Do I really need a will?

Apparently a lot of people don’t think they do. According to a recent survey, 55% of American adults do not have a will. More disturbing, only 39% of adults with minor children have a will – that leaves 61% that don’t. That fact that they have minor children means they are probably relatively young, so preparing a will for the unlikely event that they might die in an accident may not seem like a high priority. But I would bet every one of them would say that taking care of their children is their highest priority. So providing for their children in the event they aren’t able to do so should also be a very high priority. In your will, you can appoint a guardian to raise your children and appoint someone you trust to manage the assets you leave to your children.

What if you don’t have minor children? Do you have a spouse? If you don’t have a will, Texas law controls who will inherit your property – and it may not be your spouse. He or she may not even inherit your half of the community property that the two of you acquired while married. Who inherits if you don’t have a will. You can avoid this outcome by having a will.

If you are young and really don’t own anything and don’t have any children, then you may not need a will. But once you have personal or real property, managing your estate becomes more complicated and more expensive if you don’t have a will.

Who inherits if I don’t have a will?

If you die without a will, you are said to die “intestate” and state law will determine how your property will be divided. The division may or may not be how you would like your estate divided. The Texas Estates Code provides for the distribution on this chart.

(Note: Separate property is property acquired by a spouse prior to marriage or acquired after marriage by gift or inheritance. All other property acquired during marriage is presumed to be community property, absent a written agreement between the spouses.)

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What does an executor actually do?

Although you name someone as executor in your will, he doesn’t become the executor until appointed by the probate court. So he will need to find your will, and then hire an attorney and file an application to probate your will. He will attend a hearing, at which he will be appointed. Then he will take the necessary steps to administer your estate as your will directs, which will depend on what assets you own but will include most of the following:

  • Obtaining death certificates.
  • Handling your funeral if you didn’t make arrangements.
  • Obtaining an EIN and setting up an estate bank account into which he will deposit all funds received for the estate. He must keep estate monies separate and so can’t deposit them into his own account.
  • Finding, collecting and protecting estate assets.
    • Contacting banks, stock brokers, investment companies, insurance companies etc. to collect funds.
    • Getting items back from family and friends that you loaned to them.
    • Changing the locks on your home if necessary to keep assets from disappearing.
    • Collecting rents from tenants and payments on loans you made to others.
    • Operating your business or finding someone to do so.
    • Obtaining or maintaining insurance on your house and valuable assets.
    • Making mortgage, car and other payments during administration.
  • If administration will take awhile or there are significant assets, investing estate assets until distribution.
  • Providing notices to the beneficiaries, creditors, and governmental agencies.
  • Preparing an inventory, appraisal, and list of claims – which must be filed with the court.
  • Selling real property, businesses, and other assets if necessary.
  • Paying legal debts, rejecting others, and paying administrative and funeral expenses.
  • Distributing remaining assets to the beneficiaries.
  • Filing a final personal income tax return and one for the estate if necessary, which may include making certain elections for tax purposes.
  • Keeping accurate records of all money collected and all expenses paid on behalf of the estate.
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Who should I name as executor?

See: Choosing an Executor

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Can I name more than one of my children as co-executors?

See: Children as co-executors

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Who should I name as trustee?

See: Choosing a Trustee

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Who should I name as guardian for my minor children?

Most parents will consider this the most important decision they make in the estate planning process. If you don't set up a trust in your will or by a separate trust document, then you will need to name a guardian for the person (who will raise your kids) and a guardian for the estate (who will manage the money you leave for your kids). Choosing a trustee covers what to consider when choosing who should manage the assets you leave to your kids. When choosing a guardian of their person, you should choose:

  1. Someone who will be willing to serve. You should confirm with the person you want to appoint that they feel comfortable being named. Raising someone else's children is a great responsibility and expense. The person you would choose may love your children but not feel comfortable taking on this responsibility. They may not feel financially able to do so for reasons you are not aware of – especially if you won't be leaving sufficient insurance or other assets to provide for your children's support.
  2. Someone your children know and love, so they will be comfortable with the person.
  3. Someone who shares your values and views on education, religion, money, family, and other matters to the extent each of these is important to you.
  4. You do not have to name the same person to serve as the guardian of their person and as trustee of any money you leave to them. If you do not, you may want to discuss with them both the reason for this choice. Otherwise, you may offend the person you name as guardian of their person, who might wonder why they are 'good enough' to raise your kids but not to handle the money. Also, they may feel it will be a big inconvenience if they have to go to a trustee any time they need money for soccer camp or private school or medical bills, and other expenses. It may be that you feel the person will be great with the emotional and personal aspects of raising children may not be great at managing and investing money. They may be intimidated by the prospect, especially considering that a trustee has a fiduciary duty to invest and protect the estate. They can't just put the money in a savings account earning 0.01% interest; but they also can't put the money into risky investments unless you expressly authorize them to do so. You can provide guidance by setting out in a trust how the money is to be used and limitations on investments.
  5. If your child has special needs, you will want someone who understands those needs and is willing to take the responsibility. Special needs children often required a larger commitment of time, so you will want to be sure to name someone who will be able to make that commitment. A guardianship for all children end when they turn 18. If you believe your child will be unable to make care for himself after reaching age 18, you may want to appoint someone who will be willing to go to court to have themselves appointed guardian at that time.
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Can I disinherit one of my children?

