If any example below applies to you then you must adopt a trust or a will to solve the problem and protect your loved ones.  Before reading the examples I recommend that you read my article called Who Gets My Property If I Die Without A Will or Trust? because you might learn that your assets will not be inherited by the person or people you want to inherit the assets.

Derrick and Julie are married and have minor children. They own a home as community property (not community property with right of survivorship) with $300,000 of equity. Derrick has a $1,000,000 life insurance policy of which Julie is the beneficiary. They have a $300,000 car insurance policy.

Julie is driving the car and Derrick is a passenger. Julie is at fault and causes an accident that kills Derrick and a person in another car. Julie is sued by the family of the person who died in the other car. The plaintiff gets a judgment against Julie for $2,000,000. The car insurance company pays the plaintiff $300,000. The plaintiff gets the $1,000,000 of life insurance paid to Julie. Arizona’s homestead exemption protects the first $150,000 of equity in a resident’s home from creditors so the creditor only gets $150,000 from the home. The unpaid judgment is $550,000 and the creditor garnishes Julie’s wages and bank account. The creditor gets $1,150,000 from Julie.

Solution: Derrick and Julie should have created a trust that provided that when Derrick died a separate irrevocable trust (called a QTIP trust) would be created for Julie and all the life insurance and all of Derrick’s property would go into the QTIP trust. Julie would be the trustee and beneficiary of the QTIP trust. The QTIP trust would own the $1,000,000 paid to it by the life insurance company, one half of the home with a value to the QTIP trust of $150,000 and all of Derrick’s other assets. Because these assets are not Julie’s assets her creditor could not get any of the assets in the QTIP trust.

If Derrick and Julie had created this sophisticated estate planning trust Julie would not have lost $1,150,000.

Note: This type of QTIP trust would protect the life insurance and all other assets owned by Derrick that he left in the QTIP trust regardless of how and when Julie got a creditor problem.

To learn why you should leave assets to loved ones in a beneficiary controlled asset protected trust read the article my son and I wrote.

Dan and Michelle are married. The home they live in is Dan’s separate property (he acquired it before he married Michelle) valued at $400,000. Dan and Michelle do not have any children, but Dan has an adult son from a former marriage. Dan dies. One half of the home ($200,000 value) is inherited by Michelle and the other one half ($200,000 value) is inherited by Dan’s son who demands that Michelle buy him out or he will move in with her. The result would be the same if Dan and Michelle owned the home as community property (not community property with right of survivorship).

Arizona’s law of intestate succession provides that when a person is married and has one or more children who are not children of the decedent’s spouse then one half of the decedent’s separate property goes to the surviving spouse and the other half of the decedent’s separate property and the decedent’s community property passes to all of the decedent’s children equally.

Solution: If Dan wants Michelle to inherit all of the home and all of his other separate property he should have signed a will or a trust that left the home and Dan’s other assets to Michelle.

All of Joan’s property including her retirement plan is worth $500,000. Joan has one child, Allie, who is five. Joan dies. Allie inherits everything. This creates two problems: (i) Allie is a minor so she cannot deal with her inheritance, which means the family must pay $3,500 or more to hire an attorney to file a lawsuit asking the court to appoint a conservator who has the duty to manage Allie’s assets until she is 18, and (ii) when Allie is 18 she will have total control of her inheritance. It is not a good idea to give a young person control of a lot of money.

The problem illustrated by this example arises frequently when a parent has life insurance that could go to one or more minor children. You don’t want a minor to inherit $100,000, $500,000 or more of life insurance that will become owned and controlled by the minor when he or she becomes 18.

Solution: Joan should have created a trust that named Allie as the beneficiary and made the trust the beneficiary of the life insurance.  The trust would also name a trusted family member, friend or trust company as the trustee to manage the assets for the minor child. The trust could make Allie the trustee when she is older and wiser at age 21, 25 or another age.

Bob owns an interest in a valuable company. Bob has a long time significant other named Jane who he wants to inherit the company. Bob dies without a will or a trust. Under the law of intestate succession of Bob’s state of residence, Bob’s estranged brother who Bob had not seen in 30 years inherited the company. Jane inherited nothing.

Solution: Bob should have signed a will or a trust that left the company and other assets to Jane.

Two parents have assets valued at $500,000. On the death of the second spouse their only child Tanya inherits the $500,000. Tanya is married when she inherits the $500,000. She uses the money to buy a home for $500,000 and takes title with her spouse as community property. Years later they get divorced and the ex-spouse gets one half the value of the home. The result would be the same if Tanya took all of the inheritance and put it in a stock or a bank account owned jointly with the spouse.

Solution: The parents should have created a trust for themselves that provided that on their deaths an irrevocable beneficiary controlled asset protected trust would have been created for Tanya. Tanya could have been the trustee and beneficiary of the trust. Tanya’s trust could have purchased the home for $500,000, which means her spouse would never have been on the title to the home and would not have any claim to it or any other assets in Tanya’s trust.

Note: This type of trust can protect your loved ones’ inherited assets from their creditors (current and future), ex-spouses (current and future) and their bankruptcy.

To learn why you should leave assets to loved ones in a beneficiary controlled asset protected trust read the article my son and I wrote.

Mary owns nine rental homes free and clear. the total value of the home is $1,000,000. Mary is single with two children, one of whom is a drug addict and unable to manage money. Mary dies without a will or a trust. Under the law of intestate succession of Mary’s state of residence, Mary’s two kids each inherited one half of all the real estate. The drug addict quickly blows through the inherited $500,000.

