In crafting a comprehensive estate plan, it’s essential to leverage various estate planning tools effectively. There are five primary tools at your disposal: wills, trusts, powers of attorney, living wills, and life insurance. Each of these instruments offers unique attributes that can significantly contribute to your estate planning process. Depending on your specific circumstances, you may choose to utilize all, several, or just one of these tools. Should you have any queries regarding the concepts covered in this article, don’t hesitate to reach out to the Law Office of Bryan Fagan for a complimentary consultation. Our team is ready to address your concerns and offer insights into tailoring each of these estate planning tools to meet your individual needs and preferences.
Wills
Whatever you own at the time of your death will require passing on to someone in some way. Either you can leave it to the state to do it for you or you can create a will that can handle it for you with the help of an executor. Certain types of property, such as insurance policies and retirement accounts, can be passed down to others without the need for a will. If you die without a will the intestacy laws of Texas will go into effect and a probate court judge will oversee paying debts and distributing property according to those laws. If this doesn’t leave you feeling a bit queasy, I don’t know what will.
To draft a valid will, you must be competent to create a document like this. That means that you must be of sound mind and understand the consequences of what you are creating. Going further, this means that you need to understand the property that you own as far as assets, and the relationship that you have to the property and then understand that by creating a will you are disposing of that property in a specific way. You’ve likely watched a movie or television show where someone challenged a will because the testator, the person who created the will, was not of sound mind.
Trusts
If you create a trust, then you are agreeing with your trustee that he or she should hold legal title to various assets of yours on behalf of beneficiaries that you designate ahead of time. A trust is a way for you to avoid paying taxes in certain situations (legally) and avoid the probate process when your heirs or spouse may otherwise need to follow through and file probate after you pass away. In Texas, there are multiple kinds of trusts that you should be aware of. Here is an overview of trusts and how each may be able to assist you in your estate planning.
A living trust is created during your life, unlike a testamentary trust, which is created within your will and only takes effect after you pass away. A testamentary trust would only go into existence after your death as established in your will or through actual trust documents itself. The thing that you need to consider is that if you create trust through your will then there is no going back. If the trust comes into being after you pass away, then you obviously cannot revoke the trust or the will itself. You need to be very sure that what you create as far as trust inside of your will reflects your actual desires and wishes.
Avoiding probate in estate planning
On the other hand, a revocable trust can be pulled back during your life. You can also update or change these types of trusts so long as you are alive and determined competent to do so. One of the main factors that drive people to create trusts like these is that you can avoid probate if done correctly. In some situations, trusts actively shield property from creditors, whether during your lifetime or after your passing. Let’s examine a few types of trusts that may be helpful for you.
You can change, revoke, or terminate a revocable trust, unlike an irrevocable trust, which cannot be altered or changed due to its creation and nature. Probate can be a lengthy and expensive process depending upon the circumstances of your estate. Probate involves the executor of your will, a potential heir, or a beneficiary filing a legal case with a probate court in the county where you resided to have a judge oversee the process of paying creditors and distributing property. It requires a time and money commitment that can be burdensome not only to you but also to your family and beneficiaries. Here is an example of why that is the case.
Ensuring timely inheritance for beneficiaries in estate planning
Imagine being a beneficiary of yours who would stand to benefit a great deal from the property that you had promised him or her in your will. For example, if you left a significant amount of money to a person that you knew had issues holding down a job due to a disability then the sum of money that would be going to him or she could be lifesaving in many ways. However, if your will gets wrapped up in the probate process for months then lifesaving or at least life-altering amounts of money may be kept from here as a result.
All the while, the money may not be invested but rather it could just park in a bank account and make very little interest. For this reason, many people think long and hard about probate and how to avoid going through the process at all. When it comes to estate planning you need to be strategic and intentional about what you do on many levels, not the least of which is due to wanting to avoid probate and save your beneficiary’s time and money themselves in addition to your estate.
