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Living Trust Mills

August 14, 2010

Living Trust Mills Can Be Financial Traps

I recently received a series of postcards inviting me to an “Elder Law Update”, strongly suggesting that I need to have a Living Trust.  In addition to the seminar, I was invited to stay for a free lunch.

Often times these solicitations come from “trust mills”.  These companies are referred to as “trust mills” because they turn out a high volume of cookie-cutter Living Trusts.  Sometimes they charge clients for the Living Trusts, other times they offer the Living Trusts for free.  However, as an unwitting consumer will soon find out, low cost or “free” estate planning documents are not really “free”.

The most serious problem with trust mills is their ultimate objective.  That is, to obtain an individual’s financial information so that its sales persons can sell unneeded annuities and related investments to unsuspecting individuals, most likely to the elderly and vulnerable adults.

Sales agents for these operations often misrepresent the disadvantages of seniors’ current investments and the advantages of the investments they are selling.  They may even make seniors believe their bank accounts are not as safe as the annuities or investments they want the seniors to buy.  To give themselves a cloak of legitimacy, these sale agents pretend to be experts at Living Trusts.  In their solicitations, these sales agents often pose as expert financial or estate planners.  They pass themselves off as a “trust advisor”, “senior estate planning” individual or a “paralegal” and schedule initial appointments with seniors in their homes.  Under the guise of helping to set up or update a Living Trust, the sales agents find out about the seniors’ financial assets and investments.  They sometimes work in assisted living centers, churches and other places where seniors gather, scamming elderly victims through free seminars and other sales presentations.

Planning an estate and choosing investments involve important legal, financial and personal decisions.  If financial planning documents are not properly prepared or executed, they can be invalid and cause lasting damage.

Following our tips can help consumers avoid becoming victims of trust mills and their scams:

  • The sales agents at trust mills are usually not attorneys nor are they experts in estate planning;
  • Watch out for companies (and individuals) that sell Living Trusts together with  annuities and other investments;
  • Sales agents may fail to disclose possible adverse tax consequences or early withdrawal penalties that may be incurred when transferring stocks, bonds, certificates of deposits or other investments to annuities;
  • An annuity is not 100% safe and only a portion is guaranteed by the state;
  • Insurance companies can and do fail and their assets may not be enough to pay the full value of the consumer’s investments; So called “promissory notes” are not insured by the FDIC or other governmental agencies and may be very risky.  They may not be registered as securities with the State of Arizona;
  • Before consumers buy an annuity or other investment, they should review it with people who know trust law, such as their financial or tax advisor, their attorney and trusted family members; and
  • An attorney qualified in estate planning can help consumers decide if they need a Living Trust and other estate planning documents or help them review an existing Trust or Will.

Here are some steps that you should take before you sign papers to create a Will, Living Trust or other estate planning documents:

  • Consult with an Arizona licensed estate planning attorney or financial advisor, preferably one recommended to you by a trusted friend or family member, or contact the State Bar of Arizona and ask for a referral of a certified specialist.
  • Beware of high pressure sales tactics.  Take time to consider your options.
  • If you decide to obtain a Living Trust, make sure it is properly funded.  That is, that the property has been transferred from your name to the Trust.  Unless your assets are retitled in the name of the Living Trust, they may very well be subject to probate proceedings upon your death.
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Estate Planning for Your Pet

July 14, 2010

Estate Planning for your PetBy John R. Becker, Esq.
Becker & House, PLLC
Certified Estate and Trust Law Specialist

Several years ago Elizabeth lost her husband to cancer.  With her children grown and living out of state, Elizabeth rescued a small dog from the local animal shelter to help fill her lonely days.  “Chomper” became an important part of Elizabeth’s family and added so much joy to Elizabeth’s life.  Unfortunately, Elizabeth is now faced with her own potentially fatal health issues and is concerned about what will become of Chomper, her beloved pet and companion, when she passes on.

Pets have become family members to many of us and often we want to insure that if something were to happen to us, they would be cared for in the manner in which they have become accustomed to.

When we perform estate planning services for our clients, we discuss their property, and who is to receive it.  We discuss their minor children, and who is to act as guardian for those minor children.  Additionally, we discuss our clients’ pets, and who is going to care for those beloved pets should our clients become incapacitated or upon their deaths.

Arizona actually has two statutes that allow the creation of a trust for the purpose of holding funds to be used for the care of a person’s pet.  Typically, the establishment of a pet trust is not necessary.  However, the identification of a proper caregiver is essential.  You should determine who you wish to act as caregiver in your place as well as name at least one alternate caregiver.

