Hits: 6029

User Rating: 5 / 5

Star activeStar activeStar activeStar activeStar active
 

iHQ: Article I

About the Frye, Oaks, Benavidez & O’Neil, PLLC Information Headquarters:

Frye, Oaks, Benavidez & O'Neil, PLLC has a boutique estate planning practice serving the GLBTI community’s unique needs Post-Obergefell and assisting their allies in the broader Texas community as well with family wealth preservation and transfer during life and at death. We work with all individuals and families of all sorts of backgrounds since we know how important it is that we provide for the beloved family, friends, and/or charitable entities we will leave behind.

DISCLAIMERS:

  • The Frye, Oaks, Benavidez & O’Neil, PLLC Information Headquarters is not legal advice.
  • The Information Headquarters is not a suitable alternative to specific, tailored legal advice from a licensed Texas attorney that is based on the specific facts and circumstances of your case.
  • The Information Headquarters should not be relied upon by any prudent person at any point in time under any circumstances to attempt to ascertain or determine any legal obligation, rights, duties, or other responsibilities.
  • You reading the Information Headquarters does not create an attorney-client relationship or privilege.
  • The Information Headquarters is not an exhaustive resource on the totality of Texas law, trust law, federal law, and the various tax laws; only a few selected topics are covered as part of a broader, general discussion.
  • The Information Headquarters is solely prepared as a general educational resource for entertainment purposes and should not be relied upon by any prudent person at any time under any circumstances.
  • The Information Headquarters may not be used to attempt to evade or defeat any of the tax laws.
  • Please reference this publication explicitly if you quote from any of the content in any commercial, nonprofit, academic, or other context.

Original publish date of 11 January 2016

Prepared by Daniel L. O’Neil, Partner

Schedule an appointment with me to discuss your specific estate planning needs at 713.227.1717

Our other lawyers at the firm handle Family Law, Social Security Disability, Criminal Defense, Guardianship, Transgender (adults and minors) legal name and gender changes, Employment discrimination law for individuals, as well as Employee planning and advice for businesses.

Frye, Oaks, Benavidez & O'Neil, PLLC

www.liberatinglaw.com

We are now on facebook!

Visit us at www.facebook.com/liberatinglaw

 

 

Article I: Estate Planning, Generally

 

Listing of topics:

Easy mode

§000:So, what is Estate Planning exactly?

§001:The peace of mind an estate plan brings

§002: What happens without a valid Will (About Intestacy)

§003: Who needs a Will?

§004: What type of Texan especially needs a Will?

§005: Documenting your capacity

§006: A note on lawyers

§007: Types of Wills explained

§008: Nuts and bolts of Wills

§009: Why have a Will?

§010: The nature of your assets

§011: Where should your assets go?

§012: The Estate Planning “Package”

§013: Introducing trusts

§014: Introducing Fiduciaries

§015: Who do you trust?

§016: About the disability planning documents

§017: About guardianship

§018: Vocabulary

§019: Your relationship with a family lawyer rather than just a scrivener

§020: Transition from the Probate Code to the Estates Code

§021: A final word on the basic importance of Estate Planning

Hard mode

§022: Annual review of Estate Plan

§023: Your digital life

§024: Myths of Estate Planning

§025: Frequently Asked Questions of Estate Planning

Legendary mode

§026: Ethical issues for your Estate Planning lawyer

 

ARTICLE I

ESTATE PLANNING, GENERALLY

 

ARTICLE I topics on EASY MODE

This section is a gentle introduction to the high-level concept of Estate Planning in the State of Texas.

§000: So, what is Estate Planning exactly?

Estate Planning is a thoughtful consideration of numerous things. This is certainly not an exhaustive list of things to be thinking about as you contemplate your estate plan, but these are extremely important things to be thinking about:

v  what you own;

v  what people are in your life;

v  how you feel about those people;

v  which people you trust to make difficult decisions for you if you no longer can;

v  which people you want to provide for financially after you pass away;

v  which people are you concerned about challenging your estate plan after you pass away;

v  what charitable entities you would like to financially support after you pass away;

v  which pet(s) you would like to financially provide for after you pass away;

v  which law firm is right for you;

v  which lawyer is right for you;

v  what cost is reasonable for that lawyer to prepare your estate plan;

v  how much money and frustration will you save the cherished family, friends, and charitable entities you leave behind if you have a valid Will rather than passing away intestate;

v  your current health (and mental health) situation; and

v  appreciating that you might not always have testamentary capacity in the future due to injury, disease, or other incapacity.

§001: The peace of mind that an estate plan brings

The best way I can describe an estate plan to a prospective client is that these documents (once executed) provide peace of mind. If you wake up in the middle of the night and feel like these documents (or the lack of documents!) are not giving you peace of mind, this is very easy to remedy with the assistance of an estate planning lawyer.

An estate plan is fluid and we can always update them as long as you have capacity. It is just human nature that sometimes we will have a “falling out” with a family member or a friend that we appointed as Executor or Trustee – and we can no longer trust them to handle our financial affairs. Also, unfortunately, the favorite people in our life do succumb to their own illnesses, injuries, or other incapacities that makes them ineligible to serve as our Executor or Trustee, so we need to appoint someone else that is still alive and capable.

§002: What happens without a valid Texas Will? (Alternative title: “About Intestacy”)

If you pass away in Texas without a valid Will then in legal parlance you have died intestate. This is what happens if you die intestate:

Article I section2

Article I section 2 include Intestate Distribution Charts2

Article I section 2 include Intestate Distribution Charts 3

 

This estate plan is called the law of intestacy, which is sometimes referred to by people as a “harsh mistress” because this does not work for everyone and throughout the modern era it has led to some unintended transfers of property that could have been prevented by having a Will.

The law of intestacy is the default provided to you by the State of Texas. You need to opt-out of this default estate plan by planning for and then executing a Will that makes different distributions. Even if you like the laws of intestacy, you still need a Will to appoint your preferred fiduciaries and to avoid costly heirship proceedings that could be avoided with a Will. Even if you don’t have that much money, most lawyers (my firm included) do offer a sliding scale of fees taking that into consideration. No two clients or married couples are the same, so there is no “one size fits all” in pricing, outside of the consideration of what is appropriate for the work being done offset by what the client feels comfortable with paying. 

§003:  Who needs a Will?

Everyone. This is an easy question with an easy answer, unlike nearly every other question you can ask a lawyer where they have to respond with a “It depends … “ because of reasons.

In the past we have heard numerous reasons from people on why they can’t justify the expense of an estate planning package. Chief among them is the thought that they are paying money now for a document that will collect dust for 50 years and they will never think about again.

But the investment today is protection for your family and friends tomorrow.

  • A Will ensures that your property goes where you want it to go.
  • A Will ensures that the people you trust will be responsible for handling the financial affairs of your estate.
  • A Will removes the frustration, expense, and chaos of a family struggling with an intestate administration while they are still grieving over the loss of their loved one.
  • A Will protects your property and the people that are going to get it.
  • The law of intestacy is rigid and uncompromising.
  • Category 01: You do not now, nor have you ever had a Will
  • Category 02: You were recently married and need to update your Will
  • Category 03: You were recently divorced and need to update your Will
  • Category 04: You have a new child (birth or adoption) that you want to provide for and need to update your Will to reflect that new child or children
  • Category 05: You lose faith in your previously trusted friends or family and you need to update your Will to appoint new fiduciaries that you trust more
  • Category 06: You bought your Will online from a document assembly shop and you are concerned it is not actually a valid Texas Will since it was drafted by a non-lawyer outside of the State of Texas
  • Category 07: You have a holographic Will and are worried you are missing important provisions that traditional Wills contain
  • Category 08: You are an unmarried millionaire concerned about estate tax
  • Category 09: You are a married multimillionaire concerned about estate tax
  • Category 10: You are a Texan reading this line right now and you did not find yourself listed above in Categories 01-09

§004: What type of Texan especially needs a Will?

The categories of Texans that most urgently need a Will:

§005: Documenting your capacity

If you are elderly, in poor health, have a drink/drug problem, or have made other decisions that have annoyed your family members and caused strained relationships with them, there are additional steps we can take to fully document (in preparation of litigation) your capacity on the specific time period in days where we discuss and craft the estate plan to your desires, and especially on the day you come into our office and you execute the Will in our Formal Will Execution Ceremony. Each situation is different, but we can find an appropriate technological solution if one exists.

