5 High-Priority Estate Planning Situations
While every adult should have an estate plan, the
stakes are especially high if you find yourself in one or more of these
Too many people die without an
plan, without even a simple Will. In the United States, where about 5.5 million people live
with some form of dementia or Alzheimer’s, the majority of whom are over the age
of 65, failure to plan can hold
If you suffer a loss of mental capacity before your body fails
you, who will be in charge of making financial decisions on your behalf, and who
will decide whether and how you will live in an assisted living facility or receive
Without an estate plan, state law governs who in your
family has priority in making medical and financial decisions on your behalf, in
case of your incapacity, and at your death. So, one of the primary reasons to
plan your estate is to create accurate legal documents to ensure that the
individuals you pick will have priority over your medical and financial
decisions when you are most vulnerable, and who will provide for the orderly
distribution of your assets according to your wishes at your death.
Most people avoid estate planning, perhaps because they
don’t want to face their own mortality or incur the legal fees to create a
legally valid estate plan. As an attorney who specializes in this area, I
understand that – but if you are like one of the five types of individuals
described below, I suggest you need estate planning.
1. You Are in a Second+ Marriage
If you have children of a prior marriage and are lucky
to fall in love again and remarry, you should consider estate planning.
Arizona is one of 11 states with community property
laws. Without proper planning, at your death your new spouse and children will
likely share in your assets and may disagree about which assets to which each is
entitled. Or, at your incapacity, a fight may ensue over who has legal authority
to make medical or financial decisions for you.
If your intentions are not spelled out clearly or
legally through proper planning, your new spouse and your children may end up
with the burden and expense to litigate about your intentions. Thus, creating an
estate plan is really a gift from you to your loved ones.
Other legal issues that often arise in blended families
include whether your ex-spouse is entitled to receive an asset pursuant to a
post-nuptial agreement, or whether your new spouse acquires a community property
interest in the family business that you owned prior to marriage, or, if your
new spouse happens to be the one who is the first to die, whether his or her
children will try to go after your assets.
This is a complex area. Consulting with a legal
professional qualified in estate/trust law as well as community property is
imperative to understand the strategy and options available to you. A legally
valid estate plan can help avoid this uncertainty.
2. You Have a Minor Child or a Child with
In Arizona, a minor child – i.e., under age 18 – is not
allowed to own property. So, if you die unmarried (or if both married parents
die together) and without an estate plan, your minor child could inherit your
property at your death. However, the court would appoint a conservator to order
how much of the inheritance can be used for the benefit of your minor child’s
education and health or other needs.
Often, the expense of involving the court drains the
child’s inheritance. After turning 18, or when the conservatorship terminates,
your child would receive any remaining inheritance. Recalling what it is like to
be 18, perhaps you would decide that delaying the age is a good idea.
If you are divorced, perhaps you would prefer that your
ex-spouse (the child’s parent) not be in charge of the way the inheritance is
distributed to your minor child after your death. While you may not be able to
take away custodianship of your child from the surviving parent, your estate
plan can specify other individuals to control how your minor child receives his
or her inheritance after your death, and, if 18 years old seems too young, you
can specify another age at which your child receives the balance.
If you die leaving a child with special needs, the
inheritance the child receives may cause your child to lose his or her
governmental benefits. In these cases, proper estate planning is truly a gift to your child
and should operate to avoid these problems.
3. You Are Single and Worth over $5.49 Million, or Married
over $10.98 Million
Only about 11,300 Americans who die this year will leave
estates large enough to require filing an estate tax return, and only about
5,460 estates will owe estate tax.
About two-thirds of the taxpaying estates will be from the top 10% of income
earners, with about one-fourth from the top 1%.
The estate tax exemption amount has increased from
$675,000 in 1997 to $5.49 million for 2017. If, on your death, your net assets
are above $5.49 million, your beneficiaries could pay an estate tax of 40% for
every dollar over that amount. Because of the unlimited marital deduction, the
surviving spouse usually does not pay any estate tax; however, at the survivor’s
death, an estate tax would be owed if the exemption of the first spouse to die
is wasted. This often happens when no election has been made to use the
exemption of the first spouse to die.
In other words, for married people, it’s important to
properly plan to use the available exemption of the first spouse to die, or the
exemption can be lost at the death of the second spouse. It is especially
important for individuals over the exemption limit to consult with qualified tax
and legal professionals before undertaking any tax planning or estate planning
4. You Are Over Age 70
Let’s face it: We are all one day closer to death. Your
deadline for proper estate planning is your death or incapacity. An accurate and
legally binding estate plan is the way to take control over your personal and
5. You Have an Outdated Estate Plan
Because laws, family dynamics, states of residence, and
the nature and value of assets change over time, your estate plan should be
reviewed every three years. If you happen to die with an estate plan that was
poorly created, or that does not match your wishes, or is noncompliant with
current laws, your estate plan fails when you need it most - at your death or
The point of having a solid estate plan is to clearly
articulate your wishes when you are no longer able to communicate. For example,
if the title to an asset, such as your residence, is not in the name of your
existing trust, did the plan accomplish your wishes to avoid probate? If any
document in your plan is noncompliant with state law governing distribution, or
federal law regarding taxation, will the estate plan be enforced?
Without an estate plan, the law governs your legal
affairs. At incapacity, if you want to control your personal and financial
affairs, you have reason to create a binding estate plan which clearly
articulates your wishes. At death, a properly created enforceable estate plan
becomes your gift and legacy to those you leave behind.
Phoebe Moffatt is a Certified Estate and Trust Law Specialist (Arizona Board of
Legal Specialization) and a Fellow of the American College of Estate & Trust
 Phoebe Moffatt is a Certified Estate and Trust Law Specialist (Arizona Board of Legal Specialization)
 "The Tax
Policy Center’s Briefing Book," Urban Institute & Brookings Institution