Our clients are also provided with a pet information sheet for each of their pets.  This document lists the pet’s veterinary information as well as its daily care information, including its usual food, likes and dislikes, and any behavioral information important for the care of that pet.

At Becker & House, we take pride in our legal services for clients, especially in estate planning and estate administration.  As part of that planning, we want to make certain that the beloved pets of our clients are properly cared for upon their passing.  Knowing that Chomper will continue to receive the care Elizabeth has given him, Elizabeth will be able to rest a little easier.

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THE GROUNDWATER / SURFACE WATER DILEMMA – Introduction

June 20, 2010

THE GROUNDWATER/SURFACE WATER DILEMMA IN ARIZONA: A LOOK BACK AND A LOOK AHEAD TOWARD CONJUNCTIVE MANAGEMENT REFORM  by Allison Evans

Introduction

The scarcity of water supplies and ever expanding population have placed Arizona at the forefront of the long ensuing national dilemma concerning the need and appropriate form of legislation and regulation to preserve and utilize water resources. The continued support and survival of expanding urban and rural areas in the water-deprived State of  Arizona *270 depend greatly on what choices are made regarding water management, including the maintenance of agriculture and other industries, and sufficient future environmental and riparian protection. A multitude of debate and controversy surrounds this issue, matched with varying propositions and ideas for resolution taking a wide range of  policy and management forms attempting to divide the limited resource between competing users. While much remains uncertain in the world of water law, one distinct failure in Arizona stands clear: the refusal to recognize groundwater and surface water under a unified legal system.

This article addresses this looming problem by beginning with an overview of the distinguishable types and sources of water—groundwater and surface water—which are the key components in understanding Arizona’s water controversy and developing solutions for the future. Next, the article will lay further foundation for addressing the issue by comparing neighboring states and their various approaches to regulating water rights. Then, a brief discussion of the history of water law and regulation in Arizona, highlighting the major policy choices, statutory implementations, and case law that is responsible for the position the State of Arizona is in today, will follow. Next, the discussion will detail the failures and consequences of Arizona’s history and legislative and judicial action concerning water rights, and the various past, present, and future problems that have occurred and will occur as an unfortunate result. The article will conclude by emphasizing the importance and feasibility of implementing a comprehensive conjunctive management system in Arizona to remedy the vast array of water rights problems. The issues concerning water supply rights in Arizona are undeniably complex and multi-faceted, and therefore first require a general understanding of the different types of regulated water sources, namely groundwater and surface water, and the policies and history that govern them.

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THE GROUNDWATER / SURFACE WATER DILEMMA – Distinction

June 19, 2010

THE GROUNDWATER/SURFACE WATER DILEMMA IN ARIZONA: A LOOK BACK AND A LOOK AHEAD TOWARD CONJUNCTIVE MANAGEMENT REFORM  by Allison Evans

The Groundwater/Surface Water Distinction

The argument asserted in this article, namely that Arizona adopt conjunctive water management reform, requires a basic understanding of the two dominant classes of water—groundwater and surface water—and the Arizona legal doctrines that govern them. The definition and applicable law pertaining to groundwater will first be explored, followed by surface water. Next, this section will introduce the relationship between groundwater and surface water and the problems associated with disparate treatment of the two classes, illustrated by Arizona statutory and case law.

Groundwater

Groundwater is water that flows to the surface from underground aquifers, which are geological units that yield usable quantities of natural water to springs, or are tapped into for agricultural, municipal, or industrial use through manmade wells. [FN1] In short, groundwater is all water beneath the surface of land that does not flow in underground streams, which historically, before regulatory legislation existed, belonged to anyone owning the land overlying the groundwater source. [FN2] In Arizona, groundwater is statutorily defined as “water under the surface of the earth, regardless of the geological structure in which it is standing or moving,” but excluding water that flows in underground streams with ascertainable beds and banks. [FN3] Today in Arizona, individuals and municipalities are pumping groundwater in excess of the amount in which nature replenishes it. [FN4]

Until the enactment of the Arizona Groundwater Management Act of 1980, [FN5] landowners were at liberty to freely pump groundwater from above land that was being put to a “beneficial use.” [FN6] The Groundwater Management Act was a monumental occurrence in the history of Arizona water law, preserving certain rights of active users before its enactment and placing restrictions and use limitations for new groundwater users, which will be discussed in greater detail later. Groundwater pumping is now governed by the reasonable use doctrine, which permits overlying landowners to obtain as much groundwater as can be “reasonably” used for the land. [FN7] This subsequently relieves these landowners from liability when another user’s supply is diminished as a result of such pumping. [FN8] Unfortunately, the lacking oversight and determination of what constitutes “reasonable,” as an always ambiguous term in the law, contributes significantly to the depletion of water resources.

