Category Archives: Estate Planning

Estate Planning 101

Most people hear the term “estate planning” and either don’t know what it involves or don’t fully understand what an estate plan accomplishes.  This article is an Estate Planning 101 to help explain what estate planning is all about, including what an estate is, the goals of estate planning, what an estate plan does, and what documents you might expect to see in an estate plan.

What is Estate Planning?

Estate planning is the process of thinking about and addressing your wishes with regard to two events: your unexpected disability during life as well as your testamentary plans for the disposition of your estate after your death.

What is an Estate?

The short answer is that an estate consists of every piece of property you own.

Examples of assets commonly found in an estate includes your house, any other real estate you may own, your cars, your personal effects such as jewelry and clothes.  It also includes your bank accounts, brokerage accounts, IRAs, 401k’s, other retirement accounts, life insurance, and your business interests.

One asset class often overlooked are your digital assets.  For example, Apple ID’s , Facebook accounts, as well as files and documents stored online are all part of your estate.

In probate, after you pass away, your estate may have liabilities in the form of unpaid debts and may have claims against third parties that arose during or at the end of your life (for example, an asbestos, medical malpractice, or wrongful death claim).

What are the Goals of Estate Planning?

Every person’s estate planning goals differ because everyone’s life is different.  Your estate plan will develop based on your planning goals that are specific to your life, your family, your assets, and your wishes.

That being said, below are a list of some of the common goals clients have when constructing their estate plan:

  • transferring assets at the death to the beneficiaries they wish to receive them;
  • planning for incapacity or disability;
  • providing instructions for their end-of-life care wishes;
  • charitable giving;
  • protecting assets from creditors; and
  • protecting assets from their beneficiaries’ creditors.

What Does an Estate Plan Do?

A properly constructed estate plan will usually accomplish the following objectives:

  • identify the individual recipients of your assets after your death and allocate your assets to them according to your wishes;
  • make sure that the transfer of your assets is accomplished as efficiently as possible;
  • minimize the costs imposed on your estate through taxes and the costs of probate;
  • make sure your non-probate asset dispositions are consistent with your probate asset dispositions;
  • make your end-of-life medical care wishes known;
  • address who will make medical decisions for you in the event you become incapacitated or disabled and are unable to make those decisions yourself;
  • address who will manage your assets and pay your bills in the event you become incapacitated or disabled;
  • provide for the designation of whom you wish and whom you do not wish to serve as your guardian should the need arise; and
  • set forth detailed instructions for how you wish your remains to be handled, whether by cremation or funeral.

Other objectives an estate plan might accomplish include the following:

  • planning for the care of minor children in the event both parents pass away;
  • planning for the care of a child with special needs; and
  • planning for the care of a family pet;

What Type of Documents Should You Expect to See in Your Estate Plan?

Basic estate plans will include the following documents:

  • a last will and testament;
  • an advanced directive (also known as a living will);
  • a power of attorney;
  • a medical power of attorney;
  • a designation of guardian; and
  • instructions on disposition of remains.

More complex estates might also include additional documents such as inter vivos or testamentary trusts as well as business organization documents.

You can read more about each of these documents and what they do by visiting this link:  Key Estate Planning Documents.

If you would like to contact my firm to schedule a consultation to discuss your estate plan, then please visit the firm’s contact page by clicking here.

An Example of Why You Should Have An Attorney Draft Your Will

An Example of Why You Should Have An Attorney Draft Your Will

Today’s example of DIY will language that cost a lot of money comes from the late Ms. Vada Wallace Allen. The issue surrounds a 316 acre tract of land the Ms. Allen conveyed to her son Bobby in some form.

The provision in her will that caused the problems reads as follows:

NOW BOBBY I leave the rest to you, everything, certificates of deposit, land, cattle and machinery, Understand the land is not to be sold but passed on down to your children, ANNETTE KNOPF, ALLISON KILWAY, AND STANLEY GRAY.  TAKE CARE OF IT AND TRY TO BE HAPPY.

