n Texas, if you die without a will, the state of Texas has one for you. Unfortunately, that’s not always what you want to happen, especially in the situation of a blended family. Generally speaking, if there’s not a blended family, it will go to the surviving spouse. However, if there is a blended family with children outside of the marriage, it can complicate things significantly. This is because the community property of that marriage will go to the children outside the marriage. If there are children both from outside and inside the marriage, all of those children will inherit, and the surviving spouse will not receive the community property.
Most people need a document to state what their wishes are going to be. So, the first one that people think of naturally is a will, but sometimes we also use a trust as an alternative to a will. A will or a trust is the first thing. Beyond that, there are the documents that I say are planning for the living. That is, if you get sick and you’re unable to make decisions for yourself, you need a health care power of attorney. Likewise, if you’re unable to make decisions for yourself, you need someone who is identified to be able to make decisions for you on matters other than health care. That document’s called a statutory durable power of attorney, and it covers pretty much everything that you could do if you were ready, willing, and able to do it.
Additionally, when people have minor children, we talk to them about signing a guardianship document. That is a document to name a guardian in case something happens to them and they’re no longer able to be the parent for their parent. Beyond that, we also frequently talk to people about their beneficiary designations to make sure that in conjunction with their will or their trust, their assets that have beneficiary designations on them go the way that they want them to go to the people that they intend to have them.
When people approach us after a loved one has passed away, they often seek guidance on what needs to be addressed in the probate process. Typically, I begin by discussing life insurance. Life insurance policies typically have beneficiary designations, and assets with these designations usually do not require probate proceedings.
Similarly, individuals with retirement assets like 401(k)s or IRAs often have designated beneficiaries. These assets, too, typically pass outside of probate through the contract associated with them.
Many people are unaware that they can designate beneficiaries for various assets. For instance, my wife and I have even designated beneficiaries for our bank accounts to ensure a smooth transfer of those assets to the survivor. In Texas, it’s even possible to designate a beneficiary for your car.
In recent years, it has become increasingly popular to put a beneficiary designation on the deed of one’s house. This can be particularly advantageous, as a house is often the most substantial asset an individual owns. Having a beneficiary designation on the house deed ensures that the property can be transferred without the need for probate proceedings, making the process more efficient and less burdensome for loved ones.
When we talk to our clients about trusts, there’s generally two big categories that we talk to people about. We talk about trusts that are inside of a will and we talk about trusts that are freestanding from a will.
So first on trusts that are inside of a will: if people have children that haven’t turned 18 yet, frequently if something happened to the adults, they wouldn’t want their children to have the money quite yet. The children aren’t quite ready, and so we frequently do trust for minors inside of Wills to help look after the money until the person is old enough to take care of the money themselves.
We also sometimes do a similar type thing for people with special needs. So if they are unable to take care of things themselves but for a different reason than age. A third type of trust that we sometimes do inside of a will is for someone that has capacity issues, Alzheimer’s or dementia, or some other kind of mental health condition that prevents them from really being able to look after assets and take care of things themselves.
Other types of trust that we do, and some can be inside of a will and some can be outside, are for tax planning purposes. So if people are in a wealth situation where they are subject to federal estate tax, then we try and set up a trust for them that helps minimize the amount of taxes that they would pay.
The last kind of trust that I mentioned is trust outside of a will. We call those revocable living trusts, and those have become more and more popular over the years for people that are trying to handle all of their probate while they’re alive. That is, transfer all of their assets into a trust now so that when they die, they can try and avoid probate altogether.
When people have concerns about whether or not a particular will is valid, the kinds of challenges that we see made are, first, does the will meet all of the requirements under the statutes in Texas for the way it is prepared? In Texas, we have holographic handwritten wills and typed wills, each with different requirements. So, we frequently look to make sure that the wills have met all of the requirements in the statutes to be valid.
Second, we look at whether or not the person had capacity. Questions arise about whether they had the mental ability to make a will. In Texas, there’s a four-part test that we use to determine if they had the proper capacity or not.
