Estate Planning Questions

What Is Estate Planning?

Estate planning involves putting your affairs in order so as to maximize the benefits that your assets can provide to you during your life and to those you desire to benefit from it after your death.

Can I do my own estate plan? 

Estate planning is more than just creating documents.  It also involves understanding the big picture and how the legal documents will work in concert with the assets at the time they are needed.

Do I need an estate plan if I hold all my assets jointly with another?  

This is one of the worst ways to plan your estate. If the assets are held jointly and one of the owners dies, the assets go to the surviving owners. The assets do not go to the deceased owner's children.  Also, the asset may be exposed to estate and gift taxes; it does not avoid probate, just delays it until the last owner's death; it may cause estate, gift and capital gains taxes; it is subject to the creditors of all owners; and it will result in the transfer of the property to the joint owner when one owner dies, even if that was not intended taxes.

When should an estate plan be reviewed?

If you already have an estate plan, it should not be considered permanent. Conditions, as well as your desires, may change. Estate plans should be reviewed at least every two-three years but, additionally, any important change in your life demands immediate review.

These changes might include:

·         Birth, death, marriage, divorce or disability of you or a beneficiary

·         Large increase or decrease in the net worth of you or a beneficiary

·         Substantial change in the type of your assets

·         Purchase or sale of a business

·         Change of residence to another state

·         Change in tax law

What is Probate? 

Probate is a court proceeding to transfer title from the decedent's name to the living beneficiaries.  Probate occurs in the state of your legal residence as well as any state where you own real property.  The length of time to complete a Probate varies from state to state, but can take six to eighteen months, on average. Probate is frustrating to the heirs and is public record. 

If I have a good Will, is probate required and will my assets be transferred immediately to the beneficiaries of the Will? 

Having a Will mandates a probate in most circumstances and the assets may not be transferred to the heirs for months or years.

Do I need a Will if I have a small estate? 

Many people also believe that if there is no Will, all the decedent's assets will be distributed to the surviving spouse.  If you do not create a valid Will, the state of Texas has a statute that will dictate where your assets go and who will administer your estate.  State law may not distribute your assets to the people you want to have them.

Does a Will cover all my assets? 

Wills do not cover assets held as joint tenants with right of survivorship, retirement plans, annuities, life insurance, financial accounts payable on death or transfer on death designations.

What are Trusts? 

A Trust document is an agreement between three people dealing with assets. The Trustor is the creator of the arrangement who appoints a Trustee to hold the legal title to the subject assets for the benefit of the Beneficiary.

Although there are certain legal limitations, it is possible for the Trustor and Beneficiary to be the same person and is even possible for the Trustor to serve as his own Trustee. In some situations, Trustors may wish a bank or other entity to serve as the Trustee.

What benefits does a Trust offer?

Trusts offer a number of important benefits:

·         Probate Avoidance

·         Retention of privacy of family assets and finances

·         Avoidance of guardianship

·         Creditor protection for your beneficiaries

·         Control of distribution and management of assets during life and after death

My child is married and I don't trust his spouse. How can he keep his inheritance out of her grasp just in case they get a divorce?

Under Texas law, inheritances are the separate property of your child and not community property.  His spouse has no rights in or to the inheritance. Of course, what your child does after he receives the inheritance can change what was once his separate property into community property. The most typical example is where the child who receives the inheritance places the assets into a joint bank account. Once he does that, it may not be his separate property anymore. So the best approach is to make sure he does not commingle these newly received assets with the joint assets of he and his spouse. Certain types of Living Trusts, like a Personal Asset Trust, can help greatly in preserving these inherited assets as separate property.

Does an A-B Living Trust have any disadvantages?

A-B trusts are a type of Living Trust set up by someone who is married and is designed to reduce or eliminate the Federal Estate (Death) Tax that would normally be incurred upon the death of the second spouse to die. Keep in mind that everything has disadvantages, including A-B Trusts. Initial cost, complexity, and maintenance costs after the first spouse dies are some of these. So whether it is worthwhile or not depends upon your circumstances. A good estate planning attorney (typically not the low cost bidder) can help you decide.