If you are expecting there to be a Will Contest it is essential that you have this conversation with us so we can take the necessary steps to begin protecting the estate plan you want.

§006: A note on lawyers

As discussed, every Texan needs a valid Will. Every Will is not going to look the same. But the one thing that matters is that it is a valid Will. An invalid Will is not worth the paper it is printed on, so be wary of being things on the internet from non-lawyers that don’t have an office in Texas.

Verify your lawyer is licensed to practice in Texas and currently in good standing with the State Bar here: https://www.texasbar.com/AM/Template.cfm?Section=Find_A_Lawyer&Template=/CustomSource/MemberDirectory/Search_Form_Client_Main.cfm

You can also use review sites and other online resources to research your lawyer before you schedule an initial consultation with them. This is not an exhaustive list but some of the most popular online resources include:

BNI - http://www.bnihouston.com/find_a_member.php

Yelp - http://www.yelp.com/

Facebook – http://www.facebook.com/

LinkedIn – http://www.linkedin.com/

Findlaw - http://lawyers.findlaw.com/lawyer/lawyer_dir/search/jsp/name_search.jsp

Lawyers - http://www.lawyers.com/find-a-lawyer

Avvo - http://www.avvo.com/find-a-lawyer

§007: Types of Wills explained

Simple Wills

Simple Wills are not simple in that they are a crayon drawing on a napkin; but in legal jargon it essentially means that there is no tax planning included in the estate plan. Tax planned Wills are problems for the 1% but not the 99%.

Tax Planned Wills

Tax Planned Wills are complicated to avoid estate tax altogether, and typically to minimize gift and/or GST tax if not to avoid them altogether.

Living Trust with Pourover Will

There are also many misconceptions about living trusts. The usefulness of this estate plan has limited utility in Texas compared to other jurisdictions. However, the pourover Will is an essential aspect of estate planning for those Texans with a living trust, to ensure that any later acquired assets and other estate assets find their way to the living trust rather than get swallowed up by the law of intestacy which could lead to unexpected and unwanted transfers of property that could have been easily prevented.

When a person with a living trust dies their assets contained in that living trust will be disposed of under the terms of that Trust Document.

As a Settlor acquires assets throughout their lifetime after settling the Trust, they need to transfer all of those assets into the name of the Trust. Everything from real estate to bank accounts, stocks, and everything else needs to be retitled in the name of the trust. If the Settlor forgets to retitle something, it is exposed to the law of intestacy if they do not also have the pourover Will in place to catch all of the other assets.

The main difference between a Will and living trust is when it takes effect – a Will only matters and takes effect when you die. So you can update it or revoke it at any point up until the day you die so long as you have capacity and intent. Meanwhile a living trust takes effect immediately when you execute it and it is notarized – there will be specific provisions that govern when, how, and under what circumstances the Trust Document can be amended. In addition to that, you still need the pourover Will on top of the living trust to catch any remaining assets you forget to retitle.

The most common misconception people have about a living trust is that it has huge tax advantages. It actually does not. It can have its own tax planning mechanisms, but all advantages contained in a living trust are just as easily included in a Tax Planned Will.

If a Texan has opted for a living trust over a Will solely for the perceived tax advantages, they have been misled and have relied on bad information – perhaps by one of the many unscrupulous non-lawyers that make money selling living trusts to seniors, and frequently run afoul of the Unauthorized Practice of Law in the State of Texas.

Holographic Wills

When you handwrite your own Will it is called a holographic Will. There are some basic requirements to follow for a holographic Will to be potentially considered a valid Will in an application for probate. This is where the huge caution comes in – holographic Wills are easy to do, but they are just as easy to cause more problems than they solve.

There are many ways a Texan can die without a valid Will: including, but not limited to, the Testator revoking the Will intentionally or accidentally. Revoking a Will accidentally is an important concern for a Texan with a holographic Will, especially if they have not had formal legal training in the Texas laws of Wills, Trusts, and Estates. The laws in California and Louisiana are much different than Texas, so even a lawyer licensed in another U.S. jurisdiction may not know how to draft a valid Texas Will or how to properly execute one.

The popularity of holographic Wills stem from the old frontier days when a person might need to ride a horse for 100 miles (a week or longer each way) into town to find a lawyer who could take care of drafting a formal Will with their fancy college boy talk. That was extremely inconvenient; dangerous with rattlesnakes, notorious brigands, and known horse thieves all along the frontier; and took them away from being economically productive farming or ranching the frontier for an extended period of time.

So this is why the basic requirements for a holographic Will are extremely basic: so any person can do it without instituting strict educational requirements, which honors the traditions of the hardy frontier settlers at that time. The world, and by necessity the legal system, became more complex in the intervening years. So the requirements are basic enough that it is an easy bar to step over, but also basic enough that they are not required to be good Wills in terms of the provisions they include and the protections that are in place to demonstrate there was sound mind, lack of undue influence, and the estate plan they are executing is actually the one they intended.

The four main concerns with holographic Wills:

  1. They are likely going to be missing important provisions that a Will drafted by a Texas lawyer is going to include, which will be important things to have in Probate Court and can create costly problems that could have been easily avoided. Ambiguity is a huge problem, as well as over-explaining and under-explaining things, which will require litigating what was actually meant out of all the possible ways the provision could be interpreted. A poorly drafted Will (holographic or not) usually causes a lot of unintended consequences such as requiring additional court proceedings, and possibly even leading to an extremely expensive dependent administration of the estate which is usually not what anyone intends with their estate planning.
  1. They are not going to create sensible, appropriate trusts that might be extremely necessary (in the case of Supplemental Needs Trusts) or highly recommended by a Texas lawyer if you are giving large amounts of cash to a person with a drink, drug, or gambling problem that should go into a spendthrift trust rather than to them outright. Holographic Wills are not going to get the basic trusts done, so it seems unnecessary to mention except out of thoroughness that they will absolutely not get the more advanced tax planned trusts (such as the ILIT, QPRT, Sprinkle, or CRAT) done right either.
  1. They are not going to have much evidence of testamentary capacity and intent, so they can be a lot easier to challenge in a Will contest than the precautions undertaken and evidence a Texas lawyer amasses in preparation for potential litigation. There is a lot of importance placed on capacity and intent, so most Texans will usually want the best evidence – which in some cases includes us taking video of the formal Will execution ceremony in our office if we know with a certainty that a family member is going to contest the Will just because that is who they are and they are willing to commit large financial resources to that end in probate litigation. Additionally, all property might not be disposed of in intended ways if the estate plan did not contemplate all major assets. Which would further increase the likelihood of a Will contest from a family member that did not receive what they considered to be their fair share and was looking for any reason to complain.
  1. They can be easily revoked, especially if the holographic Testator has not heard the various and numerous cautions a Texas lawyer will give them on things to do and things not to do with their executed Will and other estate planning documents. As things in our life change it is very common that we need to update our Wills – marriage, divorce, new children, or someone falls out of our favor. Clients of Texas lawyers have heard the details about what not to do. But Texans with holographic Wills that want to update their Will, in most circumstances, will take out a red pen and start “updating” their Will, in a way that might revoke the Will entirely at the worst, or render any “update” completely ineffective at the best.

Holographic Wills are the best and typically only option in emergency circumstances. They have plenty of pitfalls though – ambiguity, omitting important provisions, tax consequences, and laying fertile ground for a Will contest that could have been avoided by going to a lawyer.

If you are not pinned underneath a tractor without any hope of rescue besides carving your holographic Will into the tractor fender; or you are not drawing your last breath from an unexpected last illness as you scratch your holographic Will into the wall above your death bed, a holographic Will is probably not going to be appropriate to cover all of the angles of your estate planning needs.

Codicils

If your prior Will is mostly good but needs some minor updates, a Codicil may be appropriate rather than starting over from scratch with a new Will. A Codicil is going to republish the old Will with the minor updates – such as adding new gifts of later acquired property, or changing other items such as converting a basic spendthrift trust now into a Supplemental Needs Trust for your adult disabled child.

§008: Nuts and bolts of Wills

Formalities of Will execution

There are some basic formalities required to execute a valid Texas Will. Not following these basic formalities can lead to the same outcome as never having made a Will in the first place.

