There's really no easy way to describe the legal consequences of death, because the consequences depend so much on the person's life. Are they married? Single? Children? Do they have children by a previous marriage? Do they have grandchildren? What's their net worth? What kinds or types of property do they own? Do they own property in other states? In other words, an estate plan, unlike a cheap baseball cap, is not a "one size fits all." It's why these "will kits," stationary store Wills, and living trusts being marketed by some companies in seminars, postcards or door-to-door solicitations, are not always right for everyone. In fact, many of these mass marketing schemes are actually scams to gain access to your financial information. As the State Bar of Arizona recommends, when being pressured to buy one of these so called "estate plans," "beware!"

So anyway, to get a glimpse into what may happen after we die, let's consider the following scenario that may have some elements typical to others.

John and Helen have been married four years. Together they have a beautiful infant daughter named Lily. John's first wife, Cruella, is really pretty nice though John insists she is "evil." Notwithstanding this "evil" blood, John and Cruella have a delightful son, Abel, age 12, and another son, Cain, age 18. Cain is a guitarist in a rock band and although they never have any bookings, he always seems to have plenty of money. Hmm?

John and Helen live in a nice home in Chandler which John has in his own name. Helen has a summer home on Coronado Island which she inherited from her parents. Like I said, John and Helen have only been married four years so they're still in love. They've decided they will change title to their homes so they are held in joint tenancy with rights of survivorship. In other words, if something were to happen to Helen, her California home would go to John, and if something happened to John, his Chandler home would go to Helen. Unfortunately, John and Helen were "going to" change title but they just haven't gotten around to doing it yet.

John and Helen have a pickup truck and a car, a boat, and some bank accounts and their estate looks like this on paper:

Sadly, John and Helen are returning from a weekend getaway when a tanker truck loaded with fresh milk rolls over, crushing their car. Helen dies instantly and John lingers for two weeks before he too passes on. After John's funeral, his sister comes into my office with a big box of papers and lots of questions. Here are just a few.

(1) Who are John's and Helen's heirs? And in what percentages will they receive the property?

(2) Who will be responsible for gathering the property, making decisions about whether it should be sold and deciding when the property should be distributed to the heirs?

(3) Because Lily and Abel are minor children, who will manage their share of the estate?

(4) Who will take care of Lily and Abel?

(5) Who pays the bills and with what?

(6) How long will all this take?

(7) How much will all this cost?

The answers to these questions depend on whether John and Helen had a Will, a Trust, or whether they "just never got around to it." Here are a few possible scenarios.

Scenario No. 1 - John and Helen have no Will or Trust. They "just never got around to it."

Who are the heirs? Because Helen passed away two weeks before John, John is a surviving spouse and will inherit everything that Helen owned. All of her property, including the California home, would therefore pass to John. When John died without a Will, John's heirs are Lily, Cain and Abel. Each will probably be entitled to one-third of the million dollar estate (plus a portion of the wrongful death monies recovered against the dairy company on the wrongful death action brought by the personal representative of the estate).

Who will be the Personal Representative? Because there is no Will, this estate will come under Arizona's laws of "Intestate Succession" which specify how property passes when there is no Will. Under these rules, the person who may be appointed by the Court to manage the estate is called the "Personal Representative." The priority for appointment is first the surviving spouse, followed by any adult heirs, then any creditors of the estate. In this case, there is no surviving spouse, and Cain is the only heir who is an adult. So Cain, if he so chooses, has "first dibs" to be Personal Representative and administer the estate. Won't that be lovely!

Who will manage Lily and Abel's share? Because Cain is 18 years of age, the law considers him to be an "adult" so that he can manage his own property. Yep, he'll get his inheritance of more than $300,000.00 (excluding the wrongful death settlement) outright. Abel's mother, Cruella, will most likely be appointed as guardian and conservator for Abel and will be entitled to manage his property. And Lily's care will be the responsibility of whoever is the most appropriate. If John's and Helen's brothers and sisters fight over it, the court will have to decide who will care for Lily and manage her property.

