Securing Your Legacy, Navigating Your Future

• Will: Also called a last will and testament, a will is a legal document in which a person describes how they would like their assets to be distributed after their passing.
• Testator: The individual who makes and executes the will.
• Beneficiary: Those who are the intended recipients of estate or trust assets.
• Executor/Personal Representative: The person who will possess legal title to the estate assets after death and manages and administers the assets in accordance with the terms of the will. The administration of estate assets by the executor must be accomplished through the probate court.
• Individuals (in the context of beneficiaries): Includes any type of beneficiary, whether it is a person, charity, business, etc.
• Trust: A legal body that maintains assets for another individual.
• Settlor: The individual who creates and funds the trust with personal assets.
• Trustee: The person or entity who possesses legal title to the assets, handles administration of the trust, and is expected to act in a fiduciary capacity.

What Is A Will?

A will, also known as a last will and testament, is a legally binding document that details what will happen to your property after your death. A will only becomes effective upon the death of the testator and can be revoked or changed at any time prior to death. The making and executing of a new will serves to revoke any past wills made by the testator. A will is generally a more cost-effective approach to estate planning. The costs of preparing and executing a proper will should be far lower than the costs of preparing a more comprehensive estate plan that includes a trust.

Requirements for a Valid Will in Texas:

• Testator must have legal capacity, meaning that they must be at least 18 years old or a member of the United States Armed Forces.
• Testator must be of sound mind, meaning they have the mental ability to understand that:
  • They are making a will and the effect of making a will;
  • The nature and extent of their property;
  • The persons who are the natural objects of their bounty (their relatives);
  • The fact that they are disposing of their assets.
• Testator must intend to create a document that will control the distribution of their property at their death (they must intend to make a will).
• Will must be in writing.
• Will does not need to be notarized; however, most wills that attorneys prepare are self-proving wills which include a self-proving affidavit, a statement that witnesses and the testator sign in front of a notary public. Most attorneys include this because it is presumptive evidence that the testator signed the will in accordance with state law.

Texas Property Distribution

In Texas, property is characterized as separate or community. Separate property includes anything owned before marriage or acquired during marriage by gift or inheritance. Community property is all property other than separate property which is acquired during marriage and is owned equally by both spouses.

Under Texas Intestacy Law, Community Property is Distributed:

1. If all surviving children of the deceased spouse are also the children of the surviving spouse: all community property passes to the surviving spouse.
2. If any surviving children of the deceased spouse are not also the child of the surviving spouse: the surviving spouse retains their 1/2 of community property, and the deceased spouse’s 1/2 passes to the decedent's children in equal shares (the descendants of a deceased child get equal shares of their parent's share).
3. If the decedent is survived by a spouse but no children: all community property passes to the surviving spouse.
4. If the decedent is not survived by their spouse: all property is separate property because the community estate terminates at the death of the first spouse.

Under Texas Intestacy Law, Separate Property is Distributed:

1. If the decedent is survived by spouse and children:
   • Personal property passes 1/3 to the spouse, 2/3 to the children (divided equally among them).
   • Real property passes in equal shares to the children subject to a 1/3 life estate in the surviving spouse.
2. If the decedent is survived by spouse but no children:
   • Personal property passes to the spouse.
   • Real property passes 1/2 to the spouse, 1/2 to the parents (or siblings); if no parents or siblings, all real property passes to the spouse.
3. If only children survive: all real and personal property passes to the children in equal shares.
4. If both parents survive but no spouse or children: all real and personal property passes 1/2 to each parent.
5. If only one parent and siblings survive: real and personal property passes 1/2 to the parent, and the remaining 1/2 split equally among siblings. If no siblings survive, all real and personal property passes to the parent.
6. If no spouse, children or descendants of children, parents, or siblings: all real and personal property passes equally to siblings.
7. If no spouse, children or descendants of children, parents, or siblings: all real and personal property passes to decedent’s grandparents. If no surviving grandparents, the law provides distribution of separate property to more distant relatives.

In addition to potentially undesired results, dying without leaving a will can also tie up assets for an undetermined period of time. Court proceedings are often required to determine who the heirs are, an administrator may have to be appointed, and post bond. Legal fees and court costs may begin to rise, costing time, money, and causing frustration for the loved ones of the decedent.

