These are some of the most frequently asked estate planning questions to help you better understand the estate planning process. While some of the answers to the questions which follow may not apply in your situation, you may find the answers to be informative nonetheless.




Common Estate Planning AND PROBATE Questions:


Q. My sole assets are a car, personal belongings and a savings account with less than $50,000 in it. Do I need a Will?


A. You would think there's a simple yes or no answer to your question. But as with so many other legal questions, the answer is: maybe, maybe not. With regard to your bank account, you can set it up so that it passes to one or more persons who are named as the beneficiaries. This type of account is normally called a "payable on death" or "transfer on death" account. Most, if not all, banks allow their customers to establish this type of account.


If you have such an account and the persons you have named are alive when you pass away, all they will need to do is present the bank with a death certificate, and they will be given the money. However, if you die without having named a beneficiary or if all of the beneficiaries you have named die before you, then some sort of probate will be needed. In that situation, if you die without a Will, your estate would probably be small enough to qualify as a small estate. That means the normal probate process could be simplified by filing a Small Estate Affidavit. The Affidavit will list the properties you owned, and it will state who your heirs are under Texas law.


Once an order approving the Affidavit is signed by a judge, your heirs can claim the money by presenting a certified copy of the order to your bank. If your estate does qualify as a small estate, but you have a Will, then your heirs can't file a Small Estate Affidavit. Instead they must probate your Will. Also, a Small Estate Affidavit will not be available if your savings account contains more than $50,000 upon your death. In such a case, it would be necessary to conduct a formal probate at the courthouse, and having a Will would make the probate process far simpler than not having one. As far as your car is concerned, it can be transferred at death without the need for probate by completing a Form VTR-262 "Affidavit of Heirship for a Motor Vehicle."


Your heirs can obtain this form at any county court annex or online at www.dot.state.tx.us. This Affidavit will establish that the car was owned by you, and the persons who inherit your estate will need to sign it. When completing the form, your heirs might also be asked to provide other documentation such as a certificate of title, release of lien, affidavit of physical inspection, bill of sale and/or proof of liability insurance. The problem with letting your heirs simply use the VTR-262 form is that the car may not be passing to the person or persons you would want. For instance, if you have two children, but you want your car to go to only one of them, then you may want to execute a Will which names the one child who will get the car. Your personal property does not have title, so it's not necessary to probate a Will in order to validly transfer ownership to your heirs.


It's unfortunate, yet often true, that personal belongings are available on a first come, first serve basis to your children, friends and neighbors. You may want to limit the number of people who have keys to your residence and also make a list of who gets what particular items. Note, however, that if you have minor children, my answer would be yes, you need a Will. With a Will, you could name guardians as well as a person to serve as trustee or custodian over the children's inheritance. So, if you set your bank account up properly, if your car will be passing as you would want, and your beneficiaries are all adults, then you don't need a Will. On the other hand, it can't hurt to have one just in case it's needed. If you have real estate, having a Will greatly simplifies the transfer of the property on death. There are other options and you can consult with an attorney as to those. 




Q. I've moved to Texas from Florida, where I had a simple Will drawn with my daughter as the only beneficiary. Do I need to get a new Will made in Texas?


A. Yes, you should prepare a new Texas Will. While it is true that Texas recognizes the validity of a Will executed in Florida, your daughter will have an easier time probating your Will if you have a new one prepared using correct Texas language. For instance, there is almost no chance your Florida Will names your daughter to serve as the "independent executor" of your estate. In fact, she is probably called your "personal representative," which is the lingo used in Florida.


Being an independent executor means she will not be supervised by the court, the preferable way to administer an estate. If you don't state in your Will that your daughter will be your independent executor, she can still make a special request to the judge after your death asking that she be allowed to act independently. But, there is no guarantee that her request will be approved. Also, the end of your Will should have what is called a "self-proving affidavit," which is a long statement discussing the signing ceremony. Texas has its own unique form of "self-proving affidavit" and it is different from the one used in Florida.




Q. Should I give copies of my Will and other estate planning documents to my children and to the Executor of my estate?


A. For some people, their estate planning documents are as private as their income tax returns, and nobody is ever given copies. For other people, estate planning documents are no different than a spare key to the house, and every family member and Executor and/or trustee named in the documents is given a copy. If you are the type of person who values your privacy, who does not especially trust your children, Executor, or trustee, or if you have written a Will or trust, which does not treat all the children equally, then it may not be a good idea to hand out copies.


