Living, Willing and Trusting
One of the difficulties in understanding the legal necessities for estate planning is that the documents all seem to have similar names and the names are not self evident in their meaning. Three of the basic documents of estate planning are the Will, the living trust and the living will.
The Last Will and Testament is the written document that sets forth how a person wants their assets distributed upon their death. A typewritten Will needs to have two witnesses in order to be valid. If the witnesses swear to a specifically worded affidavit and the document is notarized, the Will can be considered "self-proving" and a formal hearing can be avoided when it is probated.
A Will can be valid if it is completely handwritten by the testator or testatrix (the man or woman who is writing the Will). A hand written Will is called a holographic Will.
For tangible personal property, the Arizona legislature has recognized that we buy and sell jewelry, furniture and the like so frequently during our lives that it would be difficult to have all of these changes reflected in the Will. Tangible personal property can be distributed in accordance with a handwritten list that accompanies the Will. However, the Will must refer to the list.
A revocable living trust is a trust which is created and becomes effective while the creators of a trust are still living. It is usually revocable, or changeable, during the life of the creator of the trust.
There are three "parties" to every trust. Each "party" can be a person, persons, company or combination. The first party is the creator of a trust and is referred to as the "Settlor". The second party is the "Trustee" who actually owns the property and has the fiduciary responsibility of taking care of the property for the recipients of the trust. The third party is the recipient or recipients of the trust, who are called the "Beneficiaries."
The use of a living trust is an important way of avoiding probate as well as avoiding conservatorship. If a person becomes incapacitated, the person's property can be used or sold for his or her benefit in one of three ways: (a) if the property is held in trust; (b) the property owner has nominated as an agent through a durable power of attorney or (c) a petition is filed with the court for a conservatorship.
A revocable living trust is the safest and often most economical of these three alternatives. However, qualified retirement accounts cannot be held in the employee's trust and so a durable power of attorney is also necessary.
A living will is the common, media name for a health care declaration. In a living will, a person can declare the type of medical treatment she wants if she were to have a terminal condition, be in a vegetative state or in a coma.
With a living will, a person can direct the type of life prolonging care to be used or avoided if futile, such as artificial food and fluids when death is likely to occur imminently. The option to die at home can also be chosen. Women can direct a desire to avoid life-sustaining treatment in all circumstances or change it if she is found to be pregnant. A preference to be an organ donor can also be listed on the health care declaration. This is important since Arizona driver's licenses no longer list organ donor preference.
The health care power of attorney is another health care document and allows a person to designate an agent who can make medical and mental health care decisions if the principal is unable to express consent or desires for health care. Powers of attorney for health and finance are necessary to make sure a person has proper access to health care and their assets during their lives. The Will only is effective upon a person's death.