Texas Estate Planning

The Benefits of a Good Estate Plan

If you don’t have a comprehensive estate plan, state law will control. That’s unlikely to coincide with what you would choose to do. MSN’s recent article entitled “What is estate planning?” discusses the benefits of estate planning.

Minimizes taxes. Clever structuring of flexible retirement accounts, such as a Roth IRA, can help funnel more tax-free money to your heirs, while other tax-planning strategies like strategic charitable giving can help you mitigate estate taxes.

Prevents family disputes. The possibility of a fight about who gets what of value or even a sentimental treasure can arise without proper planning.

Clarifies your directives. Although you may have always intended for your niece to get a certain heirloom, unless it’s written out in your estate plan, it may not get into her hands. If you clearly spell out your wishes with the help of an experienced estate planning attorney, you can help your loved ones remember you fondly or at least get what you intended.

Avoids the time and expense of probate court. Done correctly, a trust can help your family avoid the hassles of probate court. Because of the ease of using a trust, more people are doing an end-run around probate and setting up their assets this way. You don’t need as much wealth as you might think to make it worthwhile.

Keeps your family assets together. Trusts can be a good way to make sure your money stays in the family. With the help of an estate planning attorney, a trust can keep a beneficiary from blowing your lifetime of hard work in a few years.

Protects your heirs. If you have minor children, a will can instruct who will take care of them. A living will can help heirs avoid some difficult health decisions during a parent’s end of life.

Sound estate planning can help avoid several potentially troubling problems.

Reference: MSN (Oct. 13, 2022) “What is estate planning?”

Why Do I Need a Will?

Without an estate plan, it can open the door to family disputes or significant court costs to settle an estate. Nonetheless, just a little more than half of Americans over 55 have a will, according to a 2019 survey by Merrill Lynch.

The Seattle Times’ recent article entitled “Do you have a will? Without an estate plan, families can struggle to sort it out” says it’s critical to put your wishes in writing, so health care and financial decisions are handled responsibly at the end of your life.

It’s the best thing you could do to help their family and eliminate any kind of discord down the road.

This can help with the most routine aspects of settling someone’s affairs or provide additional protection for more rare occurrences.

There are three significant steps to take when estate planning, though others may be necessary for someone’s specific financial, health or family situation.

It’s best to work with an experienced estate planning attorney.

Create a living trust. A living trust states specific plans for the person creating the trust, while they’re still alive and after death. This includes instructions for medical care and how to divide and distribute assets held in the trust, including property, businesses and investments.

Write a will. Writing a will can also instruct the way real property and other assets should be transferred. Note that a will that’s entirely in someone’s own handwriting — not anyone else’s — that’s signed and dated can be valid. However, it’s important to know that a hand-written will can be disputed in court, if there are questions about its authenticity and some states do not permit them at all. A will also can nominate the guardian for your minor children.

Designate health care and financial powers of attorney. This person or people will make decisions about your medical decisions and finances, if you’re incapacitated.

Reference: The Seattle Times (May 16, 2022) “Do you have a will? Without an estate plan, families can struggle to sort it out”

Estate Planning Tools and the Ones You Must Have

When hip-hop star DMX died in 2021, he had no will and only a few liquid assets. His estimated 15 children are expecting a share of his estate, but the estate has been in the probate court for months. An estate also has to be established to manage any expected future earnings from his music. However, with no appointed administrators and legal costs, DMX’s estate will be dwindling until the proceedings are finalized.

In fact, some reports estimate that DMX's net worth was estimated to be $10 million. However, it fell to a perhaps even negative $1 million at the time of his death.

Finurah’s recent article entitled “Not Just for the Rich: Five Estate Planning Tools Everyone Needs” reports that the number of Black Americans who have completed a will has increased by 6.2% (from 25.9% to 27.5%).

Estate planning lets you stay in control of your assets, while contributing to your family’s generational wealth. Let’s look at five tools necessary to create a comprehensive estate plan.

1. Will. A will establishes the distribution of your individual assets. A will is also important if you have minor children because it is the only way you can nominate a guardian of your choosing for them.
2. Trust. A trust is a fiduciary arrangement that lets a third party (the trustee) hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries.
3. Power of Attorney. This lets you appoint a trusted person to act on your behalf as your agent or attorney-in-fact. He or she will handle financial decisions on your behalf, such as real estate transactions, banking transactions, insurance and Medicare.
4. Health Care Proxy. This document allows someone you have appointed to make medical decisions in the event that you cannot.
5. Living Will. If you have a terminal illness or death is imminent, this document identifies the treatments or medications you would want administered, withheld, or withdrawn, allowing you to remain in control of your end of life. In short, this lets people know what you want and do not want.