Benefits of revocable trusts in Texas estate planning
A revocable trust can help you avoid probate and for that reason, it is extremely popular among Texans who want to engage in sensible and results-oriented estate planning. In fact, as a substitute for a will, a revocable trust can perform many of the same maneuvers as a will while also insulating you from creditors during your lifetime. This can be important if you are a high net-worth individual and you may be in danger of losing property in a lawsuit. Working with an experienced estate planning attorney regarding these possibilities and situations is crucial. You want a trust that can stand up to scrutiny before a judge and accomplishes what you want it to for the benefit of the people in your life.
A trust can help you best when you name a person as trustee that can exercise sound judgment when it comes to distributing property at their discretion. If you need to update or change a trust during your lifetime it is difficult to do so. However, there are certain circumstances under which an irrevocable trust can be amended. However, it will likely take a court order to do so. Let’s walk through a few of those situations right now where you can update a trust.
Protecting government benefits in estate planning for disabled individuals
I’d like to address a specific scenario related to special needs trusts. When establishing a trust for someone with a disability or impairment, it’s crucial to manage the trust property with care and intentionality to protect their interests. This ensures that the property designated for the individual’s benefit is managed appropriately and safeguarded. As discussed earlier, it’s essential for the trustee to exercise sound judgment when making distributions from the trust, particularly during times of need or significant life events for the beneficiary.
Another key point to this discussion is that many times a disabled person needs to pay special attention to their government benefits regarding property left to them by a well-meaning friend or family member. In most cases, government aid is based upon requirements that the person not earn over a certain threshold or own property more than a certain dollar figure.
If you’re estate planning for someone in this situation, it’s beneficial to familiarize yourself with the specific government benefits they receive and understand what needs protection. If he or she is capable of it then it may pay for you to speak to them about the situation and what you can do to help while not jeopardizing their benefits. There may be a requirement that you were unaware of or a potential planning instrument that we discuss today which could be more or less advantageous as a result.
Preserving Medicaid benefits in trust distributions
A special needs trustee needs to be able to exercise especially good judgment, therefore, when it comes to handling matters related to the trust. If the trustee of your trust distributes money in an excessive way or without proper planning, then their good intentions may inadvertently cause the beneficiary to lose eligibility for a government health insurance plan like Medicaid.
In many cases, the relatively small amount of money that would be going to them in a trust distribution would pale in comparison to the financial benefit of having health insurance. This is especially true if the person has a surgery planned, and receives medication through Medicaid or a range of other possibilities that may be an issue. What the trustee can do to avoid situations like this is to pay money directly to those people or entities, like a doctor, creditor, or landlord, that may need money from the disabled person rather than pay the beneficiary directly.
Keep in mind that Medicaid has a process where it “looks back” up to five years to determine eligibility. The beneficiary would then be liable to have their circumstances viewed under this lens and it could be unfavorable to have large amounts of money distributed to them under any circumstances. Even if the person is crafty and intentional about how they receive, spend, and hold the money, it can still jeopardize their government benefits if the trustee releases funds in a manner that wasn’t fully thought out.
Power of attorney
There are two types of power of attorney that can be helpful to a Texan while performing basic estate planning functions. We won’t get too far into any one topic, but I at least wanted to spend some time with you today here on our blog to help familiarize you with their names. The first is a financial power of attorney which allows the person named with power of attorney to manage financial areas of your life if you become unable to do so. This could happen, for example, if you become incapacitated. The other type of power of attorney, known as a healthcare power of attorney, pertains to healthcare circumstances. This document can be particularly crucial if you require medical care toward the end of your life but may not be capable of making sound judgments in such situations.
How to use life insurance to plan your estate
Life insurance is a simple step to take to provide for your loved ones after you pass away. The other type of power of attorney, known as a healthcare power of attorney, deals with healthcare matters. This document becomes especially vital if you need medical care near the end of your life but may not be able to make sound judgments in such situations. When we spoke earlier of the impoverished individual in your life who could need a cash infusion after you pass away, a life insurance policy where he or she is the named beneficiary could do wonders to help this person out of an undesirable situation. Paying rent, buying groceries, paying medical bills and similar expenditures are all good examples of ways that a person can utilize funds left to them under a life insurance policy in ways that are advantageous to them.
