Estate Planning: Texas Wills and Trusts

Why You Need an Estate Plan

Estate planning is not just for the wealthy – this is a common misconception.  Most people spend more time planning a vacation than they do planning their estates!  Fewer than half of all American adults (and Texans) have even the most basic estate planning document – a will.

No matter what your net worth may be, it is important to have at least a basic estate plan in place to protect your family and loved ones in case you were to die unexpectedly.  (Most of us don’t plan to die any time soon – but accidents happen every single day!)  If you don’t have a will or other estate plan, the state will determine what happens to your property, cash and personal effects when you die – and you might not like (or expect) the result.  The state will also decide the guardianship of your minor children.  Without an estate plan, your death could put your family through unnecessary expense, hardship and uncertainty during an already difficult time – don’t they deserve better?

The 5 Basic Estate Planning Documents:

There are five essential estate planning documents, all of which I can help you create through this virtual law office:

Texas Will – also known as a Last Will and Testament.  This is the first building block of an estate plan – it provides the essential details of who will inherit your property, how and when they will receive it, and who will be the executor of your estate.  The executor is the person who will settle your estate and distribute your property to your beneficiaries.  If you have minor children, you can also designate a guardian for them in your will.

Texas Advance Directive – also known as a “living will”.  This document allows you to provide written instructions to your doctors as to what kinds of treatment you want, or don’t want, if you are in a possible end-of-life situation, or in an irreversible condition that prevents you from making your wishes known, such as a coma.

Texas Durable Power of Attorney – This document lets you designate someone you trust, such as a spouse, close friend or family member, to manage your finances in case you become incapacitated and are no longer able to manage them yourself.  Without a Durable Power of Attorney, a court would have to appoint a guardian to manage your affairs – a legal process which takes time and costs money.

Texas Healthcare Power of Attorney – also known as a Medical Power of Attorney.  This allows you to designate someone you trust to make decisions regarding medical treatment in the event that you are unable to make them yourself.

HIPAA Authorization – This document allows you to authorize your healthcare providers to share your medical information with a person of your choice – such as the person named in your Healthcare Power of Attorney.  This information may be needed to help prove whether you are able to make medical and/or financial decisions on your own – which could activate your Durable Power of Attorney and/or Healthcare Power of Attorney.   (HIPAA is a federal law that restricts access to medical records to protect patient privacy.)

Do You Need a Living Trust?

In some cases, your family and/or financial situation may require a more sophisticated estate plan, involving the creation of a Living Trust.  A trust is essentially a contract between the grantor (the creator of the document) and a trustee who agrees to hold the assets for the beneficiaries.  As part of an estate plan, the living trust document contains detailed instructions regarding how the assets will be handled in three possible scenarios:  1) while you are alive and well; 2) in the event you become incapacitated; and 3) when you die.  After you create the trust, you transfer ownership of your property to the trust.  During your lifetime, you still have control over the property in the trust, and can do what you want with it.  When you die, or become incapacitated, the person named as trustee will distribute the trust property according to your instructions.  (If you have a trust-based estate plan, you will still need a “pour-over” will to dispose of any assets that you did not transfer to the trust while you were still alive.)

A living trust offers certain advantages over a basic will, such as privacy (a will becomes public when probated), tax planning benefits, and avoidance of probate.  It can also be useful when you own real estate in other states (to avoid probating the will in multiple states), and in cases where a will contest is likely.

Factors to Consider – Wills vs. Trusts

In deciding whether your estate plan should be will-based or trust-based, there are number of factors to consider.  Here are some of the more important ones:

Factor

Favors

Will

Trust

Limited Current Cash Flow

X

Limited Assets

X

Younger Client

X

Simple Estate

X

Complex Estate

X

Privacy Issues

X

Likelihood of Moving to Another State

X

Real Estate in Another State

X

Post-Retirement Client, Stable Assets

X

Likelihood of Will Contest

X

Tax Planning Considerations

X

If you are not sure which type of estate plan suits your needs, and need advice, please contact me or schedule a free consultation to discuss your estate planning requirements further.

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