Articles Posted in Estate Planning

At McCulloch & Miller, we often speak with clients who struggle to find the motivation to begin their estate planning processes. Once we make clear to these clients just how important estate planning can be in Texas, their interest grows in getting started as soon as possible. With so much on the line, we try to emphasize to our clients that estate planning does not have to be difficult but that it is still an extremely important process that deserves their full attention.

What Is Estate Planning?

Importantly, estate planning is not only the process of creating a will. Estate planning allows you to protect your property and ensure that your assets are distributed exactly as you want them to be distributed in the event of your death. Estate planning can include drafting wills, establishing trusts, naming beneficiaries, and designating a power of attorney in case of incapacitation. Estate planning can also help you figure out how to save money on taxes, which benefits you in the present as well as your loved ones in the future.

What Happens Without an Estate Plan?

In Texas, when a person dies, his or her loved ones must go through the probate process so that a court can determine how to divide up his or her assets. Without estate planning documents on hand, this process can be costly, drawn out, and draining. The lack of a solid estate plan can also lead to high levels of tension among family members while the court tries to determine how to divide the decedent’s money and property.

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One of the most frustrating aspects of estate planning can be having to pay out a percentage of assets to the government or to others who have a claim on your estate. In Texas, tax implications depend on the estate strategy that you choose. Today, we review some of the tax implications of estate planning with an eye toward minimizing tax liability.

What is an Estate Tax?

Texas is one of 38 states that does not require residents to pay an estate tax. In states without this benefit, an individual’s estate will have to pay a certain percentage of their assets to the state government upon that person’s death. This is good news: by living in Texas, you already avoid a tax that residents of some other states will have to pay.

Texans do, however, still pay a federal estate tax. This kind of tax can be generally broken up into three different taxes: the estate tax, the gift tax, and the generation-skipping transfer tax.

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Finding out you are the beneficiary in a decedent’s will can be a small dose of good news in the midst of experiencing grief and in the process of adjusting to life without your loved one. Sometimes, though, a decedent’s beneficiaries are not negatively affected by the death of the person that leaves assets to their name. In this case, the law calls this particular kind of beneficiary a “laughing heir.”

A laughing heir is a beneficiary who was distantly related to the decedent and likely has very little reason to be saddened by that person’s death. If a decedent leaves behind no spouse, children, siblings, or parents, for example, he or she might have chosen to give their assets to a relative that he or she did not know very well.

If the decedent died without a will or estate plan, the probate court might divide his or her assets using the law of intestacy – this essentially means that the decedent’s closest living relatives will inherit his or her assets. When the closest living relatives are distant relatives, those relatives might be considered laughing heirs.

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As you go about your estate planning process, you will necessarily think about who you want to be the beneficiary or beneficiaries of your assets. If you are leaving behind money for your children, you have worked hard to earn that money and keep it safe for future generations in your family. If you have a child with poor money management skills, then you might be worried that the money will be spent frivolously. In this blog post, we go over a few ways you can protect estate assets from heirs who might be at risk for depleting assets you leave behind.

Option One: Spendthrift Provisions

One solution to the problem of untrustworthy beneficiaries is creating a trust with a “spendthrift provision.” This kind of provision essentially puts limits on how a beneficiary can use the money he or she inherits in a trust. For example, you can explicitly state that you only want a beneficiary to benefit from a trust if he or she is gainfully employed. You can write that the money is only to be used for specific purposes, such as rent, utilities, or car payments. You can also give restricted deposits so that the beneficiary does not receive too much money from a given payment.

Setting up spendthrift provisions requires specificity in order to eliminate the risk that the provision can be interpreted in ways that are different from how you intended. Contacting a qualified attorney to help create your spendthrift provision is always a good idea.

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Unfortunately, when a loved one leaves behind friends and family members, he or she also leaves behind the possibility that there will be disagreements about how to distribute his or her assets. Even when a decedent writes a will or other detailed estate plan, beneficiaries can often disagree about how to interpret the documents or how the money and property should be dispersed. On today’s blog, we talk about ways of resolving estate disputes, which tend to come up when beneficiaries don’t all agree about how to effectuate a loved one’s will.

If you and other possible beneficiaries of a will have found yourselves disagreeing about how to interpret a loved one’s will, the first thing you can do is try to resolve the dispute outside of court. You could, for example, hire a mediator that could hold sessions for the group and try to get everyone to a place where they agree. Sometimes, individuals that wish to contest the contents or interpretation of a will can be persuaded not to pursue their claims simply through the mediation process.