Do you need a will?
The most common estate planning tool is a will, which can safeguard your property from government intervention posthumously. This observation isn’t meant to convey any political stance or critique of the government; rather, it emphasizes the importance of having a will to dictate the distribution of your assets upon your passing. Even if you’re familiar with Texas laws regarding property distribution, this isn’t a substitute for deliberate estate planning. Creating a will serves as the cornerstone of effective estate planning in your situation.
If you are an adult, you should have a will. I say this without reservation because there are multiple reasons why you should think about creating a will today even if you are not wealthy. There are some preconceived notions in our society about wills and the people who create wills. However, it is not only wealthy people who create wills. Rather, people of all different stripes create wills each day. Most of these folks are not wealthy and are not trying to do anything overly creative with their estate. Rather, drafting a will is an exercise that anyone can and should perform to exert control over an important area of their life.
A will directs property to specific individuals and places, covering tangible assets like your house and intangible assets such as bank accounts and investments. The person overseeing your will’s execution is the executor, who can be anyone you choose. While many select their spouse for this role, it’s not mandatory, and other individuals may be better suited. Considering someone else may be wise, especially if you prefer to spare your spouse from immediate duties due to the emotional strain of your passing.
Conclusion
A well-rounded estate plan relies on the strategic use of various estate planning tools, including wills, trusts, powers of attorney, living wills, and life insurance. Each of these instruments offers distinct advantages that can enhance the effectiveness of your estate planning strategy. By carefully considering your individual circumstances and objectives, you can determine which combination of tools best suits your needs. Remember, the Law Office of Bryan Fagan is here to offer expert guidance and support, ensuring that your estate plan is comprehensive and tailored to your specific requirements. Reach out to us for a complimentary consultation and take the first step towards securing your legacy and protecting your loved ones’ futures.
Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan
If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed estate planning attorneys offer free-of-charge consultations six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about the world of Texas estate planning but can also help you fine-tune your own estate planning goals as well as the methods you employ to help achieve those goals.
Other Related Articles:
- Real Estate Evaluation in Texas Estate Planning
- The Importance Of Wills In Texas Estate Planning
- Mastering Estate Planning in Texas for Non-U.S. Citizens
- Texas Probate Guide: Unraveling Legal Intricacies for a Seamless Journey
- What Happens to Debt in Texas Probate?
- The Role of Probate Courts in Small Estate Settlement
- Benefits of Small Estate Affidavits for Simplified Probate
- Common Misconceptions About Probate In Texas
- The Importance Of Updating Your Will In Texas Probate
- How To Plan For Probate In Texas: Tips and Strategies
Bryan Fagan, a native of Atascocita, Texas, is a dedicated family law attorney inspired by John Grisham’s “The Pelican Brief.” He is the first lawyer in his family, which includes two adopted brothers. Bryan’s commitment to family is personal and professional; he cared for his grandmother with Alzheimer’s while completing his degree and attended the South Texas College of Law at night.
Married with three children, Bryan’s personal experiences enrich his understanding of family dynamics, which is central to his legal practice. He specializes in family law, offering innovative and efficient legal services. A certified member of the College of the State Bar of Texas, Bryan is part of an elite group of legal professionals committed to ongoing education and high-level expertise.
His legal practice covers divorce, custody disputes, property disputes, adoption, paternity, and mediation. Bryan is also experienced in drafting marital property agreements. He leads a team dedicated to complex family law cases and protecting families from false CPS allegations.
Based in Houston, Bryan is active in the Houston Family Law Sector of the Houston Bar Association and various family law groups in Texas. His deep understanding of family values and his professional dedication make him a compassionate advocate for families navigating Texas family law.