Composition of the Will

Integration: that all components are meant to give rise to the Will. This essentially means that no pages have been slipped in after the fact. Wills that are not doing well on the integration aspect look like: (a) loose pages without a staple, (b) no page numbers, (c) no cohesiveness from page to page, (d) pages in different fonts, (e) holes from removed staples and a new staple in place, or (f) one page looking years older or newer than all of the other pages. The most obvious case of this would be a Will that was printed on our formal, fancy thick bond paper (ivory) in the Times New Roman font and finding a cheap Walmart quality printer paper page on page 5 written in the Comic Sans font – we would never endorse Comic Sans as a font choice in a Will. That is a Will that has been altered after the formal Execution ceremony. That is a Will whose integration could be easily challenged in litigation.

Republication: that you really mean (most of) what you said earlier in a prior Will execution. Republication arises mainly in connection with executing a Codicil to your Will. Some Wills get it mostly right, but need a few updates. Rather than going back to the drawing board on the entire Will some people prefer just to update addresses of property, add Trust provisions, or make other changes. It depends entirely on the structure of the Will and the drafting that went into it. Some Wills I see are so bad while we could theoretically just do a Codicil, I recommend putting the old one in the trash and starting over with sensible and ordered articles and sections that will be much easier to update by Codicil later. Republication also arises when there is a concern about the validity of the Will execution ceremony that took place on the initial Will. We see this most often from lawyers that do not have an estate planning practice, but still sold a $1,000 Will to their personal injury client that just received a large settlement. As long as a Codicil to that Will is validly executed and attended to by an actual estate planning lawyer, any defects existing with the Will execution before can be cured. This is important when the Testator is pretty certain the Will is going to be contested – and the prior lawyer did not document anything on capacity or intent.

§009: Why have a Will?

  • Direct your assets to go where you want them to go.
  • Appoint the people you trust to handle the financial affairs of the estate so your intended beneficiaries are not robbed blind.
  • Save your family, friends, other loved ones the additional time, expense, and frustration of dealing with an intestate estate (which is more complicated than a testate estate.)
  • In nearly every situation, the cost of a Will is a drop in the bucket of the large expense (plus time plus frustration) that an intestate administration will ultimately end up costing. In most cases you could easily spend at least 10x more money (plus the time plus the frustration!) on an intestate administration than you would on a sensibly priced Will. In terms of family wealth protection and facilitating transfer of that wealth (whether it is $1,000 or $1,000,000,000) a Will is the single best investment a person can make – and going without a Will is a very risky financial decision akin to going to Vegas and putting all of the family’s wealth on red.

§010: The nature of your assets

IMPORTANT NOTE: You will need to see Article II if you are married; and/or Article III if you are concerned about tax consequences for a more complete picture of the overall nature of your assets. Article I is just the most basic introduction to the topic of “what stuff do you own?”

The starting point in an estate plan begins with an analysis of the nature of the assets that you own. Cash, stocks, bonds, house(s), land out in East Texas, oil & gas royalties, the beach house, the lake house, the prized art collection, a signed Mickey Mantle baseball, a jar of buttons, your ceramics, your vinyl record collection, an interest in a closely held corporation … no two people own the same stuff of course; every individual and family’s financial situation is going to look different from the next one.

But, it’s a legal requirement that you know the nature and extent of your bounty; if you don’t know this you don’t have testamentary capacity. This is why the starting point is about what you own, and why that features so prominently in our (and other firms’) initial client consultation’s estate planning questionnaire. Whether you have $500 or $5,000,000,000 to your name, it is extremely important that you know what you have – and you tell us what you have, so we can assist with tax planning if needed, or discuss ancillary services or a possible referral to a trusted referral partner in the life insurance industry if you do not have a life insurance policy in place.

We will discuss this more later, but your relationship with your Estate Planning lawyer should be one where you consider that person to be a “family lawyer” rather than a person that just types out a form how you tell them. A “family lawyer” is someone that you make a part of your family, as much as they make you a part of their firm’s client family. In estate planning you need to discuss all of the sordid, relevant details of your life along with your family and marital situation in a judgment free zone, and your lawyer can help with a variety of things that are related to the estate plan, but are not necessarily going to actually be in the Will. For instance, at our firm we assist clients preparing an external memorandum to certain family members or friends to explain in full detail why they have been put in the estate plan, or more importantly, why they have been kept out. We also assist with marital property agreements for couples that are arguing over money, but are not ready to have the divorce conversation. We also handle deeds, assist in funding trusts, and a wide variety of other services that are required, recommended, or might be helpful to a person executing a Will or trust document.

§011: Where should your assets go?

Once you know what you have, the next step is figuring out where it should go based on your family situation. If you are single with no children then that estate plan is likely going to look a lot different for a married person with six minor children. If you are married with grown adult children that have their own professional careers, your estate plan might focus more on your charitable interests.

The importance of figuring out where your things should go feeds into preparing for a possible Will Contest if you are greatly favoring one child over another, or making other distributions that have a good chance of being challenged by a family member that you know is already quite litigious.

There also might be external considerations on where your assets should go, such as the various tax laws or concerns about the specific beneficiaries which might necessitate placing their testamentary gift inside a spendthrift trust so it’s not frittered away on drink, drug, or gambling.

§012: The Estate Planning “Package”

The typical estate planning package that takes care of 99.9% of Texas residents looks like the following:

ü  Will

ü  Memoranda external to the Will that tell people what you think of them

ü  Disability planning documents for your health & medical needs

ü  Disability planning documents for your financial needs

ü  Disability planning documents to take care of your minor children

ü  Important notices and helpful memoranda we prepare as a reference for you to consult

ü  Phone number of your lawyer to ask follow-up questions to, as needed

More complex plans require more provisions in the Will and additional documents, depending on the structure, such as with a Living Trust.

§013: Introducing trusts

Trusts are a very important part of estate planning. You can think of a trust as the strings that support, and control, the marionette puppet. Depending on the beneficiary’s unique situation in life the facts determine how much support is needed relative to how control and oversight is needed. As we leave money to friends, family, and others we want to make sure they use it well to live a good life. We want to make sure that, if they cannot handle the responsibility, they do not take the inheritance or gift and put it up their arm. Trusts prevent that from happening; trusts also protect their inheritance from divorce or other creditors in the event they lead a complicated lifestyle.

§014: Introducing fiduciaries

The two most important duties for a fiduciary involve the duty of prudent administration and the duty to administer the trust for the benefit of the beneficiary. There are a number of other “sub-duties” but they all relate back to prudent administration and for the benefit of the beneficiary.

Trusts are not piggy-banks. Trustees risk fiduciary litigation over most of their actions and their omissions. Not every action or omission is going to lead to fiduciary litigation but it is always a risk. In addition to costly civil litigation, depending on the actions or omissions that are alleged, Trustees also risk criminal prosecution under all flavors of white collar crime under the sun – this involves state and the far more menacing federal (including tax crimes) prosecution.

Undivided loyalty to the beneficiary issues usually involve the Trustee self-dealing (selling valuable trust property out of the trust to himself outright for $1) or a conflict between the fiduciary and the personal interests (whether the Trustee should purchase severely undervalued real estate, make a modest investment, and flip it for himself personally, or for the trust.) In the real world most self-dealing and conflicted transactions are less “outrageous” examples and can require extensive discovery to figure out the nuts and bolts of what really happened and how bad it was.

Prudent administration issues involve the objective standard of care. This is where the “prudent person” comes in to determine how reasonable a Trustee’s actions really were. Betting all trust assets on red at the Roulette wheel is probably not how a prudent person would conduct financial affairs. Nor would a prudent person necessarily build a time machine, travel back in time, and invest all trust assets in Yahoo at a point in time when that would result in a large financial gain. 

§015: Who do you trust?

Financial affairs

In the worst case scenario, you will not be able to continue taking care of your own financial affairs but you will not be dead yet so your Will still does not come into play.

If you have planned ahead, you have found someone now that you trust enough to collect rent, pay your bills, and otherwise handle your financial affairs. You appoint this person in the Statutory Durable Power of Attorney that takes effect upon your disability or incapacity but not before then.

Throughout history there are plenty of stories about how this has not ended well. But there are just as many stories of where things have worked as planned – someone you trusted was able to seamlessly step into your shoes and handle your affairs as you would have.

