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WILLS, TRUSTS AND ESTATE PLANNING

STAY IN CHARGE

Powers of Attorney, an Advance Directive, a Mental Health Directive and Declaration of Guardian help keep you in charge.

Most people begin planning for their future by thinking about a Will or perhaps a Trust.

Plan first for life.

How do you want to spend your retirement? What should happen when you get sick? How can you stay in charge?

The Garrett Law Firm can help you stay in charge, arranging for your choices to be known and your decisions followed. We can help you protect your spouse and dependents and leave a family legacy.

 

Contact an Austin estate planning and probate attorney for help.

There are several documents you should consider in addition to a Will – or if you never have a Will. These will help you stay in charge and avoid guardianship. For other suggestions, see Alternatives to Guardianship.

A HIPAA Medical Information Release tells your doctor and other health providers who they can talk to about your health and who can see your chart. These people are your eyes and ears.

A Medical Power of Attorney appoints someone as your voice. Who should your doctor listen to if a treatment decision must be made and you are unable to communicate? About half of people over 65 arrive at the hospital unable to direct their care.

A Declaration for Mental Health Treatment is needed to convey your wishes in case you are among the one in three nursing home residents who becomes temporarily deluded, disoriented or deranged due to a medication error or have one of the many old-age transitory conditions which mimic dementia.

A Declaration of Guardian in Case of Need names whom you would want to make personal and financial decisions for your if your Medical Power of Attorney and Durable Power of Attorney are insufficient, or if the people you name in them are unable or unwilling to act. It lets you keep a facility, facility employee or other paid non-family caregiver from inserting themselves should you ever need a guardian. You can also name other people whom you do not want as guardian.

An Advance Directive to Physicians (sometimes called a “Living Will”) tells your doctor what to do if you are found to be in an irreversible coma or if, even with available medical treatment, you are not expected to live more than six months.
Stay in charge. Document your choices while you are still able. To help you talk about this difficult subject with your loved ones, consider “Your Conversation Starter Kit”, available www.theconversationproject.org.

A Durable Power of Attorney grants and limits the power of someone you name to handle your finances. You can appoint co-agents who must act together (much as banks dislike this). You can require reports to a third person. Whatever your Durable Power of Attorney says, be careful whom you name as your agent. Elder fraud is rampant. An estimated 1/3rd of elder fraud is committed using a Durable Power of Attorney, mostly by family members.

Other documents to consider include

A Declaration of Guardian of Our Minor Children. While you can also do this in your Wills, it is easier and cheaper to replace this stand-alone document than to add a Codicil to your Will as your children grow and their needs change.

A Family Caregiver Agreement is particularly helpful if the VA, a Medicaid waiver program or a long-term care insurer will pay a family caregiver. It can also clarify everyone’s expectations and give you and your caregivers a way to modify the arrangements and a way out as the situation changes.

An Out-of-Hospital Do Not Resuscitate order and, under the right circumstances, two other physician’s orders: a Do Not Hospitalize order and an in-hospital Do Not Resuscitate order.

An Anatomical Gift Declaration allows you to give certain body parts or your whole body for certain purposes or for any purpose to specified organizations or to any organization. Checking “organ donor” on your driver’s license is not enough. That tends to result in only blood and skin tissue being donated.

You can also donate your brain to help cure Alzheimer’s and mental illness such as schizophrenias and bipolar disorder. www.neurobiobank.nih.gov

An Appointment for Disposition of Remains states what you want and who you want to do it, avoiding uncertainty, indecision and family disputes.

By deciding now, you can stay in charge. These documents can be important Alternatives to Guardianship.

WILLS

In Texas settling an estate by probating a properly executed Will runs about one-quarter the average nationwide cost and generally takes much less time.

Many people have heard horror stories of contested Wills or of lengthy or expensive probates in other states or in years gone by. They want to “avoid probate”. There are several ways to do that.

Most of your assets can pass outside of your Will and, thus, outside of probate. Since Texas Medicaid can only recover from the probate estate (the estate which passes under your Will or, if you have none, to your heirs at laws), passing property outside your Will and outside your probate estate is one way to provide for your heirs and avoid Medicaid Estate Recovery.

Whether or not you have a Will

  • your assets must be inventoried because
  • your debts must be paid and
  • your remaining property must be distributed according to law.

In Texas, that is almost all there is to probate, if you have a properly executed Will. But if Medicaid estate recovery is not a concern and your estate is small, you still may not want a Will.

For most people, the principal asset in the estate is the home. If that is all there is, perhaps because the bank account was held “joint with right of survivorship” or “pay on death,” passing outside the estate, an Affidavit of Heirship can be recorded in the county deed records. While this indicates presumed ownership, it does not itself transfer title. A court will not enforce an Affidavit of Heirship until it has been filed in the county deed records for five years with no one complaining that it is incorrect. But In certain situations title companies will treat an Affidavit of Heirship as though it transfers title. The buyer then relies not on a Court Order and a Distrbution Deed but on the title insurance.

