Why should I consider a revocable living trust? Part 2

• It is important to know that many assets are not subject to probate even if they are not owned by a trust. Excluded assets are:
a. Property held as joint tenants with rights of survivorship passes by operation of law and is not subject to probate if one of the owners dies.
b. Proceeds of IRA accounts, pension plans and life insurance policies that have named beneficiaries are paid directly to the designated individual(s) without probate.

• A revocable trust provides for the orderly management of a grantor’s financial affairs, while retaining control.
• If a trustee become incapacitated, the trust will provide for a succession of the trustee position without the requirement of a court proceeding, e.g. guardianship or conservatorship. A guardianship may still be needed if there are assets outside the trust or for non-financial issues that may exist.
• Owners of trust need to develop thorough trustee instructions. This is a major advantage of revocable trusts- to provide specific rules to the successor trustee about post-disability events.
• Authority under a power of attorney will terminate at the death of the principal while the revocable trust agreement will continue after the death of the grantor at least through the final trust distributions and possibly with continuing trusts. If the bank account is in the name of the trust the house bills can continue to be paid and monetary assets can be added to prepare for final distribution after all the estate affairs are completed -eg. Payment of taxes and creditors.

• A “pour-over will” is necessary for assets not transferred into the trust. This will should contain back-provisions in case the trust is revoked and not replaced.

• Does my trust end when I die?
Unlike a will, a trust doesn’t have to die with you. Assets can stay in your trust, managed by the trustee you selected, until your beneficiaries reach the age(s) you want them to inherit. Your trust can continue longer to provide for a loved one with special needs, or to protect the assets from beneficiaries’ creditors, spouses and future death taxes.

Summary of Living Trust Benefits
• Avoids probate at death, including multiple probates if you own property in other states
• Prevents court control of assets at incapacity
• Brings all of your assets together under one plan
• Provides maximum privacy
• Quicker distribution of assets to beneficiaries
• Assets can remain in trust until you want beneficiaries to inherit
• Can reduce or eliminate estate taxes
• Can be changed or cancelled at any time
• Difficult to contest
• Prevents court control of minors’ inheritances
• Can protect dependents with special needs
• Prevents unintentional disinheriting and other problems of joint ownership
• Professional management with corporate trustee
• Avoid circumstances where a will probate would require notifying distant relatives or difficult-to-find distributees (persons who must be served in probate)

• A trust can let you provide for your spouse without disinheriting your children, which can be important in second marriages. It can protect inheritances for children and grandchildren from the courts, creditors, spouses, divorce proceedings, and irresponsible spending.
• Lasts after death-no interruption
• Protection for vulnerable person-write check excessively
• Ease with financial institutions- banks want special powers of attorney
• Trustee has more clear and specific duties than the Power of Attorney
• You can require accountings from trustee
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Knowing you have a properly prepared plan in place – one that contains your instructions and will protect your family and will give you and your family peace of mind. This is one of the most thoughtful and considerate things you can do for yourself and for those you love.

Joint revocable trusts allow married persons to combine their assets and control the disposition of those assets in a uniform manner. A portion of the trust becomes irrevocable upon the death of the first spouse, unless otherwise provided by the trust. The trust is always revocable upon the death of the surviving spouse.

Why should I consider a revocable living trust? Part 1

• The revocable living trust avoids probate. It lets you keep control of your assets while you are living — even if you become incapacitated — and after you die.
• Avoidance of probate. Probate process can be long and costly. The court allows a personal representative to collect the decedent’s assets, pay valid claims, debts and taxes and finally distributes the remaining assets to those names in the will to receive them.
• For small estates (personal property [cash, belongings etc.] valued under $75,000 and real property [real estate] under $100,000) a quick probate process using a small estate document can be used.
• Probate avoidance occurs with a revocable trust because assets owned by the trust at the decedent’s death pass to trust beneficiaries from the trustee who holds title to them, not according to the terms of the decedent’s will.
• Costs for probating a will include court costs, appraisal fees, attorney’s fees, and executor’s commissions.
• A valid reason for a revocable trust exists if an individual owns real property in more than one state which, at his or her death, would require a probate procedure in each state.
• Probate is a public process and all documents are part of the public record, including the will. A revocable trust does not require probate and does not become public. May want to keep private if providing only a minimum distribution to a spouse or disinheriting a child.
• A possible will contest may be reason to consider a revocable trust. A trust does not require to notice to next of kin like when a will is probated- a disgruntled heir can then contest the validity of the will. A trust avoids this notice requirement and can circumvent a potential will contest.
• A trust can be challenged but less vulnerable to an attack and therefore can prove to be a useful tool for same-sex couples, non-traditional families, and families with multiple children from prior marriages.
• The Revocable Living Trust generally DOES NOT require any court action! Your heirs have immediate access to your estate after your death to pay bills and distribute your assets as you want them to be distributed. You DO NOT lose control of your estate in any way. You can handle your affairs the same way you always did. All you need to do is keep your Trust updated!
• A revocable trust can be beneficial in a case where a will probate would require notifying distant relatives or difficult-to-find distributees (persons who must be served in probate). If the distributes are unknown or cannot be traced, a company may have to be hired to find them.

