Basic Estate Plan


Estate Planning?

Estate Planning is essentially taking steps to minimize costs and burdens for loved ones we leave behind when we die.  Its good stewardship and we would argue -- it is your responsibility especially when you have others depending on you.  

In our opinion, a basic estate plan consists of three key documents (executed in conformity with Texas law) and one aspect related to "bringing it all together":

1) a Last Will and Testament,

2) a Durable Power of Attorney,

3) a Healthcare Directive,

4) a Medical Power of Attorney, and

5)  Bringing it all together - Some thought on funding needs (especially if people are depending on you) and how to coordinate that and other non-probate assets into the plan. 

For example, I have life insurance -- how should the beneficiaries be styled in conjunction with documents?  or I have bank accounts -- how should the payable on death read in conjunction with the documents?

The assets of the estate are referred to as the "probate assets of the estate". These assets are attempting to be transferred to the beneficiaries under the Will. But before these assets can legally move to the beneficiaries, any creditors of the estate must be addressed.  Contrast this to what is referred to as "non-probate assets" of an estate. These are assets held and owned by the decedent at death but are being transferred to another at death outside the decedent's Will (most common a contract principle). The most common are "payable on death" accounts with a financial institution and/or life insurance policies.  A proper estate plan makes sure both probate assets and non-probate assets work together in one steamless plan.

While we can certainly do advanced estate planning beyond this to address other aspects, including steps to minimize estate taxation, we believe everyone should have at least a basic estate plan.  

Essential Documents in a Basic Estate Plan

The Last Will and Testament

While the overall plan could be basic, the Will needs to be quite robust to handle multiple contingencies and situations.  "Basic" does not mean low quality or inadequate.

This document deals with the disposition of all probate property you hold at time of death.  A proper Will invokes rights under Texas law to have your estate to be free from Court oversight (Independent Administration), allows you to choose whom will administer the winding down of your affairs (called an executor or executrix), allows for the appointment of Guardians of minor children, and allows for Trustees to be appointed to safeguard assets for the benefit of minor children. 

A properly drafted Last Will and Testament provides for contingencies in the order of these appointments and decisions (i.e., if X deceases me then Y, if X is unable or unwilling to serve then Y).

A properly drafted Will is not static in nature.  It is written in a fashion to be adaptable to changing circumstances, the birth of additional children, the change of things you own, death of other people, inability of people to serve in roles, etc.

If written properly, you likely will only have to create a new if you have a major event (death, divorce, etc.) or move outside the State of Texas.

A proper Will is executed in special formalities that allow for it to be admitted (process of being recognized by a Texas legal authority) on its face (no need to call witnesses who saw you sign it) - in accordance with Texas law. 

Durable Power of Attorney

This document creates an agent to legally act on your behalf.  The "Durable" aspect allows for the principal-agent relationship to remain intact in the event the principal loses legally capacity by making use of special form and substance of the document in conformity with the Texas Probate Code.  Often in the estate planning realm, the agency "triggers" or becomes effective when the principal loses their own legal capacity and allows a known and selected person chosen by the principal before hand to continue to make legal decisions on their behalf.  

A properly drafted document provides for contingencies in the order of these appointments (for example, if X is unable or unwilling to serve then Y, if Y is unable or unwilling to serve then Z).   

Healthcare Directive

This document allows you to memorialize some choices and preferences regarding certain end of life decisions in conformity with Texas law.  This document is particularlly helpful to the family in bringing closure.   

Medical Power of Attorney

This document is similar to the Durable Power of Attorney in that it creates a principal - agent relationship unaltered by the principal's future legal incapacity.  The difference is that it is restricted medical decisions only.  The document also addresses confidential information issues in question with the enactment of The Health Insurance Portability and Accountability Act (HIPAA) of 1996.

 

What the Documents Do and Prevent

1) The Will

a) Allows you to alter the disposition of your property different than the intestate code (See intestate scheme).

b) Allows you to select the representative (Executor/Executrix) of your Estate versus the Court determining who it is going to be.

c) Allows the personal representative of your Estate to serve without bond versus the Court requiring bond to serve. 

d) Allows the Estate to be administered with minimal Court supervision (Independent Administration) versus the Court making every decision (Dependent Administration).

e) Allows the Court to waive appraisers of the Estate property.

f) Allows the Will to be admitted largely on its face (self-proved) versus requiring witnesses who saw you execute it and requiring the witnesses to offer testimony as to your state of mind when executing.  Shifts burden to prove not valid versus proving valid.

g) Prevents legal proceeding to appoint "Guardians of the Estate" for minors taking under your Will.

h) Allows trustees to be selected by you versus the Court appointing "Guardians of the Estate" for minors taking under your Will.

i) Allows trustees to serve without bond.

j) Eliminates heavy oversight and reporting requirements to the Court for the trustees. 

k) Allows you to determine who need oversight when receiving under the Will versus the legal age of 18 years.

l) Allows you to memorialize your wish on who should care for your minor children versus the Court determining who should be the caretakers of your children.

2) Durable Power of Attorney

a) Allows you to select someone to legally make decisions on your behalf versus the Court determining who should.

b) Prevents a legal proceeding to determine the "Guardian of the Person" and "Guardian of the Estate".

c) Prevents the agent from having to post bond to perform the role.

d) Prevents heavy reporting requirements to the Court by the agent.

e) Prevents the agent from having to obtain approval on some decisions from the Court.

3) Medical Power of Attorney

a) Many similar to Durable Power of Attorney but restricted to medical decisions.

b) Prevents issues with HIPPA

c) Brings better closure to family members, less confusion during difficult emotional time.

4) Healthcare Directive

a) Allows you choice versus medical providers, Court, etc.

b) Brings better closure to family members, less confusion during difficult emotional time.

Overall, eliminates time, money, and burden on those you love and carries out your wishes more precisely.