Estate Planning

Wills


A Will is a legal document that allows you to prepare for the disposition of your property at your death. There are many considerations to take into account when preparing your Will. In preparing your Will you will need to determine what assets you have, who your beneficiaries are, appoint Guardians of your minor children and nominate Trustees and Executors.

First, it is important to understand that only “probate” assets pass through your Will. A “probate” asset is any asset that does not pass through a beneficiary designation (e.g. life insurance or retirement accounts) or by contract (e.g. bank account established as a joint account with right of survivorship). Because it is not always clear whether an asset is a “probate” asset or “non-probate” asset, it is wise to have an estate planning attorney help you determine which assets will pass through your Will and which will not. In some instances, even the assets that pass via a beneficiary designation or by contract may end up passing through your probate estate (e.g. you failed to provide a beneficiary designation).

Once you understand which assets you are dealing with, it’s then time to determine who will be the recipients of your assets at your death – who are your beneficiaries? If any of your beneficiaries are minors, are incapacitated, have a disability or are receiving certain need-based governmental assistance, then special trusts will need to be included in your Will. Trusts that are included in your Will are called “testamentary trusts.” These trusts only come into existence at your death. Failing to include these important trusts could create significant expense and delay for the administration of your estate when you pass.

If you have minor children, you will also want to appoint Guardians of those minor children in your Will. This can also be accomplished in a standalone document as well. You will appoint either one single person or a married couple to serve as Guardians. It is advisable to also name one to two alternate Guardians in the event that the first are unable or unwilling to serve.

Finally, you will need to nominate an Executor and a Trustee. The Executor is the person who will be responsible for administering your estate at your death. Your Executor will be the person to “probate” your Will; a process that includes gathering your assets, paying your debts and distributing the remainder of the estate to your beneficiaries. The Executor owes a fiduciary duty to your beneficiaries. That means, that your Executor has a special relationship with your beneficiaries and must act in their best interests at all times. If you have created any trusts in your Will, then you will also need to nominate a Trustee to administer those trusts. The Trustee owes a fiduciary duty to the beneficiaries of the trusts that he or she is administering. As with Guardians, it is best practice to nominate one to two alternate Executors and Trustees in the event that your first choice is unable or unwilling to serve.

Austin attorney Lesley Hempfling can help draft your Will. By hiring a local lawyer in Austin, you can be confident you’ve taken all the proper legal steps for your Will.

Living Trust


The popular financial advisor, Suze Orman, likes to talk a lot about Revocable Living Trusts and has in fact written extensively on the subject. Many of my clients come into my office with Suze Orman’s book in hand and request that I draft a Revocable Living Trust to manage their assets. Before we go down that road, I like to make sure that the client really understands what they are getting into.

What is a Revocable Living Trust (“RLT”) anyway? A RLT is just another vehicle for distributing your property at your death. Put another way, it’s the counterpart to the traditional Will. Rather than nominating an Executor as you would in a Will, you nominate successor Trustees to manage the RLT at your death. While you are living, you are the Trustee of your trust and have full management and control of all of the assets in your trust, just as if they were not in trust. You will also identify your beneficiaries in your RLT – those people you would like to receive an interest in your trust at your death. Finally, you will outline the various dispositions of your property.

There are two very popular misconceptions about what the RLT can do that a Will cannot do. First, many people believe that the RLT has some type of extra “tax” protection or financial incentive. It does not. There is no tax planning that you can do in a RLT that you cannot also do in a traditional Will. Secondly, most people believe that having a RLT will help them “avoid probate.” This may or may not be true. When an attorney drafts a RLT, she will also draft a document called a “Pour Over Will.” The purpose of the Pour Over Will is to capture any assets that were not properly titled in the RLT at the time of your death. Once you establish your RLT, you then need to take the next step of re-titling all of your assets into that trust – you must keep up with the titling throughout your life in order for your assets to pass outside of probate at your death. If you fail to title all of your property into the RLT before you die, then your beneficiaries will still go through the probate process. Even if your beneficiaries are 100% certain that all of the assets were titled in the RLT at the time of your death, most attorneys will nonetheless want to probate the Pour Over Will “just in case.” Just in case of what? In case an asset that your beneficiaries and maybe even you didn’t know about shows up years down the road. If an Executor has been appointed to your estate, then that person has the capacity to handle any matters that may pop up down the road. The good news is that the probate process in Texas is very simple and efficient….IF you have a properly drafted Will.

