Estate Planning FAQs

Most of us spend a considerable amount of time and energy in our lives accumulating wealth. With this, there comes a time to preserve wealth both for enjoyment and future generations. A solid, effective estate plan ensures that your hard-earned wealth will remain intact as it passes to your beneficiaries, instead of being siphoned off to government processes and bureaucrats.

YES. But your family may not like it. The government’s estate plan is called “Intestate Probate” and guarantees government interference in the disposition of your estate. Documents must be filed and approval must be received from a court to pay your bills, pay your spouse an allowance, and account for your property–and it all takes place in the public’s view. If you fail to plan your estate, you lose the opportunity to protect your family from an impersonal, complex, governmental process that can become a nightmare. Then there is the matter of the state and federal government’s death taxes. There is much you can do in planning your estate that will reduce and even eliminate death taxes, but you don’t suppose the government’s estate plan is designed to save your estate from taxes, do you? While some estate planners favor Wills and others prefer a Living Trust as the estate plan of choice, all estate planners agree that dying without an estate plan should be avoided at all costs.

A Will is a legal document that describes how your assets should be distributed in the event of death. The actual distribution, however, is controlled by a legal process called probate, which is Latin for “prove the Will.” Upon your death, the Will becomes a public document available for inspection by all comers. And, once your Will enters the probate process, it’s no longer controlled by your family, but by the court and probate attorneys. Probate can be cumbersome, time-consuming, expensive, and emotionally traumatic during a family’s time of grief and vulnerability. Con artists and others with less-than-pure financial motives have been known to use their knowledge about the contents of a Will to prey on survivors. A Living Trust avoids probate because your property is owned by the Trust, so technically there’s nothing for the probate courts to administer. Whomever you name as your “successor trustee” gains control of your assets and distributes them exactly according to your instructions. There is one other crucial difference: A Will doesn’t take effect until your death, and is therefore no help to you during lifetime planning, an increasingly important consideration since Americans are now living longer. A Living Trust can help you preserve and increase your estate while you’re alive, and offers protection should you become mentally disabled.

Unfortunately, you would be subject to “living probate,” also known as a conservatorship or guardianship proceeding. If you become mentally disabled before you die, the probate court will appoint someone to take control of your assets and personal affairs. These “court-appointed agents” must file a strict accounting of your finances with the court. The process is often expensive, time-consuming and humiliating.

YES. In fact, people who create most Living Trusts act as their own trustees. If you are married, you and your spouse can act as co-trustees. And you will have absolute and complete control over all of the assets in your Trust. In the event of a mentally disabling condition, your hand-picked successor trustee, not the court’s appointee, assumes control over your affairs.

NO. The purpose of creating a Living Trust is to avoid living probate, death probate, and reduce or even eliminate state and federal estate taxes. It’s not a vehicle for reducing income taxes. In fact, if you’re the trustee of your Living Trust, you will file your income tax returns exactly as you filed them before the trust existed. There are no new returns to file and no new liabilities are created.

YES. In fact, all real estate should be transferred into your Living Trust. Otherwise, upon your death, depending on how you hold the title, there will be a death probate in every state in which you hold real property. When your real property is owned by your Living Trust, there is no probate anywhere.

NO. The Living Trust has been authorized by the law for centuries. The government really has no interest in making you or your family suffer a probate that will only further clog up the legal system. A Living Trust avoids probate so that your estate is settled exactly according to your wishes.

NO. A Living Trust can help anyone protect his or her family from unnecessary probate fees, attorney’s fees, court costs and state and federal estate taxes. In certain circumstances even individuals with small estates can derive meaningful benefits.

YES, but you would be better off choosing an attorney whose practice is focused on estate planning. Members of the American Academy of Estate Planning Attorneys receive continuing legal education on the latest changes in laws affecting estate planning, allowing them to stay on top of the latest laws and techniques to help you meet your needs.

The federal estate tax is a tax levied by the federal government upon the estate of a deceased person. The federal government gives certain exclusions and deductions and then taxes everything above a set level.

A state estate tax is a tax levied by a state government upon the estate of a deceased person. It is levied in much the same way as the federal estate tax. A state inheritance tax is a tax levied by a state government that varies depending upon the relationship of the inheritor to the deceased person. Many states have a separate state estate or inheritance tax which kicks in at a lower level than that of the federal government.

Portability is where the surviving spouse can use the amount of federal estate tax exclusion that their deceased spouse left unused at their death. Portability has been part of the law since 2011, though it was temporary until 2013.

Yes. Portability must be elected on a timely-filed federal estate tax return. This is the case even though a federal estate tax return would not otherwise be required, such as if the estate of the deceased spouse is below the threshold for federal estate taxation.

This is a very commonly heard explanation for the lack of an estate plan. The reality, however, is that every adult should have an estate plan without regard to age, marital or parental status, or net worth. Your estate plan protects the assets you do have and helps to protect you and your loved ones from tings such as your own incapacity. It also ensures that  the State of Texas does not determine what happens to your assets upon your death. As your family and your net worth grow, you can expand your basic estate plan; however, you need at least a basic estate plan now.

This is, by far, one of the most common – and most costly – estate planning mistakes. In today’s “DIY” age, it may be tempting to avoid paying for professional help and save some time by using DIY legal forms you find on the internet; however, in the long run you will likely cost your loved ones a considerable amount of time and money when it comes time to probate your estate. DIY legal forms are well known for having mistakes, errors, and omissions that frequently lead to protracted, and expensive, litigation when the need arises to use those forms to probate an estate. Don’t put your loved ones in that position. Consult with an experienced estate planning attorney when it’s time to create your estate plan.

A trust is a commonly used estate planning tool that can help you achieve a wide variety of estate planning goals. A trust agreement is an agreement wherein you place assets with a Trustee who manages those assets for the benefit of a third party beneficiary.  A trust can activate during your lifetime (living trust) or after your death (testamentary trust). Just a few estate planning goals that can be further by the creation of a trust include:

• Probate avoidance
• Incapacity planning
• Pet planning
• Special needs planning
• Asset protection
• Medicaid planning

Because a lot can change in a short period of time, especially when you are young, it is best to review and revise your estate plan every three to five years until you reach your 50s. After that, a routine review should occur every five to eight years. In addition, important life events, such as marriage or divorce, the birth of a child, or the move to another state should prompt an immediate review of your estate plan.

One of the any benefits to creating a well thought out estate plan is that you can include tools and strategies that significantly reduce, if not completely avoid, the time your estate spends in probate after your death. That, in turn, means your loved ones will receive your estate assets much sooner and your estate will not incur a huge probate bill which effectively reduces the value of the estate you left behind for your loved ones.

Absolutely! In fact, incapacity planning is one of the most common components of a comprehensive estate plan. Contrary to what many people believe, incapacity is not something that only happens to the elderly as a result of Alzheimer’s or other dementia related conditions. You stand a one in five chance of suffering a period of disability or incapacity that lasts for five months or longer before you reach retirement age. Failing to plan for the possibility could result in the need for a judge to decide who takes over control of your assets and who makes important decisions for you while you are unable to make them yourself.