Estate Planning Frequently Asked Questions

Estate Planning does not only encompass death-time planning, but also incapacity during life. Ancillary documents are what we consider "incapacity planning" documents. 

If you got into a car accident and were not able to make your own medical and financial decisions, who would make them for you? The ancillary documents below give you the opportunity to list who you would like to step in your shoes if you were unable. 

1. Statutory Durable Power of Attorney

Allows you to name who you want to make business and financial decisions for you in the event of incapacity or disability.

2. Durable Power of Attorney

Allows you to name who you want to make your medical and health care decisions for you in the event of your incapacity or disability.

3. Directive to Physician (Living Will)

Declares your wishes with respect to life-prolonging treatments and procedures.

4. HIPAA Authorization

Permits you to name individuals to have access to your medical information and records.

5. Declaration of Guardian

(Should the Need Arise) Allows you to name the individuals who will be your guardian of your person and estate in the event of your incapacity or disability. More importantly, it allows you to name the individual you DO NOT want serving in that capacity.

6. Declaration of Guardian for a Minor Children

(Should the Need Arise) Allows you to name the individuals who will be the guardian of your children in the event of your incapacity or disability.

 It's important to plan for the unknown and what you would do should you become disabled or incapacitated.

 

A Declaration of Guardian is a document that allows you to name the individuals who will be your guardian of your person and estate in the event of your incapacity or disability. More importantly, it allows you to name the individual you DO NOT want serving in that capacity.

Essentially, the Estate Tax is a tax on a person’s right to transfer property upon his or her death. 

The “Gross Estate” includes everything from cash and securities to business interests to real estate.  Basically, everything a person owns.  Tax deductions are taken from the Gross Estate to create the “Taxable Estate.” 

If a person’s Taxable Estate is over the exemption limit, $5,490,000 for 2017, the estate will be taxed at a rate of forty percent (40%).  It is important to understand what the Estate Tax is and why it could affect your estate, whether you are over or under the exemption, because it will dictate the type and complexity of your estate plan. 

It is best to work with a qualified attorney to determine the most viable estate plan for you based on your planning goals and objective. 

A disposition of remains is an estate planning document that allows you to appoint an agent to make all decisions about the disposition of your remains after death. For example, if you would like to be buried, cremated, have your ashes spread in a specific manner, etc.

Learn about other important estate planning documents.

Yes.  Succession planning is not just about preparing a will or a trust.  It is not even about deciding who will run the company when you die.  Succession planning documents can provide the protection your company needs to combat business risks, but they can also protect your estate against any future estate taxes.  Further, it is equally as important that you, the benefactor, are protected during your lifetime.  Succession planning works hand in hand with estate planning to provide that protection. 

Yes, you can designate a minor as a beneficiary, but doing so can create MAJOR problems.

THE PROBLEM: In the state of Texas, minor children (any person under the age of 18) cannot legally own any real property or be entitled to receive any assets. This means that if minor children are designated as beneficiaries, they need a guardian of the estate appointed by the court to control the assets or property on their behalf until they turn 18 years old. Appointing a guardian of the estate for minor children can be a long and costly process.

If you or a family member has designated minor children as beneficiaries on any current documents, it may be time to reconsider. Please contact a probate attorney to discuss the alternatives. 

We recommend that if you own property outside of the state of Texas that you have a revocable living trust. Without having the trust in place, upon your death, your family has to go through the probate process in every state that you own property. This can be a costly and time consuming process.

You can save your loved ones the time, money, and stress by having your out of state property in trust.

A step-up in basis is the readjusted value of an asset inherited by a beneficiary.  The readjusted value is referred to as “stepped-up” because the asset’s base value is increased to reflect the value of the asset at the date of the decedent’s death.  This adjustment creates a huge tax advantage for the beneficiary because, if the asset is ever sold, the capital gains taxes due upon the sale of an inherited asset are reduced. 

For example, let’s say you purchased your home for $100,000.  Your “basis” in the house is $100,000.  Upon your death, you leave the home to your daughter and it is now worth $150,000.  Her basis in the house is $150,000 not $100,000.  Should your daughter decide to sell it for $150,000, she would not recognize a “gain” because the sales price ($150,000) minus the value ($150,000) is zero.  Should she sell it for $170,000 she would only pay capital gains taxes on $20,000 ($170,000 minus $150,000) rather than $70,000 ($170,000 minus $100,000).

When I meet with clients it seems there is one question I am asked over and over again: “Do I need a Trust?”

