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Houston Probate & Estate Administration Law Blog

New tax laws not the only reason to update an estate plan

Texas residents who were estimating how the new tax laws would affect them should know about the changes to the estate tax. The amount that is exempted has doubled to around $11.2 million for an individual and twice that for couples. While this is important to those with a large amount assets and who would like to ensure that the amount subject to tax is minimized, there are reasons to think about estate planning and periodically update documents regardless of the size of the estate.

It is important to consider the disposition of assets. For people who have created a will, it can include how assets will be transferred. There can be a trust, it can be provided to the beneficiaries outright or there can be a new trust created, also known as a testamentary trust. With a testamentary trust, certain provisions can be included, such as how old the beneficiaries must be to get the assets. Other factors that should be considered are items of sentimental value and if there are charities the testator wants to donate to.

Have you considered how an estate plan could benefit you?

Many people may live their lives without giving much thought to when they will die. While this live-in-the-moment type of attitude may seem positive and uplifting, it may not benefit everyone to avoid thinking about their potential demises. If you die without an estate plan, your affairs and your loved ones could face complications.

Of course, whether or not you choose to create a plan is a considerably personal decision. However, before you entirely decide against it, you may want to assess why you feel that you do not need one and also gain more information on how having a plan could prove more beneficial than you may think.

Trusts are often preferable than simply willing assets to heirs

Texans who are crafting an estate plan might want to keep the document as simple as possible and give their heirs their inheritance immediately. This is especially true when the testator has adult children and believes they are of sufficient education, age and maturity that they can handle the inheritance which, in some cases, might be substantial. Leaving the assets to the adult children outright is what is frequently done. Trusts are generally perceived to be for children under the age of 18 and those who need special assistance. But trusts can also be valuable for adult children.

Financial wisdom is not based on age, but on experience and knowledge. Some adults might not be completely aware of how to handle money, particularly a large amount of money and assets. A person leaving assets to adult children can use a trust to ensure that the finances are competently managed by a qualified person so it is not lost by the inexperienced adult child. While it is possible for the adult child to handle this on his or her own by seeking an advisor, the testator could have someone he or she trusts to handle the finances. Mistakes can be made with hiring someone even if the adult child is legitimately trying to be vigilant. A trust can avoid this.

Common mistakes made when crafting living trusts

Estate planning strategies inevitably differ based on the individual's needs. Texans who are in the process of deciding what form of estate plan they want to use might be confused by all the available options. Trusts are a common method of estate planning. However, those who have a revocable living trust could be missing out on the advantages they can use with a living trust. Knowing those advantages is step one in utilizing and maximizing them.

With a living trust, the owner and his or her spouse will transfer title of most assets to the trust. They will then be the co-trustees, maintain control and handle them as if there was no trust at all. The difference is that the owner is the trustee and not the owner anymore. With a living trust, a main benefit is that it avoids probate. When the owner dies, the successor trustee becomes the trustee and manages the assets. They can then be distributed or other actions can be taken based on the trust and its requirements. Since probate can be costly and take time, this is a significant benefit.

Wills are often not enough for comprehensive estate planning

Responsible Texans will take the imperative steps to craft their estate plan to adhere to their desires and loved ones' needs. Many will think that they have done what is necessary to ensure their plan is airtight and covers all eventualities by having a basic will. However, mistakes are common when drafting estate planning documents. In many cases, the person will use the wrong estate planning vehicle to suit their needs. In others, they will not go as far as they should by stopping at a simple will without considering the possibility that other steps should be taken. Knowing when to go beyond a will is imperative with any comprehensive estate plan.

While a will is a good thing to have, there are other documents that might - and usually are - needed. In many instances, a power of attorney, an advanced medical directive and more will be essential. Having another person or more than one other person who can make decisions in the testator's stead is key. Medical decisions, asset allocation and the basics of life can be handled with these documents. Should the testator not have these documents, the court will appoint someone to oversee these issues and it might be a person whom the testator does not know or does not want. These documents are important for everyone, even someone who is younger and seemingly in good health as accidents and unforeseen incidents can leave them incapacitated at a moment's notice.

What should I know about a medical power of attorney?

Drafting estate planning documents in Texas should be comprehensive and adhere to all the needs and desires the person has. For some, a health proxy is one of the key factors they will think about as they formulate strategies for their estate plan. Understanding all the various aspects and requirements for a medical power of attorney is one of the most important factors for it being complete and achieving the desired ends.

With a medical power of attorney, it is possible to designate an agent who will make the decisions on the person's behalf if it is determined that the person is incompetent to make those decisions. The medical power of attorney provides the representative the right to make all health care decisions based on the person's wishes. For example, the representative will have the right to refuse treatment on behalf of the person. This includes any attempts to move forward with life-saving techniques.

Tailoring an estate plan based on the new tax laws

Texans who are drafting estate planning documents should pay close attention to changes in laws that come about with every governmental power shift. Such is the case with the Trump Administration and its changes to federal tax laws. With it, the amount that people can pass on to heirs doubled without the need to think about the estate tax or to use various trusts to shield wealth.

Heirs can get slightly more than $11 million as individuals with the changes to the estate tax. Couples can get double. Other strategies, in conjunction with these changes, save people even more. For example, an irrevocable dynasty trust can be used to grow an estate, sans concern about the estate tax, and continue passing those assets along for generations. Another tactic that people might want to consider is simply amending a will to account for changes in the law.

Should you update your estate plan to include a living will?

You may take pride in choosing to prepare for situations that are possible, even if you do not know whether they may actually come to fruition. Feeling prepared and having a plan may allow you to feel less stress in your life, especially when those plans prevent your loved ones from finding themselves in a difficult predicament. When it comes to knowing your end-of-life wishes, you may want to ensure that your loved ones have the information they need.

As part of your estate plan, you may want to include instructions on how your care should be handled in the event that you cannot express your wishes at the time the need for care presents itself. Luckily, a living will could help you detail your instructions for this type of scenario, and though you may never need to use it, having it in place could allow you to feel more certain that your family will not have to make difficult decisions regarding your care on their own.

How does a durable power of attorney work in Texas?

Residents who are taking the necessary steps to protect themselves and their estates will want to know all the different tools that can be used under estate planning laws. One is a durable power of attorney. With a durable power of attorney, there will be another person (an agent) who is granted the power to make decisions on behalf of the person (the principal), when the principal is unable to do so. This can involve health care and end of life care, among others.

The designated person can be anyone whom the principal trusts with these important decisions. These decisions include whether the principal should be placed on life support, and whether to use extraordinary measures to keep the principal alive.

Important considerations with a special needs trust in Texas

One of the most common concerns for Texans when they think about the future and with drafting estate planning documents is if they have a loved one who will need to be cared for after they are gone. Statistics show than there are more than 40 million people across the nation who had a disability in 2016.

Since some of these disabled people are not capable of caring for themselves, parents and other guardians should take steps to protect their loved ones. Toward that end, a special needs trust should be considered. There are certain factors to consider with these issues.