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What is a Power of Attorney?

By | Estate Planning, Legal Education | No Comments

A Power of Attorney is a document in which the “Principal” gives powers, duties, and responsibilities to the “Agent” who acts for the Principal under certain circumstances. The Power may be over health matters (a Health Care Durable Power of Attorney – also known as a Health Care Proxy or Advance Health Care Directive in some states) or financial matters (a General Durable Power of Attorney).

I often get calls from family members and loved ones saying they “need to get a power of attorney” over their mom, dad, sibling, relative or other loved one because they can no longer handle their affairs. Unfortunately, at this point it is usually too late. A power of attorney is a power by the power holder (Principal) given to the agent acting on the Principal’s behalf. It is a right that is given not gotten. Therefore, when someone needs to “get” power of attorney over another person and that person no longer has capacity, you are likely looking at obtaining a conservatorship and guardianship which is a much more complicated court process.

Not all Power of Attorney documents are created the same. Some are effective immediately and some require a physician or sometimes two, to certified that the Principal is incapacitated. Some are limited and some are more general. While powers of attorney seem to be pretty straightforward, there are several intricacies and significant decisions to be made based on the principal’s circumstances. It is a powerful document and should not be treated lightly. Please come in to see us to learn more about this document and how we can craft a power of attorney as part of a comprehensive estate plan to meet your specific needs.

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Updating Your Plan: Powers of Attorney

By | Estate Planning, Legal Education | No Comments

As we enter the new year, it’s a good time to think about updating your plan. This includes your entire plan, including Powers of Attorney. Powers of Attorney are part of even the simplest estate plan. A Power of Attorney allows your Agent to act for you. There are Powers of Attorney for financial matters and also those for health care. It’s important to consider whether you need to update either of these powers. Read on to learn more.

Why Your Choice of Trustee Matters

By | Trustees | No Comments

One of the first documents added to an estate plan as it expands is a trust agreement. A trust can help you accomplish a wide range of estate planning goals and objectives; however, your trust will only be successful if you appoint the right Trustee. In fact, a Tucson trust attorney at Morris Hall PLLC explains how choosing the wrong Trustee can cause your trust to fail.

Trust Basics

A trust is a legal relationship where property is held by one party for the benefit of another party. The person who creates a trust is referred to as the "Settlor", "Trustor" or "Grantor." The Settlor transfers property to a Trustee, appointed by the Settlor. The Trustee holds that property for the trust's beneficiaries, also named by the Settlor. The overall job of a Trustee is to protect and invest trust assets and to administer the trust terms found in the trust agreement.

Trustee Responsibilities and Duties

A Settlor may appoint anyone he/she wishes as the Trustee. That Trustee has a fiduciary duty to the trust itself and to the beneficiaries named in the trust. As such, the Trustee must treat the trust assets with more care and invest with more caution than he/she would with his/her own assets. In addition, a Trustee is legally required to follow all the terms of the trust agreement unless a term is impossible, illegal, or unconscionable.  A Trustee has an enormous amount of power over the assets held in a trust as well as considerable authority over how and when they are distributed to the trust beneficiaries.

Choosing the Right Trustee Is Crucial

Given the important role a Trustee plays in the administration of a trust, and the power a Trustee has over the trust assets, it should come as no surprise that there are numerous things a Trustee could do to damage the trust and/or cause the trust to fail, such as:

  • Not following the trust terms. Unless a term is illegal, impossible, or unconscionable, the Trustee is legally obligated to follow the terms as created by the Settlor. Failing or refusing to abide by the terms of the trust will almost certainly thwart the trust purpose as stated by the Settlor of the trust.
  • Mismanaging the trust assets. A Trustee is in a fiduciary position, meaning that the Trustee must handle the trust assets with the utmost care. When investing trust assets, the “prudent investor standard” must be used by a Trustee. The prudent investor standard requires the Trustee to only invest in risk-averse options and to consider retention of the principal to be the most important consideration when making investments. If a Trustee is careless with the trust assets, the trust value could actually decrease instead of increase which clearly damages the trust.
  • Engaging in self-dealing. “Self-dealing” by a Trustee can do enormous damage to a trust. Self-dealing basically means that the Trustee cannot manage the trust assets or invest those assets with the intention, or goal, of benefiting himself/herself. This is not to say that a Trustee can never benefit from a trust. In fact, sometimes a Trustee is also a beneficiary of a trust; however, the Trustee cannot make decisions with his/her own self-interest at the heart of those decisions.
  • Creating a conflict of interest. In the event that a conflict of interest arises between the Trustee and the trust purpose, the trust terms or the beneficiaries of the trust could be irreversibly damaged.

