Estate Planning

What is Estate Planning?

Estate planning involves putting your affairs in order so as to maximize the benefits that your assets can provide to you during your life and to those you desire to benefit from it after your death.  An estate plan should include at least these four key documents:  will, medical power of attorney, durable (financial) power of attorney, living will.  However, there are many other documents that can address the specific needs of your situation.

When should an Estate Plan be reviewed?

You should review your documents every 3 – 5 years or after any major life change.  A few major life changes includes such things as birth, death, divorce, disability, significant change in net worth, purchase or sale of a business and moving to another state.  It is important to consider the life changes of those named in your documents as well.  A change in their situation might change their suitability for the task named.

How does divorce affect my property and estate plan?

If you divorce your spouse and do not update your will and other estate planning documents, benefits to your ex-spouse in your will are nullified, because your ex-spouse is treated as if he or she died before you. Additionally, all beneficiary designations in life insurance policies in favor of the ex-spouse are nullified, unless (1) the divorce decree designates the former spouse the beneficiary, (2) the spouse re-designates the former spouse after the divorce, or (3) the former spouse is designated as beneficiary to receive the funds in trust for children. If the beneficiary designation of a spouse is nullified and, you do not name an alternate, the proceeds are paid to your estate.

Power of Attorney

If I have a will why do I need a power of attorney?

A will deals only with what should happen after your death. If you become incapacitated, a will has no power to appoint a person to manage your affairs during your incapacity. Powers of attorney allow you to name who should handle your finances and make medical decisions if you are unable. Furthermore, there are separate documents for financial and medical decisions so that you can easily name different people for these tasks if you wish.

Wills

Do I need a will?

Yes, a will simplifies the process for your heirs. A properly executed Last Will and Testament assures that your property passes to the loved ones that you choose. The preparation of a will can be accomplished simply by writing it in your own handwriting and signing it, but it is safer to use an attorney to draft your will and supervise its execution.

What happens if I die without a will?

If you die without a will the State of Texas has one for you. If you are a resident of Texas and die without a valid will, your property will be distributed to your heirs as determined by Texas law. Your property does not pass to the State unless your heirs cannot be located.

Can I name a non-family member as guardian of my children?

The natural parents of a child always have priority.  You cannot pass over your child’s other parent because you don’t think they will do a good job.  However, you can name any adult or married couple to care for your child if you pass away.

What happens if I don’t have a living will?

If there is no living will, the person named in the medical power of attorney or the next of kin will be asked to make decisions regarding your terminal or irreversible condition. The benefit to the living will is you will have expressed in writing your wishes for this situation. It will provide peace of mind to the decision makers because they know exactly what you want.

Guardianships

Is guardianship just for children?

While children are the classic example of someone who needs a guardian, this is not the only situation. If an adult is not able to care for themselves then they will need a guardian. This may happen as a result of dementia, Alzheimer’s, or an accident. Special needs children may need a guardian when they turn 18 if they are unable to assume full control for their lives.

Can I control who becomes my guardian?

As an adult you can control who is or isn’t your guardian should the need arise. By preparing a Declaration of Guardian in Advance of need, you can name who you wish to be your guardian and can name those who should never be your guardian. This is important if those you wish to be your guardian are not blood relatives or a spouse recognized by the state.

Trusts

Does everyone need a trust?

In Texas, a trust is not necessary for everyone.  Texas has a fairly simple and inexpensive probate process.  Furthermore, if any assets are left out of the trust by accident then probate will be required anyways.  There are several reasons to consider a trust.  Some are tax planning, owning property out of state, special needs or disabled family members, a medical diagnosis of dementia or a degenerative disease, and planning for blended families and same sex couples.

Why should blended families consider a trust?

Many couples wish to ensure their surviving spouse is cared for throughout their lifetime.  The secondary concern is ensuring your children benefit from your work instead of the surviving spouse’s new spouse.  By leaving assets in trust and designating the surviving spouse as the primary beneficiary and the children as secondary beneficiaries, both goals are achieved.  The surviving spouse can use the assets for his or her needs during life, and at their death it goes to the children.

Why should a person consider a trust after a dementia diagnosis?

A dementia diagnosis means you need to assess every aspect of your life with an eye for the future. By placing your assets in trust you allow for an easier transition when you are no longer able to manage your financial affairs. The new trustee needs only take one step to take over control of everything. If your assets are not in trust, your future financial caretaker must deal with each of your bills, banks, and financial provides or asset holders individually to take control. This process outside of a trust can be time consuming and difficult.

Probate

What is probate?

Probate is the legal process that transfers the property of a person who has passed away to their heirs or beneficiaries.  If a will exists, it is submitted to the court and upon proper proof, the executor is accepted and granted letters testamentary.  The executor may then carry out the business of wrapping up the estate.

How does probate work if you don’t have a will?

There are several options depending on your particular situation.  A determination of heirship is a court process that allows the judge to formally declare the heirs and appoint an administrator to handle the affairs of the estate.  Some estates can be transferred with an Affidavit of Heirship which is filed in the county property records.

When can I probate a will?

Wills must be probated within four years of the person’s death except in very limited circumstances.

Business Planning

Do all businesses need a buy/sell agreement?

Usually, yes. A buy/sell agreement allows one person to easily buy out another’s interest in the company. It also prevents you from going into business with an unintended partner. This need can arise in divorce, death, disability or differing desires for the future of the company. A buy/sell agreement prevents you from being forced into business with your deceased partner’s widow.

What is an exit strategy?

An exit strategy is a plan for how you will leave your business. There are options such as selling, closing, transferring to business partners and transferring to family members to name a few. Knowing your plan in advance allows you to put in place the correct business policies and documentation. It also allows for negotiations to take place without the stress of a pressing need.