These are the potential responsibilities you will be giving someone to handle your financial affairs:

  • Real property transactions;
  • Tangible personal property transactions;
  • Stock and bond transactions;
  • Commodity and option transactions;
  • Banking and other financial institution transactions;
  • Business operating transactions;
  • Insurance and annuity transactions (provided that my agent shall specifically not have the power to designate or change the beneficiary of any annuity or contract of insurance on my life);
  • Estate, trust and other beneficiary transactions;
  • Claims and litigation;
  • Personal and family maintenance;
  • Benefits from social security, Medicare, Medicaid, or other governmental programs or civil or military service;
  • Retirement plan transactions (provided that my agent shall specifically not have the power to designate or change the beneficiary of any of my retirement plans or IRAs);
  • Tax matters.
  • Specific gift: “My lightsaber collection to George.” If the Testator gifted the property to someone else (or for whatever reason it is no longer in their estate when they die) it is an irrebuttable presumption that they knew what they were doing and intended to revoke the specific gift mentioned in the Will. Ademption applies regardless of Testator’s actual intent regarding the gift.
  • Demonstrative gift: “$500 to be paid out of the proceeds of selling my unique twitter account username on ebay.” Ademption may not apply since money is money.
  • General gift: “$500 to Larry.” $500 is $500 since money is just money. Ademption may not apply.
  • Avoidance doctrine: “$500 from my account at Bank A to Bob.” A gift of money at Bank of A (zero balance) might be substituted for funds at Bank of B ($50,000 balance) since money is money, it’s a rather general transfer of money
  • You have two deceased children: Abel and Baker
  • Abel left behind one kid: Tiberius
  • Baker left behind two kids: John and Jackson
  • Tiberius takes 1/2
  • John and Jackson split the other half:
    • John takes 1/4
    • Jackson takes 1/4
    • You have three kids that are all still alive: Ron, Fred, and George
    • Ron has one kid: Harry.
    • Ron dies before you.
    • Fred has three kids: Regina, Cady, and Damian
    • Fred dies before you.
    • George has no kids but is still alive.
    • George takes 1/3
    • The remaining grandchildren take the remaining 2/3 in equal shares:
      • Harry takes 1/6
      • Regina takes 1/6
      • Cady takes 1/6
      • Damian takes 1/6
      • You have two deceased children: Apache and Beta.
      • Apache left behind two kids: Charlie and Darnell.
      • Beta left behind one kid: Erev.
      • Charlie, Darnell, and Erev all take 1/3 equally
      • Spouse 1 dies. Their Will utilized the unlimited marital deduction to give everything to Spouse 2 tax free. Say this amount was $5,430,000 which is the current threshold for estate tax.
      • Spouse 1 wasted their entire estate tax exclusion, it is gone like a wisp in the air.
      • Spouse 2 has separate property of $5,100,000 and receives the $5,430,000. Spouse 2’s separate property appreciates to $5,430,000 at time of death. So Spouse 2 has $10,860,000 in their estate.
      • Spouse 2 gets the $5,430,000 estate tax exclusion and then is paying estate tax on the entire remaining $5,430,000 which is a very big tax bill for the estate.
      • So that was how it worked before portability.
      • Spouse 1 utilizes the unlimited marital deduction at death on their $5,430,000, so no tax due.
      • Spouse 1’s entire estate tax exclusion is transferred to Spouse 2.
      • Spouse 2 dies. Spouse 2 can exclude $10,860,000 from the estate tax with both estate tax exclusions joined together. No estate tax due.
      • Communication
      • Discussing available alternatives
      • Plainly explaining benefits and burdens
      • Listening to client input discussing alternatives
      • Consequences on family relationships with certain estate planning decisions
      • Completing work timely for clients in poor health or who are otherwise at risk of losing capacity
      • Avoiding conflicts of interest.

Health/Medical affairs

In the event you require medical treatment but cannot voice your desires, someone needs to make those difficult decisions for you in a way that would most closely match the choices you would make for yourself if you could still voice your desires.

If you have planned ahead you have found someone now that you trust enough to make those decisions and otherwise handle your health and medical affairs. You appoint this person in the Medical Power of Attorney. You can also authorize more people to receive news of your medical situation with the HIPAA Release, though if they are not your appointed agent in the Medical Power of Attorney, they will only receive information and will not be able to make decisions for you.

Taking care of your children

In the event you are a single parent, you need to plan for what happens to your children if something should happen to you. This is done through the Declaration of Guardianship for Minor in the Event of your own incapacity. The main importance of this document is not just who you want to take control of your children; but you can also expressly exclude people you do not want involved with your children. This is a powerful document if you do not get along with some members of your family and would not want them anywhere near your child – you can make those desires clear now, while you still have the ability to execute a document such as this.

§016: About the Disability planning documents

Statutory Durable Power of Attorney

A Will only takes effect on death. When a person is still alive there is another document that will control management of their financial affairs if they are unable to do so for themselves.

The “Durable” means that while you execute it today, it does not take effect until later on when you are disabled or incapacitated – through a traumatic brain injury, the onset of Alzheimer’s, or another scenario such as those.

This document allows another person to financially step into their shoes to sell stocks, collect rents, pay your taxes, and otherwise manage financial resources and properties.

Executed in conjunction with a Medical Power of Attorney, this is a least restrictive alternative to Guardianship.

Medical Power of Attorney

In the event you are unable to speak for yourself, this document appoints someone you trust to make your medical decisions for you. The document does not take effect when you execute it – since you need capacity to execute it – but rather it only springs into effectiveness when you can no longer speak for yourself and need medical treatment.

The importance of this document cannot be overstated when you know you are going in for surgery; and also for all of the other things that can happen in life. We strongly urge you to give copies of the document to everyone listed in succession from the primary to the fourth alternate (if you name that many) so they are aware of their responsibilities should the time ever come – because that time will be stressful for them, and you are placing a lot of power in their hands, and hoping they also remember about your Living Will.

Executed in conjunction with a Statutory Durable Power of Attorney, this is a least restrictive alternative to Guardianship.

Directive to Physicians

If you are suffering from an illness or serious injury that you will likely not survive, and you are unable to communicate your wishes, this document directs that you will either (1) be given life sustaining treatment, or (2) be allowed to die naturally while being kept comfortable. This directive allows you to make this choice for yourself right now rather than placing the burden of such a serious decision on a loved one later in the hospital room.

This document works in conjunction with the Medical Power of Attorney, and the agent you appoint in that document.

Most hospitalizations are not planned in advance, so your Living Will desires should be communicated to your Medical Power of Attorney primary agent and all of the alternates in advance. If they do not know you have a Living Will they are (a) not going to have a copy of it and (b) are not going to tell the doctor about it either. If nobody knows about it, it is a useless document.

While it was over a decade ago, the memory of the Terri Schiavo case is enough to compel most people to get their affairs in order with a Living Will. Nobody wants to get their 15 minutes of fame in the way that she and her family did.

HIPAA Release

When you are unable to speak for yourself, this document allows your physician to speak freely about your medical condition, but only with the person you have designated in this document. This is especially important if you designate an unrelated person or unmarried romantic partner.

Declaration of Guardian in the Event of Later Incapacity or Need of Guardian

If you are ever challenged by continuing diminished mental capacity due to a serious injury or illness such as Alzheimer’s, you can give strong authority to a loved one so he or she can step into your shoes and act on your behalf as your legal guardian in financial matters and with regard to your physical care.

Appointment of Agent to Control the Disposition of Remains

This document will ensure that what happened to Leelah Alcorn will not happen to you. When you pass away this appointed agent will ensure your funeral arrangements are taken care of the way you desired when you were alive. For our trans* friends in the community this document is of the utmost importance to ensure that you are buried in the clothes you prefer and that your life receives the fullest amount of respect in the funereal process.

§017: About Guardianship

Guardianship is a relatively unpopular concept for a lot of reasons. The legendary Groucho Marx guardianship fiasco is an example on the tip of every tongue when the ‘G’ word is mentioned.

The disability planning documents such as the Powers of Attorney are least restrictive means – which means you need to try them first anyway before attempting to secure a guardianship over a proposed ward. Also, for most people and most situations the least restrictive means are probably going to work well enough that they will be all that is needed. Meanwhile guardianship is an extremely expensive and time consuming process that is bound to be frustrating and stressful for nearly all parties going through it.

Guardianship is serious for a lot of reasons. EC § 1201.003 provides that “A judge is liable on the judge’s bond to those damaged if damage or loss results to a guardianship or ward because of the gross neglect of the judge to use reasonable diligence in the performance of the judge’s duty under this subchapter.” So judges overseeing these cases place the highest importance on guardians timely accounting and having ad litems assist the court. These are some of the best defenses today against the darkened history of guardianships

Proposed Ward

Guardianship starts with a proposed ward – someone that is allegedly incapable of taking care of their daily affairs. This includes their financial affairs (guardianship of the estate) and/or their personal affairs.