Surface Water

“‘Surface water’ means the waters of all sources, flowing in streams, canyons, ravines, or other natural channels, or in definite underground channels, whether perennial or intermittent, floodwater, wastewater or surplus water, and of lakes, ponds, and springs on the surface.” [FN9] Surface water is a distinct class of water, which is generally derived from falling rain or melting snow which is diffused over the surface of the ground while maintaining this diffused state or condition. [FN10]

Arizona employs the prior appropriation doctrine, a first-in-time, first-in-right methodology, in governing surface water rights and uses. [FN11] The Gila River Adjudication began in the 1970s to judicially settle and determine issues pertaining to the use of surface water deriving from the Gila River, one of the most important water resources in Arizona [FN12] The Gila River adjudication is among the longest and most complex litigations in the history of Arizona, costing millions of dollars in attorneys’ fees and resulting in the passage of the Arizona Water Settlements Act in 2004 to settle disputes and inconsistencies between Indian tribes, intrastate water users, Arizona state law, and federal law. [FN13] A great bulk of water rights litigation in the past few decades has focused on the rights and claims of various Indian tribes. Arizona has arguably done a successful job of handling the resolution of matters concerning the Indian tribes, but  numerous uncertainties still remain. While the litigation has addressed many issues, the problems of the groundwater and surface water distinction endure, leaving questions of when the two are intermixed, and how to classify the water at issue and apply the appropriate law.

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THE GROUNDWATER / SURFACE WATER DILEMMA – The Relationship

June 18, 2010

THE GROUNDWATER/SURFACE WATER DILEMMA IN ARIZONA: A LOOK BACK AND A LOOK AHEAD TOWARD CONJUNCTIVE MANAGEMENT REFORM  by Allison Evans

The Relationship and Interconnectedness between Groundwater and Surface Water

Although the distinction between groundwater and surface water may appear to be relatively simple, the two are undeniably interconnected. Separate regulation for the two types has proved difficult and problematic as *273 they often merge and connect. [FN14] Nonetheless, separate regulatory administration for groundwater and surface water has been a historical and continuous defining characteristic of water law in Arizona.

Pumping and withdrawal of groundwater supplies often diminishes surface water supplies, causing it to percolate in aquifers, while diversion of surface water often leads to depletion of groundwater supplies. [FN15] On the other hand, surface water levels may increase when groundwater use is restricted and percolation decreases, illustrating the undeniable relationship between the two. [FN16]

The distinction between groundwater and surface water is further complicated by the concept of subflow. Subflow is defined as “those waters which slowly find their way through sand and gravel constituting the bed of the stream, or the lands under or immediately adjacent to the stream, and are themselves a part of the surface stream.” [FN17] Arizona common law prohibits “surface appropriators to protect their source of surface waters from depletion by groundwater pumping unless that pumping draws from the relatively narrow category of ‘subflow.’ More distant pumping within a common aquifer is governed by the relatively unfettered doctrine of reasonable use.” [FN18] This concept of “subflow,” which is a complete legal, not scientific, creation, has further compounded and confused the separate notions between groundwater and surface water. It is a particular class of groundwater that is treated as surface water and subject to the prior appropriation doctrine. [FN19]

For example, Arizona does not only apply the doctrine of prior appropriation to surface water, but also to the subflow category. The concept of subflow has played a critical role in the development of water law in Arizona from 1931 through today. The attempt has been to define *274 those areas where pumping has so vastly depleted surface flow of streams to require the application of the same law that regulates the stream itself, blurring the line between groundwater and surface water concepts. [FN20] The Arizona Supreme Court has also acknowledged the deficiencies inherent in the concept of subflow established by Southwest Cotton. [FN21] Nonetheless, it refused to abandon this longstanding framework, which has served as the backdrop for all Arizona water rights regulation. [FN22]

A common problem in states that fail to integrate use regulations for groundwater and surface water occurs in the form of denying relief to plaintiffs in many well-interference cases when wells are rendered dry from surface water diversions. [FN23]

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