Wills &Estate PlanningThe Will is the basic document for estate planning. In Texas, the Will can be handwritten, or printed and signed with two witnesses. This is the document that will provide clarity and direction to those who must carry out your wishes after you are gone.
Our next Wills & Wishes workshop will be held in January 2019.
Question: If I get a divorce, will my ex still receive some of my estate under my will?
Answer: No. Divorce cuts off the ex-spouse’s gift in a will executed before the divorce.
Besides being a bond of love, marriage is also an economic unit. Commonly, when writing the will, one spouse will leave the other spouse all or much of the estate. Each spouse also commonly names the other as primary executor.
Sadly, marriages often break up. Texas law recognizes that divorce breaks up the economic unit. While almost everyone changes their intent about gifts to the ex-spouse, many neglect to go back and change the will. Texas law takes care of that.
In Texas, if a person divorces, a gift to the divorced person’s ex-spouse in a will executed before divorce is void. An appointment of the ex-spouse as executor (or trustee or donee of a power of appointment or any other fiduciary relationship) is also void. The court will read the will as if the ex-spouse died before the testator.
Sometimes after a divorce, a person still does want the ex-spouse to receive gifts under the will. In that case, the divorced person must write a codicil to the will reaffirming the gifts, or making new gifts, to the ex-spouse. Also in the codicil, the divorced person must reappoint the ex- spouse to any roles such as executor or trustee.
The law also applies to all relatives of the ex-spouse who were named in the will. However, it does not apply to relatives of the ex-spouse who are also relatives of the divorced person, such as their children.
In a provision of the law that is surely not used much, a person can state in the will that he or she does want the spouse to enjoy the benefits of the will after any future divorce.
Merely being separated does not void any will provisions. Only divorce (or annulment or a declaration that the marriage is void) will do it.
Sources: Texas Estates Code §§ 123.001
Question: Can a Will written and executed in another state be recognized in Texas?
Answer: Yes. An out-of-state Will can be admitted to probate in Texas.
With the heavy migration of people from other states to Texas, many bring with them a Last Will that was drafted and executed elsewhere. Texas law is generally liberal in recognizing these Wills. However, Texas law also contains a number of provisions that make the Texas probate process go smoothly. Wills from other states may not take advantage of these provisions.
One great advantage of the Texas probate system is the independent administration. With an independent administration, the executor does not need to post a bond and may act without court supervision. However, the key to an independent administration is for the Will to request it. Wills from outside Texas almost never request an independent administration. Dependent administration is more costly and time consuming.
Another advantage of the Texas probate system is the self-proved Will. Texas lawyers append an affidavit to the Will that verifies its due execution. With a self-proved Will, the executor and her lawyer can attend the probate hearing alone. Many out-of-state Wills do not include the self-proving affidavit. For those Wills, the executor must bring one or two witnesses to testify at the hearing.
Finally, out-of-state Wills sometimes name the drafting attorney or a bank as executor. This is unnecessary and can further complicate the probate process.
These are just a few examples of the advantages of the Texas probate system.
To take full advantage of the Texas probate system, it is wise to update your out-of-state Will to comply with the Texas Estates Code.
Source: Texas Estates code §§ 251, 305, 505..
Question: Does the Will take the place of the family tree or Heirship Affidavit?
Answer: Yes. The Will overrides the family tree.
The default method to distribute an estate under Texas law is inheritance according to the family tree. When you write a will, you can choose to distribute your estate to anyone you wish. Whether through inheritance or by will, distributing an estate of any substance requires the approval of a probate court.
Heirship is the standard path for distributing an estate. Texas law defines the order of heirs. Depending on the family history of the deceased person, the person’s heirs begin with spouse, children, and descendants; then ascend to the parents; then descend through siblings, nieces and nephews, and down the family tree. The family tree can be complicated in complex families with multiple marriages and stepchildren.
Writing a will tells the world that you do not want to have your estate distibuted according to a set of standard rules. You’ve thought about it. You’ve declared your wishes. And you’ve appointed an executor to carry out your wishes.
The probate court will rule on an estate, whether it is distributed by heirship or by will. In an heirship proceeding, the court has a big job. It must determine who the heirs are, and carefully supervise the person who administers the estate. In probating a will, the court has an easier job. It must simply confirm that the will is authentic, and confirm that the person appointed by the will as executor is able to serve. Because the person who wrote the will made his wishes known and endorsed the executor, the court can turn the executor loose to do his job according to his conscience.
Source: Texas Estates Code §§ 32.001, 201.001-201.003, 202, 251.002, 256.
Question: Should I create a living trust?
Answer: While some people are sold on them for the wrong reasons, trusts can be very useful.
No need to avoid estate tax. A trust can be very useful in avoiding or minimizing estate taxes. However, since the minimum size of a taxable estate was raised to $5 million, very few people need to worry about estate taxes.
No need to avoid probate. A trust can be used to avoid probate, but generally this is not a good use for a trust. In Texas, a good Last Will can be probated with a minimum of fuss. Frequently, even if there is a trust, the estate must go through probate anyway. This happens when there are assets that were not transferred into the trust.
Manage property for a disabled person. A trust can be very useful for managing the assets of an incapacitated person, such as a parent with dementia. A good Durable Power of Attorney gives the authority to manage a person’s assets. However, financial institutions have become wary of accepting a Power of Attorney that they see as ‘stale.’ This means the managing adult child could at some point find it difficult to conduct business based on an old Power of Attorney. When an adult child takes over business management for the incapacitated parent, that might be the time to move all the assets into a trust.
