When a person becomes mentally and/or physically incapacitated or, upon their death, the administration of that person's estate, the assets and liabilities which they have accumulated during their life, is no longer of immediate concern to them. Rather, it is generally such person's loved ones who must come in and assume responsibility for the management and disposition of their estate. In the case of incapacity, this generally means seeking appointment as a conservator through court proceedings. Upon death, probate and appointment as a "Personal Representative" (Executor) is generally required.

Probate proceedings are not always as complicated and expensive as portrayed by the media. Depending upon the size of the estate and cooperation of the heirs, much of the work can be done without the direct involvement of an attorney. Once the personal representative fully inventories and appraises the estate assets, satisfies estate claims including estate taxes, if any, and accounts and distributes the remaining assets to the lawful beneficiaries, the estate can be closed. Because, however, many people do not wish to consider the prospect of their demise or, believe that the day of reckoning is still off in the distant future, people do not always plan appropriately for their death and leave a mess for their heirs to sort through. These situations are often very frustrating, time consuming and expensive to resolve.

While a probate proceeding is more a matter of winding up affairs of the estate, a conservatorship proceeding continues until the death of the incapacitated person. Such continued administration is often more expensive than the probate because at least two attorneys are required by the court, one to represent the conservator and one to represent the incapacitated person. Bond is required of the conservator in an amount equal to the value of the estate assets plus one years income. The conservator is, additionally, required to file annual accountings with the Court. Finally upon death of the incapacitated person, probate is required to settle the estate. Conservatorship proceedings are particularly trouble for the surviving spouse of an incapacitated person who must obtain court approval to manage estate assets over which they previously had unsupervised control.

People have traditionally provided for the disposition of their estate upon death by drawing up and executing a "Last Will And Testament". This document, while better than no document at all, does not avoid probate. They can, however, make probate easier and less costly be naming the personal representative, waiving bond and directing the disposition of their estate.

People have, also, planned for incapacity by executing and conveying to a trusted person a document entitled "General Durable Power Of Attorney". This document does enable that trusted person to administer an incapacitated persons estate without court intervention, but, in the event that a guardianship is, also, required, the Court may require the appointment of a conservator as well.

In recent years, an increasing number of people have turned to the Living Trust as legal instrument of choice to minimize, and even avoid, the problems associated with incapacity and/or death. This document, if properly drafted and used, will avoid probate and reduce the financial consequences of incapacity.

A Living Trust is a form of agreement executed between two persons for the benefit of another. The parties to the agreement are the "Trustor" who establishes the Living Trust and transfers assets into it and the "Trustee" who receives the assets from the Trustor on behalf of the Living Trust and who administers such assets in accordance with the specific instructions contained in the trust agreement. Another party is the "Trust Beneficiary" for whom the trust assets are held. In most case the Trustor, the Trustee and the Trust Beneficiary are all the same person. Married people can be joint Trustors, joint Trustees and joint Trust Beneficiaries. In the trust agreement, the parties, additionally name successor trustees and successor beneficiaries.

After the Living Trust is executed, the Trustor(s) must properly fund the Living Trust by transferring their assets to the Trustee(s). This is known as "funding" the Living Trust. Failure to fully fund the Living Trust could frustrate the Trustor(s) goals in avoiding probate or conservatorship.

A Living Trust avoids probate because at the time of the Trustor's death, there are no personal estate assets to administer. The assets are all in the Living Trust and will be administered by the successor trustee in accordance with the terms of the trust agreement. Likewise, in the event of incapacity, the person designated by the Trustor as successor trustee can administer the Living Trust assets for the benefit of the Trustor without the need to file a bond or account annually to the Court.

A Living Trust can additionally provide for the continued supervision of the Trust Estate for some time after the Trustor's death. The Trustor(s) can provide that the Trustee(s) hold and administer the estate for successor beneficiaries until they reach a certain age, i.e.. 25, or attain a certain goal, i.e.. graduation from college, etc. These times and conditions can be custom tailored in accordance with the needs of each Trustor. Use of a living trust to provide for minor beneficiaries, also, minimizes the costs associated with minor guardianship and conservatorship proceedings.

While the costs of administration can be reduced by placing the assets of the Living Trust outside court supervision, this does not necessarily mean that the Trustee has unfettered discretion concerning the administration of these assets. Trustees are bound by law to act in a fiduciary capacity and will be held responsible for neglects and mistakes of administration and/or self dealing. The lack of Court supervision has both pros and cons and can certainly put the trust assets at risk.

During a Trustor's lifetime and capacity, they retain full power over the administration of the Living Trust assets and may, if they so desire, transfer all of the assets back into their personal name and dissolve the trust. The Trustor(s) administer these assets in their name as Trustee(s) of the Trust. During their lifetime and capacity, no accountings or reports are required are required of the Trustee(s) and all Living Trust tax consequences are reported on the Trustor's personal tax returns.

The type of trust described in this article is dispositional only and does not minimize or avoid estate taxes. For married couples whose joint estate exceeds the present federal tax credit for estate taxes (An estate in excess of $650,000 in value) an A-B type of trust would be more appropriate. That type of trust in not dealt with in this article. Also, outside the scope of this article are the "Irrevocable Life Insurance Trusts", "Charitable Remainder Trusts" and vehicle whose primary intent is to avoid estate taxes. If you believe that you have an estate which will be subject to estate taxes upon your death, it is important that you consult personally with an attorney. The attorneys at Bill King P.C. have expertise in such area and are available for such purpose.

The Living Trust described in this article can be purchased from the Lawvue Law Store. This product includes, in addition to the Living Trust, Pourover Will(s), General Durable Powers Of Attorney with power over trust administration, Living Will(s) and Health Care Directive(s). This product, also, includes two deeds for transferring real property owned by you in the State of Arizona into your Living Trust. Each product comes with complete instructions. If you need assistance in entering the data or in executing the documents, please contact the Lawvue Host in your area by calling 1-877-949-7121.

Thank you for visiting this site. Please e-mail your comments to:

Bill King