Do I Really Need a Will?

Our clients have often asked us “Do I really need a will? This question often comes up because the client feels that “the law will take care of it when I die”, or the client doesn’t think they have a lot of property or money to worry about, or because the client thinks that they have already disposed of their property by other means such as a deed, a beneficiary designation for an account, a trust, or some other transfer besides a will that, unlike a will, allows the client to avoid a probate procedure in Superior Court.

The law will only take care of distributing your property if the law follows the way you want the property distributed. People who want their property distributed in a specific fashion should not depend on state law to do that job for them.

The other reasons stated above may be reasons for believing that a will is not needed for the purpose of distributing their property on death, when looked at very narrowly; however, a will has other purposes as well.

First, a will is used to identify a person’s heirs under the law. It is important to do so because will contests are often based on a failure of the testator to adequately state who his or her natural heirs are. This indicates that the testator may lack capacity to make a will. Stating who would legally receive your property if you had no will and died immediately is an important way to lessen the likelihood of any contest, even if some or all of these heirs will not be receiving anything from the will. Stating who your heirs are together with a statement in the will that specifically disinherits any or all of them can be very effective in disinheriting heirs if that is desirable.

Persons with minor children can nominate a guardian for them in their will. Such a nomination will be prioritized by the court over others who might be asked to be so appointed.

Even in the case of a small estate (in Arizona this would mean personal property of $75,000 or less and Real Estate of $100,000 or less) being named in a will entitles a person to utilize a much abbreviated probate procedure for small estates.

Finally, a will is a fail-safe document for property that is never placed in a trust or otherwise transferred outside of the jurisdiction of a probate court. A great example of using a will in this manner in conjunction with a trust is through a pour-over will. This type of will transfers any property subject to a probate proceeding into an existing trust to ensure that the trust provisions for distribution of the property will be applied.

© 2020, Michael G. Kelly Attorney at Law
Arizona Mobile Attorneys

Should I Put My Home in A Trust?

A trust is a legal entity that is created when one person, referred to as a “Trustor” or “Grantor”, and another person, referred to as a “Trustee”, enter into a contract called a Trust Agreement. The trust agreement states that the trustor will provide the trustee with certain property which the trustee agrees to hold for the benefit of persons or entities that are specified in the trust agreement as beneficiaries.

Often, a trustor will place their home in a trust. This is most often done in order to avoid including a home in a probate estate in order to avoid the time and expense of a probate court procedure to determine heirs and distribute property.  Another reason for doing so is to try to move the property out of the trustor’s individual name in order to protect the property from any legal exposure the trustor may have in his or her own affairs. Unfortunately this action can cause more problems than it solves.

While a trust will effectively avoid probate, it will only remove exposure to any personal legal liabilities of the trustor if the trust agreement is one that fully removes his ownership control of the property. Trust agreements very often fail to do this because the trustor continues to maintain ownership control over the property.

One problem that elder law attorneys frequently encounter when trusts are used for a home is in obtaining Medicaid assistance for elders to receive skilled nursing.  The problem occurs frequently because most elders cannot afford the extremely high cost of skilled-nursing care without Medicaid assistance. When a home is owned by a trust the home becomes an asset of the trustor that the Medicaid Agency (ALTCS in Arizona) counts in deciding whether the individual is “poor enough” to be eligible for the Medicaid assistance. In Arizona a single person is prohibited from having more than $2,000 in property in order to be eligible for such assistance. If the house is in a trust that does not completely remove all ownership control from the trustor these persons are deemed ineligible for such assistance. In such cases it is best to leave the house in the name of the person rather than moving it into such a trust.

There are effective ways for an elderly homeowner to maintain ownership control of a home, maintain eligibility for skilled-nursing Medicaid assistance, and avoid probate of the home on the owner’s death. An elder law attorney can help a homeowner attain all three of these goals, and at much lower cost than an approach which may leave the homeowner unable to obtain the needed Medicaid assistance. At Arizona Mobile Attorneys we can assist you with estate planning and health planning issues like these.

© Michael G. Kelly, Attorney at Law, Arizona Mobile Attorneys

Fighting Financial Exploitation of the Elderly

By Michael G. Kelly, Esq., Arizona Mobile Attorneys

As people age they become more vulnerable, both physically and mentally. If they live alone this vulnerability can be worsened by feelings of loneliness and depression. This vulnerability can lead to various forms of abuse of the elderly by others. The most common of these is financial exploitation.

