Do I really need a will?
Do I really need anything besides a will or trust?
I have kids, what should I do?
I've heard a lot about trusts, do I need one?
Do I need to worry about estate taxes?
LInks for further information
*Disclaimer: The following information is provided for informational purposes only and should not be construed as legal advice or as creating an attorney-client relationship. *
Do I really need a will?
If you have property titled in your name (such as stocks, investments, real estate, cars), have one or more children or other dependents, have opinions about the disposition of your property (including pets) if you die, and/or have opinions about how your person and services should be handled in the event of your death, you would benefit from a will and possibly additional estate planning documents.
Even in the event that you are completely ok with your estate being divided according to Texas's laws on intestate succession, consider this: by not leaving a will, you are forcing your family to use the probate courts not merely to rubber-stamp your previously made decisions but to actually divide your estate, and possibly to make major decisions for your children or dependents such as choosing a guardian. This is a much bigger deal than simply having the court approve a will. In most cases your heirs will not be able to legally change the title on your property or access your accounts, even for the benefit of your children or other dependents, until the court has taken action. The court-appointed administrator of your estate may have to post bond in order to serve. While Texas has an extremely efficient and minimalist approach to probate, without a will to streamline the process your estate can easily end up spending more money in attorney's fees than what you would likely have paid to have some basic estate planning done for you. If there is any conflict at all, it could be a lot more.
Do I really need anything besides a will or trust?
Yes! In fact, the "extra" documents and assistance that estate planning attorneys typically prepare and provide serve extremely important purposes. In some situations, these documents will turn out to be as important as the will itself - or more so. In fact, for exceptionally small estates, individuals with high-risk occupations, hobbies, or circumstances, and/or those dealing with illness, obtaining these documents could be of equal or greater priority than a will (though most would want both if possible).
Here are the top four documents every adult should consider in addition to a will:
Medical Power of Attorney - Gives someone else the right to make medical decisions on your behalf if you are incapacitated. Even if you are ok with the "default" person who would legally have this right making such decisions (typically a spouse or parent), you still need a Medical Power of Attorney. Why? Because in the event that that person either dies before you or is incapacitated as well, it is a good idea to name your backups yourself.
HIPAA Release - Gives someone else the right to access your medical information. Why would you need this if you already have a Medical Power of Attorney? Because the MPOA will only go into effect after you have been declared incapacitated by a doctor. It may be that you will want and/or need assistance with your medical and insurance decisions before the point that you are fully incapacitated. You may also find yourself in a situation where you are seriously hurt, but incapacity is not a factor. A HIPAA Release will allow the person you named to access that information so that they can assist you prior to or without incapacity. However, be aware that a HIPAA release is also a powerful document that can only go into effect immediately. That means that if you sign one, the people you give HIPAA authorization to could access your medical information immediately if they were so inclined.
Directive to Physicians or "Living Will" - Gives you the chance to tell your doctors directly if you do not want to be kept alive under certain circumstances. Even if you believe that those you have granted Medical Power of Attorney are fully aware of your desires and would follow them, a "Living Will" is still recommended for two reasons. First, for the peace of mind it can bring to that person in the event that they do become responsible to see your wishes done, and, second, because it will provide protection to that person in the event that other family or loved ones disagree with your wishes and attempt to stop them from being carried out. Additionally, it generally makes for a smoother interaction between that person and the health care providers involved.
Durable Power of Attorney - Gives someone else the right to make financial decisions on your behalf if you are incapacitated. It is the financial equivalent of the Medical Power of Attorney, and is very important because without one your family or loved one will often have to go to court to get a guardianship established in order to gain control of those assets. There may then be ongoing costs and court appearances associated with that guardianship. These are important even for spouses to have in regard to one another, as -surprisingly- there are some actions that one spouse may need to take on behalf of the other that would not be allowed unless a properly drafted Durable Power of Attorney is in place.
In addition, if you have children and/or are concerned about your own incapacity, you may choose to include either or both of the following:
Appointment of Guardian for Children - Gives you the chance to name the person who would be guardian for minor children in the event of your incapacity OR death. An often overlooked issue in planning for children is what will happen if the remaining parent or parents are incapacitated but not deceased. In this case, a statement in a will naming the next guardian will not be effective, because the will only takes effect if you have died. An Appointment of Guardian is a simple add-on that covers both situations.
Appointment of Guardian for Self - Gives you the chance to name the person who would be your guardian if you should become incapacitated to the extent that a guardian is needed. This document can also name people whom you do NOT want to be considered as possible guardians under any circumstances.
I have kids, what should I do?
You should make a will naming the persons (and backups) that you would wish to care for them if you are gone, and providing for their financial needs to whatever degree you can.
