If you don't have an estate plan, you're not alone. Some estimates indicate that between 60 and 75% of Americans haven't made a will. Maybe you don't think you have enough property to warrant the cost of making a plan for passing it on. Or maybe you're among the folks who simply don't want to think about some of the thorny issues estate planning can raise. After all, none of us like to contemplate our own demise. But an estate plan is essential, even for those of us who are not wealthy. Here are some reasons why.
Deciding Who Inherits Your Property
When you die without a will, it's known as dying intestate. State law then determines who inherits your property, and a probate court judge appoints an administrator to manage your estate. Your estate includes all the real and personal property you own at the time of your death. Real property obviously includes any real estate, like your home, but also oil, gas, and other mineral interests. Personal property includes everything else, like bank accounts, investment accounts, pensions, cars, boats, jewelry, furniture, and so on. When you think about it, your estate may be larger than you had imagined. And even if you don't have much today, that could change by the time you pass on. A good estate plan prepared today takes into account any potential increase in the value of your estate in the future.
With a will, you have the power to say who inherits your estate. Additionally, you appoint an executor to manage that estate - to settle any remaining debts and distribute property according to your specifications. Without a will, the court will appoint an administrator, who may not be someone you would wish to handle that process. And though you may assume that under state law your property will simply pass to your family, that isn't necessarily the case.
Let's say you want to leave everything to your spouse, to provide and care for your minor children. If you simply leave it up to state law, that might or might not happen. Under Texas law, all the property in your estate is divided into two types - community property and separate property. Generally, community property includes anything acquired while you were married, while separate property includes anything you brought into the marriage, as well as any gifts or inheritance that came exclusively to you during your marriage. Community property and separate property pass differently under state law. You and your spouse each own half of the community property. If you only have children from your current marriage, then your half of the community property passes directly to your spouse upon your death. But if you have a child from a previous marriage (that is, a child who is not also your surviving spouse's child), your spouse takes their half of the community property while your half is divided equally among all your children - meaning your child from a previous marriage would have an ownership in your home. Meanwhile, your surviving spouse would take one third of your separate personal property, with the remaining two thirds going to your children. Your spouse would retain a life interest in one third of any separate real property.
Confusing, right? And consider further that any stepchildren you may have whom you have not legally adopted are left out completely - they are simply not considered heirs by state law, which presumes a preference for blood relatives. If you have children who were conceived using assisted reproductive technology, that complicates things as well. And what if you'd rather not leave anything to your family? If, for example, you live with someone to whom you're not married, that person will not inherit anything under state law, and neither will close friends. But with a good estate plan prepared by an experienced Texas estate planning lawyer, you can control the entire process.
Saving Time and Expense
While deciding who inherits your property is by far the biggest advantage of creating an estate plan, there are many other benefits as well. Texas has two methods of estate administration - independent and dependent. With an independent administration, once the executor has been approved and an estate inventory filed with the court, the executor can then proceed to manage the estate without further need for court approval. On the other hand, with a dependent administration, the court must approve all the executor's actions, which increases cost and delay. So, how to ensure that your estate is independently administered? Specify it in your will. If you die without a will providing for an independent executor, all your heirs can agree to an independent administration, but the court is not required to approve it. And before that can even happen, all the heirs must be identified. Under Texas law, anyone to whom you are related is a potential heir when you die intestate, so even the process of figuring out who your heirs are can be time consuming and expensive.
Designating a Guardian and Creating a Trust
An estate plan allows you to designate a guardian for your minor children. It also enables you to place property in trust to be managed for your children's benefit until they are legally of age. Similarly, you can create a trust and designate a trustee to hold and manage property for your spouse. A trust can also be a useful vehicle for minimizing or delaying any estate taxes that may be due.
Appointing an Agent to Manage Financial and Health Decisions
A good estate plan doesn't stop with a will. It also includes a statutory durable power of attorney
, through which you can appoint an agent to handle financial matters should you become incapacitated in the future. Additionally, you can appoint someone to make health care decisions for you if you can't make then for yourself, via a medical power of attorney
. And you can prepare a Directive to Physicians and Family
, through which you can express your desires concerning end-of-life care.
Contact a Tyler Estate Planning and Asset Protection Attorney
My goal as an attorney is to provide you with an estate plan that suits your circumstances and meets your needs. As the saying goes, "Nothing is certain but death and taxes," and I can help you prepare for both. Call me today at 903-944-7537 for a consultation and let's get started.