There is a common misconception that Wills are only for the rich and famous, but that couldn’t be further from the truth. A Last Will & Testament is an essential part of any estate plan, regardless of your net worth, career, family size or age. It is the primary document used to transfer your assets upon death. This legally binding tool directs who will receive your property and assets after you pass away along with giving you control over your legacy. The Will names an “executor” – the person that will carry out your wishes and directions regarding the distribution of your assets.
The executor and successor executor should be chosen with care as they have many responsibilities. Therefore, it is prudent to select a person that is organized, diligent, detail oriented, and comfortable navigating the legal system. Typical duties of an executor include, but are not limited to the following:
It’s advisable to speak with an experienced will and trusts lawyer in Frisco for additional attributes to consider when selecting an executor for your estate.
How do Property and Assets Pass at Death?
The method in which property passes to your heirs or beneficiaries depends on how you hold title to that property. There are two types of assets: probate assets and non-probate assets.
Property that does not pass by beneficiary designation passes through the court system in the probate process. The court will allow distribution to heirs according to the terms of your Will, after the Will goes through a special proceeding (often referred to as “proving the Will”). A well drafted and properly executed Will allows you to choose those individuals or organizations who will receive your property at your death. Unless special circumstances arise, i.e., the Will is contested due to lack of capacity, the court will enforce your wishes as to the distribution of your property.
However, if you die without a Will (intestate), the property that you own in your own name will be distributed according to Texas’ law of descent and distributions. This process is referred to as “intestate distribution” and varies from state to state. Please keep in mind that our state’s inflexible default laws may not provide for the distribution you prefer. For example, if you are estranged from a parent or sibling, you may not want to leave your hard-earned assets to them, but Texas intestate distribution laws will override your personal preferences if you die without a Will. It is crucial to speak with a will and trust attorney in Frisco TX to learn more about the pitfalls of dying without a Will in place.
Texas – Community Property State
You may have heard of the term “community property” for the first time, unfortunately in a divorce proceeding (ouch!) or you might have read a blurb in a news article. Let’s discuss this significant form of ownership in more detail. Texas is one of the nine community property states in the country. https://statutes.capitol.texas.gov/Docs/ES/htm/ES.112.htm
Community property is a form of ownership of assets between spouses that is limited to a few other states as well including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Washington, and Wisconsin. In a community property state, a husband or wife has an undivided one-half ownership interest in property acquired by either spouse during the course of marriage. Community property has the characteristics of an informal partnership or unspoken marital property agreement between spouses.
However, not all property is classified as community. Property that each spouse possessed prior to marriage may remain the separate property of that spouse. Property given to a spouse during marriage by gift, devise or descent is also the separate property of that spouse. Though, in most situations it may be difficult to distinguish between separate and community property. During the course of a marriage, spouses may co-mingle their separate assets with their community assets making it impossible to distinguish between them. Furthermore, income derived from separate property may be classified as community property. If your will and trust lawyer in Frisco can trace the source of the comingled property to its acquisition, they may be able to make the distinction between community or separate.
Additionally, community property states use a general rule that presumes all property is community property when there is a doubt as to its classification. Community property has significant estate planning considerations that should be discussed with your will and trusts lawyer Frisco. The gross estate of the deceased spouse consists of his/her separate property and one-half of his/her community property. Marital deduction planning is available so that a deceased spouse may pass their separate property and their share of the community property to the surviving spouse.
Furthermore, we live in an increasingly mobile society. With the availability and prevalence of remote work, more American families are choosing to move across state lines for a lower cost of living. Thus, a husband and wife who move from a community property state to a common law or separate property state may have their assets retain their classification as community property. Community property interests are not easily extinguished by simply moving to another state. A husband and wife who move to a community property state from a separate property state may automatically convert their entire estate to community property.
Jointly Owned Property
The majority of married couples own their assets jointly with the “right of survivorship.” This unique classification mean that when one spouse dies, the surviving spouse automatically receives complete ownership of the property. This distribution cannot be changed by Will. Many people erroneously believe that this type of ownership precludes the need for the parties to have a Will. Because the surviving spouse becomes the outright owner of the property, he or she will need a Will to direct its disposition at his or her subsequent death. Since one never knows which spouse will survive the other, it is important that both have a Will. In addition, a plan that provides that everything go to the surviving spouse may be inefficient for purposes of ultimate distribution to other family members.
Life Insurance and Retirement Plans
Life insurance proceeds payable to a named beneficiary pass without regard to the terms of a person’s Will. Therefore, insurance will generally pass outside the probate system. Other property that may pass to named beneficiaries automatically and without regard to a Will include benefits of qualified retirement plans, annuities and inter vivos or living revocable trusts.
However, life insurance policies issued on the life of a husband or wife before or during the course of marriage may cause controversy when the beneficiary of the policy is not the surviving spouse. If the surviving spouse has not consented in writing to the naming of the third party as beneficiary or has not relinquished his or her interest in the policy, a claim against part of the death proceeds of the policy may still be made by the surviving spouse. Policies naming third parties as beneficiaries must be carefully set up to avoid unexpected gift and estate taxes. It would be best to discuss the intricacies with an experienced will and trusts attorney in Frisco TX.
Guardianship Declaration for Minor Children
Estate planning centers around the family unit and takes into consideration the people that are most important to you. If you have minor children (under the age of 18), the selection of their guardian(s) will be one of the most pivotal decisions that you will make. The individuals you judiciously choose to raise your children if you and your spouse can’t are referred to as “guardians of the person.” https://statutes.capitol.texas.gov/Docs/ES/htm/ES.1301.htm
Ideally, you will select as guardians’ people whom you believe will love your children and raise them as you would with similar values and morals. A few factors to consider in the selection process include:
1) The age of the guardians as too young or too old could be a potential problem with regards to maturity and stage in life.