If, in addition to the home, the person left no more than $60,000 in personal property (such as furniture and cars) and no more than $75,000 in financial assets (such as bank accounts), their estate might be settled using a Small Estate Affidavit. Note, however, that a Small Estate Affidavit can only pass the home to the surviving spouse or a minor child who lives in it.

Before choosing not to have a Will, make sure that Texas law will distribute the property the way you want. See the heirship charts on the website of the Travis County Probate Court.

Dividing up the furniture and other personal possessions often causes the greatest family quarrels. If you are confident that there will be no hard feelings in dividing these items, you might “avoid probate” by passing everything else outside your Will. You can title bank accounts “Pay-on-Death” or, with your spouse, “Joint with Right of Survivorship”. You can title brokerage accounts “Transfer-on-Death.” You can designate beneficiaries of life insurance policies, 401(k)s and IRAs. You can transfer title to your vehicle using a DMV form. You can transfer title to real property using a Lady Bird or a Transfer on Death Deed. You can pass furniture and personal effects using a Memorandum of Personal Property and Heirlooms, executed with the same formality of a Will but, unlike a Will, not submitted to or accepted by a Court – unless there is a dispute.

So why have a Will?

For all the loose talk about probate, a Will can make settling your estate faster, cheaper, easier — and make sure that whatever happens, your property passes the way you want. Your family can be spared the financial and emotional burden of a determination of heirship and, possibly, a court-supervised administration of your estate. Your property can be kept in your family and out of the hands of some current or future in-law and his children from another marriage. You can transfer assets to a Special Needs Trust while preserving someone’s eligibility for Medicaid and Supplemental Security Income. This is very important if your spouse may someday need Medicaid or if one of the people to whom you want to leave things becomes disabled.

A Will lets you decide who will handle your affairs, including filing your last tax return and, if necessary, handling your remains. Life is full of “what ifs.” A Will lets you provide for them.

The idea of a Will is simple. It is the language which can be confusing. See Legal Terms 

What if you write your own Will?

Without a valid Texas will your property passes under Texas rules of descent, which are not what you may imagine.

What if you get one from the internet or from a financial planner or an insurance agent which works in New York or Florida but not in Texas?

Would you even know? Would you only think that you have a valid Texas Will? What would happen if you did not?

All too often those Wills have a problem: they were not properly executed, or are insufficient, or an out of date, online DIY attempt, which might work somewhere but not in Texas.

Texas is a community property state. If you are married, anything acquired during the marriage is presumptively community property. You may also have separate property: property acquired before the marriage, an inheritance, gifts and similar funds which are never commingled with community property. Some of it is personal property. Some of it might be real property.

last will signature

If you do not have a Will and all your children are also the children of your current spouse, your half of the community property would go to your spouse. Whether you own your home together or one of you owns it separately, the surviving spouse has the right to live there for life.

 

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Blended and non-traditional families need wills, and sometimes trusts, for a fair distribution of property.

Blended and non-traditional families without Wills can face unexpected situations. When you die, your community property interest in the home is divided among your children (though you surviving spouse has the right to live there for life). Two-thirds of your personal property goes to your children — born or adopted by you — but not to step-children or children for whom you are the legal guardian. One-third goes to your current spouse. If you die before your spouse, your children do not inherit from her unless they are also her children. You can solve this problem with a Qualified Terminable Interest in Property (a “QTIP Trust“), a combined Family Trust and Marital Trust or other Trust arrangement. You may try to solve it by Will. Since most people leave things to their spouse, this may not be foolproof if you die first.

You can name your children’s guardians in your Will. You can also name them in a separate document which you can change without changing your Will. (People who are great with little ones may not be skilled at parenting teens.) You and your spouse can also sign a special Declaration of Guardian for Our Minor Children in case of Need naming someone if you become unable to act.

TRUSTS

Is a Will enough? Maybe. But maybe you need more. Consider a Trust if

  • you own real estate outside of Texas;
  • you or your partner have a child from another relationship or have inherited family property which should stay within that family;
  • you do not have family close by who can help you in your old age, perhaps because you are all of the same generation; you want to
  • protect your spouse and children from potential creditors and predators;
  • you want to protect a spouse who may someday need Medicaid or anyone who may someday become disabled;
  • you want funds to go for a specific purpose, such as education;
  • you want to benefit people living in a state or country with inheritance tax;
  • you do not want your plans to become public, perhaps because you are not leaving the same amount to each of your children;
  • you want to preserve your property for multiple generations;
  • you want to protect your financial legacy from a decrease in the federal estate and gift tax exemption;
  • you want to protect against a possible elimination of the step-up in basis rule, which allows people to inherit real estate and securities at the value they have when inherited

In many cases, the answer is a Trust. A Trust is simply an agreement by which one person is trusted to handle property for another, sometimes with positive tax results and sometimes preserving eligibility for government benefits such as Supplemental Security Income and Medicaid. Sometime a Trust can be incorporated in a Will. Sometimes a Trust should be a separate document.