A third kind of challenge that we see to wills is whether or not the person making the will was unduly influenced by a family member, friend, or caretaker. This means they may have been coerced into signing a document they wouldn’t have signed otherwise due to duress, coercion, poor health, not understanding the document presented to them, or other factors.
The last issue we encounter isn’t so much related to wills but involves beneficiary designations on bank accounts, retirement accounts, or life insurance policies. Occasionally, we encounter forgeries or documents signed by someone other than the asset owner without proper authority to do so.
There are two main deadlines for estate litigation that individuals should consider. The first deadline is related to will contests. At most, individuals have two years from the date the will is admitted to probate to file a contest against that will.
However, there’s also a softer deadline to keep in mind. If the contestant, the person who wishes to contest the will, files the contest before any will is admitted to probate, they can benefit from various procedural advantages. These advantages are lost if they wait until a will is admitted. Therefore, even though a contest may still be considered timely after the will is admitted, it may become more challenging or costly to bring the contest at that point.
Trials, Mediation and Arbitration
Arbitration is a private forum that replaces the judicial system. Instead of going to court to see an elected or appointed judge, the parties submit their dispute to a tribunal. This tribunal might consist of one arbitrator or three, typically governed by the rules of an association. For example, the dispute could be submitted to the American Arbitration Association under their commercial rules or construction rules. The number of arbitrators is determined by the agreement of the parties, and the arbitrator has nearly 100% final say over the outcome. There are limited reasons to challenge the determination of an arbitrator, making their decisions generally final.
While some arbitration forums allow for appeals from one arbitrator to a panel of arbitrators, these appeals do not provide the same appeal rights as those in a courtroom. In a courtroom, if you lose your trial, you can appeal to a board of judges known as a court of appeals. In the arbitration world, you might not even have that option.
For many years, people said the best thing about arbitration was that it was faster and cheaper. That is no longer true, not just in arbitration in the United States but also worldwide. Having experienced arbitration in various parts of the world, including a case in Hong Kong, it has become evident that arbitration practices tend to emulate local legal systems.
Consequently, arbitration has inherited both the positive and negative aspects of civil court litigation. Instead of offering a notably cheaper and significantly faster process, it might now be somewhat faster but is not notably cheaper. Parties involved in arbitration must bear the cost of an arbitrator, which can amount to twenty or thirty thousand dollars. Additionally, there are the high filing fees paid to the Arbitration Association, ranging somewhere between one thousand and twelve thousand dollars. Furthermore, parties still have to pay their lawyers for all the work involved.
Estate Planning Questions
Yes. Having a valid Will in place at the time of your death can help make the administration and distribution of your estate easier for those who are left behind. Even if you have a living trust, you should still have a Will to cover assets outside of the trust.
A Will is a document which controls the ownership of your property upon your death. In Texas, there are two basic types of Wills -- (i) the attested or formal Will, which is in writing and is witnessed by two or more witnesses, and is the most effective and (ii) the holographic Will, which is wholly in the testator’s handwriting and signed by the testator.
If you die intestate or without a Will, your state's laws of descent and distribution will determine who automatically receives your property. These laws vary from state to state, and may not distribute the property the way you would choose to.
A Will becomes effective at the time of your death and specifies how your property is to be disposed of. A Will must be acknowledged as valid through a court procedure known as probate. A living trust also specifies how your property is to be disposed of at your death, but since it exists before your death, its validity does not need to be acknowledged by a probate proceeding. It is this quality – the avoidance of probate – that has brought the living trust most of its recent popularity.
Maybe. A living trust can be used as an alternative to a Will. Determining if a living trust is the best solution for you depends on your circumstances. We can help you make that determination.
A trust is a legal device used for the management of property. In a trust, legal title to the property -- the right to manage the property -- is held by one person, called a trustee, while another person, called the beneficiary, has the beneficial right to the use and enjoyment of the property. A living trust is a trust created while the creator is living (compared to a testamentary trust, which is created at or after the creator's death under the terms of his or her Will). A living trust may be (i) revocable or changeable by the creator prior to his or her death or (ii) irrevocable or unchangeable by the creator.
