Estate Planning

What is estate planning?

Estate planning is creating a plan for managing your wealth during life and distributing your wealth once you die. You may own these assets separately or jointly with others.

In estate planning you look to preserve and distribute your assets, whether it be during your life and/or upon your death. An estate is all assets of any value that you own. This may include real property, business interests, investments, insurance proceeds, personal property and even your personal effects. So an “estate plan,” would refer to the means by which your estate is passed on to your friends and family on your death. Of course, estate planning may be accomplished through multiple methods, including:

  • Revocable Living Trusts
  • Last Will and Testament / Probate
  • Lifetime Gifting
  • Joint Ownership
  • Beneficiary Designations
  • Life Estates

What should my estate plan include?

A basic estate plan should include a will, an advanced health care directive, a durable power of attorney, a medical power of attorney, a HIPAA authorization, and a designation of guardian in advance of need. These documents allow you to distribute your property to individuals of your choosing upon your death and plan for your incapacity. The documents below do not provide for tax planning, such as estate tax, gift tax, or the generation skipping tax.

  • Will – with a will you are able to distribute your assets to individuals of your choice upon your death. If you do not have a will, your assets will be distributed according to Texas law.
  • Advanced health care directive – an advanced health care directive or, “living will,” is a legal document that allows you to set forth the end-of-life decisions you would want made on your behalf should you ever lose the ability to make those decisions yourself. You are also able appoint someone of your choosing to make health care decisions for you when you can no longer make them for yourself. This authorized individual will be allowed to access your medical information.
  • Durable power of attorney – a durable power of attorney allows you to name an individual who is authorized to act on your behalf with respect to financial decisions in the event you become incapacitated.
  • Medical power of attorney – a medical power of attorney allows you to designate an individual to make medical decisions on your behalf in case of your incapacity.
  • HIPAA Authorization – a HIPAA authorization authorizes individuals to receive your medical information from your health care provider. The HIPAA authorization goes hand in hand with the medical power of attorney.
  • Designation of guardian in advance of need – a designation of guardian in advance of need pre-designates a guardian of the estate and a guardian of the person in the event of incapacity.

What is a Will?

A will is a document that a person signs to provide for the disposition of their assets after death. Wills have no legal authority until the person who made the will dies and that original will is delivered to the Probate Court. Furthermore, a will is the only way to appoint the new “parent” of an orphaned child.

A will can provide for the management and distribution of assets for your heirs with special testamentary trust provisions. Along with management and distribution, assets can be arranged and coordinated with provisions of the testamentary trusts to avoid death taxes.

What is an executor?

The executor is responsible for carrying out what is specified in your will. Their responsibilities include collecting and protecting the assets in your estate, paying off debts and taxes owed by your estate, and distributing the assets in accordance with your will. An executor has the responsibility to manage and care for the estate property as a prudent person would care for his own property.

What is an “independent executor?”

Texas allows you to designate your executor to serve as an “independent executor.” This means that the executor will serve with minimal court supervision. Making your executor an “independent executor” can save your estate money and expedite probate.

Who should I appoint as my executor?

The person that you appoint should be someone that you trust and someone who is willing and capable to serve. You should only appoint someone who you trust to handle your assets and the responsibility of administering your estate in what will be a difficult time. Further, at least one alternate executor should be named in case your initial choice for executor is unable or unwilling to serve.

What is the estate tax?

As of this writing in 2016, the estate tax is a tax on the transfer of wealth following death. Estates worth more than $5.25 million will be subject to a 40% tax. If you are married, the estate tax exclusion doubles for transfers of wealth from both you and your spouse. Thus, a widow or widower may transfer up to $10.5 million without incurring estate tax.

What is a trust?

A trust is an entity in which an individual, the trustee, holds legal title to property for the benefit and use of another, the beneficiary. The trustee holds legal title and the beneficiary holds equitable title each sharing a portion of title to the property in trust. When you make you appoint the trustee in the document creating the trust. The trustee has certain duties to the beneficiary to manage the property in the trust in accordance with Texas law and of course the provisions of the trust.

What is a revocable trust?

A revocable trust is a trust which the person who made the trust can change it or revoke it during her lifetime. If a trust is irrevocable, it can longer be revoked once it is finalized. Whether the trust should be revocable or irrevocable depends on the purpose of the trust.

What an advanced health care directive?

Sometimes referred to as a living will, an advanced healthcare directive allows you to designate in advance medical treatment for end of life care. Usually this is regarding the use of life-sustaining treatment in the event of a terminal condition.

Is my will prepared in another state valid in Texas?

It is very possible that a will drafted in another state is also valid in Texas. Many of the formalities that go into drafting a will overlap from state to state. Ultimately, it is generally a good idea to consult an attorney concerning the validity of you will when you move to a different state.

Do I need to update my will?

Drafting a new will, or a codicil (amendment) to your current will is often necessary as life progresses. If you’ve experienced major life changes such as marriage, having children or obtaining a large amount of assets since drafting your will you may want to consult an attorney about updating your will.