Everyone has an estate. Your estate consists of everything you own including your personal property from your toothbrush to the most expensive real estate you can imagine. It is your stuff! Your estate can also contain stuff that you cannot see or touch. These are things like copyrights, royalty rights, intellectual property etc.
Estate planning is the thought process that you put into determining how you will distribute your property upon your death. Will you leave all of your property to a spouse? What about your children? How about your grandchildren? What if you don't want to decide, but instead you want them to sort it all out after your death? Another part of estate planning, a part that is often forgotten, is planning how to handle your affairs and property if you are permanently or temporarily disabled. It includes planning for Medicaid claims if you must spend time in a nursing home. What if you are able to live at home but need constant care? Who will be the guardian of your person? Who will be the guardian of your estate? What about your children if something happens to you? Do you want to be kept alive on a ventilator?
Having an estate plan, as you can see, is important no matter how much wealth you attain or have. It is, at its core, a gift to your loved ones. The estate plan allows you to tell your family and friends, doctors and caretakers what you want in the event you cannot make decisions.
Wills & Estate Plans for Single People
A single person should have an estate plan. The plan should consist of at least the following documents: (1) Last Will and Testament, (2) Statutory Durable Power of Attorney, (3) Pre-need Designation of Guardian, (4) Medical Power of Attorney, (5) Disposition of Remains, and (6) Physician's Directive. You should know too that, unless you have gobs and tons of money and assets worth over 11 million dollars, you likely do not need a Trust. If you own real estate (homes or land) there are much simpler and much less expensive alternatives now under Texas law than creating a Trust. The best example is a Transfer on Death Deed. The Transfer on Death Deed receives a more detailed discussion below.
As a single person, you must give careful consideration to who you will give the responsibility to be the executor in your will. But, more importantly, you must have faith and trust in a person whom you choose to hold your powers of attorney. You may choose a trusted family member, but you do not have to. Whomever you choose, you should make sure they know your wishes and share your values.
A single person must also know that subsequent marriage does not automatically change any document in your estate plan. Divorce voids gifts to your spouse left in a Will, but that is all. If you create an estate plan, and you should, remember to change it if you desire changes upon marriage.
If you are a single person with children, the same considerations discussed below about children apply to you as well.
Wills & Estate Plans for Married People
Marriage in Texas does not automatically insure that all of your property goes to your spouse if you die. The state legislature provides a plan for you if you do not have a will. Divorce will void gifts you leave your spouse in a will, but nothing more. For example, if you have children with one spouse or other person and then later marry someone else and die without a will, your children from the prior relationship receive half of your property save some exceptions for the spouse granted by the Texas Constitution. If you have children from a prior relationship to your current spouse, it is a very important and loving gift from you to have a complete estate plan that states clearly your intentions and desires.
The plan should consist of at least the following documents: (1) Last Will and Testament, (2) Statutory Durable Power of Attorney, (3) Pre-need Designation of Guardian, (4) Medical Power of Attorney, (5) Disposition of Remains, and (6) Physician's Directive. If you have children under 18, you and your spouse (or your children's other parent if you are not married) should predesignate a person who to server as the guardian of your children if you become disabled or die.
While it is not often that someone actually needs a trust, there are sometimes advantages to having a trust depending on your assets and the nature of those assets. The biggest possible advantage to a trust is that it avoids the need for probate and makes sure your assets pass the way you intend them to pass. However, it is important to note that there can be special tax implications to the creation of a trust, depending on the assets in the trust and the type of trust that you have.
There are two main types of trusts that people can do during their lifetimes. A revocable or irrevocable trust. A revocable trust means that you can always decide to end the trust at any time and get your assets out of it. While irrevocable means that once it is created it is in existence until it runs its duration, this is usually dictated by the trust agreement. It is also worth noting that any trust agreement can be amended by the rules and procedure set out by the trust agreement.
The most common trust set up is that spouses set up the trust, where they are both the trustees and after they have both passed away the trust is distributed as per the trust agreement to the beneficiaries of the trust. This happens in a very similar fashion as to when someone probates a will. The successor trustee has the power to sell and/or give assets to the beneficiaries as dictated in the trust agreement.
There is also another type of trust that is fairly common in Texas. It is called a testamentary trust. This is a trust that is created in a will and during probate of the will is created. This type of trust is usually for minor children, with the distribution of the trust assets coming at a certain age or upon some other event such as graduation from college.
Transfer on Death Deeds and "Lady Bird" Deeds
As mentioned above a Transfer on Death Deed and "Lady Bird" deeds can also be part of someone's estate plan. A Transfer of Death Deed is a deed that you can file while you are alive that designates a beneficiary(s) to receive your real property upon your death. It is filed in the County Deed Records, and upon your death title to the property transfers to your named beneficiary(s). This type of deed is fully revocable, meaning that if you change your mind about who should get the property or sell the property you can change or revoke the deed.
A "Lady Bird" deed is another type of deed, that instead of naming a beneficiary, instead transfers title immediately. When a person creates and files a "Lady Bird" deed, they do retain what is called a "life estate" in the property. Meaning that for the remainder of your life you can use and enjoy the property as you see fit, as long as there is not any damage done to the value of the property. Basically, the person named in the "Lady Bird" deed gets an immediate ownership interest in the property that is subject to the life estate of the creator of the deed.
If you have any questions about what kind of Estate Plan would be best for you and your current assets, please contact us today for a free consultation.