I regularly meet with clients who want to take preventative measures to ensure their families are not burdened if they become incapacitated or die. The most common question I hear is, "What do I need to do to make it easy for my loved ones?"
I do have a few recommendations.
1. Prepare an Estate Plan
If you die without a valid estate plan in Texas, the law determines how to divide your property. The statutory formula that determines the distribution of your property does not consider your wishes or your unique circumstances, often leading to a different outcome than you would expect or want. Also, the process of settling your estate without a plan in place will be significantly more complicated and, as a result, substantially more expensive than if you have a plan in place.
2. Name a Guardian for Your Minor Children
Because you know your children better than anyone else, you are in the unique position of choosing the best person to raise them in the event of a tragedy in your family. But, if you don't name a guardian, that decision will be made by a judge who must follow specific legal guidelines and doesn't know you or your children. Again, this can often lead to consequences you would not want.
Suppose, for example, that the law requires a court to award custody to an orphaned child's grandparents. But the extended family of the child's parents does not get along and disagree about who would be best suited to care for the child. In that situation, a legal custody battle over guardianship may be the outcome. Your child would be caught in the middle of that battle and subjected to more stress during what is already an emotionally tumultuous time.
3. Leave Assets for Your Children in a Trust
Texas law considers minors as incapacitated individuals. If you leave them more than a nominal amount of money outright, a guardianship will have to be created to manage those assets for them. Guardianships can be expensive and time-consuming. Additionally, the assets you leave them will be distributed to them when they turn 18 years old when they may not have the wisdom or foresight to manage them wisely.
A trust ensures a person of your choosing manages your assets and distributes your property how and when you decide.
4. Coordinate Your Non-Probate Assets with your Overall Estate Plan
Non-probate assets include things like life insurance. I have seen clients spend time and money creating an estate plan only to forget to change the beneficiary designation on assets like life insurance that will not go through the probate process. You don't want to let that happen.
After you finalize and sign your estate plan, you must change your beneficiary designations to match the way your will disposes of your assets. If you don't do this, your property may not be distributed in the way you desire.
5. Make Your End of Life Wishes Known
Do you know now whether you would want life-sustaining treatment if you suffer from an irreversible or terminal condition? If you know what you want in that situation, share it with your loved ones. Knowing your wishes and your reasoning behind those wishes relieves a lot of stress they may feel in making those decisions without your guidance.
6. Prepare a Durable Power of Attorney
Should you become disabled without having a durable power of attorney in place, it may be necessary for your family to seek a court-ordered guardianship of your person and estate so they can manage your affairs for you. Such a guardianship proceeding is time-consuming and expensive. You can avoid that possibility by creating a durable power of attorney before a tragedy occurs.
7. Make Sure You Have Enough Life Insurance
Life insurance is the best way to ease the financial burden on your family when tragedy strikes. If you are the sole provider for your family, life insurance is essential. Not having enough assets or insurance at the time of your death may mean that your spouse cannot afford to maintain the family home or pay for living expenses.
Life insurance is essential if you and your spouse both die together. Ultimately, it is your responsibility to provide for the financial support of your children after your death. Proceeds from a life insurance policy can help the guardians of your children provide them a higher level of support.
8. Plan for the Distribution of Sentimental Items
Many clients take great care to plan for their higher value assets like homes, 401Ks, IRAs, and jewelry. But my experience is that the items causing the most conflict after the death of a loved one are items that hold sentimental value.
My recommendation, therefore, is that your family openly talk about the items that hold specific sentimental value for any individual. You can then include a special bequest to those individuals for such sentimental items.
9. Organize Your Records
Your family will not appreciate having to rummage through your disorganized records while they are grieving your loss. Do them a favor and get your documents in order so they can easily find what they need when they need it.
10. Tell Loved Ones Where You Are Storing Important Documents
It doesn't matter where you keep your estate planning documents if no one knows where to find them. Tell your family where you are storing your estate documents. And don't just tell them once but remind them over the years at family gatherings.
Following these ten steps will allow you to rest easy and know that you have protected your loved ones when tragedy strikes. Your family will be grateful.
Resources for More Information
For more information to help you prepare an estate plan, download my books. If you prefer physical copies of the books, call my office at (254) 233-7300, and my staff will get copies to you in the mail.
I present an estate planning webinar several days a week. You can register for it here: Register for Webinar