There are two types: minors and incapacitated people.

Minors

Under the age of 18, never married, and never had the disability of minority removed by judicial confirmation.

Incapacitated Person

An adult (not a minor) that has a physical and/or mental condition leaving them substantially unable to take care of their own needs such as food, clothing, and shelter; to care for their own physical health; or to manage their own financial affairs.

An additional type of incapacitated person is someone that is required to have a guardian appointed to receive funds from a governmental source indirectly, rather than receiving those funds directly from the governmental source.

Interested Party

An interested party (usually a family member but sometimes it is not a family member) files an application, most often where the proposed ward resides. The application needs to include documentation of recent medical exam by a licensed Texas physician. There is additional paperwork required if the incapacity results from intellectual disability, MHMR is typically involved with this proposed ward.

Guardian of the Person

A guardian with limited powers in this aspect, or full power, addresses care of the physical well-being of a ward.

Guardian of the Estate

A guardian with limited powers in this aspect, or full power, addresses the property and finances of a ward.

Least Restrictive Measure

Once filed, the initial investigation (court investigator) takes place to determine if the application was inappropriate and should be withdrawn since less restrictive measures could protect the proposed ward. Otherwise an Attorney Ad Litem (“AAL”) is appointed.

Attorney Ad Litem

The AAL further investigates and advocates for the proposed ward.

Jury trial

The proposed ward is entitled, on request, to a jury trial.

Contest

The proposed ward can contest the guardianship; as can anyone without an adverse interest. The court is interested in hearing about the ability of the proposed ward to feed, clothe, and adequately shelter themselves; to care for their own physical health; and to manage their own property and financial affairs.

Clear and convincing evidence

The court must find by clear and convincing evidence (a high standard in civil cases) that (1) the proposed ward is an incapacitated person; (2) it is in the best interest of the proposed ward to appoint a guardian; and (3) the rights of the proposed ward or the proposed ward’s property will be protected by the appointment of a guardian.

Preponderance

The court must find by a preponderance of the evidence (a much lower standard) that (1) the court has venue or that this court is the proper court to make the determination of necessity of guardianship; (2) the person to be appointed as guardian is eligible and qualified to serve as guardian; (3) the guardianship of a minor is not solely to determine or change school districts, and (4) the proposed ward is totally incapacitated or is partially incapacitated and can perform some (but not all) of the tasks necessary to care themselves and manage their individual’s property.

Limited powers

If the ward is able to care for themselves or manage their property, a guardian receives only the limited powers necessary to assist in the other areas. As many decisions as possible are intended to be left to the ward.

Elder abuse

Financial exploitation of elders and physical abuse are serious issues and require reporting immediately.

Here is a link on elder financial abuse:

http://www.preventelderabuse.org/elderabuse/fin_abuse.html and another one on elder abuse: https://www.texasattorneygeneral.gov/seniors/elder-abuse

§018: Estate Planning vocabulary and phrasing you might see

Moiety

One of two approximately equal parts.

Executor

The person you appoint in this role has the duty to settle the financial affairs of your estate. Their numerous duties will include (but are not limited to) filing your final individual tax return, the estate tax return, and income tax returns for your estate; dealing with creditors and claims against the estate; and distributing property to the beneficiaries named in your Will. In your Will you can direct that the Executor be paid for their services, or that they not be paid. You can appoint a family member, a trusted friend, or a bank entity/trust company. If you have a particularly complex estate we will need to discuss the education and experience of the people you are appointing as Primary and First/Second Alternates. For more straightforward estates, most people usually appoint their Spouse (if there is one) or the most trusted family members or the longest-term friends. You may name two or more people to act together as Co-Executors if you so desire.

Trustee

The person you appoint in this role will manage the trust for the benefit of your spouse or other named beneficiaries. Depending on the trust assets involved, a business management or investment familiarity is recommended. However in certain family circumstances it is more important to appoint someone that will be sensitive to the needs of the beneficiaries. As with the Executor, you may name two or more people to act together (and specify they only act unanimously or by super-majority, or otherwise) as Co-Trustees if you so desire.

Guardian

Guardians need to make difficult decisions that can have profound impacts directly on the person the decision affects, as well as indirectly affecting a number of other people with the shockwaves of that decision. A guardian should be a person you completely trust around your children.

Spendthrift

The beneficiary of the trust has restrictions placed on them in terms of the money in the trust. The trust funds can’t be gambled away or reached by creditors prior to the beneficiary’s actual receipt of the property. These trusts are typically put in place by parents who feel that their child is unable to control their spending at this point in their life, and an independent trustee should have authority to determine how trust funds may be used for the benefit of the beneficiary.

Integration

That all pages are meant to go together, and that they flow together sensibly as one document. Pages in different fonts, paragraphs “continuing onto the next page” but not actually continuing onto the next page, and pieces of paper in the Will that look 20 years older than other pages are typically going to make a Will look like it is not very well integrated – which means that there might have been shenanigans involved which need to be litigated in Probate court; or potentially prosecuted in the criminal courts.

Republication

In the case of a codicil, it republishes the prior Will and doubles down on how good of a Will it was and how validly it was executed. Republication means they are super serious about the Will but are making new, minor changes in the Codicil. A validly executed Codicil can cure defects (and provide additional evidence for testamentary capacity and intent) with the execution of the underlying Will.

Acquittance

A document evidencing a discharge from an obligation. This is the “receipt” typically mentioned in the Executor & Trustee powers article in a Will regarding distributions to beneficiaries.

In terrorem clause

“Don’t contest this Will please” – this threatens people not to challenge the Will. If the Will is found to be invalid, then the in terrorem clause goes into the trashcan with it. So it is a gamble you may win or lose on.

Unlimited marital deduction

You can leave everything to your spouse estate tax free when you die. This used to be a bigger deal before portability that you would waste your entire estate tax exemption (and your surviving spouse could not use your unused exemption) but now if you give everything to your spouse utilizing the unlimited marital deduction, the surviving spouse only needs to worry about the amount of the estate that rises above the joint credit amount (or whatever of the credit you did not use added to whatever they have not otherwise used.)

Lapsed gifts

The beneficiary predeceases Testator. A Will cannot make a gift to a dead person. But there is a major asterisk: the anti-lapse statute.

Anti-lapse statute

If the beneficiary was in specified degree of relationship to the Testator (e.g. the son) and left descendants that survived the Testator, then the beneficiary’s descendants take by substitution. The anti-lapse statute can save gifts for certain people that would have failed under the general rule of lapsed gifts to “legal” strangers of the family. But the main asterisk here is that a contrary intention must not appear in the Will – e.g. “To my son only if he does not predecease me” is probably not going to be saved by the anti-lapse statute to divert the gift to the son’s descendants that survive the Testator.

Void gift

When you execute your Will, unbenknownst to you factually (but not due to a mental incapacity rendering you unable to understand that), your sister has passed away already. The gift is technically void, but if the sister left descendants that survive you, the gift will go to those descendants of hers through the anti-lapse statute.

Abatement

A decedent’s property is liable for debts and expenses of administration. So bequests abate (go to pay the debts/expenses rather than gifts) in the following order: (1) property not disposed of by will, but passing by intestacy; (2) personal property of the residuary estate; (3) real property of the residuary estate; (4) general bequests of personal property; (5) general devises of real property; (6) specific bequests of personal property; and (7) specific devises of real property. A decedent's intent, as expressed in a Will, controls over the abatement of bequests just listed.

Ademption

What happens when specific property mentioned in a Will no longer exists.

Advancement

If a parent lends you money and puts in writing that this is an advancement of their estate, that counts later on if they die intestate your “share” will be reduced by that advancement relative to your other siblings that did not receive an advancement.

Memorandum of Personal Belongings

This is an unrelated document that is not going to be probated. In it you can express your private desires and explanations about things. This can be a very nice handwritten legacy and historical document you can leave behind to your family. Or you can explain why you are cutting your kids out of your Will. They can go both ways. The important thing is that it’s not in the Will which will be part of the public record when it is filed with the Probate court. We give you a form for this if you get your estate planning services through our firm.

Per stirpes (Option ‘A’)

The distribution to your descendants will begin with an equal division into shares at the child level, whether or not a child is living.  One share will be allocated to each surviving child, and one share will be allocated to each deceased child who left surviving descendants. Each share for a deceased child who left surviving descendants is divided in the same manner, with subdivision repeating at each succeeding generation until the property is fully allocated.