Contact a Tucson Trust Attorney

For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about choosing the right Trustee for your trust, contact an experienced Tucson trust attorney at Morris Hall PLLC by calling 888-222-1328 to schedule your appointment today.

Estate Planning 101 Wills vs Trusts

By | Estate Planning, Legal Education, Trustees, Will | No Comments

ESTATE PLANNING 101 – WILLS vs TRUSTS

Your estate plan should accomplish some extremely important things, including protecting you, your assets, and your loved ones both now and in the future. Given everything your plan can, and should, do for you and your loved ones, you may not know where to start to ensure that your finished plan works as intended.

If you die without an estate plan, your estate will be subject to intestacy laws in your state and likely have to go through the process of probate in court. The division and distribution of your estate will be subject to a predetermined formula. For many, the state’s distribution plan is vastly different from how they would have chosen to distribute their assets themselves. The following explanations provide a basic understanding of the difference between planning with a will versus a trust.

Planning with a Will. A will is one of the most basic and commonly used estate planning tools. Simply put, a will is a legal document that directs how your assets should be distributed when you pass away. It also nominates who should serve as the guardian of your children. A will is only effective at death. Upon passing away, a personal representative (also known as an executor), that is named in your will, manages the distribution of the estate to any beneficiaries named, however, the distribution of the assets is overseen by the probate court.

A probate is necessary when a person dies, who owned assets that were in the decedent’s name only, with no pay-on-death or transfer-on-death beneficiary listed. In this situation, a probate court is the entity that grants authority to someone living, the ability to access, manage and distribute the assets of the deceased person.

Another consideration when planning with a will is that a will does not provide any lifetime planning, an increasingly important consideration now that Americans are living longer. Who will help make financial and medical decisions if you become incapacitated are important decisions to have in place before they are needed. Of course, passing away with just a will expressing one’s final wishes is much better than dying with no plan at all.

Planning with a Revocable Living Trust.  One of the most comprehensive estate plans is the revocable living trust. A trust is often a better way to give your family faster, unfettered access to the funds they need. A living trust is set up in such a way that the trust owns the assets to be left to the beneficiaries, thereby avoiding the need for probate.

Upon the death of the original trustee or co-trustees, the successor trustee becomes responsible for the management and distribution of the trust assets. Like the personal representative of a will, he or she is required to manage and distribute the estate strictly according to the terms of the trust.

A trust can provide asset protection for surviving spouses and children, and other named beneficiaries, so that the assets that you spent a lifetime accumulating are not squandered in a lawsuit or part of a divorce.

A trust also provides for administration during incapacity, so that successor trustees can have access and authority over the trust assets quickly and avoid the need and cost to go to court.

At Morris Hall, our only focus is on estate planning and we are passionate about helping families and individuals accomplish their estate planning goals to ensure that hard earned assets are passed to the intended beneficiaries with the least delay possible. Get started today by contacting Morris Hall and scheduling a complimentary consultation to review or begin your estate plan.

Cat and dog sleeping together. Morris pet trust estate planning.

Pet Trusts: An Often Overlooked Part of Your Estate Plan

By | Estate Planning, Pet Trusts | No Comments

Why a Pet Trust?

Pet trusts are becoming more and more utilized in today’s world.  As the birth rate goes down, the ownership of little dogs, weighing less than 20 pounds, has substantially increased.  We are seeing this trend across the country, beginning around 1999.  If you are the owner of a pet of any shape, size, or kind, you know that these furry creatures wiggle their way into your heart and become like family- so much so, that many employers offer bereavement leave when pets pass away.  Many stores now offer an entire collection of urns for pets and pet owners drop thousands of dollars at the vet every year for medical procedures for these beloved creatures.  For these reasons and more, Morris Hall estate planning services many clients in the Arizona and New Mexico area.

We all have those friends that have pets that eat and live an overall better lifestyle than do most human beings.  For example, some individuals are never able to have children of their own and many make it a life’s passion to give their fur babies the best possible life.  Some of these animals have spa days each month, have trainers and sitters that come to work with them each week and eat like royalty.  Though an extreme example, many of us have very close attachments to our pets, and when they pass, it’s like losing a loved one.  

Pet trusts are important.  Pet owners want to be sure that their cats, dogs, and birds are cared for in the event that they pass away and that their beloved pets do not end up at a shelter or on the streets.  This is not something that just the rich and famous are doing.  Plenty of every day people have added pet trust to their estate planning.

Seek a Pet Trust Expert

Morris Hall estate planning experts are a fantastic and reliable resource when it comes to setting up a trust.  Morris Hall helps you determine how much money to set aside for your pet’s future care, in the event that you pass away, for things like food, grooming, boarding, medical care, etc.  Morris hall can also help you identify the right person to act as Trustee of the Pet Trust.  If you are to move out of state, they are also experienced with transferring trusts.  