Solution: Mary should have signed a trust that created one trust on her death for each child and that caused $500,000 of assets to be transferred into each child’s trust. Mary’s trust would have named a trusted person or a corporate trustee as the trustee of the drug addict’s inheritance. The corporate trustee would invest the $500,000 and use it for the drug addict’s benefit, but not allow the funds to be wasted or spent on drugs or other stupid things.

Susan’s mother died and left Susan $250,000. Susan lost a law suit a year before her mother died, which caused Susan to be liable to pay a $500,000 judgment. The judgment creditor took the $250,000.

Solution: Susan’s mother should have created a beneficiary controlled asset protected trust for Susan and funded it with the $250,000. Because Susan would be the beneficiary of the irrevocable trust created and funded by her mother the assets in the trust would not legally be her assets, which means Susan’s creditor could not take the $250,000 in the trust. The money in the trust could be used for Susan’s benefit. If Susan did not have a creditor problem the trustee could pay money from the trust to Susan. If Susan had a creditor problem the trustee could use the trust assets for Susan’s benefit. For example, the trustee could buy a home titled in the name of the trustee and let Susan live in the home rent free.

To learn why you should leave assets to loved ones in a beneficiary controlled asset protected trust read the article my son and I wrote.

Homer and Marge have a special needs child name Bart who gets monthly payments of government benefits. When the second spouse dies Bart inherits $200,000. This causes Bart to exceed the asset limits of the government so he loses all government money. Another problem is that Bart lacks the capacity to manage his inheritance. The family is forced to spend a lot of money on a lawyer who files a lawsuit to get a conservator appointed with the power to manage Bart’s inheritance.

Solution: Homer and Marge should have created an irrevocable special needs trust for Bart and funded it with the $200,000 when the second spouse died. Bart would not be the trustee. The trustee could be a trusted family member or a trust company. Because Bart would not be considered the owner of the $200,000 put into the trust Bart would not be considered the owner of the money and not lose any government benefits.

Parents have a daughter Wendy who is married to a medical doctor Charles. The parents give Wendy $450,000 to buy a home. Wendy and Charles take title to the home as community property. Charles gets sued for malpractice and gets a judgment against him for $500,000. The creditor causes the home to be sold at a foreclosure auction that results in the creditor getting $350,000 and Wendy and Charles retain $150,000 because Arizona’s homestead exemption protects the first $150,000 of equity in the home of an Arizona resident.

Solution: The parents should have created an irrevocable trust and funded it with $450,000 cash. The trustee and sole beneficiary could have been Wendy. The trust would then have purchased the home that Wendy and Charles live in. Because the trust owns the home Charles’ creditor could not have gotten the home or any other assets in the trust. This trust would have protected the home and saved Wendy $350,000. Another benefit of putting the $450,000 in Wendy’s trust is that if Wendy ever gets divorced or has a creditor problem her ex-spouse and/or creditors could not get any assets in the trust.

To learn why you should leave assets to loved ones in a beneficiary controlled asset protected trust read the article my son and I wrote.

Stop Procrastinating During These Coronavirus Times – Protect Your Family Before It is Too Late

If you have procrastinated up to now and do not have a documents to protect your loved ones and if you do not take the next step now and purchase one of our two estate plans, the sad reality is that you will most likely continue to procrastinate for many years to come and probably will die without protecting your family. That’s ok if you want the State of Arizona to decide who inherits your property and if you don’t care about the problems and expense your family may suffer if you die without planning ahead.

Isn’t your family your most valuable asset? Don’t you want your family to have the protection that a good estate plan can provide? If the cost is preventing you from making an appointment, compare the cost of an estate plan against money you have spent on things for yourself such as a flat screen TV, furniture, swimming pool, computer system, hi-fi system, car or SUV, boat, country club membership, jewelry, art and other “toys” or expensive items. Don’t spend more on “stuff” than you do to protect your family if something happens to you.

Our Two Estate Plans

We do not have a one-size fits all estate plan.  Our two estate plans give you the option to pick the plan that is best for you.  Our estate plans are:

1. the Silver Estate Plan ($997 for a single person or $1,497 for a couple).  To purchase the Silver estate plan complete our Silver Estate Plan questionnaire.  This plan is for people who have important or valuable assets and they want to make sure that the assets are inherited by the person or people they want to inherit rather than the people who will inherit under the law of the decedent’s state of residence at the time of death.  Arizona residents should learn Who Gets My Property If I Die Without A Will Or Trust?

2. the Gold Estate Plan ($2,997 for a single person or $3,497 for a couple).  People who bought a Gold LLC from us get a $500 discount off the price of this estate plan.  To purchase the Gold estate plan complete our Gold Estate Plan questionnaire.  If you buy this estate plan make an appointment for a free phone call or video conference with Richard C. Keyt by using his online scheduling calendar or by calling our estate planning legal assistant Michelle Watkins at 480-664-7413.  During this meeting Ricky will answer your questions and work with you to design your estate plan.

Do You Have Any Estate Planning Questions?

If you have any questions about wills, trusts, estate planning or our two estate plans call or email one of us.

  • Richard C. Keyt (the son) at 480-664-7472 and rck@keytlaw.com or make a phone appointment with him using his online calendar.
  • Richard Keyt (the father) at 480-664-7478 and rk@keytlaw.com or make a appointment with him using his online calendar.

Get Free Access to the Keyt’s Estate Planning eBook Called Family Asset Protection

See the Keyt’s ebook about wills, trusts and estate planning called “Family Asset Protection.”  This book gives you more information about these important documents and how they protect your loved ones.