Options To Transfer Your Estate
The goal of estate planning is to provide for the transfer of property to loved ones while maximizing asset protection and minimizing expenses. Dealing with and planning for death is never an easy thing, however, it is important to plan ahead and understand the basics of transferring the estate.
In considering the best way to transfer your estate, it is important to understand your general options. Some ways to transfer your estate include:
- Transferring your estate using a will
- Gifts during your life (Inter-vivos Gifts)
- Transferring your estate using a trust
Transferring your estate using a will
The most common and well-known way to transfer an estate is by using a will. A will is a document that transfers property by using a court process known as the ‘probate’ process. Upon the death of the testator (creator of the will), the Personal Representative (named in the will or appointed by the court) will distribute the estate according to the will, under the supervision of the court.
If you want to have a say in how your estate is distributed, you must have a legally recognized document expressing your instructions. If you die without a will (intestate), your property will be distributed according to state laws. In Arizona, if you die without a will (intestacy), your property will be distributed to your closest surviving relatives in the following order.
1. Surviving Spouse & Minor Children
2. Children – This includes adopted children, but not step children.
5. Parents Descendants – This includes your brothers, sisters, and their children, grandchildren, etc. Note that half-siblings are treated the same.
6. Your Grandparents, equally to mother’s and father’s side, and then to their descendants.
7. At this point, if there is still no one to transfer your property to, your property will then go to the State.
Using a will, you can also name conservators or guardians over your minor children and you can provide instructions on the management of your estate if you become incapacitated. Although the court must approve the guardians you designate for your children, without such instruction, the court will appoint someone on its own.
Transferring Your Estate Through Gifts
Gifts can be made during your life without being subject to intestacy (dying without a will) laws or the probate process. Once a gift has been made, the gift is no longer subject to the probate process but the person giving the gift no longer has control or possession over the gift. Currently, the maximum amount a person can gift in their lifetime is $5 Million, without paying taxes. The receiver of the gift, however, may be subject to gift taxes. The exemption each year for gift tax is $13,000. In other words, if the total value of gifts received in a year is $13,000 or less, the receiver does not have to pay any gift tax. However, if the total value of gifts received is higher than $13,000, the receiver is subject to gift taxes. It is important to understand that these laws are always changing.
Transferring your Estate Using a Trust
Another way to transfer your estate upon your death is by using a trust. A trust allows you as the creator to manage the trust during your life, thereby maintaining control of your assets. Upon incapacitation or death, your trust will then be managed by the one(s) you choose. Trusts can also be less expensive and less time consuming than the probate process (transferring your estate through a will). The probate process usually takes between six and twelve months to complete all probate transfers and close an estate. Arizona courts do not usually step in with additional action before two years. During this time, if the probate is contested, there could be additional court costs to the estate, and the probate process could also lengthen until the matters are resolved. When using a trust, there are fewer disputes on how to manage and transfer your estate. Rather than waiting for the probate process, the trust is in affect immediately. The only changes are who the trustee and beneficiaries are. Lastly, where wills are recorded publicly as part of the probate process, transferring your estate though a trust is private.
Seek Counsel from an Experienced Attorney
Dealing with and planning for death is never an easy thing. However, it is important to understand and plan for the disposition of property to loved ones upon such an event. Because there are so many options, in order to do so legally, accurately, while maximizing your interests, it is always best to seek council from an experienced attorney. Our Phoenix estate planning attorneys at Gunderson, Denton, and Peterson PC can assist you with your planning needs.
Guest Blog Written By Brent Gunderson
Wayne Gardner, Attorney
Buntrock & Gardner Law, PLLC
Mesa, AZ 85203