If the group is still at an impasse, any individual that wants to challenge a will can file a lawsuit with the probate court. Any challenges must be filed within two years of the will being admitted to the probate court. Importantly, only those with something called “standing” are legally able to challenge a will; essentially, this means that a party contesting a will must be either the decedent’s spouse, family member, or creditor. Those without any real grounds to file the lawsuit will generally not be heard by the probate court.

In thinking through the probate process, there are various nuances and procedures that are important to keep in mind. One term that you might hear while undergoing probate is “dependent administration” vs. “independent administration.” While there are similarities between dependent and independent administration, it is also important to know the difference between the two as you prepare to complete the probate process.

What is Independent Administration?

As we have discussed previously on our blog, the executor of an estate is the person in charge of setting a decedent’s estate. In Texas, independent administration allows an estate’s executor to have minimal court supervision during the probate process. This kind of administration is only allowed if the descendent named a specific executor in his or her will, or if all of the estate’s beneficiaries agree to a specific executor.

When one of these two conditions is met, the court is then minimally involved in the probate process. Typically, all that needs to happen for probate to move forward is that the judge must approve the list of assets in the decedent’s estate. The estate’s executor can then distribute the assets from there.

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At McCulloch & Miller, we always advise our clients to begin their estate planning processes on the early side. The reality for many clients, however, is that life circumstances change as time goes on, which is why it is important to update your estate plan as you experience significant shifts in your life. Importantly, divorce can have implications for those who have already laid out their estate plans. If you have gone through a divorce, it is important that you speak with an estate planning attorney as soon as possible so that you can make sure your affairs are in order.

How Does Divorce Change My Estate Plans?

If you have named your spouse as the main beneficiary in your estate, he or she will likely remain the beneficiary until you actively make a change in your estate plan. Thus, even if you get divorced and no longer want your ex-spouse to be named in your will, you cannot just assume that divorcing that person will remove him or her from your estate plan. You must update your estate plan to specify which assets, if any, you would like to leave for your former spouse.

How Do I Update My Estate Plans?

To update your estate plans after a divorce, there are several things to keep in mind. First, you will want to consider revoking your previous will so that no one questions whether or not it still stands after your death. By revoking the will entirely, you can leave no room for doubt that your wishes are encapsulated in your new estate planning document.

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In the past, we have covered power of attorney on our estate planning blog, reviewing when it might be appropriate to have someone step in to make medical decisions on your behalf. As discussed, the concept of “power of attorney” allows another individual to make decisions on your behalf. The individual will only be able to make decisions for you, however, if you are both incapacitated and declared incapacitated by your doctor.

There are times when individuals want to revoke the power of attorney they have assigned, such as when the power of attorney is not performing his or her duties diligently when there are signs of elder abuse, or when there is another person that might be better suited for the job. Today, we review this process and clarify the steps necessary to revoke a Texas power of attorney.

What Steps Are Required in Texas to Revoke a Power of Attorney?

There are several possible avenues you can take if you would like to take away power of attorney from an individual you’ve previously assigned to the role. As long as you are physically and mentally able to revoke the position, you can complete these steps at any time.

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One of the most important – and dreaded – parts of estate planning is gathering all of the necessary documents to make sure no stone is left unturned. From birth certificates and marriage licenses to vehicle titles and tax returns, the number of documents to sort through can feel overwhelming. If you are beginning this process and you have discovered that you’ve lost one or more of your important documents, don’t fret – you are not alone. Today’s blog will focus on how to replace what you need in order to move forward in your estate planning process.

How to Replace Your Documents

The process for replacing lost documents depends on the type of document and the circumstances under which you need to replace them. Most commonly, in our practice, we meet with clients who have no idea where their birth certificates might be located. To start replacing a birth certificate, contact to Texas Department of State Health Services here. You can fill out a regular or expedited request to receive your birth certificate.

For marriage licenses, you must contact the specific court at which you obtained your marriage license. By searching for the court and contacting the court’s clerk, you can get copies of your marriage license mailed to you. For divorce decrees, the process is the same.

Replacing a driver’s license can be more complicated. To go about getting a new license, you must apply in person at any DMV office with a completed form DL-43. You will also need to bring documents that prove you are who you say you are – for example, a passport, a birth certificate, or another piece of paper that verifies your identity.

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The thought of organizing assets for loved ones after your death can feel daunting, especially when the Texas probate process seems so complex. Avoiding probate is possible, though, with the right tools, circumstances, and expertise on your side. One way to bypass probate with regards to real estate is the special deed, which allows for property to transfer from the descendent to the beneficiary more efficiently than it would through probate. On today’s blog, we review the special deed and some of its characteristics to keep in mind when undergoing the estate planning process.

What is a Special Deed?

A special deed is a legal document that transfers real estate from one person to another. When a property owner dies, if there is a valid special deed, that property does not need to go through probate at all.

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