Also, you may have more money than your children expect, and depending on how your Will or trust is written, giving them a copy may be letting them know too much about your personal business. On the other hand, if you have a fairly open relationship with all your children, you regularly discuss finances with them, and you are leaving your estate to them in equal shares, then go ahead and give everyone a copy. Of course, if you decide to change your Will or revocable trust, you should be sure to give all the same people copies of the new documents. If you don't, then there may be some arguments following your death over which document controls the disposition of your estate.




Once Your Will and/or Trust is Signed:


Q. Where is the best place to keep my signed original estate planning documents?


A. The best place is probably in a safe deposit box because it will protect the documents from theft, fire, accidental loss, and most other types of damage or harm. A potential problem, though, is getting it opened after your death. If you decide to keep your estate planning documents in a safe deposit box, consider naming a family member or your Executor or trustee as a joint holder on the box. That should simplify matters following your death, because someone will be able to get into the box without delay.


Many people keep their original estate planning documents at home in a secure place. If you have a safe at home, that can be a good place to keep them. Be aware though, when thieves enter your home and discover a locked safe, they often take the whole safe thinking they'll find cash and jewelry. More people than you would expect keep original Wills and other estate planning documents in an air-tight plastic bag at the bottom of their freezers. Freezers are well insulated and heavy, and have a way of withstanding fires, hurricanes, and tornadoes, but they are NOT fireproof.




Q. I'm named as the executrix of my father's Will. What do I do when he dies?


A. There are some steps you must take and other steps you may need to take. Exactly what you must do depends on the types of assets your father owns and the size of his estate. Find the Will. Locating an original Will can sometimes be difficult. Many people keep their Wills in a safe deposit box, while others keep them at home or someplace else. It may be a good idea to talk to your father and find out where his is kept. If it's at the bank, be sure you're authorized to enter the box, otherwise it may be harder to get the Will out. Hire a Lawyer. Most of the time, it's necessary to hire a lawyer.


The judges in some smaller counties allow people to represent themselves in probate matters, but you still may have trouble preparing all the necessary forms that are required. It's safe to say, therefore, that lawyers must be hired in the vast majority of cases. Application For Probate. The first document your lawyer will prepare is an application for probate. The original Will is filed at the court house along with the application and a filing fee. The application is usually several pages long, and it describes certain facts about your father, his Will, and his property. The Probate Hearing. After a ten day mandatory waiting period, a probate hearing will be held. Your lawyer will schedule this hearing for you. Under ideal circumstances, you can get your hearing two weeks after the application is filed. However, it often takes three weeks or longer to schedule a hearing because of the backlog in the courts and other scheduling conflicts. In larger counties, the hearings are held in a crowded courtroom, and dozens of cases are heard one after another.


In smaller counties, the hearings are often less formal, with the judge often shaking your hand at the door to his or her office, and then showing you to a chair right there in the office. Testimony and Order. At the hearing, your lawyer will ask you a number of routine questions. Most of the time, the judge will then sign an order admitting the Will to probate. The order is a document which your lawyer will have prepared and brought to the hearing. You will also be asked to sign the written document containing your testimony. The Oath, bond, and Proof. After the hearing, you will need to sign an oath stating that you will fulfill your duties as independent executrix of your father's estate. The word "independent" means that you will not need to ask the court for permission to sell estate assets or to conduct any other duties as executrix. You will also need to provide the court with a written affidavit of the facts to which you testified. In rare cases, the judge will require a bond. Letters Testamentary. After your oath is filed and, if required, the bond is provided, you will be able to order "letters testamentary" from the county clerk. The letters will authorize you to close bank accounts and collect and claim other estate assets. You can order as many letters as you think you will need.


Notices. Within 30 days of receiving letters testamentary, you must publish a "notice to creditors" in a local newspaper. This notice lets creditors of your father's estate know where they may file claims to recover money they are owed. It must be published even if your father has no creditors. Certified letters must also be sent to all of the charities named in your father's Will. Proof that you performed these tasks must be filed with the court as well.


Notice to Beneficiaries. Within 60 days, you must notify most beneficiaries that the Will has been probated.


File the Inventory. Within 90 days of qualifying as executrix, you must file an Inventory with the court. The Inventory lists all the assets, which pass under your father's Will. (Note, though, that is now often possible to file an Affidavit in Lieu of Inventory with the court rather than filing the Inventory.) Importantly, the inventory doesn't always list everything a person owns, since you don't have to list assets that pass directly to named beneficiaries. For instance, life insurance, retirement plans, some joint accounts, and many other properties are designed to pass directly to a named beneficiary. After the Inventory is filed, the judge will sign an order approving the Inventory.