Step 1: Choose an Attorney

While not necessary for a will to be legally binding, choosing a trusted and knowledgeable attorney to draft the will can help ensure that the will meets all legally required elements. Engaging an attorney to assist in drafting the will helps to ensure that the will will be enforceable and decreases the likelihood that the will will be contested after your death.

Step 2: Plan for Minor Children

It is a very important and often overlooked aspect of estate planning. If you have children who are minors, you should choose a guardian who will care for them and include this in your will. This will ensure that should anything happen before they reach the age of legal maturity (18), they will be protected and cared for by the person that you choose and trust.

Step 3: Personal Representative

Choose a trusted individual that will act as executor and administer the will, as well as a potential alternative executor.

Step 4: Beneficiaries and Assets

Choose the beneficiaries of the estate and who will receive which assets. It is important to note that some assets may pass outside of probate and the will such as property passing through a transfer on death deed (TODD), property passing by contract (such as life insurance proceeds with a designated beneficiary), or property passing by survivorship.

Step 5: Execute the Will

States differ with respect to specific execution requirements such as the number of witnesses or whether a notary is required. Because of this, it is important to consult an attorney who has knowledge and experience drafting wills and preparing estate plans.

The Texas Supreme Court has created and approved simple will forms in English and Spanish. The forms include:

• Will form for a person who is single, widowed, or divorced and who has children
• Will form for a married person who has children
• Will form for a person who is single, widowed, or divorced and does not have children
• Will form for a married person who does not have children

A transfer on death deed (TODD) is a way to transfer real property outside of probate. A TODD is a legal document which transfers a person’s interest in real property to designated beneficiaries on the transferor’s death.

The transferor retains all rights and control of the property, including the rights to sell, transfer, and encumber the property. The TODD does not change ownership of or rights to the property until the death of the transferor.

If a TODD and a Will are in conflict, the TODD controls and the property will pass to the beneficiary under the TODD.

A TODD is always revokable, even if the deed says that it cannot be revoked. To revoke the TODD, the transferor can file an instrument of revocation expressly revoking the TODD, or they may execute and file a subsequent TODD that revokes the prior TODD. Revocation must be recorded prior to the transferor’s death. Additionally, if the transferor were to sell, gift, or transfer the property while living, the TODD would be revoked.

What Is A Trust?

A trust can be more complex than a will, and those who set up trusts are generally advised to have a will in place to ensure that the trust and the will work in tandem in order to capture all assets of the creator to direct proper distribution.

A trust can be used to extend the settlor’s control over the assets after death as the trust will operate in a manner consistent with the settlor’s wishes. Trusts can also function to protect assets against creditors of the beneficiaries.

Almost any assets can be held in a trust. Unlike a will, which takes effect after the death of the testator, most trusts come into existence as soon as they are executed by the settlor.

Step 1: Choose an Attorney

You should consult an attorney who specializes in estate planning and trust preparation and should generally be the same attorney who prepares your will to ensure your entire estate plan operates consistently.

Step 2: Beneficiaries

Like a will, your trust will dictate the individuals who you wish to receive trust assets.

Step 3: Manner and Method of Distribution

Trusts operate differently from wills in that trusts offer more flexibility in how and when trust assets will be distributed. A trust can be designed to set aside assets for minor children to be managed by the trustee and then distributed to the children in any desired manner. Distribution may be based on life events such as graduating from college. It may be based on age, distributing certain amounts when they reach designated ages, or it may be based on any combination desired by the settlor. Such prescribed distribution can be set for any beneficiaries and is not limited to minors.

Step 4: Choose Assets to Fund the Trust

There are many trust styles available to suit specific situations and assets, and you are not limited to establishing only a single trust. The assets you choose to fund the trust will depend on the planning objectives, intended beneficiaries, and potentially on tax consequences or benefits.

Step 5: Execute the Trust

Similar to wills, states differ in the execution requirements for trusts. It is important to consult an experienced attorney to ensure all requirements are met.

What Is a Power of Attorney?

