Video Transcript Below
Introduction
00:00:03 Francisco Sirvent:
Well, good morning, everybody! Bright and early for one of the most interesting topics to do at 9:00 a.m. in the morning. Uh, thank you for joining. I’m Francisco Sirvent with Keystone Law Firm. And today you’re going to get to hear from one of my favorite people, my partner Michelle Dexter, who’s been with the firm—I think we’ve worked together for about eight years now.
00:00:28 Michelle Dexter:
That’s correct.
00:00:29 Francisco Sirvent:
Michelle leads our estate planning department, and today she’s going to share some really good information with you. Michelle is one of the clearest educators about complex topics that I’ve met. What’s really great about how she works with our clients is that it’s not just dumping information on you to overwhelm you—she genuinely wants to make sure you understand it. And that’s what you’re going to walk away with today. So if you’ve been wanting to know how to do this, what you should do, and how all this stuff works, you’re in the right spot.
00:42:04 Francisco Sirvent:
I think you’re going to walk away with a couple of “aha” moments. That’s really our first goal today: that you walk away saying, “Ah, I get it now. I know something more than I started with.” And you can take that and apply it to your life. That’s our biggest first goal.
Obviously, our second goal as a business is that if you’re looking for help with this stuff, this webinar gives you a very low-pressure way to learn about us, hear how we do things, and kind of evaluate whether it would be a good fit for you to work with us if you need help.
00:42:59 Francisco Sirvent:
I know some of you are already clients, and I love that you’re here. There’s nothing better than learning about this stuff over and over. As we all know, the best way to learn something is through repetition. Come back to these webinars—we have a whole bunch of them for the rest of the year. Learn these topics repeatedly. The more you know and hear, the more you can recognize when something in your life might mean you need to make a change or ask a question. I’m glad you’re here, and I know you’ll learn something new today.
So, with that, I want to hand it over to Michelle. Take it away, Michelle.
Michelle’s Introduction
00:43:54 Michelle Dexter:
Thank you so much, Francisco. Everyone, just a heads-up: this is my first webinar. I’ve done some live seminars before, but this is my first webinar, so I appreciate your patience with me. If I’m not always looking at the camera, it’s because I have some notes over here and my iPad down here to draw some things for you. I’m going to do my best in the hour we have to give you some really good information about estate planning here in Arizona, the purpose of a trust, and the alternatives to a trust.
Why Trusts Are Important
00:43:54 Michelle Dexter:
Many of you know I work in worst-case scenarios. Our litigation department handles some of the uglier sides of estate planning. I like to use those lessons to help clients really understand the decisions they’re making and make the best decisions for themselves and their families.
People often ask, “Why do I need a trust? I don’t think I need a trust; there are other ways to do it.” So I like to start with a visual. I’ll draw three boxes. Most of your assets, if they’re not in a trust, are probably in your name—bank accounts, your house, and those types of things. That’s typically where most people keep their assets. Some people have assets in their name with a beneficiary, like retirement accounts or life insurance.
00:44:58 Michelle Dexter:
Assets that are just in your name are subject to probate. If you pass away and have assets still in your name here in Arizona, those assets are subject to probate.
Recently, Arizona changed some laws regarding probate and small estate affidavits. The limit for personal property under a small estate affidavit has been raised: if all your assets in your name total less than $200,000, your family can receive those funds with a small estate affidavit.
00:46:08 Michelle Dexter:
There are a couple of rules:
The family has to wait 30 days after your passing to execute the affidavit.
All your heirs have to sign off on it.
So, if you have a child who’s not in communication with the rest of the family, or someone missing, you can’t complete the affidavit without everyone’s signature.
Another thing: the affidavit is signed under penalty of perjury, stating all creditors and final expenses have been paid. Often families need access to funds to pay those bills, which can create a catch-22: they can’t pay the bills until they have access to money, but they can’t get the money until bills are paid—unless they go through probate.
For real property, the limit is $300,000. That requires six months to pass after your death, which can burden families with mortgage, taxes, insurance, HOA fees, and upkeep. Real estate affidavits must also be filed in court and require all beneficiaries to sign, which can complicate things.
Access During Lifetime and Powers of Attorney
00:48:21 Michelle Dexter:
Another concern is accessing assets during your lifetime, especially if incapacity occurs. Years ago, families could just go to the local bank, and everyone knew each other. Today, if assets are still in your name, you need a power of attorney.
A power of attorney is simple: you name agents and decide their authority over bank accounts, government benefits, and other items. The challenge: banks have discretion on whether to accept them.
We update powers of attorney every five years, even if no changes are made, to ensure the document is fresh. Some banks may refuse documents older than two years. Banks have even refused POAs due to outdated language or privacy concerns.
00:50:15 Michelle Dexter:
If a power of attorney isn’t accepted, the alternative is a conservatorship, where a court appoints someone to manage your finances. Conservatorships are expensive (often $10,000+), require annual accounting, court approvals, and bonds. This makes updating powers of attorney critical.