Tax Returns. Estates valued at over the estate tax deduction ($5,250,000 for 2013) must file a federal estate tax return and a Texas inheritance tax return within nine months of death. Taxes will be owed if the net estate exceeds that amount. The tax rate on assets over $5,250,000 can be up to 40%. You may also be required to file income tax returns for the estate. Often, the lawyer handling the estate will also prepare the estate and inheritance tax returns. However, few lawyers prepare income tax returns.


In answering your question, I have assumed your father's Will was executed, witnessed and notarized properly, and that it contains all the right language. Not all probate proceedings are as easy as this answer indicates. For instance, you may find yourself in the middle of a Will contest, or your father's Will may have been written in another state, thus complicating the probate.


One more thing: Not all Wills need to be probated. You may find that everything your father owns passes directly or automatically to named beneficiaries. If the only assets left are his household goods and other personal items, there is no need to hire a lawyer and go through probate. 




Revocable and Irrevocable Trust Questions:


Q. For whom are living trusts most appropriate? What are the pros and cons?


A. For starters, while it is true that probate can be expensive and time-consuming in some other states, in Texas, we have a streamlined system of probate. As long as you hire a lawyer with experience in probate court, you have a well-written Will, and nobody files a lawsuit after your death, then probate is typically not so bad.


Stories you read in the paper may lead you to believe otherwise. The heirs of multi-million dollar estates frequently fight it out in court for a larger inheritance. Also, bookstores carry dozens of books, which talk at length about the delays and high costs associated with probate. These stories are simply not true in Texas in the vast majority of cases. Even so, living trusts are useful estate planning tools, and they do have their place in many people's estate plans. If you find any one of the following benefits appealing, then a living trust may be appropriate for you.


Benefit #1: No Court Involvement. When a person dies, most properties pass either under a person's Will or under a living trust. Some properties--such as life insurance, IRAs, and certain types of bank and brokerage accounts, pass directly to named beneficiaries. If property passes under a Will, then the Will must be probated at the courthouse. Probate typically entails hiring a lawyer, filing a number of papers with the court, attending one or more hearings, and providing a written inventory to the court valuing the properties, which passed under the Will. Some people don't want this type of involvement with the court, so they opt for a living trust.


By transferring all properties which would otherwise pass under your Will to a living trust, you can avoid the court entirely. For estates which don't owe estate taxes, there is usually less work for the lawyers, and that translates into reduced estate administration costs; however, it is usually more expensive to prepare a trust than a Will and most lawyers believe that even if you have a trust, you also need a Will.


Benefit #2: Privacy. As mentioned above, when a person dies with a Will, an inventory must be filed with the court. You may not want your friends, neighbors, or the media to be able to read a listing of what you own and what it is worth. After all, an inventory is a public record. With a living trust, your properties and their values are all kept private. Now that an affidavit in lieu of an inventory is allowed, this benefit has largely evaporated.


Benefit #3: Plan For Future Incapacity. You may be worried that one day you won't be able to manage your own finances, and you may want to name someone to handle these types of matters for you. You can address this potential problem with a power of attorney or with a living trust. A power of attorney will usually be accepted by banks, title companies and the like, but there is always the risk that an institution's legal department will reject it. The same person who may be denied the ability to use a power of attorney will likely be allowed to do anything he or she wants when acting as trustee of a living trust.


Benefit #4: Harder to Challenge. If you are planning to disinherit one of your children or grandchildren, you may be better off with a living trust because there is nothing filed at the courthouse. Also, it is a little harder to contest a living trust than a Will. Many people are interested in doing as much as possible to prevent a successful challenge to their estate plan.


Benefit #5: Avoid Out-of-state Probate. If you own property in another state, you can avoid a costly probate proceeding in that state by transferring the property to a living trust. Before you establish a living trust you need to understand the downsides, which include the following:


Disadvantage #1: Time-consuming to Set Up. Depending on how many different types of properties and accounts you own, it can take quite some time to switch everything over to the name of your living trust. Also, some financial institutions in Texas are not geared up to handle living trusts, so you can expect a little trouble and frustration in getting the trust fully established.


Disadvantage #2: Complicated. Wills are usually shorter and simpler to understand than living trusts. Also, with a Will, you can sign it and forget about it. But with a living trust, you need to put your property into the trust and run your life out of it for as long as you live. For many people, this downside outweighs all the potential benefits.


Disadvantage #3: Time-consuming to Revoke. A year after you set up the living trust, you may decide you don't want it any more. At this point, you will need to return to every bank and brokerage house, and undo everything you had done to establish the trust. You can expect more lawyers' fees too.


