There is a common misconception "out there" that estate planning is just for the rich. Let me clear that up. Estate planning is NOT just for the rich. It's for everyone. That's right, everyone. It doesn't matter what you do for a living, whether you have a dozen kids or no kids, whether you think you have an estate to plan or not, estate planning is for you.
Estate planning documents are prepared based on a snapshot of your life at the time you prepare them. The documents accomplished your goals and objectives then. But, life changes. While your estate plan may have achieved your objectives then, your goals now may be different. So, the documents you have may not accomplish your goals at this point in your life.
If you die without an Estate Plan, Texas law has a formula that determines the distribution of your assets. That formula does not consider your wishes or unique circumstances. The following summary explains how Texas law distributes your assets if you die without a plan.
All property left by a Will must go through probate. Probate is the legal process by which a Will is “proved” and accepted in court as a valid last testament of the deceased. Once the Will is proven to be valid, the legal process of administering the estate of the deceased begins. The administering process involves distributing property according to the Will. Probate can be a tedious and expensive proceeding.
Janet is diagnosed with terminal cancer. She has three grown children. Janet heard that her children would likely spend thousands of dollars to probate her estate after her death. Since her only real asset is her family home, she is concerned that they will spend too much on probate to get the house in their names. Janet also heard that she can help her children avoid probate by deeding the home to them while she is still alive. Janet hires a lawyer to prepare a deed transferring her home to her children while she is still alive.
John and Diane have been married for over 30 years. They have no children together, but each of them has two children from prior marriages. In their Wills, they provide for each other first and then leave the assets equally to all four children. What they don’t consider when drafting their Wills is that the survivor of the two of them can always change the Will to leave everything to only that survivor’s children.
I see a lot of poor writing when reviewing estate plans for clients. Most of the worst writing I see occurs when people attempt to write their Wills using forms found on the internet, including LegalZoom and Rocket Lawyer. I addressed do-it-yourself estate planning in a previous post. In case you didn't see it or you've forgotten what I said, you should run, not walk away from forms found on the internet. Proper estate planning isn't as simple as a few fill-in-the-blank forms. You must know the legal effect of the wording that goes into your estate plan. You need an estate planning attorney to make sure the language in your estate plan correctly accomplishes what you want to achieve.
An effortless and straightforward way to plan for the passing of your estate is to use beneficiary designations. The problem is that beneficiary designations don't handle contingencies very well.
Contrary to popular opinion, your will doesn’t necessarily control how your assets pass at your death. You may hold most of your wealth in assets that pass outside of your will.
In Texas, co-owners of property can have a right of survivorship to the property they co-own. Co-ownership with the right of survivorship means that when one co-owner dies, the surviving co-owner becomes the sole owner of the property without the necessity of opening a probate estate. But, using this method of estate planning can cause unexpected tax and legal problems.
Mary’s estate consists of two significant assets, a life insurance policy and a traditional IRA. Both assets are equal in value. To simplify and equally distribute her assets, Mary names her son as the beneficiary of her life insurance and her daughter as the beneficiary of her IRA.
have seen a lot of poorly drafted estate plans. Inexperienced attorneys wrote some of those plans. Financial planners and CPAs even wrote some of them. With the proliferation of wrong information on the internet, I have seen more than a few poorly written do-it-yourself estate plans from forms found on the web. It isn't a good idea to find forms on the internet and then complete them by just typing your name in blank spaces. And, just because you pay for a form on the web doesn't mean you're getting something that fits your needs.
If you don't have an estate plan, Texas law has one for you. The state's plan determines who gets your property based on their relationship to you and the type of property you own.
Many parents with minor children have not acquired substantial assets, so they use life insurance to provide financial security for the children in case one or both parents die. If you name your minor children as beneficiaries and they are minors when you die, the insurance company cannot legally pay the life insurance proceeds directly to them. In this scenario, it will be necessary to ask a court to appoint an adult to manage the money for the children until they reach adulthood. You can avoid this situation by establishing a trust for the children and naming the trust as the beneficiary of your life insurance.
I discourage clients from planning their estates around specific assets. There may be a compelling reason to do it in rare instances, but in most cases, it can result in unintended consequences.
In another post, I talked about why a Will is not the best tool to address your concerns for quickly transferring your assets, keeping your estate private, or properly leaving money to minors. A Trust, however, does address these concerns. Here's how: Asset Management If you have heirs...
A Will is supposed to allow you to leave your property efficiently to your loved ones, but it rarely does that. Leaving property through a Will is like pouring a pitcher of water into cupped hands to take a drink. Most of the water spills onto the floor and disappears before you can use it properly.