Why Estate Planning Matters
Who Should Have a Will and Powers of Attorney?
The simple answer is: everyone. Any adult – regardless of age, marital status or economic position – should have a will so that they can give clear, specific instructions about important decisions like how they want their property distributed, how they want to be treated in the event of a medical crisis and who will take care of their children or aging parents if they are no longer able to do so. Today's blended families, single parents and same sex couples especially need to provide for loved ones through these important legal instruments.
How Can a Will Protect Me?
Wills and other forms of estate planning are not just for millionaires and senior citizens. Regardless of your income bracket or age, chances are you need a will in order to insure that your wishes are observed and your assets are protected. The people who can most benefit from having a will:
- Are not married but are in a committed long-term relationship;
- Have minor children or aging parents who will need care in the event of their death;
- Want their personal property to go to specific people in their lives;
- Own a home or any other type of real estate individually or jointly with another;
- Have more than $50,000 in non-homestead assets;
- Want to make the probate process as easy and cost-effective for family members as possible;
- Want to exclude or disinherit someone who the law would automatically deem a legal heir in the absence of a will;
- Want to leave specific property to non-relatives such as stepchildren, charities or a devoted friend. (Often the most important people in a person's life would not be considered their heirs in the eyes of the law.)
What Happens to My Property if I Die Without a Will?
When you die without a will, the state directs how your property will be distributed by creating a hypothetical will according to state laws. These are called intestacy laws and will likely not distribute property the way you would have if you had written your own will. For instance, very often one spouse may prefer to leave everything to the surviving spouse who will then provide for and take care of the children. But this may not necessarily happen if there is no will. If one spouse dies without a will, the surviving spouse more often than not receives only his or her one-half share of the family home with the children inheriting the other half. Although minors have the legal capacity to own property, they do not have the legal capacity to manage it. Thus, if your children inherit a share of your house, your spouse would not be able to sell it, rent it out, or even refinance the mortgage without a costly and time-consuming court order. In the case of same sex couples, current Texas law does not provide for even this kind of spousal protection.
Can I Appoint a Guardian for My Children in My Will?
Yes. Every parent should have a will in order to appoint a guardian to care for their minor children and manage the family property on behalf of their children. If you do not leave a will and another parent is not living or recognized, the court may appoint a guardian who you would not necessarily have chosen to raise your children and manage the property they inherit.
I've Heard That It Can Be Expensive To Die Without a Will – What Does That Mean?
Dying without a will can tie up assets for an undetermined period of time. A court proceeding is often required to identify who the heirs are, to appoint an administrator, to determine what debts must be paid and how, and to decide how the individual's remaining property should be distributed. The administrator may be required to post bond to insure that the duties are performed properly. If the estate cannot be settled amicably, the court will resolve the disputes. Because of congested dockets, court proceedings are often slow. In addition, legal fees and court costs may erode estate assets. In fact, depending on how difficult it is to divide the property and whether the heirs agree on the value assigned to it, court proceedings could be so lengthy and costly that the estate is completely depleted. The bottom line is that dying without a will costs time and money and causes frustration for those you leave behind.
Which Assets Are Exempt From Creditors at Death?
1 | Homestead
Texas has one of the most liberal homestead exemption statutes of any state. The homestead is exempt from creditors' claims other than liens for the purchase or improvement of the homestead (such as voluntary "home equity loans") and taxes. Generally, an urban homestead consists of a house and lot of up to 10 acres, regardless of the value. A rural homestead provides protection of up to 200 acres for a family or 100 acres for a single person, regardless of value. However, if a Texas resident files for bankruptcy, the homestead exemption may be limited value-wise under the 2005 revisions to the federal bankruptcy laws.
2 | Personal Property
Various items of personal property are exempt from creditors. The exempt personal property can have a value of up to $60,000 for families and $30,000 for single adults.
3 | Life Insurance and Annuities.
Life insurance and annuity proceeds are also exempt.
4 | Retirement Plans.
In addition to the personal property exemptions, all qualified retirement plans, profit-sharing plans, pension plans and IRAs are exempt.
5 | Section 529 Plans.
A Texas resident's right to the assets or benefits held in a Section 529 plan (a college savings plan) is exempt from creditors.
Who Needs To Worry About Estate Taxes?
The federal estate tax – a tax imposed on assets left at death – now affects fewer than 1% of the nation's residents. This tax applies only to people who die leaving a taxable estate worth $5.49 million (in 2017) or more. Currently, Texas has no state estate tax of its own.
What Other Planning Should I Do?
While a will enables you to name an executor of your estate, designate a guardian for your minor children, establish a trust, minimize estate tax liability if necessary, and reduce probate-related costs and delays, it cannot appoint individuals who you would like to act on your behalf in the event of your incapacity. In order to enable someone to handle your financial affairs in your place and/or to make health care decisions for you if you are unable to do so yourself, you should execute the appropriate powers of attorney and advance directive:
- Durable Power of Attorney for Finances: In this document, you appoint another individual to make financial, business and property management decisions on your behalf if you become incapacitated. This person manages your assets and must do so in a prudent manner, remaining accountable to you and bound to act solely in your best interests.
- Medical Power of Attorney & Advance Health Care Directive (commonly known as a "Living Will"): These documents allow the person named as your agent to make health care decisions for you when you can no longer make them for yourself. It may also contain statements of wishes concerning such matters as life-sustaining treatment and other health care issues, as well as instructions concerning organ donation, disposition of remains and your funeral.
How Much Does It Cost to Have a Will Drafted?
Executing a will is not as complicated or expensive as you might think. But it's also definitely not a one-size-fits-all, fill-in-the-blanks-and-print sort of thing. To truly be an effective reflection of your life and your wishes, drafting a will requires talking with a seasoned estate planning attorney who can help you determine what type of will your circumstances might require and what other ancillary estate planning documents you should consider executing.
We provide most estate planning services on a flat-rate basis because it's a simple and straightforward way to insure you get the estate planning tools you need. Contact us today to obtain an estimate of fees.