Seems simple enough, right? A lot of people might draft that very type of provision in their will and think nothing of it.

What do you think it means?  Who ultimately has the right to own the land in fee simple and sell the land if they so please?

Bobby thought this language means that the 316 acre tract was devised to him in fee simple and the rest of the language was merely an expression of Ms. Allen’s wishes that he pass it on down to his children.  Alternatively, Bobby thought that the rest of the language constituted an unenforceable disabling restraint.

Bobby’s children thought the language meant that Bobby only had a life estate in the land and that upon his passing, title to the land would pass to them.  Under this interpretation, Bobby did not have the ability to sell the land.

What That Language Actually Means

The trial court said the provision means that Bobby owns the land outright and that he can dispose of it as he wishes.  That is exactly what Bobby did as he sold the land in 2014.  This is the transaction that caused Bobby’s children to sue him as well as the purchasers.

Bobby’s children appealed the trial court’s decision but the Court of Appeals agreed with the trial court.

Then, on March 23, 2018, the Supreme Court reversed those decisions.

The Supreme Court of Texas said no, this language did not convey the land to Bobby in fee simple.  Rather, this language granted Bobby a life estate to use and enjoy the property during the term of his life, but upon his death the land passes to his children.

Bobby’s children were right.  Bobby did not have the right to sell the land.

Why It Cost So Much Money

Ms. Allen passed away on June 8, 1993, and her will was admitted to probate on November 9, 1993.  That was 25 years ago.

Bobby conveyed the land in April of 2014.

And in November of 2014, his children filed suit to contest the conveyance.  They had a trial in Robertson County.  Then they appealed the trial court decision to the Court of Appeals.

Then they appealed the Court of Appeals decision to the Supreme Court of Texas.

The Supreme Court’s decision came down almost 4 years after the attempted sale of the land and 25 years after Ms. Allen passed away.

That is a lot of attorneys fees – for each party to the dispute.  And I bet being on opposite sides of a lawsuit did not do much to help the family dynamics between Bobby and his children.

Had Ms. Allen had an attorney draft her will and include appropriate language documenting her intent to convey a life estate to Bobby with the remainder to his children, then the costs and conflict could have been avoided.

How to Keep Your Family Together During the Probate Process

Financial interests and dealing with the emotional loss of a loved one can combine to create tension, dispute, and destruction in family relationships.  Family members fight.  Siblings feel hurt by the terms of a parent’s will.  Someone feels a strong need for a sentimental personal effect.  Family members feel pressure from their own financial problems and look to their inheritance as a solution.

Probate can be lengthy – in many cases it may last well over a year.  Complex cases may last even longer.  Managing family dynamics during this time period can be difficult.

This article is designed to provide some insight for executors and other family members on how they can avoid and diffuse these issues during the probate process.

Set Expectations Early

This should begin even before you have the will admitted to probate and someone is appointed executor.  Speak to family members and beneficiaries.  They often have expectations for immediate access to money or property.  They may have expectations that are contrary to the terms of the decedent’s will.  Explain the probate process and timeline so that those expectations are realistically tied to the time needed to settle the estate.

Partial early distributions is an area where a dispute often arises.  Expectations should be set regarding whether there will be any early distributions.  It is quite common for beneficiaries who are not in a stable financial situation to request loans or advances.  How will you handle those requests? How will you respond when other beneficiaries find out? Set the expectations – and set them for everyone.

You should also set expectations regarding communication and the exchange of information during the probate process.  How will you communicate? How often? Simple estates may not require frequent updates while more complex matters may dictate frequent, even weekly, updates.

Communicate Frequently

The human mind has an amazing ability to develop conspiracy theories when left with little information and the time to do so.  You should communicate with beneficiaries and family members often.  The more complete and accurate the information they have is, the less likely their mind will wander and fill in any gaps with suspicion.