Who pays the bills and with what? As Personal Representative, Cain will be responsible for paying the bills out of a bank account opened for the estate and into which John's and Helen's monies will be transferred.

How long is this gonna take? Cain, as Personal Representative, will have the responsibility of publishing a notice informing all creditors to whom John and Helen owed money that such creditors have four (4) months in which to submit their claims or bills to the estate. If bills are not submitted within that four (4) month period, they may be barred. Cain will also have to decide whether to sell the homes and vehicles. If he decides to sell the houses, the estate will most likely have to remain open so that a broker can be hired and Cain can sign the contracts, escrow documents and file income and estate tax returns. So the estate may be open for a year or more.

How much is all this gonna cost? Well, it depends whether there are any disagreements along the way. Whoever is appointed guardian and conservator for Lily may want the court to decide whether Cain is fit to take on the responsibilities of Personal Representative. Abel and Lily, through their guardians and conservators, including Cruella, may want to challenge Cain's decision to sell the California property. (By the way, there had to be a separate probate to transfer Helen's property to John. More time. More money.) Depending on Will challenges, the fees are probably going to be somewhere between $3,000.00 to $30,000.00. Oh yeah, we almost forgot: Estate taxes. IRS is entitled to an estate tax on anything in an estate over $700,000.00. When Helen died, she had a California residence worth about $800,000.00 that went to John. If $700,000.00 of John's million dollar estate is exempt from tax, then John's estate would only have to pay 37% of $300,000.00. So there would be an estate tax of a little over $100,000.00!!! I don't think John and Helen would like this.

Scenario No. 2. John and Helen bought a form Will on the internet for about $30.00 and simply left everything they had to one another.

Same result as in Scenario No. 1. Because John and Helen died at about the same time, the fact that they left all of their property to one another doesn't really change the result.

Scenario No. 3. John and Helen went to a seminar, or met with a Trust salesman in their home. They had a Trust prepared that provided that John's sister would manage their estate after John and Helen were gone. Because John and Helen wanted to prevent Cain, Abel, and Lily from getting a lot of money at age 18 and blowing it on cars and who knows what else, the Trust said that Cain, Abel and Lily would get their respective one third shares upon the sooner of graduating from a University or their 28th birthdays. It also said that if the kids needed any money sooner, the Trustee (John's sister) had the discretion to pay up to $30,000.00 per year toward tuition or living expenses which the Trustee, in her discretion, felt necessary and appropriate. Pretty neat, eh? Unfortunately, John and Helen never got around to "funding" this Trust by transferring the houses into it. Nor did the Trust salesman tell them they needed any Wills as part of the Trust package. So guess what? – same results as Scenario No. 1!! Yep, all that planning, all that expense, and Cain still gets to administer the estate and each of the kids get their money at age 18.

Scenario No. 4. John and Helen hired a qualified lawyer who prepared a Trust, that did everything the Trust in Scenario 3 did, and more. This Trust was written in a way that allowed John and Helen to take advantage of each of their $700,000.00 exemptions from estate tax. By doing this, John's and Helen's estates would be able to avoid any estate tax and save more than $100,000.00!

Their lawyer also prepared the deeds transferring their homes into the Trust, and just in case John and Helen failed to properly transfer everything they acquired during their lifetimes into the trusts, their lawyer prepared "pour-over Wills" by which such property would "pour" into their Trust upon their death. John and Helen weren't excited about having to pay the lawyer $1,500.00 to $3,000.00 for his work, but considering the reduced risk of litigation over who would be Personal Representative, whether the homes should be sold, etc., and the $100,000.00 or more in estate tax savings, – not to mention their peace of mind – it seemed like money pretty well spent.

Moral of the story:

We all plan for a lot of things, but it doesn't necessarily mean it's going to happen right away. I'm planning for retirement, but if it ever happens, it's going to be a long time from now. Death is the same way. Just because we plan for it doesn't mean it's going to happen anytime soon.

Look, I know I'm going to die, we're all going to die. Hopefully, none of us will die before we are really, really old. Whenever it happens, it's probably going to be sad . . . but with a little thought, and a little planning, it doesn't have to be a tragedy for our families.

Back to Articles