Example:

Per capita (Option ‘B’)

The distribution to your descendants will begin with an equal division at the nearest generation to you that has a living member.  One share will be distributed to each such living member, and the share or shares passing to the deceased members will be combined and then divided and allocated among the surviving descendants of the deceased descendant(s) as if the surviving descendants who are allocated a share had died without descendants. 

Example:

Hybrid per stirpes (Option ‘C’)

The distribution to your descendants will begin with an equal division at the nearest generation to you that has a living member.  One share will be distributed to each such living member, and the share for each deceased member will be further divided in the same manner. 

Example:

§019: Your relationship with a family lawyer rather than just a scrivener

Open communication, listening, and feedback

The main duty of an estate planning lawyer is to listen to what you want in your estate plan and why you want it. The lawyer then tells you the various impacts (tax, state law, otherwise) of those decisions and discusses potential alternatives with the pros and cons of each option. Listening to why you want things a certain way is the most important stuff you can tell the lawyer about, so they understand where you are coming from and your desires. There are usually a variety of ways to structure things, but understanding your intentions helps make it clear which option is likely to be the best – and then a discussion on alternatives can take place in a way to compare and contrast the alternatives to what seems to be the preferred method.

In terms of fiduciaries, it is important to have a discussion about who they are, how well you know them, what they are like, and other important things like their age and overall health. For our elder clients an unfortunate reality, but an important discussion we need to have, is that if their preferred person to appoint as a fiduciary is in the early stages of Alzheimer’s, they are not going to be a suitable person to appoint. This is why an open and honest conversation with the lawyer is important because all of these external factors matter – and you are paying your lawyer for advice and to protect you, you are not just paying your lawyer to type up the words you say. The lawyer gives you feedback and constructive criticism when it is necessary so that you are as best protected as possible.

A judgment-free safe space

It is important to understand the lawyer is not judging you or judging your decisions. The feedback is necessary so you don’t shoot yourself in the foot down the line by making a bad decision today. That is what separates a scrivener (and online document assembly shop) that just copy and pastes words from an estate planning questionnaire into a document, from a great estate planning lawyer that has an earnest conversation with you about your family, friends, and your overall intention for the estate plan.

You can easily find someone to just type up what you say. But that’s not sensible estate planning – that is the “extreme sports” version where you just hope everything works out for the best, and it rarely if ever does.

Long term relationship

Things happen over time. As a part of your annual review of your estate planning documents, your life situation may require some updates. The benefit of having a long term relationship with a “family lawyer” rather than just a scrivener, is that they already know you and your family situation. They know the details and you don’t need to start over every time you need a minor update, or a major update year to year. There is not only the price break (typically no charge for small changes) but also the understanding that comes from years of a long term relationship. Lawyers are not fungible and sometimes there are unexpected benefits of returning to the same one time and time again.

The relationship as a networking resource

I represent many entrepreneurs that have big ideas and like starting new companies. We have relationships with trusted referral partners outside of the firm that can help someone start up a new business – everything from a commercial real estate agent to an accounting firm to an energy consultant and beyond. As a law firm with longstanding ties to the community and a brick and mortar location in Houston, we don’t just type up documents. We help our clients in every way we can to make their life and their business life easier, which includes our referrals to service providers outside of the. This is one of the many ways we continue to be a part of the community we all decided to live and work in, and will continue to do so for a long time here in Houston.

§020: The transition from the Probate Code to the Estates Code

Back in the day when things were kinder and gentler, in the simple times of the past, we had the Probate Code. It had been around forever, nearly 60 years. It was old and it was predictable. That’s what was around when I was in law school, working during my 1L and 2L summers, and then for the first few years of my practice. And then that went away, leaving us with the Estates Code.

There were several changes that took place besides the cites changing. Sections were consolidated, re-ordered, and certain ambiguous sections received a slight facelift to be a little less ambiguous.

Here is a derivation table from the Probate Code to the Estates Code, if you are still seeing references to the Probate Code in your googling:

Article I section 020 include derivation table to estates code 1

Article I section 020 include derivation table to estates code 2

Article I section 020 include derivation table to estates code 3

Article I section 020 include derivation table to estates code 4

Article I section 020 include derivation table to estates code 5

Article I section 020 include derivation table to estates code 6Article I section 020 include derivation table to estates code 7

Article I section 020 include derivation table to estates code 8

Article I section 020 include derivation table to estates code 9

Article I section 020 include derivation table to estates code 10

Article I section 020 include derivation table to estates code 11

Article I section 020 include derivation table to estates code 12

Article I section 020 include derivation table to estates code 13

Article I section 020 include derivation table to estates code 14

Article I section 020 include derivation table to estates code 15

Article I section 020 include derivation table to estates code 16

Article I section 020 include derivation table to estates code 17

Article I section 020 include derivation table to estates code 18

Article I section 020 include derivation table to estates code 19

Article I section 020 include derivation table to estates code 20

Article I section 020 include derivation table to estates code 21

Article I section 020 include derivation table to estates code 22

Article I section 020 include derivation table to estates code 23

Article I section 020 include derivation table to estates code 24

Article I section 020 include derivation table to estates code 25

Article I section 020 include derivation table to estates code 26

Article I section 020 include derivation table to estates code 27

§021: A final word on the basic importance of Estate Planning

Estate Planning is a necessary component of your life. This online resource is intended to take some of the mystery out of the estate planning process, and to better explain why an estate plan should be prepared by a licensed Texas lawyer with a physical office in the State of Texas, rather than one of the online document assembly shops which have documents that are drafted by non-lawyers that are outside of the State of Texas.

 

 

ARTICLE I topics on HARD MODE

This section discusses the various potential circumstances that arise in the course of life that necessitate an annual review of your estate plan; and furthers discussion of some of the basic topics covered earlier.

 
   

 

§022: Reasons that justify the need for an annual review of your estate plan

Issues with your intended beneficiaries

Things happen. The people that we name in our Will to receive our property might die, become disabled or incapacitated, or they might say or do something that causes them to fall out of our good graces, such as divorcing you if you were married when you executed an “everything to my spouse” Will a few years ago. When these things happen you know about them; but the Will you executed ten years ago doesn’t know about it, and the Probate Court certainly doesn’t know about it either. That is why when these unfortunate things happen, you need to go back to the drawing board on your Will provisions and ultimately the orderly disposition of your property with the new information you have.

If there was a specific reason why you were giving property to an intended beneficiary and they passed away, that plan has failed and it is time to figure out what to do with that art collection, the collection of cars, or whatever else was contained in the specific bequest.

If your intended beneficiary has become disabled, incapacitated, or has otherwise fallen on hard times (such as drink, drug, or gambling-related) it might be inappropriate to gift them money outright. So that plan needs to be revisited to think about trust options, or to find another beneficiary.

If you are recently divorced you definitely need to update your Will and your disability planning documents to reflect that there is no longer a valid marital relationship with that person. And it is certainly time to find a new intended beneficiary that is not an ex-spouse, outside of the court mandated requirements (such as life insurance) contained in your decree.

Just as many “bad” things can happen, sometimes the good things happen to your intended beneficiaries. If they win the lottery, their software company goes public, or they otherwise have accumulated great wealth and no longer need the financial gift that you were going to leave them, it is time to reassess who might better use the money or property, such as a charitable entity or perhaps another family member that is not a millionaire.

There are many other aspects of a beneficiary’s life that you might think important to consider and reconsider on an annual basis. I strongly urge all people with validly executed Wills to just think it over once a year on their birthday as they are receiving nice gifts and enjoying the pleasant company of those closest to them, to just ensure that the estate plan they have in place is going to reciprocate in the same way. If people have fallen out of favor, or their financial situation has drastically changed, that is the year to make the proper changes to the Will.

Issues with your intended fiduciaries

The people closest to us have earned our trust over time. But things happen that might prevent them from serving as a fiduciary when the time comes in our life to need them. Sometimes they have no control over it in the event they die from natural causes. Other times they pick up a drug habit. Or they make a series of bad decisions and end up serving time in the custody of the State. Or they say something hurtful that destroys the bond of trust we once had in them.

No matter the actual circumstances that led to this re-evaluation of our relationship with this person, it is important to remove them from our estate planning documents as soon as possible. In the event of their service as Trustee or Executor they could be making very bad decisions they should not have been allowed to make, had you only updated your Will in time. Or in the event of a Statutory Durable Power of Attorney taking effect only upon your disability or incapacity, they could essentially start robbing you blind if you didn’t update that document in time.

