A comprehensive estate plan is essential for every business owner, professional, and parent. It is sad that the majority of people die without even a simple will. There are several important reasons to have an estate plan:
A Will is the cornerstone of estate planning. Simply speaking, you have a Will to spell out how you want to divide your assets when you die. Since you cannot take it with you. Wills also generally also address paying off your of debts and conditions you want to place on any of your gifts (for example, not giving your children access to a large inheritance until they are 30 years old.) If you die without a Will, the state will decide who gets what share of your estate. No, this does not mean the state gets to keep it. The State of Texas has simply "guessed" what most people want; this is called "intestate succession."
Wills are generally divided into two categories:
A simple Will contains the basic provisions disposing your estate upon when you die. What makes it "simple," is that is does not address estate tax concerns. Basically, a Simple Will is only either a single people who has assets, including life insurance, that totals less than $1,000,000. The same limitation applies to married couples whose combined estates exceed $1,000,000.
"Tax Planned Wills"
Larger estates require Tax-Planned Wills. Including tax planning in your Will can save your beneficiaries enormous amounts of money in estate taxes. While Tax-Planned Wills are slightly more complicated (and marginally more expensive to prepare), the are necessary if you face potential estate taxes.
In this document, you authorize an agent to make financial decisions on your behalf as long as you are alive. There is an important choice you have to make before signing this document; you have to decide to make the power effective immediately or only if you become disabled. The advantage of making it effective immediately is that banks and other institutions are more likely to accept it. However, this gives your agent significant power to affect your financial life, and some people are uncomfortable with that arrangement.
This is another Power of Attorney. The one I described above was for financial affairs; this one is for medical decisions. In this document, you select the person to make a broad variety of health care decisions if you are incapacitated. These decisions include consenting to surgery, checking you into a nursing home or hospital, obtaining medical records, and terminating life-sustaining treatment.
This document is often referred to as a "Living Will." The Directive allows you to communicate to your family and medical personnel your decisions about life-sustaining treatment. If you are suffering from a medical illness or condition that you will not survive, this document tells the doctors whether to provide all life-sustaining treatments, or only those treatments needed to keep you comfortable. The document is a great gift to your family when faced with this situation; it is much easier on them if you have communicated your decisions in writing.
This document serves as a backup to the two powers of attorney I already discussed. The powers of attorney I prepare usually avoid the need for a court having to appoint a guardian for you. If for some reason you need one, someone, usually a loved one or the state, may initiate a guardianship proceeding. In that proceeding, the party is asking the court to appoint someone to act on your behalf. This Declaration helps ensure the court appoints the person you want to be your guardian. (You can also express your desire that the court not appoint a specific person to be your guardian.
Many people are overly concerned about the probate process. It can be advisable, however, to avoid probate in particular circumstances. If assets are removed from the probate estate, they can be distributed more quickly to the beneficiaries. If done properly, this may entirely avoid having to file a probate action.
When a person dies, typically, their estate goes through "Probate." In Texas, probate is usually a routine court proceeding that involves :
- Identifying the assets of the estate
- Paying the debts of the estate
- Collecting debts others owe to the estate
- Distributing remaining assets to the beneficiaries or heirs
- Paying estate taxes (for larger estates)
In Texas, there as are two basic types of probate administration:
- Independent Administration - In an independent administration, there is very little done with the court other than appointing the executor.
- Dependent Administration - In a dependent administration, most significant transactions are done with the court's approval. Usually, that is routine, but it increases the time and expense of the probate process.
Texas also has a process where a will is admitted to probate as a "Muniment of Title," which can allow title to pass to beneficiaries.
I assist executors and family members with the probate process and can advise beneficiaries and heirs about the rights under the will and Texas law.
Trusts are used for many reasons in estate planning. Click here for a discussion of trusts and their use in estate planning.