What are some reasons you may want to choose a RLT over a traditional Will as your core estate planning document? First, you own property in a state that has an onerous, timely and expensive probate process. While there are few states that have such an onerous process, you do not want to be stuck in one of them. This is something that should be discussed with your estate planning attorney in order for her to advise you on the ease of probate in the state where your property is located. For instance, if you are a Texas resident and own property in Colorado, you do not necessarily need a RLT as a result of that out of state property. The probate system in Colorado is very much like Texas and allows for some fairly simple methods by which to transfer title from your Colorado property at your death as long as you have a valid Will in place. You may also consider a RLT for the ease of continuation in the management of your assets. For example, if you are concerned about capacity issues a RLT will allow you to appoint “successor” trustees to serve if you are unable to serve in the case of incapacity or disability. This is helpful for someone who may see that they will need assistance with their finances in the near future and want to be prepared. It may also avoid a Guardianship of the Estate in some instances as well. However, it should be noted that a properly drafted Durable Power of Attorney should work just as well in the case of incapacity if you choose the Will route. Another reason you may choose a RLT instead of a Will is that you own substantial mineral interests and do not want your beneficiaries to have to wait for royalty checks or other distributions after your death. If you have a Will rather than a RLT, the purchasers of the mineral interests will most certainly require you to produce evidence that the Will was probated, among other documentation, and will suspend payments (or issuing new division orders) until they receive such documentation. A RLT may be a better option if you anticipate a Will Contest. If you are “disinheriting” someone and expect that this person will want to challenge the disinheritance, then a RLT may be a better option because the legal standards differ in a Will Contest v/s a challenge to a RLT. Finally, you may want a RLT just because that is what you want! As you can see, there are very few reasons why someone would really need a RLT. If you do not fit into any of the "need" categories, then it just becomes a choice between the document that fits you best. Our Austin lawyer specializes in Revocable Living Trusts and can help you navigate through all the legal work. Call our local Austin estate planning attorney today to schedule your appointment to discuss your RLT.

Testamentary Trust


A testamentary trust is a trust that only becomes effective at the death of the Testator (the person making a Will). A good example of a testamentary trust is a trust established for minors in a Will. The provisions of the trust for minors will prohibit any distributions of assets to minors until they reach a certain age and may contain other limitations as well. Austin Estate Planning Attorney Lesley Hempfling can walk you through the trust process.

Directive to Physicians and Family or Surrogates ("Living Will")


The Directive to Physicians and Family or Surrogates is also commonly known as the "Living Will." The purpose of the Living Will is to help you communicate your decisions about life-sustaining treatment in the event that you are diagnosed with a "terminal illness" or "irreversible condition." This document allows you to make decisions about end of life treatment before you become incapacitated. It will override your Medical Power of Attorney to the extent that your Agent under your Medical Power of Attorney attempts to act contrary to the wishes set out in your Living Will. Like your Medical Power of Attorney, your Living Will may be customized to meet specific religious and/or philosophical preferences or beliefs. Talk to an Austin estate planning attorney about customizing a Living Will to meet your specific needs.

Statutory Durable Power of Attorney


The purpose of the Statutory Durable Power of Attorney is to allow someone that you designate as your Agent to handle virtually any of your business or financial matters on your behalf. The Statutory Durable Power of Attorney may be drafted so that it is effective immediately or only upon your incapacity. There are pros and cons to either choice. One potential benefit to having the document drafted so that it is effective immediately is the simple fact that the immediate effectiveness avoids the need for a subsequent determination of incapacity by a doctor and usually allows for greater acceptance and recognition of the Agent’s authority by third parties (banks, insurance carriers, etc.). However, there are also very good reasons to make the power under this document "spring" into effect only upon your incapacity and/or disability. Our Austin estate planning attorney can help you determine if your needs are better met with a "springing" power or an immediate power of attorney.

Medical Power of Attorney


A Medical Power of Attorney is a document that allows you to appoint an Agent to handle any medical decisions that need to be made on your behalf when you are unable to do so yourself. This document is only effective upon your incapacity. With few limitations, your Agent will have the authority to make any medical decisions that he or she believes are right for you, including: operations, medication, procedures and life support (to the extent that issue is not addressed in your Living Will). This document may be customized to meet your own personal needs. For instance, you may place restrictions on the decisions that can be made by your Agent under this document, or you may include specific religious and/or philosophical beliefs that you hold in this document. Talk to our Austin estate planning lawyer about drafting a Medical Power of Attorney that is right for you based on your individual needs and preferences.

Health Insurance Portability and Accountability Act of 1996 "HIPAA" Release


HIPAA was enacted to ensure that individuals’ health information is properly protected while allowing for the flow of health information needed to provide and promote high quality health care and to protect the public's health and well being. The HIPAA Release is primarily meant to deal with this recent legislative change that prevent doctors and health care providers from disclosing your personal and private health information to any third party without your prior express consent. In the event that you become incapacitated, the HIPAA Release permits your doctors and other health care providers to provide the necessary information to enable the agents you designated in your Statutory Durable Power of Attorney and your Medical Power of Attorney to begin acting on your behalf. The HIPAA release allows your Agent access to your medical records so that he/she may make informed decisions regarding your care. Austin Estate Planning Attorney can assist you in preparing and executing your valid HIPAA Release.

Guardianship in Advance of Need


The purpose of this document is to name, in advance, the person(s) whom you would like to act as your legal representative in the event of your incapacity. You will designate both a Guardian of your Person (the person who will make decisions regarding your residence, medical care, general well-being) and a Guardian of your Estate (the person who will act on your behalf in your financial matters). Before your guardian can act as your representative, he or she must first be appointed by the Court in a formal "Guardianship" proceeding. The Designation of Guardian is a document that tells the Court whom you wish to serve in this capacity, should the need arise. The Court will typically adhere to your wishes unless you have chosen someone who does not "qualify" as a Guardian. Austin Estate Planning Attorney can walk you through the Guardianship process.