The world of estate planning has a number of horror stories that all stem from appointing “the wrong person” and not removing them from that intended position of power soon enough. There are certainly valid causes of action against them down the line, but that is akin to letting the bull loose in the china shop and then getting angry about it a few years later – the damage is already done and it’s a long road to walk before you finally get the chance to start unringing the bell.

Appoint the people you completely trust when you execute your documents. And be willing to update your documents as soon as possible once the necessity arises to change them. Do not let this be the thing on your “to-do” list that always remains on the bottom of the list.

Issues with your marital relationship

Divorce happens. So does remarriage. While technically you are going to be dead when it becomes an issue so it might not actually matter that much, but it would seem to be some kind of existentially embarrassing to have never updated your Will that you executed during the marriage of Spouse #1 when that divorce happened 20 years ago, your remarriage was 15 years ago, and your Will still mentions Spouse #1, not Spouse #2. Wills admitted to probate become public record so everyone else can see what you did. This is why your documents should be updated timely to reflect your new marital relationship status – divorced/single and then married again once that happens. Remove your ex-spouse from your documents, they no longer have a place there for them.

Issues with a new child, either through birth or adoption

Whether by birth or adoption, a new child is a happy thing and one worth celebrating. One way to celebrate their existence is to update your Will to provide for them. Just like a Will that was never updated to reflect a current spouse, it also must be a bit existentially embarrassing to have identified Children #1-4 but to have never updated it to reflect Child #5 and Child #6. As part of the public record, they will remember that for the rest of their lives that they were not important enough to actually get identified in the Will unlike their siblings. It is easy to avoid these kinds of things by remembering: new child, new update to Will. In the event the child grows up to be mean and you do not like them, we can also update your Will to reflect that situation as well.

Issues with increased wealth

Estate tax, gift tax, and GST tax considerations along with tax planned Wills are important for the 1%. If you are the 1% you know that this is not a DIY project. If you are new to the 1% as a self-made, first generation high net worth individual then your plans are going to look a little different than the Robber Baron families’ plans that have been in place and have been evolving for generations now. These are what we call “Champagne Problems” though, because they are good problems to have. Depending on family structure, there are a variety of options to minimize or eliminate tax. It is definitely not a DIY project with a holographic Will or something that would be appropriate from an online document assembly shop though. Find a “family lawyer” and stick with them!

Issues with changes in the tax laws

A big change in the tax laws was the concept of portability. Before portability what could happen was this scenario:

Now with portability this is what it looks like:

This is not the only change in the tax laws and there will always be more. An annual review of your plan and a discussion of “what’s new” can help you determine if the plan you have in place is the one that is most appropriate given new law and their impacts.

Issues with changes in state law

Typically affecting more people than the changes in the tax laws, state law can change too. For instance on September 1, 2015 Texas joined the wave of other states that allow for a “Transfer on Death Deed” as an estate planning mechanism. However, unlike in a lot of other states, there are definitely some potential pitfalls and concerns that need to be addressed before advising that it is a correct course of action to pursue in lieu of a joint tenancy with right of survivorship (“JTWROS,”) gift deed, transfer into a trust, or other mechanism. This is not the only change in the law and there will always be more. An annual review of your plan and a discussion of “what’s new” can help you determine if the plan you have in place is the one that is most appropriate given new law and their impacts.

§023: Your digital life

With our increasing reliance on digital life to store everything from photos to other good memories, a new wrinkle has developed in estate planning world on how to handle digital accounts. Some lawyers ignore the topic altogether. Others will make it the main focus. It depends on the client and how active they are on the internet with curated accounts, blogs, and other resources.

Appointing someone to take over your accounts (to close them down, like with a facebook – or perhaps to take over management, like with a flickr of family photos) is a careful consideration since they are not exactly a fiduciary, but they are not exactly not a fiduciary. There are not the restrictions for Executors (no felonies etc.) but we typically want some of the same good judgment.

We have a variety of ways to include transition of your digital accounts at death the same as we would help transfer real estate or make other conveyances at life, or in death. It all depends on what you think is important and we will help you get to where you want to go with your digital life, just as much as with more “old school” financial assets.

§024: Myths of Estate Planning

Misunderstandings about Estate Planning create costly mistakes for your family that you can easily avoid. These misunderstandings can wreck the plan you have for your family’s money and the direction the family is going in.

There are innumerable myths of Estate Planning. These are some of the more common myths of Estate Planning we have heard about:

Myth #1: Estate Planning is only for college boys and rich people.

Reality: This is completely wrong. Your default estate plan that the State of Texas has put in place is the law of intestacy, which can make some unintended (and unwanted) transfers of your property to people you don’t even like. This doesn’t matter whether it is your $500 or your $50,000,000 because it is your money, and you have the power to direct where it goes if you have a proper estate plan in place – for most Texans the law of intestacy is NOT a proper estate plan.

Myth #2: I’m too young for estate planning, I am only 50 years old.

Reality: You never know when the end is coming. You also never know when a disability might come that will remove your capacity to plan for and execute the Will. Putting it off too long can have disastrous results, especially if you have a complex family situation or want to leave your money to charity rather than family – that is not included in the law of intestacy you will be stuck with if you do not execute a valid Will while you still have capacity.

Myth #3: I don’t need a lawyer to draft a Will.

Reality: If your Will isn’t done right, it won’t be a valid Will. If your Will is done badly, it might be valid but it will create huge expenses and create new problems if, for example, it didn’t have the correct provisions for an independent administration. If you have no legal training the odds of you getting the Will even close to the ballpark of being a valid Will are relatively low – the odds are even worse that you will include all necessary provisions for it to be a “good” Will and it is an improbable reality you will have necessary trusts put into place as well. The expense of an estate planning lawyer is extremely minimal compared to the huge costs of not having a Will, or having a bad Will.

Myth #4: If I have a living trust there are no taxes ever again.

Reality: That’s not even close to true. A living trust is revocable. A revocable trust is not the same thing as an irrevocable trust. Living trusts can have tax planning built into them, but it is no better (and no different) than the tax planning that can also go into a Will.

Myth #5: Probate is terrible.

Reality: For some people, yes. For others not so much. No two situations are going to be exactly the same.

Myth #6: I have a Will and that is all I need.

Reality: This is extremely wrong. The disability planning documents are a bare essential in addition to the Will; and certain situations require additional documents and planning. Your Estate Planning package protects you, so it should protect you from as many different worries and concerns as your family situation and finances warrant. No two estate plans are going to look the same.

Myth #6: Now that my estate plan is done, I am done, right?

Reality: Wrong. There can be changes in the laws or changes in your personal life, or the lives of your fiduciaries and beneficiaries. All of these possibilities require at the very least an annual review of the estate plan to make sure the plan is still intact and doing what you want it to do. If you want to cut someone out of the Will because they said something mean to you, that doesn’t just happen magically – your Will needs to be updated, they need to be removed from a possible appointment as fiduciary if they had been named in any of those documents, and you might want a new Memorandum of Personal Belongings to make your exact feelings known about this person outside of the four corners of the Will. Once a year on your birthday or at the end of the year take a look at everything and make sure the plan is still doing what you want it to do – your plan just covers literally all of your assets and all of the money you have worked had for over the years. So you want to make sure that the plan is still working hard for you and will do the right thing when the time comes.

§025: Frequently Asked Questions of Estate Planning

There is no such thing as a stupid question in Estate Planning. If you don’t understand something, you should ask your lawyer about it and receive a dignified, plain English answer that you understand and can incorporate the information (or not) into your intentions for your overall estate plan. These are some of the more common questions we have heard.

Question #1: How do I get started?

Answer: Ask me for an estate planning questionnaire. That starts the conversation between us and lets me know more about you, your family, and your estate planning needs and desires.

Question #2: Why is there a fee for the initial consultation?

Answer: I will give you legal advice during our consultation. This is a loss leader for both of us to determine if we work well together. If there was no fee and no legal advice, it would just be a polite conversation about baseball and the weather – and that will not help you with your legal needs. However, if you hire us to prepare your estate planning documents then the entire consultation fee is applied toward the cost of the document or package of documents.

Question #3: What should I think about before meeting with an estate planning lawyer?

Answer: The most important questions at the outset include: (1) to whom do you want to leave your assets? and (2) who do you want to name in various positions of responsibility? Depending on family structure, marital status, occupation, plans for the future, and many other factors you might have some very specific questions and concerns we can address in more detail after I learn more about you and your objectives.