Talk to an experienced estate planning attorney about a comprehensive estate plan that includes these five documents.

Reference: Finurah (Feb. 5, 2022) “Not Just for the Rich: Five Estate Planning Tools Everyone Needs”

Do I Need a DNR in My Estate Plan?

Forbes’s article entitled “Should “Do Not Resuscitate” Be Part Of Your Estate Plan?” explains the difference between a health care proxy and a DNR.
A health care proxy is a legal document that lets you name an agent to make health care decisions for you. It is used if you’re unable to make those decisions for yourself. When you were again able to communicate, you’d go back to making your decisions for yourself. The ability to create a health care proxy is governed by your state’s laws. Every state’s laws are different.
Ask an experienced estate planning attorney how to comply with your state’s law in creating these directives. He or she will know about health care institutions and whether they will give authority to the documents you created. If they won’t, your named agent would have to go to court to enforce them.
You can also supplement your state’s directives with additional guidance.
Some states’ directives require a set series of instructions for your agent. For instance, it may include questions as to whether you want life sustaining treatment and medically administered nutrition and hydration. Other states contain language that is broader. They allow the agent more latitude to decide end-of-life decisions. This language usually includes the intention that you want to be taken off life support, if you have a terminal illness or injury and your death is imminent.
A DNR is a medical order informing health care workers that they are not to revive you. It is a document that you put in place with your physician. Some states have also adopted MOLST forms (Medical Orders for Life Sustaining Treatment) to address other situations, like intubation, ventilation and dialysis. These documents require a thorough discussion between the patient and the health care provider. They are typically part of end of life care, when a person has an advanced stage terminal illness.
If you’re relatively healthy, you want to be treated – and resuscitated – if you have a heart attack. There may be a time when you need a DNR, but most likely it’s not now. If and when that time comes, you’ll need to have a talk with your doctor about a DNR.
However, you should speak with your estate planning attorney about your health care proxy, especially if you don’t have one. Whether it’s during the coronavirus pandemic or not, a health care proxy is a critical part of a complete estate plan.
Reference: Forbes (May 28, 2020) “Should “Do Not Resuscitate” Be Part Of Your Estate Plan?”

Are People Avoiding Estate Planning in the Pandemic?

A survey by Quest Research Group in the wake of COVID-19 wanted to see how prepared people would be, if something were to happen to them. They asked 1,000 people how much planning they’d done in the past, and if the pandemic encouraged them to start planning now.
Forbes’ June article entitled “The Three Reasons People Avoid Estate Planning” says that with all the uncertainty in the world, the study reveals that people are taking action, even though it’s something people typically try to avoid. Why do people avoid it? The article narrows it down to the three most common excuses:
I’m much too busy. I can barely keep up with my life as it is.
It’s complicated and/or expensive.
I’m just too superstitious. I’ll just jinx my life by thinking about death.
All of these excuses are followed by a sentiment such as “I know it’s something I should do” and “I’ll get around to it one day.” No matter how it’s said, people just don’t feel that it is urgent.
First, are those who are superstitious and think doing this somehow curse their life. However, people buy car seats for their children, and no one refuses to buy a car seat because they think it would make them more susceptible to an accident. Instead, you buy one, because you’re a responsible adult who cares for your child.
The other two excuses are similar, because when people say that planning is a time consuming or expensive task, they’re automatically too busy or frugal to even consider taking on such a task. Then we do all that we can to procrastinate.
To address these excuses, here are some things you can do right now at little or no expense that can help your family, if there’s an emergency. It will also make you feel more responsible for your life, in the same way parents do when they purchase car seats.
Password Sharing. Passwords are the keys to modern estate planning. To have access to your accounts in the event of an emergency, someone you trust should have access to your passwords. There are password managers, like Dashlane or LastPass, which coordinate all your passwords, so you only have to remember one. You can later share it.
Draft a Medical Directive. This document instructs your family what you want done in a medical emergency (Living Will) and who should speak on your behalf, if you’re unable to communicate (Health Care Proxy). These make up an Advance Directive.
Create a Will and a Power of Attorney. A will is the document that instructs your executor how to distribute your assets. A will also names a guardian for any minor children. A Power of Attorney (POA) is like a Health Care Proxy for your money and lets an agent make financial and legal decisions on your behalf, when you are unable.
Ask an experienced estate planning attorney to help you create these to avoid any issues down the road.
Reference: Forbes (June 24, 2020) “The Three Reasons People Avoid Estate Planning”

