Frequently Asked Questions: Wills, Trusts and Probate|
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"As a sole practitioner, all of my clients receive my personal attention. I also have an experienced paralegal, who is responsive to the needs of my clients."
--Attorney Dean Shearer
Every client has unique family and financial circumstances. Your specific objectives are important to us.
Still have questions? Please contact us anytime! We look forward to hearing from you.
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Estate planning can be a bit intimidating. After all, who wants to think about "death" and "taxes?" We want to make the planning process as comfortable as possible. What kinds of questions do you have about Wills, Trusts and Probate? We have answered some of the more common questions below.
What are the advantages of estate planning?You choose your beneficiaries, as well as the amount and timing of distributions. - Select the Executor/Trustee/Guardian.
- Reduce probate expense and delays.
- Reduce death taxes.
- Incapacity planning for asset management during your lifetime.
- PEACE OF MIND!
Have you left a well planned estate for your family?
What is a Will and why should I have one?A Will is a written document in which you direct disposition of your property following your death. Advantages of a Will: - You determine who inherits your property (not a Judge) and any alternate beneficiaries.
- You select Executor of your estate and Guardian of your minor children (not a Judge).
- More efficient administration of your estate, resulting in reduced probate costs and delays.
- Reduced death taxes with proper planning.
Do you have a Will?
What property passes under my Will?- Non-probate Assets - (i) life insurance proceeds, (ii) joint tenancy with right of survivorship accounts, and (iii) death benefits under retirement plans generally do not pass under your Will.
- Probate Assets - generally everything else passes under your Will.
Who are named as beneficiaries of your life insurance and retirement plans? Do you have any JTWROS property?
Who is my Executor?An "Executor" is the person appointed in your Will to wind up your affairs (An "Administrator" is appointed by the Judge to carry out these duties if you have no Will). Who is named as Executor in your Will? Alternates?
Who will by my child's Guardian?- A Guardian of the Person has custody and the responsibility for the physical care of a minor or incapacitated person (such as your child; known as the "Ward") during the period of guardianship.
- A Guardian of the Estate is responsible for the Ward's assets during the guardianship. (This expensive and cumbersome process can be avoided by using a trust.)
Who would you want as Guardian for your children... or yourself?
What is Probate?The process of proving your Will is valid and appointing a "personal representative" (Executor or Administrator) for purposes of terminating your affairs. Probate administration requires the Executor to (i) locate your assets, (ii) file an Inventory with the probate court listing those assets, (iii) pay your debts, taxes and estate expenses, and (iv) distribute the remaining assets to those beneficiaries named in your Will, if there is one -- otherwise to your "heirs" determined under state law. - Dependent Probate Administration - in most states, including Texas, virtually all of the Executor's duties and actions are subject to advance approval by the probate court, which is an expensive and time consuming process.
- Independent Probate Administration - Texas law allows your Will to appoint an "Independent Executor" to act independently of control by Texas probate court, except for filing of the required Inventory.
Does your Will allow for Independent Administration under Texas law?
What happens if I die without a Will?- Judge appoints an Administrator, who must post a bond, and act subject to "Dependent" Probate Administration, which is an expensive and time consuming process.
- Heirship hearing must be held to determine identity of "heirs" under state law.
Will your estate be subject to unnecessary additional expense, delay and uncertainty?
Who are my "Heirs?"- It depends…your spouse may not inherit everything if there is "separate property" involved or if there are children from a prior marriage. If you have no spouse or children, then, basically, your "next-of-kin" inherit, who may or may not be those you would want.
Who would inherit your estate (by Will or by law)?
What is Community Property in Texas?- Separate Property - all property (i) acquired before marriage, (ii) acquired in another state during marriage which is not community property under the law of that state, (iii) received at any time by gift or inheritance, or (iv) acquired at any time by separate property funds.
- Community Property - all other property acquired during marriage (includes salary and income earned from separate property assets). Each spouse owns an undivided one-half.
If married, do you know what is community property and what is separate property? Do you need a Pre-Marital Agreement?
What is a Trust?A Trust is created when you (as the Trustor, Grantor, or Settlor) transfer legal ownership of property to another person or corporation (the Trustee) to be held for the benefit of yourself or another (the Beneficiary). - A Trust created during your lifetime is called an inter-vivos or Living Trust.