You set the expectations for the probate process and timeline early on.  You should communicate frequently with other family members about where you are in the process.  If there are any issues that may cause a problem or delay, communicate them as soon as you can.  If the expectations for the timeline change, then update them.

Some family members may have previously had access to estate property that they will not have access to during the probate process.  The executor may need to change the locks, secure the property, or otherwise take possession of assets until the probate process is complete.  Communicate that fact early on so that it is not a surprise to some accustomed to having use or access to the property.

Some family members may have relied upon assistance from the decedent – financial or otherwise.  You should communicate with those family members and determine whether the estate can continue that support and how it might go about doing so.  You should also make sure that other beneficiaries or family members are aware of any arrangements you make so they are not surprised to find out about any support the estate provides.

You should discuss how decisions will be made as well as who is responsible for making which decisions.  The executor is ultimately responsible for all decisions regarding the estate, however, there may be room for input from other family members.  Allowing family members to participate in the decision making process so they have an opportunity to be heard and feel like they have a voice can go a long way in avoiding conflict.

Frequent communication will not only help prevent beneficiaries and family members from negative speculation but it will also allow you to anticipate potential conflict so that you can act to de-escalate it quickly.

Be Aware

You should be aware of the expectations of beneficiaries and family members.  You should also be aware of the family dynamics and how that might play into any disputes that might arise during the probate process.

For example:

  • Is someone expecting to inherit under the will but the decedent left them little or nothing?
  • Was someone promised a personal item but it is not written in the will?
  • Is a family member in a financial bind and likely to request an advance or loan?
  • Are tensions already high between certain beneficiaries from some long simmering dispute?  Is that likely to trigger a fight during probate?
  • Are there established roles or pecking orders within the family that might affect their interaction during the probate process?
  • Are discussions best handled as a group or one on one?
  • Are there any items of particular sentimental value that might “disappear” if you don’t take immediate action?
  • Does a beneficiary or family member have a sentimental attachment to a particular personal effect or household item?

You should also be aware of your power and authority as executor.  What does the will say about how to handle disputes among beneficiaries?  How much discretion were you afforded in distributing personal property under the will?  What factors did the decedent instruct you to consider when making decisions regarding distributions?

Understanding the amount of discretion you are allowed as well as what factors you must consider when making decisions regarding distributions can provide you with a foundation to explain your decisions to family members that might otherwise question those decisions.  Providing a sound, logical, explanation for a decision can help prevent any argument from escalating.

Use Your Advisers Wisely

The professionals advising you during the probate process are there to provide objective advice that is unfettered by the emotion that arises between squabbling family members.  Use this to avoid and diffuse potential conflict.

Do you know there is going to be a delay coming up?  Family members might view the news coming directly from you with suspicion or a lack of understanding.  Having the attorney handling the probate inform the family members and explain the reasons for the delay might be more acceptable to other family members.

Tax issues preventing a closure of the estate?  Have the CPA talk to your family members to explain why there is a delay and the importance of handling the matter appropriately.

These professionals act as an objective authority to explain the basis of the decision that might otherwise cause conflict.  You can and should use them to shield yourself from taking the blame from other family members.

In Conclusion

The stress of dealing with loss of a loved one combined with the desire and expectation of new wealth from settling the estate can make family members act in ways they might nor ordinarily act.  A little thought, a little planning, and a lot of communication can go a long way towards ensuring your family can get through the probate process without irreparably damaging your familial relationships.

Key Estate Planning Documents in Texas

There are numerous documents used when putting together an estate plan.  Each plan is different and focused on the individual client’s needs so one client may have documents in his or her estate plan that are not necessary to address another client’s estate planning objectives.  However, certain documents are common to most estate plans. It… Continue Reading

Basic Estate Planning Issues for New Parents

The feeling of being a new parent is exhilarating, a little scary, and often very tiring – I know, I did it twice.  I still remember walking out of the hospital when my son was born thinking, “That’s it? They really just let me walk out the door and go home with him?”  Along with… Continue Reading

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