More Reasons Why You Need a Will

It doesn’t take very long for any newly-minted attorneys in the trusts and estates practice area to see what happens when there is no will, says the Daily Memphian in a to-the-point article titled “Five reasons you need a will (and one reason you don’t).” The stress on families, unnecessary expenses and assets going to the wrong people, can easily be prevented with an estate plan and a will. However, in case you still aren’t convinced, here are the top five reasons:

You have a family. For those who are married with children, the laws of intestacy take over, if you don’t have a will. Assets are divided between the surviving spouse and the children in most states (check with a local estate planning attorney for your state’s laws). In theory, that sounds fine. But there are three situations where not having a will can make a mess of things:

• Minors and developmentally delayed heirs. Minors and individuals with special needs may not legally contract or represent themselves in court. Therefore, they cannot agree to the disposition of assets. When a minor or individual with special needs inherits assets directly, the court must appoint a neutral person, often an attorney, to oversee that person’s best interests. It may also require the appointment of a guardian, so the court can monitor the use of the assets in the child’s best interest, until they are of age.
• Bad relationships between surviving spouse and children. Under intestate law, the spouse inheriting reduces the amount the children inherit. If the spouse is a second wife, this can make a bad situation worse. A will can plan out the distribution of assets to care for the spouse and ensure that the children receive the assets, as determined by their parent.
• Extramarital children. Children who are not born to legally wed parents have the right to inherit, regardless of whether their parents were married. What if an unknown offspring shows up and demands his share? This does happen.

You hate your next-of-kin. Not every family is as happy as their Facebook photos. If you don’t want your lawful next of kin inheriting your assets, you need a will. Remember that as time passes and people enter and exit the family, through birth, death, marriage and divorce, the person who is your next-of-kin will likely change over time.

Do you want to give specific gifts? Under the intestacy laws, your relatives (next-of-kin) inherit your property in percentages that are based on their degree of relationship to you and the number of other relatives at that same degree. Outside of designating a beneficiary or joint owner of an assets, having a will that is properly prepared under the laws of your state, is the only way to ensure that you can determine who gets what.

You know how you want things to work after you die. If you want to have any control over what happens to your assets, how you want your funeral to be paid for, what you want to happen to personal property, etc., a will may be the best way to do this. The person named to be your executor is legally responsible to carrying out your wishes, unless it’s impossible, impractical or illegal for them to do so.

You have a living trust. If you took the trouble to have a living trust, then you should also have a will. You need, specifically, a “pour-over” will. This ensures that any assets not titled in the name of the trust at the time of your death, are transferred into the trust. Otherwise, your non-trust assets are subject to intestacy law.

The ONLY reason you may not need a will? If every single asset you own has either joint ownership or beneficiary designations. That’s very unusual, in part because it takes a lot of detail to make sure that every asset is titled correctly. You can leave real property to another person through a joint ownership deed, which establishes that person as the co-owner of the property. Accounts can be left to a person of choice, by naming a person as beneficiary.

Joint ownership and beneficiary designations do supersede the intestacy laws. However, what happens if a beneficiary dies before you do and you neglect to change the name on the asset? There are also gift and tax implications.

A will can be as complex or as simple as you want. Speak with an experienced estate planning attorney, who can make sure that your will and any other documents are prepared to achieve your wishes for your estate, protect your family, and don’t leave anything to chance.

Reference: Daily Memphian (March 8, 2019) “Five reasons you need a will (and one reason you don’t)”

Making a Living Will Work

Part of planning your estate is planning for your end of life care. If you are ill and incapacitated, then it is important to have plans in place regarding how you should be treated and who should manage your affairs. Not making such plans now can risks chaos and legal struggles later that can drain your eventual estate of assets.

One of the key components to planning your end of life care is an advanced medical directive, commonly called a living will. This document lets you state in advance what treatments medical professionals should give in the event you are incapacitated with a terminal illness or injury and have no chance of recovery.