A power of attorney is a written document that authorizes a person (the agent) to make decisions or take actions on behalf of someone else (the principal). A power of attorney only allows the agent to do things for the principal that the principal wants to be done for them. It does not limit the principal’s ability to do something for themselves.

Types of Powers of Attorney:

• General Power of Attorney: Grants the agent very broad rights to act for the principal. They are used to allow a person to act for the principal in a wide variety of matters, such as selling property, spending money, and taking other actions on the principal’s behalf. A general power of attorney ends:
  1. After the time period stated in the document;
  2. When a specified task in the document has been accomplished;
  3. When the principal dies;
  4. When the principal is deemed incapacitated;
  5. When the power of attorney is revoked by the principal.
  Because a general power of attorney is terminated when someone is incapacitated, it is not ideal for medical directives or end-of-life planning. A medical or durable power of attorney is a better alternative for this situation.
• Limited, or Special, Power of Attorney: Grants the agent the right to perform a very specific action for the principal.
• Durable Power of Attorney: A durable power of attorney is a general power of attorney which continues after the principal becomes mentally or physically incapacitated. It has specific requirements:
  • Must be in writing;
  • Name the person that the principal wants as their agent;
  • Be signed and notarized;
  • Must state how the power of attorney is to be used.
• Medical Power of Attorney: Gives the agent the authority to make medical decisions for the principal if they become mentally or physically unable to make medical decisions for themselves.
• Springing Power of Attorney: Gives the agent authority only when the principal becomes incapacitated.

Legal Requirements for Executing a Power of Attorney:

• The power of attorney must be signed before a notary public.
• The principal must be 18 years or older and must be of sound mind and know what they are doing when they sign the power of attorney.
• If the agent is entrusted to conduct real estate transactions for the principal, the power of attorney must be filed with the clerk of each county where the property is located.

Revoking a Power of Attorney:

A principal can revoke a power of attorney anytime if they have sufficient mental capacity to understand that they are revoking the power of attorney. A principal can do so by destroying the original power of attorney and any copies. Although not required, it is advisable to have a written revocation with the agent’s name and the date the power of attorney was created. The revocation should be signed before a notary public and a copy of the revocation should be delivered to the agent and anyone the agent dealt with on the principal’s behalf.

A living will, rather than delegating the declarant’s health care decisions to others, frees others from making health care decisions on the declarant’s behalf by providing instructions for continuing or stopping life-sustaining treatments to be used if the declarant becomes incapacitated or is unable to communicate their desires.

A competent adult may at any time execute a written living will. The living will must be signed in the presence of two qualified witnesses who also sign or acknowledged before a notary public.

A competent qualified adult patient (a patient with terminal or irreversible conditions that have been diagnosed and certified in writing by the attending physician) may issue a nonwritten living will in the presence of the attending physician and two qualified witnesses. The attending physician must make the fact of the living will part of the declarant’s medical record along with the name of the witnesses.

Guardianships differ from custody. A guardianship is a relationship which is created and monitored by the court when an incapacitated person cannot handle their own personal or financial affairs. Disability is not the same as incapacity. Legal incapacity means that a person is unable to provide for their own food, clothing, or shelter, or they are unable to care for their own physical health or manage their financial affairs.

Guardianships take away the rights of the ward and give those rights to another person, the guardian. Because guardianships take away a person’s rights, less restrictive options are typically tried first. Guardianship is a last resort.

There are two types of guardianships:

• Guardian of the Person: Controls the ward’s personal matters such as medical decisions.
• Guardian of the Estate: Controls the ward’s property and finances.

The same person can serve as guardian of the person and the estate.

To become a guardian, you must hire an attorney. While you may represent yourself in court, you do not have the right to represent someone else; only a licensed attorney can represent the proposed ward. Your attorney will file an application for guardianship with the court, and a doctor must evaluate the proposed ward and certify that they are incapacitated. Other interested persons (such as relatives) must be served or notified, and the person filing for appointment must file an affidavit including contact information for all individuals entitled to notice. An attorney ad litem will be appointed for the proposed ward, and the applicant, the proposed ward (unless they are unable to appear), and both attorneys must appear in court for a hearing. At the hearing, the applicant will testify as to why a guardianship is necessary.