Estate Administration vs. Estate Planning in Arizona

Making preparations for managing your personal affairs and supporting your family is essential as you age. A well-constructed estate plan gives you confidence that your wishes will be respected if you become incapacitated or pass away. It can also preserve your wealth so you have the support you need to live comfortably in your older years.

But what happens to your estate once you pass away? That’s where proper estate administration is key. Here’s what you need to know about the difference between estate planning and estate administration in Arizona.

What is Estate Planning?

Estate planning focuses on developing a strategic plan addressing how you want your financial, legal, and medical affairs handled during your lifetime and after you die. It includes drafting and executing various legal documents to protect your assets, bypass probate, minimize taxes, and ensure you leave behind the inheritance you want to your beneficiaries.

Your estate encompasses all the property you own. This includes real estate, vehicles, personal items, stocks and bonds, life insurance, bank accounts, digital assets, intellectual property, and business ownership interests.

Many people mistakenly assume that estate planning is just for seniors. In fact, it’s best to get started early. There’s no way to know what the future holds. Without an estate plan, decisions about the distribution of your assets will be left to the Arizona courts. The court’s decisions may not align with your preferences, which could lead to disputes among family members.

The other important advantage of an estate plan is that it outlines your wishes in the event of a sudden emergency that causes incapacity. Several legal tools and structures can guide your loved ones when it comes to important decisions such as life support and who manages decisions about your finances or other affairs. Working with an estate planning lawyer can ensure your estate plan suits your needs and complies with Arizona law.

Key Components of Estate Planning in Arizona

Estate planning uses many instruments to meet a person’s needs and goals, including:

• Wills – A will is the cornerstone of an estate plan. It names a personal representative (an executor in some states) to administer the estate. People typically use wills to direct the distribution of their assets after death.
• Trusts – A trust is a legal relationship in which you appoint a trustee to manage your assets for your beneficiaries according to your specifications. You can create a trust that is effective while you are alive and after death. People frequently create trusts to manage and protect assets and pass them on without the time and expense of probate.
• Healthcare directives – Healthcare directives allow you to select a trusted individual (called an agent) to make medical decisions if you cannot make them yourself. A healthcare directive may include a living will or other documents informing the agent of the person’s treatment or end-of-life preferences.
• Powers of attorney – With powers of attorney, you can authorize trusted individuals to handle your financial, medical, legal, business, and child care affairs if you become incapacitated. An estate planning lawyer can guide you on the power of attorney arrangements that may be right for you.

An estate plan may also leverage other legal tools, such as titling assets in joint tenancies with the right of survivorship or tenancies by the entirety, beneficiary designations for life insurance policies or annuities, and pay or transfer-on-death orders for financial accounts. Since estate planning is not a one-size-fits-all process, it’s best to get legal advice on the tools that make sense for you.

What is Estate Administration?

When you pass away, the court must appoint one or more people to wind up your remaining affairs. This process might include gathering and inventorying your assets, paying off debts, and distributing property according to your will or state law. If you die with a valid will, estate administration will follow the terms you set. If you do not have a will or there is property not addressed by the will, it will be distributed according to Arizona intestacy laws.

Estate administration also frequently involves trust administration, including trusts established and operated during your lifetime and testamentary trusts that go into effect after your death. During trust administration, a trustee will distribute income and principal to beneficiaries per the trust document’s terms, which may outline specific conditions for distributions or give the trustee broad discretion when making distributions.

Estate Administration Process in Arizona

Not all estates need to undergo probate in Arizona. There are several types of probate:

Informal probate

Informal probate occurs if the estate is small, no one challenges the validity of the will, or all heirs approve of who will administer the estate. In these situations, the court appoints a personal representative, and the representative administers the estate with minimal court oversight.

Formal probate

Formal probate becomes necessary if someone disputes the will’s validity, the will cannot be found, or there is disagreement over who should administer the estate. In these cases, the court will hold hearings to resolve the matters. Once settled, the administrator can carry out their duties without additional supervision.

Supervised probate

In cases of supervised probate, the court is involved in any decision the estate’s personal representative wants to make. Anyone can ask the court for supervised probate, but the court may choose not to grant it. Usually, supervised probate proceedings are necessary if the courts believe a beneficiary’s or other party’s interests need protection.

Getting legal guidance can help you understand how probate works when making an estate plan or if you are appointed as a personal representative. After reviewing your unique circumstances, an estate planning attorney from Brown & Hobkirk, PLLC can advise you.

What Happens if a Challenge Arises During Estate Administration?

Estate administration is an intensive process. A personal representative must be willing to carry out numerous functions, such as notifying creditors, preparing the final tax return, directing asset distribution, and many other responsibilities.

Common challenges that arise during the estate administration process include:

•  Disputes from family members and other interested parties
•  Missing assets
•  Difficulty valuing the estate, which can cause tax problems and delay asset distribution
•  Creditor claims
•  A non-compliant personal representative
•  A personal representative who is unwilling to serve

Contact an Estate Planning Lawyer Today

Understanding the difference between estate planning and estate administration is vital to planning for a secure future. And if you are an executor (or personal representative), hiring experienced legal counsel can make estate administration and probate administration less stressful. Contact Brown & Hobkirk, PLLC today to schedule an initial consultation with our experienced attorneys.