However, these important instructions are too often ineffective as Wealth Management discusses in "What Advisors Need to Know about Living Wills."

For your living will to be effective when you need it there are a few things you should consider. First, it is a good idea to be as specific as possible in the document. Detail exactly what treatments you do and do not want to authorize in advance.

You also need to let other people know you have a living will. If you stick it in a desk drawer without telling anyone, then no one will know to give it to medical professionals at the appropriate time.

Finally, every state has its own laws concerning living wills. In some states you must use official forms. In every state, even if official forms are not required, specific language must be included in a valid living will document.

For all of these reasons and more, make sure your living will is drawn up by your estate planning attorney without delay.

Reference: Wealth Management (Sept. 27, 2016) "What Advisors Need to Know about Living Wills."

Japan Debating Living Wills

In the United States when you prepare your estate plan, you will be asked if you also would like to get a living will. When you go into the hospital, you also might be asked if you want to get one. 

Living wills allow us to direct doctors not to give medical care that would artificially prolong our lives when we have no hope of recovering. These documents have legal effect and doctors are not liable for following their directives. 

Japanese attitudes have traditionally been different than ours. There it is normal for doctors to extend life as long as possible. There is no formal, legal way to order doctors not to. 

However, under pressure from a struggling economy and an aging population, the Japanese attitude is beginning to change according to Japan Today in "'Living wills' spur debate on right to die with dignity in Japan."

People in Japan are starting to create their own living wills, but doctors do not have to follow them. In fact many doctors fear getting sued by upset family members if they do follow the living wills. This is sparking a national debate over the issue. 

Those in favor of them say they allow people to die with dignity while the opposition fears allowing the living wills could be the first step towards euthanasia.

It will be interesting to see how the debate ends up in Japan. 

In the meantime if you do not have a living will and you would like one, in the U.S. you can and should visit an estate planning attorney to have one drawn up.

Reference: Japan Today (March 8, 2016) "'Living wills' spur debate on right to die with dignity in Japan."

 

Living Trust Tips

Probate avoidance is an important goal in many estate plans. While there are many techniques and legal instruments that can be used for the purpose, living trusts are the most popular instrument to avoid probate because of their flexibility and ease of use. 

Despite that ease of use, people often get tripped up. They are totally unaware of what must be done so the trust works as intended. 

The Wills, Trusts & Estates Prof Blog recently offered some advice about this important step in "Tips To Estate Planners To Avoid Probate With Living Trusts." 

The tips include:

• Trusts can only be used to avoid probate when assets are transferred to the trust. That means that ownership must be transferred from the individual to the trust.
• Some property might be exempt from probate by state laws. Accordingly, it is a good idea to check the laws in your state. For example, if cars are exempt from probate in your state, then there is no need to transfer ownership of them to a trust.
• Retirement accounts do not need to be transferred to the trust. By law they will pass to the named beneficiary. Just make sure that the beneficiary designation is up to date.
• Get advice on trust creation from your estate planning attorney and accountant to ensure all relevant issues are addressed.

Reference: Wills, Trusts & Estates Prof Blog (Jan. 9, 2016) "Tips To Estate Planners To Avoid Probate With Living Trusts."

 

What to Do after an Alzheimer's Disease Diagnosis

There is a common myth that people with Alzheimer's are completely incompetent and cannot be trusted to make their own decisions. It is not true as the early stages of the disease are relatively mild. 

People who are diagnosed with the disease early enough can still make their own decisions. However, as the disease progresses most do eventually lose the ability to make their legal decisions as NorthJersey.com points out in "Planning becomes vital following Alzheimer's diagnosis."

The article suggests that people who receive an Alzheimer's diagnosis should get a general durable power of attorney, a health care power of attorney and a living will. 

The powers of attorney will allow the person to appoint someone else to handle financial and medical affairs, respectively, when the Alzheimer's patient is no longer able to do so. The living will is used to give advanced directives about what type of treatments doctors should employ to keep the patient alive.

These are important documents to have. 

Getting them after an Alzheimer's diagnosis is solid advice. However, even better advice is not to wait until after receiving such a diagnosis. All three documents are part of general estate planning. There is no need to wait until you know you will need them to get them. 

Plan ahead and get them now before an issue of competency is raised.

Reference: NorthJersey.com (Dec. 27, 2015) "Planning becomes vital following Alzheimer's diagnosis."