, the child becomes a legal owner of the assets in the account. Even though in the minds of both the parent and the child, the money “belongs” to mom or dad, the reality is that from a legal perspective, the money actually belongs to both the child and the parent. This means that the money in that account can be spent by the child for any reason, not just for caring for mom or dad. The money in the account also becomes reachable by any creditors of the child. Even if the child is a responsible adult, unforeseen circumstances, such as a car accident, could cause mom or dad’s bank account to be wiped out due to the child’s liabilities. One of the most common creditors is a divorcing spouse, and the money in the joint account could be counted as an asset of the child in a divorce.
Another common misconception is that the parent does not need a Will or Trust because the child on the jointly-owned account knows after the parent dies, the money is to be split among all of the child’s siblings. Now, there are times when this strategy could work; however, legally the money transfers 100% to the child named as a co-owner on the account. That child has no legal obligation to share the assets of the account with other siblings. Frequently, there is conflict among siblings about whether mom or dad offered the co-owner child a larger share, or all, of the account to compensate that child for caring for the parent during their last years.
The intentions behind adding an adult child to mom or dad’s accounts are good – everyone wants a simple solution that is easy to manage. Even though I do not recommend adding a child to a parent’s bank account, there are other ways to address the issues, and they do not need to be complicated or expensive. At the most basic level, the child could be added as agent, or signer, on mom or dad’s accounts by filling out a form at the bank. This would allow the child to access the money for mom or dad’s benefit only. The money would not legally belong to the child, and would not be reachable by the child’s creditors. A beneficiary designation form can also be filled out at the bank which would allow the assets in the account to avoid probate and pass to all the siblings automatically at mom or dad’s death.
Caring for family members can sometimes feel complicated, but taking these steps will allow the child to not only care for mom or dad, but also protect mom or dad’s money from unintended consequences that may arise from joint account ownership.
Lisa is well versed in challenges faced by small businesses and their owners. Her unique prospective benefits her business clients with agreements, employment advice, copyright violations and succession planning. She also assists families with estate planning not only guiding them through the estate planning process but also understanding why this is so vital to their families.
