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Do You Trust Your Trust?

Do You Trust Your Trust? Another way of saying this is: How often do you need to have your revocable living trust reviewed after you set it up? Alternatively, what are some triggering events that might cause you to have your trust reviewed? In general, the answer varies depending on the complexity of your estate and other factors in your family. However, I generally tell my clients that it is a good idea to have your estate plan reviewed every three to five years. For larger estates, this time frame gets shortened up to every one to two years, and, for smaller estates, it may be possible to do the reviews at longer intervals. Of course, I also tell my clients that this assumes that there are no changes in your family situation “on your end” and no significant legal changes “on my end”. What Are Changes That Might Occur on “Your” End? There are several changes that might occur in your family that would prompt you to make changes to your trust. First, one of the key people in your documents (maybe the person you named as your trustee or your agent under your durable general power of attorney) passes away or becomes incapacitated. Obviously, if the person that you were expecting to be in charge of your estate can no longer serve in this position, you will need to make some changes to your documents. Second, when someone gets divorced or remarries, they usually want to make changes to these documents. Third, sometimes over time, people develop different ideas about their distribution provisions. These changes are prompted by the birth of a grandchild, the behavior (or lack thereof) of some of their children, the death or incapacity of a child, their recent involvement in their church or a favorite charity. Finally, there are endless other reasons too, which are all specific to changes in your family situation. What Are Legal Changes That Might Occur on “My” End? On my “end”, various legal changes also occur over time. For instance, there may be a significant tax law change that impacts the planning that I do for my clients. In December 2017, there was a huge tax law change that affected almost everyone in America. For estate taxes, the estate tax exemption is now $11.18 million per person in the United States, meaning that, generally speaking, you can pass away with up to $11.18 million in your estate without having to pay any estate tax. This amount doubles to...

Does My Business Go Through Probate if I Die?

Does My Business Go Through Probate if I Die? For many of my clients who own businesses, their business is the largest asset in their estate. As a result, it is critical that this asset is properly transferred after their death. Several clients have asked me if their business or their interest in a business passes through probate if they die. The short answer is, “yes”, in general, your business or business interest will also have to go through a probate if you pass away if it is valued at $75,000 or more and there is not additional planning done to avoid a probate. This blog discusses this issue in more detail. Your Business Has to Go Through a Probate Just Like Any Other Asset in Your Estate. Under Arizona law, if you pass away with assets in your estate that are valued at $75,000 or more, then your estate will have to go through a probate process instead of completing a small estate affidavit. This $75,000 threshold applies to businesses and business interests too. Thus, unless you take some additional planning steps, your business or business interest will probably have to go through the normal probate process in Arizona. This can add additional time to the administration of your estate, additional cost to the administration, and the requirement of filing certain paperwork with the Arizona courts in order to administer your estate after you are gone. However, as is discussed below, with proper planning, you can avoid probate for your business  or your business interest by using two relatively straight-forward strategies. For businesses that have two or more owners, a buy-sell agreement can efficiently set forth the way the transfer will occur, and this is typically handled outside of a will or a trust. If the business is owned by one owner or by a married couple, a buy-sell agreement will not work and the transfer is typically set forth in a will or a trust or in certain business formation documents. How Does a Buy-Sell Agreement Work for Businesses That Are Owned by Two or More Owners? A buy-sell agreement is a written agreement that provides a mechanism for the orderly transfer of an owner’s interest to the other co-owners on the occurrence of certain triggering events. Without an exit plan, the owners of an Arizona LLC or corporation are essentially stuck with each other indefinitely even if one of the other owners dies, becomes incapacitated, gets arrested, or files for bankruptcy. A buy-sell agreement defines what...

How Do I Administer a Trust?

How Do I Administer a Trust? So, you just found out that you are the trustee of your relative’s trust. What do you do? This blog gives an overview of the steps that a trustee needs to take to administer a trust after the settlor (i.e., creator of the trust) passes away. In general, a trust administration is the orderly administration of a trust after settlor or the settlors pass away.  It can either be the administration and distribution of one or more trusts for the benefit of a surviving spouse after one spouse passes away or the administration and distribution of a trust to the beneficiaries after a single settlor passes away or both settlors pass away. This particular blog will focus on the administration of a trust created by one settlor.  How Long Does a Trust Administration Take? In general, a trust administration takes between six months and one year to complete.  There are many factors that can lead to a delay in the administration of a trust.  One factor that always causes delays in the trust and increases the attorney’s fees and costs associated with it is the presence of difficult parties.  Most trust  administration issues can be resolved by the parties with appropriate dealings outside of the court.  However, like any contested matter, the more that that trustee has to go back to court to get administrative issues resolved, the more the trust administration process will be delayed.  Another factor that can delay the trust administration process is a difficult asset, such as a hard to sell timeshare or other trust asset.  Finally, one additional factor that can delay the trust administration process is a formal accounting in a case.  Because the court accountant and the court typically take months to approve a final accounting, this almost always delays the trust administration process considerably.  For this reason, unless it is unavoidable, I always encourage the trustee to do an informal accounting with the beneficiaries, rather than a formal accounting approved by the court. What Are the Key Steps of a Trust Administration? After the settlor passes away, there are several things that need to be done to make sure that his or her trust is administered properly.  First, it is important to meet with an attorney as soon as possible after the settlor passes away. Depending on the type of trust that you are dealing with, there may be deadlines to make certain tax and other elections that need to occur within a certain time...

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