Morris Hall is a premier estate planning firm and services a wide range of clients.  As members of the AAEPA (American Academy of Estate Planning Attorneys) access is had too many advantages and benefits other attorneys cannot provide.  Qualified and experienced, Morris Hall is able to handle the most complex of financial matters and would love to visit with you, to see how your plans can be put into action.  Whether it be living trusts, income-only trusts, and many others, the goal is to help you find the best possible solution that is catered to your individual situation, while employing a strategic plan to defend and protect your assets.  Schedule a consultation with Morris Hall today.

Last will and testament, an important estate planning document.

How Does a Will or Trust Work?

By | Estate Planning, Living Will | No Comments

Regardless of your age, if you have dependents, you should look into creating a will, a trust or both. Putting those measures in place can help ensure your loved ones are not burdened with sorting out your financial affairs in the event of your death. Additionally, it can help offer stability for those you leave behind.

But how does a trust or a will work? Do you need one or both to get your affairs in order? First, let’s talk about what each of these legal transfer methods entails.

What’s the Difference Between a Will and a Trust?

In case you’re not already familiar with the differences between a will and a trust, we’ll highlight that below.

What is a Will?

Probably the biggest takeaway of a will is that it goes into effect only after you die. With a Morris Hall estate planning representative, you will designate someone as the executor, who will be the person in charge of carrying out the instructions in your will. Be sure your will gives the executor access to your financial accounts and records so they can seamlessly take control of your assets. 

If you are the parent/guardian of minor children at the time of your death, your last will and testament will ensure a new guardian is assigned to care for them. Making this decision before anything happens to you can help ease the stress of uncertainty for your loved ones, as there will be no question regarding who will take on that role. Additionally, your will can list beneficiaries, or recipients, of any heirlooms or sentimental belongings you possess.

A will is also an effective way to detail your funeral arrangements so loved ones do not have to make those decisions during their time of mourning. Since your financial status may change throughout your life, or simply your tastes and desires, it is recommended you periodically revisit your will to ensure it is up to date with your wishes. 

What is a Trust?

It might sound like a will covers all your assets, and a trust isn’t something you need to establish as well. At Morris Hall, however, we recommend having both! One of the biggest differences between a will and a trust is that a trust can be put into effect while you’re still living. There are myriad trusts one can set up, but we’ll outline two of the most common.

  • Living Revocable Trust - While you are still living, you can have a trust set in place. In the event you become incapacitated in any way (illness, injury, etc…), your trust names a successor trustee. This person becomes responsible for making decisions on your behalf. The successor trustee has the trust to refer to in order to help them be informed of your wishes if you are unable to communicate them yourself. Additionally, if you do end up passing away, the successor trustee maintains control of your assets without any disruption, or period of probate. When you set up a revocable trust, you have the power to make changes at any time.
  • Income Only Trust - Another common form of trust is the income only trust. When considering your estate planning with Morris Hall, you may benefit from this type of trust if you need to preserve your assets and maintain access to the income they generate. There can be a lot to understand in this trust and as AAEPA members, Morris Hall is ready to help you sort the details.
  • Probate - A trust is typically a way for eventual beneficiaries, or recipients, of the trust to avoid legal proceedings after your death. With a trust in place, the successor trustee usually has immediate power over your estate and can take the necessary action to transfer your assets to the beneficiaries. Avoiding probate is ideal for those who wish to maintain privacy regarding their estate.
  • Special Co-Trustee - Another element of a living revocable trust is a special co-trustee. This person can help facilitate the management of the trust. In the event there are disagreements about the terms of the trust, the co-trustee has the authority to act as a mediator or to make final decisions. To remain impartial, it is recommended that a special co-trustee is not someone related to you, or to any of your beneficiaries.

We understand it may be uncomfortable to have these conversations now with loved ones, but making will and trust decisions well in advance of your death is one of the best gifts you can give. Your beneficiaries will be grateful they have less to worry about at the time of your passing, as you will have provided clear instructions for not only your funeral but anything of value as well.

Phoenix estate planning attorney

The Difference Between Guardianship and Conservatorship

By | Estate Planning, Guardianship | No Comments

When it comes to stewardship over people or property, there is a lot to consider both personally and legally. At times when the legality of such things is challenged, it can present difficulty to multiple parties. It is always wise to walk such roads with a trusted divorce and family lawyer or experienced estate planning attorney to avoid further complications. However, understanding the basics ourselves can prove very beneficial.

There are two common terms that refer to stewardships: guardianship and conservatorship. But what exactly do these terms mean, and is there a difference between the two?

