01. Estate Planning
Coming up with the right estate plan is about more than Wills, Trusts and Powers of Attorney. It is about protecting your estate from creditors, probate law and the impact of Estate and income tax laws. Every estate, no matter the size, can benefit from having a proper estate plan in place. To ensure that your assets pass exactly as you wish and that your loved ones can administer your estate efficiently, setting up the right estate plan is very important.
There are two common misconceptions that we see every day in our practice.
1. The first is, "If I am married, everything I own goes to my spouse, so I do not need a Will." Depending on your family dynamic, this is not always the case. Many people who are in their second marriage or have children from outside their current marriage find out the hard way that without the proper Estate Planning document in place, many of their assets do not go to their spouse, but to their children.
2. The second is, "I do not own very much, therefore, I do not need a Will." Everyone, no matter the size of their estate, can benefit from have estate documents in place. Having the right estate planning documents in place ensures that your assets go to the individuals that you want them to go to and that they transfer with the least amount of hassle, time and money.
Different Types of Estate Planning
A Will is a document that dictates where, how and who your estate passes to when you pass away. For a Will to be valid, it must follow the requirements set out in the Texas Estates Code. Additionally, a Will must be probated within 4 years after the passing of the individual who created the Will. It is very beneficial to have an experienced attorney draft a Will that fits your needs and goals to give you the peace of mind that your estate and finances will be handled according to your wishes.
There are many different types of Trusts an individual can create and each of them serve a different purpose. A Trust can be used to avoid the need for probate, lower your potential estate tax and gift tax, provide a tool to manage family assets and provide when an asset distribution is to be made to a beneficiary, or protect you in the event you later become incapacitated. A few, but not all, of the different types of Trusts are:
Testamentary Trust: a Trust created in your Will to hold and manage the assets given to a beneficiary named in your Will. This Trust becomes effective when your Will has been probated and can protect the assets from creditors, divorce and estate taxes.
Living Trust: a Trust created while you are living and is used for your benefit until you pass away. This Trust holds all of your assets and avoids the need for probate. If you draft this Trust as a "Revocable Living Trust," and as long as you can still make decisions, you can modify, amend or terminate this Trust.
Miller Trust aka Qualified Income Trust: this Trust is to assist people who might be over the "income cap" in Texas and are trying to qualify and become eligible for Medicaid or other state benefits.
Special Needs Trust: this Trust is designed for beneficiaries who are disabled, either physically or mentally. It allows the beneficiary to enjoy the use of the Trust property without disrupting any type of government benefits they might be receiving.
Irrevocable Trust: an Irrevocable Trust is normally used to hold and administer assets for beneficiaries until they reach an age where they can handle their own assets. An Irrevocable Trust is normally drafted to provide creditor protection and divorce protection for the beneficiary of the Trust
Durable Statutory Power of Attorney (Financial)
A Durable Statutory Power of Attorney, also known as a financial power of attorney, is a document that designates an individual to handle your financial matters and estate for you at various points in your life. A financial power of attorney can become effective of the day you sign the document or only upon being declared incapacitated by a doctor. There are many different powers that can be granted to an agent ranging from real and personal property transactions, to tax matters, to managing your bank accounts and paying your bills. A way to look at a financial power of attorney, is the individual you have designated steps into your shoes acting as your agent to handle your finances. Having a financial power of attorney in place is very important because it avoids the need for a guardianship in the event you should ever need one.
Medical Power of Attorney
A Medical Power of Attorney is a document that designates the person you want to make decisions for you about your health care in the event you cannot. At some point in everyone's life we will face some state of incapacitation and having a Medical Power of Attorney in place allows for the individual(s) you named to make medical decisions for you when you cannot.
Directive to Physician (Living Will)
A Directive to Physician, also referred to as a Living Will, is a document that provides written instructions to medical providers that describes the end-of-life treatments you do and do not want.