- An irrevocable trust is one which cannot be modified or dissolved by you as Trustor (typically used to avoid death taxes). When you as Trustor retain the right to modify or dissolve the trust, it is a revocable trust (typically used for probate avoidance).
- A Trust created under your Will is called a testamentary trust and does not come into existence until after your death, at which time the trust becomes irrevocable. Testamentary trusts may be used to save death taxes; to provide for a spouse's lifetime needs, while preserving the remainder for children; or to defer distribution of an inheritance until a child is of legal age or is financially and emotionally mature.
Is a testamentary trust appropriate for your Will?
Who is my Trustee?- A Trustee is the person responsible for administration of your trust estate, whether the trust is created under a Will or during lifetime. The Trustee is responsible for prudently investing the trust assets and making distributions of trust income and principal to the beneficiary within the guidelines established in the instrument creating the trust.
Who would you name as Trustee?
Why use a revocable Living Trust?- Advantages - avoids expenses and delays associated with probate of a Will; avoids ancillary probate for out-of-state real property; privacy; asset management on disability.
- Disadvantages - more complicated and expensive to create than a Will; still need a Will; assets must be transferred into trust during lifetime to avoid probate.
Is a revocable Living Trust appropriate for you?
What are Death Taxes?- Federal estate and state inheritance taxes are excise taxes on the right to transfer property on death or the right to inherit.
- An unlimited amount may pass to a U.S. citizen spouse or charity without being subject to estate tax.
- Estates passing to anyone other than a spouse or charity in excess of the $2 million "exclusion amount" for persons dying in 2008 are subject to estate tax -- increasing to $3.5 million in 2009; with estate tax repealed in 2010. Unfortunately, estate tax repeal is not permanent unless Congress extends the law; otherwise the "tax-free" exclusion amount will return to $1 million in 2011!
- Federal gift tax also applies for certain gifts in excess of $12,000 per donee annually, in addition to a $1 million lifetime gift tax exclusion. A generation skipping transfer tax also may apply.
(Various estate planning techniques are available for reducing or eliminating these taxes.) Are death taxes a concern for you?
I am not wealthy, so do I still need a Will?You need a Will if you are: - Single, no children…and want to provide for parents, siblings, life partner or charity.
- Single, with children… and want to provide trusts for minors; designate guardians.
- Married, no children… and want to provide for spouse, parents/siblings or charity.
- Married with children... and want to provide trusts for minors and designate guardians.
- Second marriage, with or without children… and want to provide for his/hers/their kids.
- Non-traditional relationship…and want to provide for life partner or charity.
Who do you want to inherit under your personal circumstances?
I already have a Will, when should it be changed?Your Will and other estate planning documents should not be put away and forgotten until it is too late to change them (after death or disability has occurred). These important documents should be reviewed periodically, and revised to reflect changed circumstances. - Birth of a child or grandchild.
- Death of a beneficiary (spouse, child or grandchild) or fiduciary (Executor or Trustee).
- Marriage or remarriage of yourself or a beneficiary.
- Change in wealth.
- Purchase of additional life insurance.
- Purchase or sale of a business.
- Move to or from another state.
- Retirement or pending retirement.
- Changes in federal or state tax or property laws.
Have there been any changes in your circumstances since you last reviewed your Will?
What is a Power of Attorney?A court created guardianship may be necessary to appoint a guardian for you if you become disabled. A Power of Attorney allows you (as the Principal) to designate a legal representative (Agent) to act on your behalf if you are physically or mentally incapable of doing so. - General Durable Power of Attorney - to handle legal and financial matters.
- Health Care Power of Attorney - to make health care decisions.
Do you have a Power of Attorney?
The information on this page is intended for general educational purposes only. It is not intended, and should not be relied upon, as legal, financial or tax advise. IRS CIRCULAR 230 -- DISCLOSURE NOTICE: IRS Circular 230 regulates written communications about federal tax matters. The preceding communication, it is not a full "covered opinion". Accordingly, it is not intended and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS regarding any transaction or matters discussed herein. Any reader should seek advice from an independent tax advisor with respect to the transaction or matters addressed herein based on the reader's particular circumstances.
Law Offices of Dean P. Shearer
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Houston, TX 77058
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