No. Many young parents with limited assets choose to create trusts either during life or in their Wills for the benefit of their children the event both parents die before all their children have reached an age where they are mature enough to handle property. This permits the trust estate to be held and used for the health, maintenance, support and education of minor children according to their respective needs, with eventual division of the trust among the child or children when they reach the required age chosen by the trust creator.
An attorney should evaluate your particular situation to determine if a living trust is right for you. The use of a Living Trust may be beneficial if you have one or more of the following circumstances:
- Real estate in another state.
- Concerns about disability or incapacity in the future.
- You are concerned about privacy.
- You need post-retirement and wealth planning.
- Contesting of your Will, is probable.
A Will or trust created this way is likely to have some effect, but it may not work the way you intend. Wills are complex documents that should be prepared by an attorney.
Yes. A Will that is valid in the state where it was drafted is valid in Texas as well. However, it is still a very good idea to have a Texas attorney review your estate planning documents. Each state has special provisions that should be included in Wills that will be probated in that state. These special provisions allow for a smoother, easier probate process. We will be glad to review your documents and make suggestions based on Texas law.
Regardless of where you live, you should have your Estate Plan reviewed by an attorney or other estate planning professional periodically, to assure that it still meets your needs. You should have your plan reviewed if any of the following events occur:
- The marriage, divorce, illness or incapacity of any member of your immediate family;
- The death of any member of your immediate family;
- A significant change in your financial condition (positive or negative);
- You move to another state or country;
- You or a spouse receive a large gift or inheritance;
- You acquire property which requires special consideration and handling;
- You change your mind about how to dispose of your property and/or who you want as your representatives; and
- If there is a significant change in the tax laws which may affect your estate.
No. Your Will only disposes of your probate property. Probate property is property that does not pass by a beneficiary designation. All property that has a beneficiary designation is called Non-Probate Property. The most common types of Non-Probate property are life insurance, retirement plans, annuities, bank accounts held as “joint tenants with rights of survivorship” or “pay on death” designations. It is also not uncommon to hold brokerage accounts with a “right of survivorship.” The beneficiary designations control who receives this property. If your Will gives all of your property to your sister, but the beneficiary designation on your life insurance lists your brother as the sole beneficiary, your brother will receive the life insurance policy. It is important to coordinate your estate plan and non-probate beneficiary designations to work together.
A plan like this may work in some situations, but in most cases it fails to cover many contingencies which may occur, with disastrous results. There also are potential negative tax consequences of using only beneficiary designations or pay-on-death designations to pass property at your death.
Yes. The following is a list of documents to consider as part of your overall Estate Plan:
- Statutory Durable Power of Attorney, in which you grant a designated individual(s) broad power and authority to deal with your property;
- Medical Power of Attorney, in which you give a designated individual(s) the authority to make health care decisions for you, if you are incapacitated and unable to make the decisions yourself and your physician has certified that in writing;
- Declaration of Guardian for Minor Children, in which you name the person or persons you want to be the guardian of your child(ren) and estate in the event of your death or disability;
- Declaration of Guardian in Advance of Need,in which you name the person you want to be the guardian of your person and estate should the need later arise;
- HIPAA Authorization, which limits the disclosure of protected medical information to those you designate in writing, and will be released only to those designated in the authorization;
- Directive to Physicians, (sometimes thought of as the “pull the plug” or “don’t pull the plug” document) in which you indicate your personal wishes regarding medical treatment in the event of a terminal or irreversible condition;
- Appointment of Agent to Control Disposition of Remains, which designates an agent to dispose of your remains after your demise; and/or
- Anatomical Gift Forms, which states your intent that some or all of your body parts may be used to prolong or improve the life of others or to advance the purposes of medical science, or both.
