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Wills and Estate Planning
In Texas, the law dictates who will receive your assets after your death, should you pass away without a Will. While many people assume that as a community property state, your assets will automatically pass to your spouse, that is not always the case. Your children may also claim an interest in your assets in some circumstances. Additionally, the probate process can become more costly and take more time for your loved ones if you do not have a Will. Regardless of the size of your estate, having a Will in place can save your loved ones time and money while giving you the peace of mind that your assets will be distributed according to your wishes.
In order for a Will to be valid in the state of Texas, it must either be typed, signed by the Testator, and signed by two disinterested witnesses, or it must be handwritten wholly in the Testator's handwriting and signed by the Testator. If your Will does not meet all requirements under the law, your assets will pass as if you had no Will, or in accordance with a valid previously executed Will if you had one. Most states will recognize a Will written in another state as valid, if it would have been valid in the state in which it was written.
In addition to deciding who you will leave your assets to, a Will should designate an Executor. This is the person who will be responsible for probating the Will if needed, distributing assets, and settling your debts. You may also designate guardians for your children in your Will. There are two types of guardians, guardian of the estate and guardian of the person. The guardian of the estate will be in charge of the child's finances while the guardian of the person will be physically in charge of the child and determine things such as residence and medical decisions. A court will ultimately decide if your designation is in the child's best interest, but your designation is to be considered with great weight by the court in making that determination. Your chosen guardians may be the same person or two different people. You should have at least one back up person for your executor and for the guardians, just in case someone is unable or unwilling to serve.
One common question I hear from my clients is "Why not just purchase a form online and do my own Will?" First, estate planning should include an evaluation of your entire estate and needs to determine the proper documents and any special provisions that may need to be included in those documents. Purchasing online forms does not give you this benefit. It is important to have your specific circumstances evaluated to make sure you are getting what you need. Second, with Texas being a community property state, there are specific aspects of community property law that may to be addressed with other documents, such as trusts, deeds, and prenuptial or postnuptial agreements in order to make sure your needs are truly met.
Probate and Probate Alternatives
The probate process may be undertaken within four years after a person's death and may be initiated an interested party. Probate is a procedure in which the Court determines whether a Will is valid, and appoints an Executor, or Administrator in absence of Will, to take care of the distribution of assets and deal with debts of the estate. Through this process, the Court will authorize issuance of Letters Testamentary or Letters of Administration which will give the appointed individual the ability to do these tasks. An Executor designated in a Will has no authority until the Court appoints them through probate. The probate process in Texas is relatively easy compared to many states. Despite its relative ease, it is not always necessary, and other procedures may be used in its place in some circumstances. One such procedure is the Affidavit of Heirship, commonly used when there is no Will, no unpaid debts, and the only asset to transfer is real estate. This affidavit is signed by two disinterested witnesses, and basically details the family history and remaining heirs to a party's estate. It is then filed in the county deed records. There is also the Small Estate Affidavit. Similar to the Affidavit of Heirship, witnesses sign an affidavit detailing heirship and family history. The Small Estate Affidavit however, must be approved by the Court. Small Estate Affidavits are available when there is no Will and the estate is valued at less than $50,000.00, exclusive of the homestead and other property exempted under the law. They should be used with caution though as they are not widely accepted by many financial institutions. It is important to seek legal advice to determine what procedure you need in order to avoid the costly problem of doubling efforts.
Trusts are also a popular estate planning tool. Contrary to popular belief though, transferring assets to a trust does not guarantee avoidance of taxes or probate, or establishment of eligibility for Medicaid. That doesn't mean all hope is lost in these situations. Depending on your circumstances, there may be other options that can be considered.
Trusts are a great tool for certain circumstances. For instance, if you have a beneficiary that is disabled, a minor, or that you simply think may need to have oversight due to the size or nature of inheritance, a trust may be advisable. Additionally, if you have property in multiple states, a trust can avoid the need for probate in multiple states. Even with a trust, you should also consider a Will as a back up in case you die owning assets not already transferred to the trust or in case you decide to revoke the trust before your death.
A trust may be set up by a Trust Agreement drafted separate from the Will, or may be set up as part of the Will document in some circumstances. Trusts may be revocable or irrevocable and may be very simple or extremely complex. They may also be set up with specific provisions that allow beneficiaries seeking government benefits to not lose those benefits by virtue of receiving trust income. You also have the option of naming an individual trustee or a corporate trustee. These are all considerations that should be discussed in your initial consultation.
Directives (Living Wills) and Powers of Attorney
Other documents may be needed for use during your lifetime. Contrary to popular belief, your spouse is not automatically your agent in Texas. They cannot sign documents on your behalf or make decisions concerning your assets without being specifically designated as your agent through a power of attorney. There are two types of powers of attorney that are typically advisable. The Statutory Durable Power of Attorney applies to financial needs, such as managing investments and accounts, while the Medical or Healthcare Power of Attorney applies to medical decisions. You may designate anyone to be your agent, and should go ahead and have these documents drafted to assure the person you want to handle your affairs in the event of incapacity has that ability. Also, keep in mind, spouses are not required to designate the same people. Power of Attorney appointments cease to be valid at your death.
A Living Will or Directive to Physicians, is a document used to dictate your wishes in regards to life sustaining treatments. Having this document can save your loved ones from having to make difficult choices. You may also designate your own guardian in case you need one in the future. This is advisable if you have someone you specifically do not want.