In order to provide for those financial needs, you may want to consider adding a trust to your will. This can make it much easier for the guardian(s) you choose (or someone else, if you wish) to manage the assets you leave to provide for your children. Without such a trust, your guardian may be required to check in with the court on an ongoing basis regarding the use and management of the assets until the youngest child reaches the age of 18, or the assets could be exposed to creditors of the guardian. Talk to an attorney about your options.
In addition to wills and trusts, life insurance is a common and advisable way to provide for children. However, it is very important to discuss beneficiary designations on these policies with an attorney, as minors will not be able to receive the funds directly and a court-appointed overseer is likely to be named.
If you can do nothing else, you should at a bare minimum execute an Appointment of Guardian naming the person(s) you would like to care for your child or children. This document is available from this firm as a stand-alone solution, but is only recommended in that manner in certain situations where time or other restrictions do not permit a more thorough level of planning for your children.
In addition, you may want to include comprehensive child coverage planning in your estate plan. This type of planning accounts not just for a long-term guardian in the event of your death, but a temporary guardian while that long-term guardian gets to your children, medical powers of attorney for your children if they are incapacitated, directions for emergency workers as to whom to call if you are incapacitated or deceased rather than putting your child in CPS or police custody until someone can be located, and much more.
There are many other considerations related to children for a variety of situations and family types, and these should be discussed with your estate planning attorney.
I've heard a lot about trusts, do I need one?
As with so many things in law, the answer to this one is "it depends on your situation." This is something you should definitely discuss with an estate planning attorney. In general, because Texas's probate process is meant to be simple with a valid will, it is not a place where trusts are as frequently used to keep property out of probate as in some other states where probate is notoriously terribly expensive, difficult, and/or lengthy even when a valid will is in place. In fact, here the cost and hassle of setting up and managing a trust can sometimes be worse for a person with an average-sized estate than the cost and hassle of simply passing those same assets by will. Be wary of anyone selling DIY trust kits, or who suggests that a trust alone is a full estate plan. At the very least, a minimal will, called a "pour-over will" will be needed in addition to the trust, in order to assure that all assets are accounted for.
However, there are many situations where trusts make a lot of sense, regardless of your level of wealth, and these should be considered with your attorney. Some common ones are: testamentary trusts for children or dependents, living trusts for children or dependents, trusts to hold out-of-state property to avoid a second probate in another state, special needs trusts, trusts related to Medicaid eligibility and other federal and/or state benefit considerations, trusts for tax planning purposes, living trusts for those with complicated estates, frequent moves, or privacy concerns, and others.
Many people mistakenly believe that putting assets in any trust will automatically protect them from creditors, government programs, and taxes. This is very definitely not true. While some trusts do have these effects, some do not, and no trust will protect you at all if it is not properly created and funded in the first place. For this and many other reasons, it is never a good idea to try to self-plan your trust by using a DIY form or package.
Do I need to worry about estate taxes?
Short answer: If you die a Texas resident with less than $10 million in net assets as an individual, or $20 million as a couple, under the current law, nope.
Long answer: The current federal estate tax exemption has just very recently been raised to 10 million dollars per person, automatically indexed for inflation each year. This just went up from 5 million per individual. That means that if your net assets at death are worth less than $10,000,000.00 in 2018, you will pay no federal estate tax whatsoever. Any amount over $10,000,000.00 will be taxed at 40%. If you don't use your whole exemption, it can straighforwardly be passed to your spouse for use at the time of his or her death. This is called "portability," and is a result that in prior years could only be obtained by specific estate planning. Portability is available to all married couples, regardless of gender, under the 2013 Supreme Court decision United States v. Windsor. One caveat there, however: your surviving spouse will have to file a form with the government within 9 months to preserve portability, so if you have a spouse who has recently passed, contact an attorney in a timely manner.
No one is completely sure if or for how long the estate tax exemption will stay this high, but for the time being it has made the creation of new tax-based planning much more focused on flexible options. In fact, it is now common for families locked into the old style of multiple trusts that must be funded with certain amounts to preserve the exemption to be revising those plans to a more flexible option. If you have a plan with a trust that was drafted pre-2012, you may want to have it reviewed by .an estate planning attorney to see if the trust structure you have is still the best solution.
Texas has no estate tax. However, if you move out of the state you should check with an estate planning attorney to see if you need to be concerned about an estate tax in your new state.
Links for further information:
The Texas Young Lawyer's Association has a very good free pamphlet available online called their "Probate Passport":
http://www.tyla.org/tyla/assets/File/38668TexasProbatePassportWebReady.pdf
Travis County Probate Court's General Information page:
http://www.co.travis.tx.us/probate/probate.asp
Williamson County Probate Court General Information page:
http://williamson-county.org/CountyDepartments/CountyCourts/CountyCourtatLaw4/Probate/tabid/650/Default.aspx
Hays County Courts Division (including Probate) General Information page:
http://www.co.hays.tx.us/cc-courts-division.aspx