Please bring your financial and legal documents, including: personal financial information; current account statements for personal and retirement accounts; statements for your banking, investment, and brokerage accounts; life insurance documents; legal property descriptions; prior estate planning documents; divorce decrees and property settlement agreements; and corporate documents for any business you may own. If you have a doubt about what to bring, gather as much of the above information as possible, and we will determine at the initial meeting if anything else is necessary.
- The first thing is to take care of your family. If you have already located the Will, look to see if there are any provisions regarding the wishes of the deceased. Also look to see if the person had a prepaid funeral contract.
- Notify the person’s employer and the social security administration if he or she was receiving social security benefits.
- Locate the original Will and review it to determine who is named as the executor. You have four years after the date of death to admit a Will to probate and have an executor appointed by the probate court. If you cannot locate a Will, it may be necessary to have determination of heirship.
- Contact a probate attorney. You are not required to use the attorney who drafted the Will. Find an attorney in your area that is experienced in handling probate matters – like us! All of the attorneys in our Firm have years of experience handling probate matters.
- Make a list of the person’s assets and debts. This will help your attorney determine whether or not you need to probate the Will. The probate procedure or trust administration will depend on the nature of the assets and debts and how they are titled. It may be possible to utilize a less complicated approach, such as an affidavit of heirship or a small estates affidavit, instead of probating the Will.
Whether or not you need to probate depends on the nature of the assets and how they are titled (in whose name are they held). There may be shortcut methods to avoid a complete administration, if appropriate. We can help you answer questions like these at an initial client meeting.
No. Powers of attorney are only effective during the lifetime of the person who granted the power. Once that person dies, the power of attorney dies with them. The only person authorized to act on behalf of a deceased individual is the court approved or appointed executor or administrator.
Yes. Being named as the executor in a Will is just the first step. You are not qualified to act on behalf of the estate until the judge signs an order admitting the Will to probate and appointing you as the executor, you have taken your oath with the court, and you have posted any required bond. Once you have been qualified, the clerk will issue Letters Testamentary which is a court order stating that you have the right to administer the estate.
It is very important to read and understand the Will or trust so that you will know:
- Who are the beneficiaries?
- Who is to receive what and when?
- Who, if any, are your co-fiduciaries?
- Does the Will give everything outright, or does it create new trusts that may continue for several years?
- Does a trust mandate certain distributions or does it leave this to the trustee's discretion?
- How many years the trust, if any, will be ongoing?
- How are debts (if any) and taxes (if any) to be handled?
The attorney will need to have the original Will, and a certified copy of the death certificate. The attorney eventually will need a list of all assets belonging to the deceased, valued as of the date of death. This will include bank accounts, investments, IRA or other retirement accounts with the balance as of the date of death and insurance, no matter to whom it may be payable. It will include all real estate owned by the decedent, whether alone or jointly with another person. Information about the decedent’s debts (including credit cards, medical bills, mortgage and car loans, if any) is also important. The attorney will need these to determine if the estate is subject to estate tax.
In most cases, the bank or brokerage firm will allow a co-signer on accounts to access funds after the death of one of the co-signers. However, not all accounts with two co-signers automatically belong to the surviving co-signer. It is advisable to consult an attorney before using funds from these accounts for personal purposes, and it is a good idea to keep precise records of how these funds are spent.
A guardianship is a court-supervised administration for a minor or for an incapacitated person. An individual, called the guardian, is appointed by a court to care for the person and/or property of the minor or incapacitated person (the “ward”). In some states, other than Texas, guardianships are called conservatorships.
There are two types of guardians and guardianships. A guardian appointed to take care of the physical well-being of a ward is called a guardian of the person, while a guardian appointed to take care of the ward's property is called a guardian of the estate.
A minor is a person younger than 18 years who has never been married or who has not had his or her disabilities of minority removed by judicial action. A minor is considered an incapacitated person. An adult who, because of physical or mental condition, is substantially unable to provide food, clothing or shelter for himself or herself, to care for his or her own physical health, or to manage his or her own financial affairs is considered an incapacitated person. The definition of incapacitated person also includes a person who must have a guardian appointed to receive funds due the person from any governmental source.