By Melissa Myers and Michael J. Tucker, July 2016 Issue.
Melissa Myers: Michael, I have had so many questions from readers about wills and trusts. Let’s make that today’s topic.
Michael J. Tucker: Well, people in the LGBTQ community would benefit, perhaps more than most people, from having proper documents in place, just in case.
Myers: So, what is the point of making a will?
Tucker: Wills carry out your wishes and minimize hassle and expense for your survivors. Of course, you can use a will to direct the distribution of certain property that you own when you die.
Myers: Doesn’t marriage take care of all that so that people don’t need a will?
Tucker: Well, sometimes, but usually not. Especially when there are children from previous relationships.
Myers: Having a will avoids probate, right?
Tucker: Not so much. Actually, a will is “activated” by court action. A will nominates a personal representative to gather assets, pay taxes and bills, and distribute what’s left to your beneficiaries.
Myers: Is a personal representative the same thing as an executor?
Tucker: Exactly. The probate of the will by the court gives the personal representative the legal power to handle the affairs of the person who died.
Myers: So, why are wills more important for LGBTQ folks than for others? Is it because they are less likely to want their estate to go to their blood relatives? Maybe they’d prefer their assets go to a spouse, partner or charity?
Tucker: Arizona law provides that relatives will inherit the property of a person who dies without a will.
Myers: For folks who have never had children, their spouse is the first relative in the lineup.
Tucker: But many people in nontraditional families would not want their property to pass to their next of kin. Arizona law would require that result if there is no will. Big plus: You can use your will to name your choice for a guardian if you have children who are still minors at the time of your death.
Myers: Let’s talk about how that works.
Tucker: Guardians for minor children are appointed by the court, based on the best interests of the child. But the parents have the right to nominate their choice of guardian in their wills, and courts give a lot of weight to the parents’ nomination.
Myers: OK, so there’s a lot that can be accomplished with a will. Now what about a trust? What are some of the differences between a will and a trust?
Tucker: A living trust can perform some (but not all) of the tasks of a will, with some additional advantages. Trusts can be handled without probate court approval. Also, trusts are more difficult for disgruntled relatives to challenge.
Myers: People appreciate that if all assets are held in trust, there is no court involvement. Your arrangements are completely private.
Tucker: That means no probate hassles.
Myers: Messing with probate courts can be time-consuming and expensive if you have to hire lawyers to help you out.
Tucker: One other aspect of trusts is particularly important in the LGBTQ community: You can specify in your living trust the person whom you choose to handle your financial affairs if you become incapacitated.
Myers: For many unmarried folks in our community, the person you might choose as trustee to handle your affairs in the event of disability is not the same person that a court would appoint as your guardian or conservator.
Tucker: In plain English …
Myers: That means you may want your partner or a friend to handle matters, and yet the court may appoint your mom!
Tucker: Scary! Court process for appointing guardians and conservators over incapacitated persons is always time-consuming and expensive, and so trusts can be useful to avoid court involvement there.
Myers: Another benefit of a trust is that we may want limits on how our beneficiaries use their inheritance from us. Trusts can help by providing for delayed distribution of assets, allowing distributions over time based on need, or conditioning distributions on whether beneficiaries reach educational or financial goals.
Tucker: That kind of trust provision can appear in a will as well.
Myers: How should people prepare for their appointment with their attorney, accountant or financial planner regarding wills?
Tucker: First, it’s helpful to determine your situation and your goals. Think about whom you wish to remember in your will. Is there anyone who might disagree with your will and want to challenge it? Who could depend on you for financial support?
Myers: When I sat down with my attorney to prepare my will, I was asked to gather a list of relevant names, addresses and telephone numbers.
Tucker: That preparation definitely streamlines the process. Finally, it’s crucial to determine your assets and liabilities. Typical assets include life insurance, real estate, automobiles and retirement plan interests. Typical liabilities include mortgages, auto loans and personal loans.
Myers: Finally, be candid with your advisors and attorneys. They can do their best work for you if they know all of the relevant information.
Editor's Note: This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Investors should consult a tax or legal professional regarding their individual situation. Neither Camelback nor Commonwealth offers tax or legal advice.