2) Do the guardians have children? Are they the same age as your children? Do they get along? Will the addition of your children create a burden on the guardian’s family (emotionally or financially)?
3) Do the guardians have the same moral and religious values as you? Will they raise the children in your faith?
4) Are the guardians in relatively good health? Do they lead a healthy lifestyle? Vices that you are concerned about or a lifestyle that is contrary to your own?
Additionally, there are situations where your chosen guardians are no longer able to serve. For instance, the couple may move away, become divorced, die, etc. Therefore, provisions for alternative guardians should be made as well. It is recommended that you seek guidance from your will and trusts lawyer in Frisco TX.
Will vs. Trust
The most commonly asked question potential clients inquire about – “Do I need a Will or a trust? What’s the difference between the two?” There are several differences between these estate planning tools. However, the greatest difference between a will and a trust is that with a trust your heirs avoid the time-consuming and expensive legal probate process of transferring property out of your name and into the name of your beneficiaries. This tedious and expensive process can take months and entangle your loved ones in the maze of the legal system. https://tyla.org/resource/texas-probate-passport/
Thus, if you create a trust, the trust transfers ownership of financial accounts, real estate, and other assets into the name of that trust directly (to ensure distribution to your named beneficiaries), without the need for probate or court intervention. Additionally, your heirs will be able to access assets in a trust more quickly than assets transferred through a traditional Will.
Unlike a Will, which must be filed with the state of Texas and becomes accessible to public inspection, trusts are entirely private. This is critical to some people because they don’t want their finances to be a matter of public record after they die. A trust can also control the timing of your beneficiaries’ inheritance even after you’re gone (i.e. “controlling from beyond the grave”) – such as preventing someone from inheriting your property until they reach a certain age, graduate from college or some other stipulation.
Trusts are complex documents with a wide variety of uses and significant legal and financial implications, and therefore, it’s essential to consult with a will and trusts attorney in Frisco about your specific needs before establishing any type of estate plan.
Also, circumstances do change over time, and you’ll want to revisit your estate plan occasionally to make sure it still meets your needs. Consult your will and trusts lawyer in Frisco every three to five years to make sure your estate plan, Will, and trusts are up to date. For any estate plan to work in your best interest, it must stay current and relevant to your life and family.
Choosing a Professional or Corporate Trustee
When you establish a trust, whether during your life or in your Will, you must decide who will manage the investment of your property and make payments to your beneficiaries. If you select an individual such as your best friend, spouse, sibling, or parent, here are some additional questions you should ask yourself.
Yet, another viable option is to choose a bank or trust company to act as your trustee. Keep in mind that a corporate trustee does not die or get ill. It is constantly acquiring new personnel and retiring old personnel. It has the money and the people to stay on top of market conditions. Banks and trust departments are knowledgeable in this area of the law and act as a fiduciary for your estate. Be sure to ask your will and trusts attorney in Frisco if you need recommendations for a corporate trustee.
Sometimes the best plan is to have a bank and family member, friend or advisor serve as trustees and successor trustees.
Protecting the Distributions to Your Minor Children: Guardian or Trust?
If property is left outright to minor children, a guardian must be named to administer this property for them until they attain the age of adulthood. This person (the “guardian of the property”) may or may not be the individual who is raising the minor children (the “guardian of the person”). Some people are warm, nurturing and maternal by nature. These individuals make exceptional guardians of the person for minor children. While other people are apt in budgeting, investing, and financial planning. Such people make an excellent choice as guardian of the estate for minor children.
There are certain problems inherent in arranging the child’s property under a guardianship. The guardian is limited as to the type of investments he or she can make with the child’s property. The guardian is also limited as to how he may apply this property. He cannot use a child’s property for the benefit of anyone except that child, even if the child’s brother or sister needs financial assistance.
When a child attains the age of majority, the guardian of the property must turn all of that child’s property over to him. If the child dies before attaining adulthood, all of the property held in guardianship for him will be part of his estate, which will require probate.
There is another way, however. The trustee of a trust for your children could be given broad discretionary powers in investing trust assets. This trustee could be given the power to use your estate in the same way you would for the benefit of your children. The trustee could spend money on a child who needs it – when he needs it. Such a trust lets you decide when your children will be mature enough to receive your estate’s assets. One common method includes splitting the trust distribution into 1/3 increments at specified ages, such as 21, 25, and 30. It also permits you to let someone else make that decision at a later time.
There are stark differences between appointing a guardian of the property versus a successor trustee tasked with the responsibility of distributing assets at specified milestones or ages. It’s prudent to discuss these distinctions with an experienced will and trust lawyer in Frisco when determining how your minor children’s property will be controlled.
How much does a will and trust lawyer cost?
The answer depends on a variety of factors, including but not limited to the experience of the will and trusts lawyer in Frisco, familiarity with the intricacies of Texas probate law, and drafting capabilities. Fees also vary depending on the complexity of your unique circumstances. For example, if you have significant assets, a child with special needs, a blended family, or would like to distribute property to beneficiaries in trusts, the fees will be higher. It all comes down to whether you want to pay for an experienced wills and trusts lawyers in Frisco now or if you’d prefer your children and grandchildren pay later in probate court. The ease and peace of mind in having a well drafted and comprehensive estate plan exceeds the upfront cost any day.