Financial exploitation can take various forms. The most common are when a person the elder is depending on for care or emotional support convinces a vulnerable elder to transfer assets the elder owns to that person, such as by adding them to a bank account or as a death beneficiary on the account, or by deeding their home to them. This type of conduct need not be accompanied by threats or coercion in order to be deemed unlawful financial exploitation of a vulnerable adult. It most often occurs with elderly females who live alone or with the abuser (75%).

Fortunately Arizona has laws that aggressively deal with situations where persons take advantage of vulnerable elders to financially exploit them. Exploitation of a vulnerable adult falls under the theft statute in Arizona and can carry a 5 to 12.5 year prison sentence.  In addition an elder, or those who are in a position to protect the elder, may file a law suit to recover damages up to three times the actual damages caused.

If you have been exploited or know a vulnerable adult who has you should take action immediately to report the criminal activity to an attorney representing you, to local police, or to the Attorney General of Arizona. This will help to stamp out this type of exploitation and help recover the vulnerable elder’s property. At Arizona Mobile Attorneys we stand ready to aggressively attack this assault on our elders.

© 2020, Michael G. Kelly

SHOULD I INCORPORATE?

By Michael G. Kelly, Esq.

I often get asked the question “Should I incorporate to protect myself from personal liability.”  The general answer to that is “yes” but the answer is actually more complex than that.

Corporations, and the more recently created Limited Liability Company (LLC), are business entities that shield their owners from personal liability by limiting liability to the amount of their investment. To many this seems to be exactly what they are looking for.  Often these entities are used to shield owners from liability connected to a particular asset, such as a piece of real estate or an airplane. What often gets neglected is that they have to behave like a real corporation or LLC.

Each type of business entity has rules that need to be followed in order to provide assurance that a court would uphold that limitation on liability to others, otherwise the corporation or LLC will be treated as nothing but an alter ego of the owner(s) and personal liability beyond the amount invested may be imposed. 

For example, these entities should have a checking account in the name of the entity rather than the owner simply writing checks out of a personal bank account.  Another example is the case where personal liability is imposed on the owner of property where that owner of the property also owns and controls a company that is leasing the property (from the owner) and one of its employees or customers is injured while on the premises. Had the property owner transferred the property to the LLC instead of retaining ownership, he would have been in a much better position to avoid any personal liability.

It is also important to adopt corporate bylaws or an LLC membership agreement. Where these agreements call for meetings and votes or consents to actions, such provisions need to be adhered to at all times. Failure to do so will bring the alter ego problem back into focus when a liability occurs.

Lastly, it is important to adequately insure a business to further protect it against any liability that may arise.  It is best to seek the advice of any attorney regarding which type of entity to form for your business and the proper steps to be taken to preserve limited liability.

© Michael G. Kelly

Estate Planning and Moving to Arizona from Out of State

By Michael G. Kelly, Esq.

Arizona’s population has exploded in recent years, attracting many people from other states. As people move into the state, they often assume that the laws are similar when that is not the case at all. One area where this is particularly true is in death and inheritance. Sometimes the differences can be stark.

A great example of this involves the marital home. Many states, particularly in the upper mid-west and the east, treat the home as a “tenancy by the entireties”. This means that the home is treated as jointly owned with the surviving spouse taking ownership of both half-shares upon the death of their spouse.

Like a number of other states in the west, Arizona is a community property state.  Arizona does not follow the “tenancy by the entireties” model. Unless it is specified in the deed the half-share of the marital home of the first spouse to die does not necessarily go to the surviving spouse.

This problem often rears its ugly head when the first spouse to die has children from a prior marriage. In that case the surviving spouse can find him or herself owning only a half-share and the children of the deceased spouse owning the other half-share.

This situation can become very precarious depending on the relationship between the surviving spouse and the deceased spouse’s children. Might the surviving spouse have to leave the home if the other owners want to sell the home and get their share(s)?  If the surviving spouse wants to sell how does he or she deal with the other owners to get that done?

These questions make it obvious that proper and timely planning should be done when moving to Arizona from outside the state to assure that ownership passes as intended and in a manner that reduces stress for the surviving spouse. At Arizona Mobile Attorneys we are experienced with these scenarios and can assist you with getting this accomplished.

© Michael G. Kelly, Arizona Mobile Attorneys

What is Elder law?

Elder law is an area of law that focuses on legal advice which takes into consideration the key issues facing older and disabled adults: housing, financial well-being and autonomy/quality of life. An Elder Law attorney assists with planning for costs of long-term care, reviewing and applying for government programs, choosing retirement plans and many other issues such as planning and settling your estate. Disability planning is a very important piece of Elder Law. It gives peace of mind to individuals that their personal and financial affairs are in order in case they are not able to manage their own affairs.