When you contribute to a 529 college savings plan or to a 401(k) retirement plan, you are in essence creating a Trust. You are trusting someone to handle your money for the person who will eventually receive it.

A Trust can become effective now, when a certain event occurs, or when you die.

A Revocable Living Trust is a trust which you can cancel (revoke) and takes effect while you are alive. It can allow one spouse to arrange assets for a better after-tax return or for other purposes if the first spouse is no longer medically competent to act. It can keep inheritance arrangements private. It can specify where and how you want to be cared for and require periodic assessments by a geriatric social worker. But a Revocable Living Trust cannot protect assets from creditors. It cannot exclude assets in determining financial eligibility for Medicaid. In Texas, it can actually interfere with Medicaid planning. Over the years, it can even have a poor after-tax result. As with everything else, your circumstances determine how useful it may be for you. Your circumstances will change. So can your revocable living trust but when you pass, it becomes irrevocable.

 

Children of a prior marriage can be protected by passing property to those children on the death of the new spouse.

When a trust is irrevocable, it can only be changed in limited circumstances and sometimes only with court permission. A common example of an irrevocable trust is a testamentary trust, a trust created by a Will. You will not be able to change this after you are gone.

A testamentary trust could be used to provide both for your spouse and for the children of the current or a previous marriage or for the grandchildren of that marriage. This is a Qualified Terminal Interest in property or “QTIP” Trust. Other families use two separate trusts. These are called a Marital and a Family Trust, also known as an A/B Trust or as a Credit Shelter and Bypass Trust.

Your Will could contain a contingent trust to be created if a beneficiary you name may apply for Supplemental Security Income or Medicaid, is under a certain age, may struggle with alcoholism or drug abuse, lives in a state or country with an inheritance tax, or if some other specified event arises such as bankruptcy or divorce.

A testamentary special needs or other trust can protect your spouse.A testamentary Special Needs Trust can let your surviving spouse be much more comfortable and enjoy life much more than she would relying on Medicaid’s measly $75 monthly personal needs allowance. You won’t be there to bring her a new pair of slippers or pay her cell phone bill. But your Will can create a Special Needs Trust to pay for these and similar items and services without completely disqualifying her from the Medicaid she may need to pay for nursing home care. Some people call these Spousal Support Trusts.

 

A trust can protect someone with poor money management skills, poor boundaries or a poor work ethic.Deciding how to benefit children and grandchildren and prevent them from having too much money, exposing them to youth’s temptations, can also be handled with a testamentary trust. You can allow for payments for a college education or a down payment on a house. You can determine what percentage can be paid by different ages and under what conditions. You can give the trustee absolute discretion over whether to pay anything at all.

Family can advise (and remove) the trustee of a Special Needs Trust.

If you have a family member with special needs or if you yourself have special needs or have been seriously injured, you may prefer to create a Special Needs Trust. Providing a distribution plan and a life care plan is an important part of making this work during the years to come.

If you are not able or eager to handle the burden of investing, managing and accounting for the money, a professional trustee can do so. Your financial advisor or investment manager can become the financial trust advisor. A family member or friend can be a distribution trust advisor or trust protector, advising the trustee on what to buy or replacing the trustee if necessary. Or a group of family members and friends can be a trust protector committee.

It takes at least five months to probate an estate, usually more. A pet trust can care for your pet immediately.

One form of Trust which should be separate from your Will is a pet trust. Fido may think that he is a member of the family and so may you. But the probate court’s family allowance will not include money for kibble and care while your estate is being settled.

There are other ways to provide for your spouse and your children — and for yourself. Cost, control and complexity may guide your choices.

15-20% of estate plans fail due to changes in assets, changes in health, changes in relationships or changes in the law.

Review your estate plan. Ask yourself

  1. Did I acquire any real estate this year?
  2. Did I acquire any accounts which have a beneficiary designation?
  3. Has my family situation changed?
  4. Does my estate plan still do what I want?
  5. In what name is my property owned? Do I need to make changes about survivorship and rights of survivorship?

Whatever you choose, review your documents with a lawyer every few years. Your documents should work when you need them.

Terry Garrett, an experienced Austin estate planning and probate attorney, can help you stay in charge, save money and leave the legacy you want. The Garrett Law Firm works with individuals and families throughout Central Texas to create practical, low-cost solutions. 800-295-3449

It’s never too early to plan for your future.

Schedule a Consultation Today

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