Appointing Guardians for your Minor Children


You may designate guardians for your minor children in the event of your death or incapacity by Will or Written Declaration. In making these designations, you must choose a Guardian of the Person and a Guardian of the Estate. The Guardian of the Person is tasked with the day-to-day obligations of raising the children, such as: determining residency, establishing schools, feeding, clothing and caring for the minor children. The Guardian of the Estate is tasked with preserving, growing and administering the children’s assets. Only one person may be appointed as Guardian of the Person or Estate, but if it is in the best interest of the children, the Court will allow one person to be appointed as Guardian of the Estate and another person as Guardian of the Person. In limited situations, the Court will allow for joint guardians, usually in the case of a husband and wife or a couple that have already been appointed as joint conservators in another jurisdiction. The Court will adhere to your wishes in preference of another otherwise entitled to serve as Guardian under the Estates Code unless the Court finds that the person designated to serve is disqualified, is deceased, refuses to serve or would not serve the minor’s best interests. If you do not make your wishes known in a written document, the Court will adhere to the preferences that are established in the Estates Code. There are many considerations that should be taken into account when choosing a person(s) for this very important role. Estate Planning Attorney Lesley Hempfling can help walk you through the guardianship process.

Appointment of Agent to Control Disposition of Remains


Unless you have made your wishes known in a written document regarding the person(s) you would like to be responsible for handling your body after your death, the Health and Safety Code provides a list of persons who are eligible to serve in such capacity as default provisions. If you do not have your wishes written down and someone other than a person who is eligible under Chapter 711 of the Health and Safety Code attempts to handle the disposition of your remains, that person will be denied access to your body. This law particularly affects unmarried couples, both gay and straight, who may want their partner to act in this capacity. If there is not a valid Appointment of Agent to Control Disposition of Remains in place, the default provisions do not provide any rights for the partners of such persons. Estate Planning Attorney Lesley Hempfling can assist you in making this document part of your overall estate plan.

Premarital Agreements


While premarital agreements are most commonly thought of as a means of agreeing on the division of property in the event of divorce, these agreements are also used very often in conjunction with the engaged couple’s estate planning.

 

The necessity for these agreements is part and parcel of the fact that Texas is a community property state. That means, once you are married, the presumption is that any property you acquire during the marriage is community property. The party wishing to refute the presumption has the burden to disprove the community property nature of the property. This is sometimes very difficult, particularly where the couple has commingled their property.

 

A premarital agreement is a formal contract that would allow the couple to agree before marriage to the future characterization of their property. For example, in Texas, any income derived from a spouse’s separate property is community property. If the spouse with separate property wanted to retain the income from that separate property as his separate property then a premarital agreement would accomplish this.

 

In the context of estate planning, premarital agreements become relevant when a dispute arises as to the characterization of property at death. If the separate property spouse from the example above leaves his separate property income to his children from another marriage, the surviving spouse would have to prove that the premarital agreement itself was invalid before she would have any rights to those funds.

 

Austin estate planning attorney Lesley Hempfling can help you create and draft your premarital agreement.

Postmartial agreement


A post-marital agreement in Texas, also known as a “partition and exchange agreement,” is an agreement between spouses to partition or exchange all or part of the couple’s community property. As the term suggests, the parties must be married for this agreement to be legal.

 

Among other formalities that must be followed, the agreement must be in writing and signed by both the parties. Like the premarital agreement, this agreement is used many times as a type of divorce insurance --allowing the parties to agree while they are married what the division of property will be in the event of divorce.

 

It is also used in the estate planning context as a way of providing legal proof of the characterization of each party’s property at death; thereby, resolving disputes that may arise regarding who has rights to the deceased spouse’s property in an efficient and cost effective manner. Where a valid post marital property agreement is in place, the only available avenue for challenging the characterization of the property at issue is to contest the validity of the agreement itself.

 

Austin estate planning attorney Lesley Hempfling can create your post-marital agreement.

Cohabitation Agreement


In Texas, engaged couples and married couples can enter into contractual agreements concerning the characterization of their property and the division of their property upon death and divorce – these agreements are called premarital and post marital agreements. These contractual arrangements are not available to unmarried couples in committed relationships.

Cohabitation agreements allow unmarried, cohabiting couples to specify their respective rights, duties and obligations in the relationship. Typical cohabitation agreements will include provisions specifying ownership of assets among the parties, defining living arrangements, and providing for the division of property upon the death of a party or dissolution of the relationship. These documents are helpful to both heterosexual and LGBT couples that may choose not to marry, but who want to protect their interests upon dissolution of the relationship. Austin Estate Planning Attorney Lesley Hempfling will assist you in preparing your Cohabitation Agreement to meet the needs of your relationship.