Banks and Financial Durable Powers of Attorney

Banks and Financial Durable Powers of Attorney

By Michael G. Kelly, Arizona Mobile Attorneys

We are contacted by persons who need assistance in regard to a bank that refuses to honor a validly executed Financial Durable Power of Attorney. This often occurs because the person who executing the power executed a “springing” power of attorney long before it was brought to a bank or other third party to add the agent under the power as a signor/authorizer on the account.

A “springing” durable power of attorney is a power that does not come into effect until the principal (the person providing the power) becomes incapacitated (unable to make informed decisions regarding their financial affairs). This can occur years after the Power of Attorney is executed by the person when they have capacity to execute it, causing the bank to view the power as stale and therefore questionable as to its validity. Though such a conclusion is in error, it is nevertheless a practical reality when dealing with some banks. Obviously this is a serious problem when an agent (often an adult child) is attempting to manage their principal’s (the parent’s) financial affairs because they are no longer able to. It is important to take steps to prevent this situation from occurring.

One approach that is often used is to name the agent as an actual owner on a joint account. This is a mistake because it invites fraud, in that the new co-owner is free to make unlimited withdrawals of money from the account that is not really their own. In addition if the new co-owner is ever sued for anything, the money that is in the account is now fair game in the law suit. Arizona Mobile Attorneys does not recommend this approach.

Another approach for a springing power is for the principal to certify the Power of Attorney by affidavit each year, effectively making it current. This may be somewhat effective, however, there is no guarantee a bank would accept it and the principal would be burdened with exercising the diligence to assure renewal each year.  Alternatively, the Power itself could be redrafted and executed periodically but that involves even greater burden and in practice is unlikely to occur unless relationships have changed.

A final approach, and one which Arizona Mobile Attorneys recommends, is to execute an IMMEDIATE Durable Financial Power of Attorney. An immediate power comes into effect immediately upon execution as opposed to being delayed until incapacity occurs (springing power). By doing this the power can be immediately presented to a bank in order to have the agent added as a signor/authorizer on the account.  This avoids staleness of the document and the burdens of annual renewal. It is extremely important that the agent is a highly trusted person who is beyond reproach since they are being given immediate powers to act on the principal’s behalf.  The agent must tacitly understand that they are acting under the direction and knowledge of the principal at all times, while the principal has capacity. The document should have safeguards in place to assure that the agent would be held legally accountable for any financial abuse.  This approach is vastly superior to adding someone on to an account as an owner with no legal safeguards.

© Michael G. Kelly, Arizona Mobile Attorneys

Tech Support Scam

A recent article has appeared in the Arizona Republic discussing a substantial increase in Tech Support Fraud across the U.S. according to the FBI. The article stated that losses from this fraud in Arizona in just ½ of 2018 are 263% of losses in all of 2017. While this type of fraud can victimize anyone, it has been increasingly targeted at citizens over the age of 60.

The scams start with an unsolicited phone call, email or computer-screen pop-up notification from someone purporting to be a tech-support specialist who has identified a virus infecting the victim’s computer. They offer to fix the problem – which very likely doesn’t exist – FOR A FEE.

When a victim responds to a call, email or clicks on a pop-up, criminals will offer to help fix the victim’s technical issues, leading them to request remote access to the victim’s device. At that point the victim will have already paid them money.

NOTE: It is this writer’s experience that these scams are presented suddenly, while a person is working on their computer, and prevents the work from continuing until you call a number in a pop-up to get the problem “fixed.”  One way to combat this problem is to press the ctrl key, then press the alt key while still holding the ctrl key down, and pressing the Delete key, while still holding the ctrl and alt keys down. This will interrupt the program and you can activate a program called  “Task Manager”  by clicking it on a window that comes up.  You can then select the web browser you are using (Chrome, explorer, etc.)  to eliminate the problem. At that point you should run any anti-spyware and anti-virus program you have and scan for problems to see if there is really anything going on and to clean up your computer.

The FBI states, anyone who is online is vulnerable to this scam, perpetrated by well-organized criminal organizations around the world looking to victimize people. Fraudulent tech support companies often will advertise their services online alongside legitimate companies, seeking to trick a victim.

With this access, scam artists can download malware to the victim’s computer, launch phishing attacks against the victim’s contacts and access the victim’s personal information such as tax returns or health records.

Criminals initiate contact with the victim and convince them to allow remote access. The FBI warns that access should never be granted to an unverified company.

According to the FBI a specific form of the fraud known as the “Fake Refund” is also becoming increasingly common. This scheme involves an offer to the victim for a refund for previous support services. The scam artist will then pretend to refund too much money to the victim’s account and ask the victim to return the difference. This kind of “refund and return” process can happen multiple times, causing the victim to potentially lose thousands of dollars.