Disadvantage #4: Post-Death Costs Not Eliminated. If you have a taxable estate (which is generally an estate over $5,250,000 in 2013), there will be a lot of work to be done after death regardless of whether probate is required. Typically, there are tax returns to file, trusts to establish, assets to value, and more. Avoiding probate will only marginally reduce the cost of administering a taxable estate.


Disadvantage #5: May Still Need to Probate Will. If you leave just one bank account or one piece of real estate out of the trust, probate will still be necessary. And probate takes about as long when there is one asset as when there are twenty.




Q. Who should not have a living trust?


A. There are several invalid reasons for having a living trust, such as:

1. To save income taxes. Realistically, less than 1% of estates are taxable. If your estate is under $5,250,000 (for 2013) then this is not a reason. Also, almost anything that you can do in a living trust to save estate taxes can also be done in a Will for less cost.


2. To avoid probate. See Disadvantage #5 above. You frequently will still have to have the Will probated. Remember, Texas has a streamlined probate system.


3. To avoid a Will contest. Well, it will be replaced by a trust contest. The issues will be the same.


4. To avoid creditors. This is simply not true. Creditors can generally attack your trust as well as they can attack you.


5. To save money. Generally, trusts are more expensive to create and fund than having a Will. In addition, you will need to manage the trust for the rest of your life, which could get pricey keeping everything straight.




Q. Who should have a living trust?


A. Some people should seriously consider a living trust such as:

1. People with real property in other states. While it is relatively inexpensive to probate a Will in Texas, that is not true in most other states. In addition, it is simply more difficult to deal with a probate long distance. If the property is in a trust, then it remains in the trust after the owner's death and no probate is necessary.


2. People with "second" families, particularly when there was children in both. With children from different spouses involved, the risk of a Will challenge or other contest increases greatly. Although it is more expensive and more work is involved, having a trust and properly administering it, including providing for children, could reduce the possibility of friction, especially if the children receive some benefits from the trust during your lifetime. By the time that you die everyone should be more comfortable with your desires. More importantly, on the death of the first spouse, some or all of the property is "frozen" as to its distribution. With a Will, after the first spouse dies (and the surviving spouse typically inherits all of the assets of the deceased spouse), then the surviving spouse can change his or her Will to provide only for his or her children. A trust can "lock in" the agreement of the spouses.




Q. What is a Miller Trust, a Qualified Income Trust (QIT) and how does it work?


A. A Miller Trust is a written trust agreement, which makes it possible for people to obtain Medicaid nursing home coverage even though they actually make too much money to qualify for Medicaid. Importantly, they are not actually called Miller Trusts anymore. Instead, they now go by the name Qualified Income Trusts. The rule in Texas is that you must have both limited resources and limited income in order to qualify for Medicaid coverage.


These are two distinct tests that must be met, and if you don't satisfy both of them, then Medicaid nursing home coverage will not be available. Lawyers prepare Qualified Income Trusts. Therefore, everyone who needs one must first meet with a lawyer to discuss the specifics of the trust and all the other planning that goes with it. To learn more about Qualified Income Trusts, search the internet for the words "Texas qualified income trust." You can also call the Texas Department of Human Services at 888-834-7406 or visit their website at www.dads.state.tx.us. They have a summary of Qualified Income Trusts, and they also publish a "Medicaid Eligibility Handbook," which contains other helpful information.




Power of Attorney Questions:


Q. What is the difference between a Medical Power of Attorney and an Advanced Directive?


A. A Medical Power of Attorney is a document that allows you to name an agent to make medical treatment decisions for you in accordance with your wishes, if you are not able to do so yourself. An Advanced Directive is a document that allows you to address what kind of medical treatment you would like to receive if you ever face a terminal or irreversible medical condition. It is often referred to as the document where you tell the doctors to "pull the plug." Most people request that all treatments other than those needed to keep them comfortable be discontinued or withheld so they can be allowed to die as gently as possible. The main difference between the two documents is that the Advanced Directive is where you actually express your own specific preferences as to the use of life sustaining treatment, and the Medical Power of Attorney is where you name one or more persons to make most medical decisions for you.




Q. Who should be my agent under a power of attorney or medical power of attorney?


A. This is simple. Your agent should be someone capable of performing the duties required and someone who you absolutely trust. If you have any qualms about a person or feel that you need to restrict his or her power, then that is probably not the person that you should have.

Call Today: (817) 632-7711

Telschow Johnson Law:

honoring families through thoughtful ESTATE planning 

and probate