Many think that estate planning is only for the ultra-wealthy, but that is simply not the case. If you have assets, you have an estate. If you have an estate, you need a plan.
Below we will explain why estate planning is important in Texas.
What Is an Estate Plan?
An estate plan is a set of documents that directs others on managing your assets during your lifetime and at death.
Part of estate planning includes developing instructions on your financial and medical care if you are unable to make those decisions.
Your estate plan may comprise a combination of the following documents:
- Last will and testament,
- Advance power of attorney,
- Living will,
- Medical power of attorney, and
At Massingill, our goal is to make sure your intentions are clearly defined in your estate plan. We achieve this by incorporating multiple document types.
Last Will and Testament
A will is your final chance to speak. This legal document communicates your wishes and instructs your executor on how to distribute your assets. Your will is only effective once you die, and only assets solely in your name (also known as probate assets) are subject to the terms of your will.
With this document, you can do the following:
- Gift specific property, cash, or other assets;
- Appoint your executor; and
- Designate a guardian for any minor or disabled child.
Texas has its own unique requirements for a will to be valid. That is why it is advantageous to consult with an attorney to assist you in creating your will.
Financial Power of Attorney
A power of attorney is a document that authorizes another person to manage your financial affairs on your behalf. There are several types of powers of attorney that are available based on your needs and goals. Powers of attorney can be broad or limited in scope and can take effect immediately or when a certain event occurs, such as incapacity.
A financial power of attorney can help protect you from financial abuse if you become incapacitated. Texas has a statutory form available, but it is best to speak with an attorney to fully understand the implications of the document before you sign.
A living will, also known as an advance medical directive, provides end-of-life instructions. This document is meant to prevent confusion or disagreement among your family and health care providers with respect to how you want to be treated before you die.
Typically, you would decide on the use of artificial hydration and nutrition, the use of breathing machines, whether you want to be resuscitated, and whether you want to be an organ/tissue donor.
Medical Power of Attorney
A Texas medical power of attorney allows you to appoint an agent to make health care decisions for you if you are unable to do so. Since the term “health care” includes a broad range of medical services, you may limit the agent’s power to only certain medical decisions.
The document only goes into effect when a physician certifies that you lack the competence to make health care decisions. The health care professional must follow your agent’s instructions.
Trusts are used for many reasons, but most commonly to pass assets to beneficiaries outside the probate process and protect against creditors. Trusts come in a variety of types, including living trusts, testamentary trusts, Medicaid trusts, charitable trusts, special needs trusts, and life insurance trusts.
These estate planning vehicles are attractive because the beneficiaries typically get their inheritance quicker and cheaper than through a will. With proper use, trusts can also provide certain tax advantages to both the testator (the creator of the trust) and the beneficiary.
Why Do I Need an Estate Plan?
Estate planning is important for many reasons, from protecting your hard-earned assets to providing for your family and minimizing taxes.
Peace of Mind
Planning for your death may seem like a morbid task. It is. Discussing how you want to die and who should get your car may not be fun, but it is rewarding.
Knowing you are making sound decisions about your assets and providing for your family should bring you and your loved ones peace of mind. Tackle the tough questions and decisions now, so your family is not left scrambling, during an already difficult time, to figure out what to do with your estate.
Protect Your Assets
Without an estate plan, you and your assets are not protected. You have worked hard for what you have, so take the time to shelter it from creditors, greedy family members, or divorce proceedings.
As mentioned above, estate planning is both important and effective during your lifetime. The use of medical and financial powers of attorney can protect yourself and your assets from abuse. By incorporating wills and trusts into your estate plan, you continue to provide protection even after your death.
Ensure Your Assets Go to the Intended Beneficiaries
If you do not write your own will, Texas will do that for you.
Under Texas intestate succession laws, your probate assets go to your closest living relatives. This highlights the importance of estate planning since your assets could pass to someone you may not want them to.
Depending on who is surviving at your death, Texas will distribute your estate as follows:
- If children survive, but not a spouse, then children inherit;
- If a spouse survives, but no children, parents, or siblings, then the spouse inherits;
- If parents survive, but no children, spouse, or siblings, then parents inherit; and
- If siblings survive, but no children, spouse or parents, then siblings inherit.
The rules become more complicated when you have blended families or a mix of surviving parents, children, and siblings. There are several ways to avoid this type of distribution, such as executing a will, transferring your assets into a trust, or jointly owning property.
An estate plan is a proactive measure you can take to mitigate family discord during an already difficult situation.
Specifying exactly how you want to be cared for and to whom your assets should be distributed can prevent disagreement among loved ones. Without direction, family members may ask a court to intervene, which can financially drain your estate and divide your family.
Common causes of conflict include:
- Health care and end-of-life decisions,
- Burial and funeral arrangements,
- Division and distribution of assets, and
- Designating an executor.
Every single one of these areas of conflict is preventable with proper and thorough estate planning.
Provide for Minor or Disabled Children
Estate planning allows you to choose who will care for your children if you die while they are young. By using a will and trust, you can designate a guardian to care for your child and choose a trustee to manage their finances. If you die without appointing a guardian or trustee, the court will choose someone for you, assuming you have no surviving spouse.
Preserve Your Family’s Inheritance
Outright distributing your estate to your spouse or children through a will may seem like a good idea, but this can have dire consequences. For example, your family will have to go through the probate process. This can be time-consuming and costly. Creditors can go after any assets distributed to your family.
If your child goes through a divorce proceeding, those inherited assets may affect the division of property. Lastly, there may be significant income and estate taxes when your family inherits your assets. With the use of different estate planning tools, such as a trust, you can avoid or minimize the impacts of inheritance on your family.
Do I Need an Estate Planning Attorney?
The internet is full of online, fill-in-the-blank templates that allow you to create your own estate plan.
You may think these are good enough, but these documents often have errors or omit essential provisions that can cost more time, money, and hassle for your loved ones. Each state has its own set of estate and trust laws, so hiring a Texas estate planning attorney is crucial to the efficacy of your plan.
The attorneys at Massingill will help you develop a custom estate plan based on a variety of factors, including your assets, goals, financial state, tax status, family dynamics, and charitable intentions.
We want you to feel confident with the decisions you make, which is why we offer unlimited pre-execution revisions and a 90-day guarantee. If after you sign your documents you are unhappy for any reason, we will begin again without any questions.