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ESTATE PLANNING PRIMER

          So where do you start? Whether just beginning, adding to, or coordinating different elements of your estate plan, an estate planning attorney can educate you, guide you through the process, and prevent you from making costly mistakes that might thwart your intentions. You can make the most of your time with an attorney by giving prior thought to some basic issues and estate planning tools. I have prepared a very short document entitled “Estate Planning – How to Begin” for this purpose.

          Many people think of estate planning as a Will. Others believe estate planning is for the very wealthy who want to avoid estate taxes. While tax avoidance is an important issue in very large estates, estate planning is really about planning to preserve, grow, and manage assets, as well as passing those assets in the manner of your choosing to the people or causes you care about. It is also important to protect yourself and your assets from risks during life, such as casualties and mental incompetency.

          Your estate planning team should be made up of your attorney, financial advisors (accountant and financial planner), and insurance agent. The attorney’s function in your estate plan is to work with you and the other members of your estate planning team to help you attain your goals. Whether you are beginning life as an adult, have a spouse, have a family, or facing issues of retirement and aging, you should be proactive about creating your estate plan. Procrastination in this area is like playing Russian Roulette, as there is no sure way to predict the timing of accidents, health problems, incompetency, and death. TIME IS OF THE ESSENCE.

WILL

          A Will enables you to direct how to distribute your assets upon death. Without a Will, your assets will be distributed according to state law, under which the recipients may differ from who you would have chosen. A Will is not an active document until its maker dies, a court approves the document as a legally valid Will, and the Will is admitted to probate. Probate is the legal process of proving the validity of a Will in court, paying debts of the deceased and estate, and distributing the remaining assets as specified under the Will. If a Will is properly drafted and executed with the necessary legal formalities, probate in Texas can be a relatively simple process with minimal court supervision. However, a poorly drafted Will can cause more problems than dying without a Will -- such as excessive cost, delay, litigation, emotional stress, and division among family members.

TRUSTS

          A trust is a contract between the creator of the trust, called a “trustor,” “settlor,” or “grantor,” and the trustee whereby the settlor places his or her trust in the trustee to manage and distribute the property as specified in the trust. Although the trustee holds legal title to the property placed in trust, the trust property is for the benefit of the beneficiaries named in the trust. A trustee has a very high duty to preserve, manage, and distribute the trust property in the interest of the beneficiaries according to the instructions of the grantor. This high duty is referred to as a fiduciary duty. Trusts may be created for a variety of purposes and can be effective during the grantor’s lifetime or after death. It is wise to provide a contingent trust in a Will for management of property that may pass to a minor, incompetent person, or someone who cannot manage money well. Many people like the idea of a living revocable management trust. This type of trust may provide that the grantor will act as trustee and manage the property just as he or she would manage it outside the trust. So why put the property in trust? One good reason is to provide a plan for the management of trust property if the grantor becomes incompetent. This may avoid having to set up a legal guardianship, which is a cumbersome, expensive, ongoing, court supervised process. The grantor also may provide directions in the trust document as to how property is to be distributed after death. This method of passing property provides for more privacy than through the probate process used with a Will.

          Various types of trusts may be used for the purpose of avoiding estate taxes and passing property to loved ones or charities. In some cases, a trust can protect assets from creditors and division in divorce. A qualified attorney can help you determine whether a trust is appropriate for use in your estate plan and the type of trust or trusts that should be used.

POWER OF ATTORNEY

          A Power of Attorney is a document through which a person may appoint another person to manage his or her property. The Power of Attorney may be for a limited purpose, such as to execute documents in a real estate transaction, or it may be drafted to cover management of practically all of a person’s assets. A regular Power of Attorney is ineffective upon the incompetency of its maker. A Durable Power of Attorney, however, does not terminate upon incompetency, and the person granting the Durable Power of Attorney may choose whether it is effective immediately or it will spring into effect upon that person’s incompetency.

          A Power of Attorney is a very important tool to provide for management of your property if you become incompetent. However, there is no guarantee that financial institutions, title companies, or individuals will deal with the agent you appoint in your Power of Attorney. A revocable living trust is a better tool for management of property during incompetency, but there are also drawbacks to going this route. A qualified attorney can guide you as to the best type of plan to manage your risk of incompentency.

HEALTH CARE DIRECTIVES/DESIGNATION OF GUARDIAN

          There are several important documents for expressing your wishes in the event you are not able to act on your own behalf regarding healthcare and guardianship issues. These are a Medical Power of Attorney, Directive to Physicians, HIPAA Release, and Designation of Guardian in the Event of Need. The exact function of each of these documents is described in the attachment entitled “Estate Planning – How to Begin.

PROBATE AND ESTATE ADMINISTRATION

          Probate is the process of a court declaring a Will legally valid, approving someone to be the person responsible for administering the estate (Executor), and seeing to it that the Executor gathers the assets, pays debts, and then distributes the property as directed in the Will. Note that the person appointed as Executor in a Will has absolutely no power to act on behalf of the deceased until the Will is admitted to probate and the court approves the person as Executor. If a Will is properly drafted and executed, probate can be a relatively simple process. However, if a Will leaves matters open to dispute, probate can be extremely expensive, time consuming, and stressful.

          If someone dies without a Will and that person owned property that does not pass under a contract to a designated beneficiary or beneficiaries, the process used to gather assets, pay debts, and distribute property is called estate administration. This is a court process conducted according to Texas law located in the Texas Estates Code. The Estates Code specifies who will inherit the property subject to the estate administration. Inheritance depends on various factors, such as whether the decedent was married at the time of death, whether the decedent had children, whether there are any children from a prior marriage, and the character and nature of the property in the estate (separate or community; personal property or real estate). Depending on the types of assets making up the estate and the heirs, there are different methods for administering an estate. In some cases a formal administration may not be necessary. There may be a simpler method to informally administer the estate. In other cases, a formal administration might be the best way to protect assets, creditors, and the legal heirs. A qualified attorney can help you determine the type of administration that is best under the particular circumstances of your case and guide you through that process.

 

 




PEACE OF MIND
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START ESTATE
PLANNING EARLY





WHAT ARE YOUR DREAMS?
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DO NOT PROCRASTINATE
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The materials and information provided on this site are for information purposes only and constitute general information relating to the areas of law familiar to our firm lawyers. They do NOT constitute legal advice or other professional advice, and you may not rely on the contents of this website as such. If you require legal advice, you should retain competent legal counsel to advise you. If you would like to retain the law firm of B. Borden Green, PLLC, please contact B. Borden Green, who will be pleased to discuss whether the firm can assist you. An attorney-client relationship will arise between you and B. Borden Green, PLLC or any attorney of B. Borden Green, PLLC only if the firm agrees to represent you in a written contract signed by all parties to the agreement.

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