Question #4: In your estate planning questionnaire you are asking for extremely personal information, why?

Answer: We realize that the information we are requesting is your most personal and intimate information. But to analyze your unique situation to craft a proper estate plan, identify and discuss alternative structuring, and help you achieve your goals, we need this information rather than discussing vague generalities. Any information provided to us is held strictly confidential.

 

 

ARTICLE I topics on LEGENDARY MODE

This section discusses some of the more important ethical issues that arise in the context of Estate Planning.

 

§026: Ethical issues for your Estate Planning lawyer

Estate Planning is not adversarial in the way criminal defense, family law, or personal injury litigation is. The relationship between the estate planning lawyer and the client is much more conversational and intimate since advising on the estate plan requires knowing the details of your friends, family, charitable interests, and all of the other important and relevant information about your life.

Attorney competence

Competent representation in estate planning involves such things as

Confidential

Confidential information is important in estate planning, especially with the sometimes appropriate interaction of life insurance, retirement, other investment, CPA, business, and other financial advisors. A thorough discussion needs to take place and boundaries need to be set if they are allowing you to interact with their other financial types of advisers, or if they do not wish you discussing their confidential information. If you do not explicitly authorize us to disclose anything, we do not disclose anything. We do not identify our clients publicly. You remain as private as you want to be for as long as you want to be as an estate planning client.

Client capacity

The client needs to have mental faculties in place to participate in crafting the estate plan and to determine that the estate plan they will be executing in front of witnesses and Texas notary is what they actually intended to execute.

Testamentary capacity is a relatively low threshold, but not documenting it has created problems throughout history. Essentially the Testator needs to understand what they are doing by executing the Will, their place in the world, identify who is in their family or who their friends are, and have a decent idea of what property they own.

Competency and capacity are more of an art than a science, but family members or other people that could coach a client definitely need to removed from the premises and a full conversation in front of witnesses and notary need to take place to get a better handle on competency and capacity concerns. This is why we use our own witnesses here at the firm so they are independent and completely financially disinterested (unrelated to your estate plan, not uninterested in the proceedings) so they can evaluate your condition without bias. If you brought your drinking buddies over from Catbird’s, they might not be the best judge of your capacity, so we cut those issues off at the pass by using our own witnesses so long as you will not object to them.

Videotaping the formal Will execution ceremony is a major judgment call. Everyone but the most seasoned actresses and divas gets a little nervous in front of a camera. This can exacerbate nervousness which makes us say stupid things or forget other things all together. If taping is going to fluster a person, it will not help us to document their capacity as they take five minutes to remember what year it is. Videotaping every formal Will execution ceremony is not appropriate; it is a judgment call on what the best course of action will be, if we know that a Will contest is coming.

Client incapacity

Sometimes the client will become incapacitated during the Estate Planning process. If the client loses the capacity to continue participating in the crafting of the estate plan and will not have capacity to execute the documents, there is no point to continue with the Estate Planning process. This is an important issue for lawyers with fee agreements such as hourly agreements, where they could continue to bill the client for services that are absolutely not necessary. Our fees are clearly understandable and all work stops when we are either told to stop, or it is clear by the circumstances that no further work is required – if they are dead, or otherwise incapacitated.

Joint representation

Joint representation can cause issues in some, but definitely not in all situations. Sometimes one spouse chooses not to follow through with planning their estate; other times there is clear disagreement between the spouses about property and it seems like the estate planning consultation is quickly turning into a divorce consultation. There are other circumstances that arise. Most important is to have a fee agreement that addresses joint representation issues, honesty, and candor among the individuals. That is, they will discuss all of their assets in the joint representation rather than secreting some from their spouse, which will greatly frustrate the estate plan they thought they were creating which was too clever by half.

If one spouse is trying to keep relevant information secret from the other, a joint representation is no longer appropriate and the lawyer probably needs to withdraw.

Familiarity

When we have a long term client that is recently remarried, sometimes it is a concern for the new spouse that has not known us for years whether we can be impartial. In situations like these a longer initial consultation is required, and we usually recommend that the couple meet with other estate planning lawyers in other initial consultations. They need to feel comfortable with the joint representation or it is not appropriate, and we will not pursue it because of the conflict. At that point they can each hire they own separate lawyer from different law firms, doubling their cost. Or one person can have the lawyer and one can handwrite their own Will; or neither spouse can hire a lawyer and they can both handwrite their own Wills.

Fee agreements

Fee agreements that are the size of a David Foster Wallace book and have plenty of pointless boilerplate provisions that are not even necessary are just not a good idea. Estate Planning lawyers sometimes more than other lawyers in other practice areas need to make their client feel comfortable and build trust.  This is done with transparency and actually having fee agreements specifically for estate planning matters, rather than ‘litigation’ fee agreements that had some quick edits.

Scope of representation

The scope of representation is also important. Estate planning fee agreements do not cover probate. They do not cover personal injury. They do not cover divorce. They cover estate planning – the documents listed that we have discussed what they do, and what they cost. There are no hidden charges beyond what we have discussed. For some clients part of the estate planning package will include additional items that are not part of a standard estate planning package – such as business succession or entity formation. These are always discussed well in advanced and are included with the fee agreement. However for most people it will list the Will (whether it is tax planned, Simple, or a pourover) along with the necessary disability planning documents (if they do not have children it will be less documents than if they did have children.)

Client participation

It is important for the client to participate in crafting the estate plan. We typically have many options in how to do things – so we discuss the different options and their benefits and burdens. Then we might recommend that one is clearly better than the rest, but it is the client that asks follow-up questions and ultimately decides how to proceed. These issues arise frequently when a non-client (included by the client at the client’s insistence) takes a dominant role in the estate planning discussion, or appears to be taking a dominant role in the decision making process behind the scene. There are various ways to address this and document private conversations with the client away from the non-client. Summarizing the meetings in a letter is one approach that details the issues discussed, the alternatives debated, and the pitfalls or the benefits. No two situations are the same, but demonstrating that no decision was rushed into willy-nilly is important.

Closing out representation

Closing out the representation at the close of the formal Will execution ceremony has some key steps. The client will always leave the office with the executed originals. We make copies so you can distribute to people named in your documents. We do not retain originals of documents as a general rule. Any fees not earned are immediately refunded. We discuss how to store the documents and what not to do with the documents. We discuss annual review of the estate plan and potential costs of updating the documents a year from now (minimal fees or no fees for some clients.)

Property distribution issues

Some of the main conflicts are about just the property. Spouses don’t always agree on who is the favorite kid. Divorces, remarriages, and complicated family situations can place additional stress on giving money or property to someone that is not related to them by blood.

Fiduciary appointment issues

Additional issues arise in determining who is a suitable fiduciary, especially if one spouse hates that person or has a complicated relationship with that person.

Clients’ differing views on their children’s maturity

Heated conversations between spouses arise when discussing whether to give money outright to children or to set up a trust. One spouse might consider the child to be a perfect angel; while the other will list off all of the things they have said or done while drunk, and then an argument ensues.

Family secrets

Secrets also come out. Hidden bank accounts, biological children they have never mentioned before, or affairs with the pool boy are all things that are all things that might come out in the estate planning process.

Marital property agreements and their impacts

Another important item to discuss in the estate planning consultation is whether this couple has a valid premarital or marital property agreement. These agreements will affect their marital property situation and thus their estate planning.

Non-clients paying fees

Non-clients sometimes wish to pay the attorney fees for an estate planning client. Such as a wealthy parent paying for their adult child’s first Will after college; or an affluent child paying for their elder parent’s updates to their Will as they are on a fixed income at that point in their life. In these circumstances there is always the risk of the person holding the power of the purse overwhelmingly influencing the person that is trying to craft their estate plan, or update it. Some important decisions along the path include the client’s informed consent to the payment arrangement; the lawyer themselves determining that there will be no interference with the attorney-client relationship or the professional judgment required in advising the client; and that the client’s confidential information is protected. For instance, even though it is the father or child (a close family member) of the client it is not a certainty that they know all of the skeletons in the closet that might come out during estate planning – so it is never appropriate to repeat any of it, unless the client explicitly authorizes us in writing to do so.

 

This concludes ARTICLE I.

Thank you for reading ARTICLE I in Frye, Oaks, Benavidez & O'Neil, PLLC’s Information Headquarters.

Return to the Table of Contents to visit another Article