The answer is not everyone needs a trust.  There are many different types of trusts and there are certain situations where having a trust would be beneficial.  Learn the most common reasons for a trust by reading our article, 6 Reasons for a Trust.

How to prevent beneficiaries or heirs from contesting a Will or Trust.

In order to address the possibility of any person – whether related to you or not – attempting to oppose the provisions or probate of your Will, we include a No Contest Provision. This means that if any of your beneficiaries or their heirs choose to contest your Will or Trust and lose, they are no longer entitled to any portion of your estate and will receive just $10.00.

We consider this provision to be non-negotiable and we require it to be in every Last Will and Testament we prepare.

There are two important estate planning pieces to have in order to protect your child/children in the event something happens to you.

1. Guardianship Provision in Your Will

If you have a minor child or children under the age of 18 it is very important that you have a guardianship provision included in your Last Will and Testament. This provision lets you name who you want as your child's/children's guardian. This particular provision is important because if you didn’t have it included in your Will, upon your death, the Court would decide who takes care of your child/children and their finances.

2. Declaration of Guardian

The second important document to have to protect your child/children is called a Declaration of Guardian. This document allows you to name the individuals who will be the guardian of your child/children in the event of your incapacity or disability. Like a guardianship provision, not having this document will result in the Court deciding who would take care of your child/children and their finances.

Protect your child/children by having these imperitive estate planning documents in place!

 

 

The Uniform Prudent Investor Act was developed by the National Conference of Commissioners in 1994. The Act offers trustees the flexibility to choose from a wider array of investments while outlining factors every trustee must consider before making investment choices.  

Learn more about the Uniform Prudent Investor Act on our blog.

A no contest provision addresses the possibility of any person – whether related to you or not – attempting to oppose the provisions or probate of your Will. This provision discourages someone from challenging your Will because if someone does attempt to oppose your Will and loses, they will not inherit anything from your estate. 

We consider this provision to be a must have and require it to be in every Will we prepare.

Find out the other must haves that need to be included in your Will.

Yes, as of January 1, 2016, the estate and gift tax exemption amount has increased to $5.45 million per person.

Learn more about the 2016 estate and gift tax exemption increase.

Yes, if you have any real estate that is not located in the State of Texas, you need to consider creating a Trust to hold the property.

We recommend setting up a Revocable Living Trust (RLT).  The primary purpose of this RLT is to eliminate the need to go through the probate process in each state you have property.  Without this RLT, you will have to go through the probate process in the state the property is located.  This process can become cumbersome and costly depending on the State.  To avoid the delay and cost, an RLT can be created to hold the property and control its distribution upon your death.

Read our article, Do I Need a Trust, to learn more reasons why setting up a trust would be beneficial to you. 

A designation of guardian allows you to name the individuals who will be your guardian of your person and estate in the event of your incapacity or disability.

More importantly, this document allows you to name the individual you DO NOT want serving in that capacity.

This document allows you to appoint the individuals who you want to be the guardian of your children in the event of your incapacity or disability.

This document only applies to minor children. In Texas, a child is considered a minor if they are younger than 18 years old.

Designation of guardian for minor children is one of the most important documents in your Will package. If you do not appoint a guardian, it is the court that decides who will take care your children. 

Check with a qualified estate planning attorney to ensure that you have this document in place! Don't let the courts choose who takes care of your children.

A directive to physicians is also known as a “Living Will.”  This is a statement of your wishes regarding life-sustaining medical intervention. This is used in the event you are unable to communicate and have become terminally ill, or suffering from an irreversible condition.

Having a directive to physicians is the only way to have a say as to whether you want life support.

Want more information on what else is included in an Estate Plan? Read our article, Estate Planning 101.

 

 

Trustees have certain duties and responsibilities under the terms of the trust. A trustee is responsible for, but not limited to the following:

• Identify and protect the assets in the trust
• Find out what the trust requires you to do – For example, when the distributions of assets are to be made, when to end the trust, etc.
• Keep up-to-date records, file tax returns and report to the beneficiaries as the trust requires.

An estate planning attorney can give you additional information on the duties of a Trustee. Remember, different trusts may have different guidelines and requirements. Protect yourself and your family by contacting a qualified attorney.

If a trust is created under the terms of your Will, you need to appoint a trustee to manage the trust assets. The trustee has certain duties and responsibilities under the terms of the trust and are required to follow those terms in order to protect the assets in the trust.

Find out the duties of a trustee.