Qualify for government benefits. A trust can make it possible for a person with some assets to qualify for government benefits without losing all the assets. Many government benefits, such as Medicaid, are only awarded to persons with virtually no assets. This means that a person with some money in the bank or maybe a rent house is disqualified. However, the person needing the benefit may be able to qualify by putting the assets in a trust. The rules and regulations are complex and subject to change, so the trust must be drafted and funded very carefully.
Sources: Texas Property Code Title 9. Texas Estates Code Ch. 751-752. 26 U.S.C § 2010.
Question: Can I file my Last Will in the county records for safekeeping?
Answer: Yes. But it may not ever be found again.
If you decide to do it, you must seal the will in an envelope before deposit. Your name and the names of up to three persons will be recorded on the outside of the envelope. The clerk’s office will issue a claim check to you, which you must turn in to retrieve the Last Will. If you lose the claim check, you must file an affidavit to get your Last Will back.
After your death, and only if someone notifies the clerk of your death, the clerk sends notice to the person or persons designated on the envelope. That designee can pick up the Last Will. If the designee fails, then the clerk will open the envelope and read the Last Will, then send notice to the executor or the beneficiaries.
Depositing the Last Will with the county clerk does not give it any special legal status. You can still revoke it with a new Last Will or amend it with a Codicil, and the new Last Will or Codicil does not have to be deposited with the clerk.
The best feature of this is that it prevents your Last Will from being lost. If you tell your executor that the Last Will is on file, then the executor won’t have to search your house for it.
What could go wrong? A few things. You won’t have ready access to your Last Will when the clerk’s office is closed. Your notice could be mailed to an old address. Notice could be mailed to one or more persons you later removed from your estate plan. Your will could be left unclaimed at the clerk’s office, because no one remembers to ask for it there, leaving your estate to pass through the heirship proceeding. If you later make a new Last Will revoking the old one, and the new Last Will is lost, the old one could be revived by default.
Source: Texas Estates Code § 252.001 et seq.
Question: Should I make my durable power of attorney effective immediately or upon my incapacity?
Answer: It depends on the purpose of the document, your stage in life, and your relationship with your agent.
If your power of attorney is effective upon your incapacity, then your agent cannot use it until you have been declared incapacitated, in writing, by a doctor. This protects you against unexpected actions by your agent while you can still act for yourself.
On the other hand, you should only appoint a person you trust implicitly to be your agent. You have the right to expect that person will act only in your best interest. If there is no one you trust implicitly, then making the power of attorney effective upon incapacity is probably best.
In this scenario, in order to act in your interest, your agent must first take you to a doctor to be examined and then declared mentally incapacitated. It can be embarrassing, and it can impair your right to act on your own behalf.
If your power of attorney is effective immediately, it does not take away your right to act. You can still conduct business as usual. But if you find yourself needing someone to sign papers for you when you are away, for example, your agent can do so with your power of attorney. Sometimes, people sign a limited power of attorney just so someone can sign a deed in their absence. If your agent has a durable power of attorney that is effective, he or she can take care of it.
On the other hand, your agent can sell your house without your knowledge. Don’t appoint an agent who would do that.
In this scenario, if your focus on business begins to fade, and your agent needs to act in your interest, the power of attorney is ready to be used. There is no trip to the doctor that draws the line between forgetful and incapacitated. The transfer of responsibility can be gradual.
The closer you are to the time when your agent may need to act for you, the more sense it makes for your power of attorney to be effective immediately.
Source: Texas Estates Code §§ 751.002, 752.
Question: Should I have my life insurance policy paid to my estate?
You can have your insurance policy paid to your estate, and in most cases that will work fine. Directing that all your insurance policies, accounts, and investments go to your estate at your death simplifies estate planning, because you can control all your assets through one document, your will. However, there are two conditions under which you would not want your insurance policy to pay to your estate. One is if your estate is very large, and one is if it is very small.
If your estate is very large, then adding your insurance proceeds and other accounts to it could push your estate into taxable territory. Today this is highly unlikely. Congress has raised the minimum size of a taxable estate to $5 million. This means an estate worth $4.9 million is not subject to the estate tax. But if you do have an estate worth $4.9 million, then adding your insurance proceeds to it might cause your beneficiaries to pay some estate tax.
If your estate is very small, then adding your insurance proceeds and other accounts could make them subject to claims by your creditors. Sometimes, an estate has more debt than assets, in which case some creditors (e.g. the credit card companies) get paid a fraction of what they are owed. Meanwhile the life insurance policy goes to your beneficiary free and clear. But if the life insurance policy is paid to your estate, then your creditors can be paid from those funds.
There is a way to route your life insurance policy proceeds through your will without having them subject to estate tax or creditors’ claims. That is to make the policy payable to “the trustee named in my will.” The trustee will hold the funds in trust, but they don’t become part of your estate. Add instructions in your will telling your trustee what to do with the funds. Then you’ve simplified your estate planning while avoiding the dangers of the estate tax and the creditors’ claims.
Source: Texas Estates Code § 111.052. 26 U.S.C. § 2010. Texas Insurance Code §§ 1108, 1104.023.