Guardianship Basics

When we speak of guardianship, it almost always refers to the stewardship an adult has over a child. A legal guardian is deeply involved in the day to day of an individual and can make many decisions on their behalf. Of course, the guardian has the responsibility of feeding, clothing, education, and otherwise caring for the protected party. 

In many states, including Arizona, there are two primary types of guardianship, one of them being full legal guardianship. This is most easily illustrated by the relationship between parent and child. Full legal guardianship persists either until adulthood or until the protected party is found legally fit to care for themself or granted emancipation. In the event of the guardian’s death, guardianship will transfer to the designated party on the deceased’s will or trust. If no party is mentioned, the court decides who cares for the protected party. 

The second type of guardianship is known as temporary guardianship. If a parent or guardian will be absent for a period of time, it is common, and often prudent for them to designate a temporary guardian to care for the protected party in their absence. Temporary guardianship generally has a set timeframe during which the temporary guardian has responsibility. In most cases, applications must be submitted to the court to be legitimized, but in some jurisdictions, the responsibility can be delegated more informally using a letter of guardianship.

Conservatorship Basics

In contrast to guardianship conservatorship generally refers to the stewardship of someone else’s assets or the responsibility to an adult party who is incapacitated or otherwise mentally unfit to take full care of themself.

A conservator, or responsible party, can have conservatorship over the conservatee themself, their estate, or both. If responsible for the estate, a conservator has the duty to protect, preserve, and manage the estate of the conservatee. If granted conservatorship over the individual, the conservator essentially has the responsibilities of a guardian and is tasked with providing for the personal needs of the protected party.

In some states, when the protected party is an adult, the legal stewardship is referred to as limited conservatorship and can pertain either to the person themself or the estate. It is not unusual to have different individuals appointed to each. This is one of the primary differences between guardianship and conservatorship.

Conclusion

To summarize, guardianship and conservatorship are very similar in that they both refer to responsibility for and stewardship of a person or their property. The primary differences lie in age and duty. Most often, guardianship refers to the stewardship an adult has over a child and often includes responsibility for the assets the child acquires. Conservatorship most often refers to the stewardship one has over an adult party who is incapacitated or unfit to care for themself. Conservatorships can be delegated as responsibility for the individual, their property, or both. For this reason, an individual can be appointed more than one conservator.

Both guardianships and stewardships are important terms to know and important for proper estate planning. When organizing a will or trust at any age, it is necessary to consider your stewardships and determine into whose hands they should fall in the event of death. If a proper estate plan is not in place and such things are not detailed, those decisions will be made by the court, an uninvolved party. If you have any questions with regards to guardianship, conservatorship, or estate planning for a more secure future, contact Morris Hall. We would be happy to assist you.

 

 

Stepped-up Cost Basis Going Away?

By | Election, Estate Planning | No Comments

Historically in a presidential election year, tax topics are widely discussed and debated between opposing candidates. This year is no different. The candidates have varying views when it comes to the tax planning strategy of stepped-up basis. The elimination of stepped-up basis would result in a significant increase in estate taxes for millions of Americans.

 What assets are affected?

Stock portfolio or real property.

What is Cost Basis?

The amount of an asset when purchased. For example, in the year 2000 Sally purchased a house for $100,000. The basis in the house is $100,000.

What is Stepped-up Cost Basis?

An inherited asset at its current market value as opposed to the basis of the person they inherit the asset from. For example, Sally dies in 2020 and the house is worth $300,000. Sally’s heirs will inherit the asset at the current market value in 2020 ($300,000) as opposed to the basis of when Sally purchased the house in 2000 ($100,000).

What does this mean with Stepped-up Cost Basis?

When Sally’s heirs turn around and sell the house after she passes, their basis is at $300,000, wiping out the capital gain tax that would have been imposed on the gain. (Gain = Sale Price – Cost Basis)

What does this mean if there is not Stepped-up Cost Basis?

When Sally’s heirs turn around and sell the house after she passes, their basis is at $100,000, with results in a gain of $200,000 that will have a capital gains tax imposed. The current top tax rate is 20%, with a proposed top tax rate similar to the ordinary income tax rate (39.6%) on the gain.

One of the additional proposed modifications to the step-up in basis of an appreciable asset, is the gain could be taxed not only if an appreciable asset is sold, but also would automatically be triggered by simply inheriting this type of asset.

The year 2020 will go down in history as one of the most challenging years for American people due to the financial impacts of the Corona Virus. These proposed changes to appreciable assets will have additional financial impacts on millions of portfolios and next generation transfers. If this tax on unrealized gains happens, people will need to rethink their investments and estate plans. Now more than ever, it’s time to rethink investment strategies and have an estate plan created or have an existing estate plan reviewed immediately.