Assets with Beneficiaries
00:52:28 Michelle Dexter:
Assets in your name with a beneficiary avoid probate, but powers of attorney and conservatorship issues remain. Retirement accounts, IRAs, and 401(k)s must remain in your name, so your power of attorney must be up to date to access funds if you become incapacitated.
00:53:29 Michelle Dexter:
Probate can be:
Informal probate: Everyone agrees, no hearing needed; about 2–4 weeks.
Formal probate: Issues like missing documents require a hearing; 6–8 weeks, sometimes 3–4 months at year-end.
This affects your family’s access to funds for expenses after your death.
00:54:39 Michelle Dexter:
Other concerns with beneficiary assets: What if a named beneficiary is not alive? Contingency plans are limited. You need to decide if funds go to their children, your other children, or your estate.
Adding a child to an account or house can trigger gift tax issues, remove stepped-up basis, and cause capital gains taxes.
00:55:43 Michelle Dexter:
For example: Your house bought for $100,000 is now worth $600,000—a $500,000 gain. If you add a child to the deed, their basis is $100,000. If they inherit at your death, the basis is the date-of-death value.
00:55:43 Michelle Dexter:
So, just to continue: if you add a child to the deed during your lifetime, they lose the stepped-up basis. That means if they sell the house later, they could have to pay capital gains taxes on the difference between the original purchase price and the sale price, rather than the value at the time of your death. That’s a big consideration for people thinking it’s “simpler” to just add someone to the title.
00:56:25 Michelle Dexter:
We often see families do that thinking it’s easy, but it can create unintended consequences. There are also potential gift tax implications. Even if no tax is owed, a gift tax return might be required. And for families, that paperwork can be complicated.
Assets in Trust
00:56:50 Michelle Dexter:
Now, let’s move to assets inside a trust. A trust allows you to transfer assets during your lifetime or at death without probate. This can include your house, bank accounts, investments, and other property.
00:57:12 Michelle Dexter:
One of the biggest advantages is that your family doesn’t have to go through probate. Your successor trustee—someone you’ve named—can manage and distribute assets according to your instructions.
00:57:35 Michelle Dexter:
Trusts also give you flexibility if a beneficiary passes away, is underage, has special needs, or is going through a divorce. You can include contingency instructions so assets are handled exactly how you want, without relying on courts to decide.
00:58:05 Michelle Dexter:
And, importantly, a trust can help avoid the conservatorship issues we talked about earlier. If you become incapacitated, your successor trustee can step in immediately to manage your assets—no court needed.
Common Misconceptions About Trusts
00:58:25 Michelle Dexter:
A lot of people say, “I don’t need a trust; my will is enough.” But a will alone does not avoid probate. And if your assets are substantial, probate can take months, cost thousands, and create stress for your family.
00:58:55 Michelle Dexter:
Another misconception: “Trusts are only for the wealthy.” That’s not true. Trusts can be beneficial for many different families, especially if you want to control how assets are distributed or protect beneficiaries from creditors, divorce, or bad decision-making.
Choosing a Trustee
00:59:20 Michelle Dexter:
When you create a trust, it’s important to carefully choose your trustee. This can be a family member, a friend, or a professional fiduciary. They need to be someone trustworthy, organized, and willing to follow your instructions.
00:59:50 Michelle Dexter:
Some people worry about naming a child as trustee if they’re young or inexperienced. In that case, you can name co-trustees or a professional trustee to assist. The goal is to make the process smooth for your family and protect your assets.
Reviewing and Updating Your Estate Plan
01:00:15 Michelle Dexter:
Estate planning isn’t a one-and-done process. Life changes—marriages, divorces, births, deaths, property acquisitions, and tax law updates—all mean your documents should be reviewed periodically.
01:00:35 Michelle Dexter:
Here at Keystone, we recommend reviewing your plan every 3–5 years. Even small updates, like adding or removing beneficiaries, can prevent big headaches down the line.
Wrap-Up and Key Takeaways
01:01:00 Michelle Dexter:
So, to summarize:
Assets in your name may be subject to probate and conservatorship.
Powers of attorney must be kept up to date to avoid conservatorship.
Beneficiary designations are helpful but have limitations and potential tax implications.
Adding someone to property can create gift tax issues and lose stepped-up basis.
Trusts provide flexibility, avoid probate, and allow for smooth management in case of incapacity.
01:01:45 Michelle Dexter:
Our goal is to make sure you leave a plan in place that protects your family, avoids unnecessary costs, and ensures your wishes are followed exactly as you intend.
Closing
01:02:00 Francisco Sirvent:
Thank you so much, Michelle! That was excellent. I know I learned a lot, and I’m sure everyone else did too.
01:02:10 Michelle Dexter:
Thank you, Francisco, and thank you all for joining today. I hope this gives you a lot to think about and helps you start the conversation about your estate planning needs.
01:02:20 Francisco Sirvent:
Absolutely. And remember, we’ll have plenty more webinars coming up, so come back and review these topics again. Repetition is the key to really understanding all this stuff.
01:02:30 Michelle Dexter:
Exactly. Thank you all again!