Yes. If you do so, you should name them in your will along with any children you are not disinheriting to show that you didn't just forget about them. You might note that you are deliberately not leaving anything to them. You may want to add a short statement of why you are disinheriting them – you have already given them money, they are provided for by someone else, you haven't seen them in thirty years, etc. You probably don't want to say it's because they are a drug addict or include any other potentially libelous statement.

Disinheriting a child is often the cause of will challenges. Even if your will has a clause stating that anyone who challenges it will get nothing – a disinherited child has nothing to lose by challenging. It may make sense to leave some amount to that child that will be put at risk if he or she challenges your will.

If one of your children is irresponsible or has drug or alcohol problems, you should consider leaving money for them in a trust rather than disinheriting them.

You may want to think carefully before you disinherit one of your children. It's your money and you are entitled to do whatever you want with it. But disinheriting a child is likely to cause on-going hard feelings and even conflict among your children if some are disinherited and some are not. Your will is often your last statement to your heirs. Disinheriting a child, even if they know the reasons, can feel like you reached out from the grave to give them one last rebuke.

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How often should I update my will and other estate planning documents?

See: Updating your will

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What options do I have if my spouse or parent did not sign a statutory durable power of attorney and is now incapacitated or suffering from dementia?

You cannot sign a durable power of attorney after you have become incompetent. Some Alzheimer's and dementia patients have lucid intervals in which they may be competent to sign, but that will require a doctor to confirm that you were competent. If you don't have a power of attorney, somebody is going to have to go to court, which means hiring a lawyer, appearing in court, possibly posting a bond and paying for an attorney ad litem, a guardian ad litem, court fees, and possibly trustee fees. Texas courts prefer a less restrictive alternative to guardianship if one is available.

Possible options when you don't have a power of attorney:

Community Administrator

If you are married, your spouse can go to court to have you declared judicially incompetent so he or she can administer the full community estate, including your sole management community property. This involves attorney's fees and court appearances and the appointment of an attorney ad litem, etc. If you own any separate property (owned before your marriage or acquired afterward by inheritance or gift), a court will have to appoint a guardian to administer your separate property. The spouse is entitled to be appointed if eligible. If you are not married, appointment of your spouse as community administrator is not available.

Management Trusts

(Formerly sometimes called '867 Trusts.') Someone may apply to the court on your behalf after you are incapacitated to have your funds placed in a management trust to be used for your health, education, maintenance and support. The court will appoint an attorney ad litem and possibly a guardian ad litem, who will be paid from your assets. The funds placed in trust will be held and managed by a professional trust company unless the person applying to have the trust established can't find a financial institution willing to serve. Annual accountings must be filed with the court.

Declaration of Guardian

If you didn't sign a power of attorney, you probably didn't sign one of these either. This allows you to name the person you want to be appointed as your guardian in the event of your incapacity. That person will still have to go to court to be appointed and the court will give great weight to your wishes as long as the person qualifies. You can also name a person that you absolutely do not want to be appointed as your guardian should the need arise. If you are going to go to the trouble of signing this form, why not sign a power of attorney and avoid the need to involve the courts?

Appointment of a Guardian

If there is no less restrictive alternative available, your family will have to go to court to have a guardian of your estate appointed. Again, this involves attorney's fees and court appearances and the appointment of an attorney ad litem, etc. The guardian will have to post a bond and will have to obtain consent from the court for most actions. He or she will also have to maintain careful records and file an annual accounting with the court, which will demand receipts for every expense. If you are married, then your spouse is entitled to be appointed if he or she is eligible. If he or she is not, then your Ònearest of kin' will be appointed, which may or may not be who you would choose.

A power of attorney is no longer effective after the person who signed it dies – that's when the will or living revocable trust takes over.

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What options do I have if my spouse or parent did not sign a health care power of attorney and is now incapacitated or suffering from dementia?

If you do not have a heathcare power of attorney, your family may have to seek to have a guardian appointed for your person to enable the guardian to make health care decisions on your behalf. Texas courts prefer a less restrictive alternative to guardianship if one is available.

Section 313.004 of the Texas Health and Safety Code provides that if you are an adult patient of a home and community support services agency or are in a hospital or nursing home, and are comatose, incapacitated, or otherwise mentally or physically incapable of communication, an adult surrogate in the following order of priority may consent to medical treatment on your behalf:

  1. your spouse;
  2. an adult child who has the waiver and consent of all other qualified adult children to act as sole decision maker;
  3. a majority of your reasonably available children;
  4. your parents;
  5. the individual you clearly identified to act for you before you became incapacitated, your nearest living relative, or a member of the clergy.

If someone is at home and not receiving services – only family is providing care - then this doesn't apply and a guardian will have to be appointed. However, if someone is so incapacitated that they can't make health care decisions, they are probably receiving some kind of services.

You would probably follow the same list of priorities given above - your spouse as your first choice and one of your adult children as your second choice. But do you want your adult child to have to contact all of your other kids and get them to sign a consent form? And what if these people disagree? What if your parents are divorced and disagree? Any dispute has to be settled by the courts. Think of the Terry Schiavo case. Her husband and parents disagreed about what she would have wanted and incurred huge legal fees over fifteen years - I hope because they really disagreed about what she would have wanted and not because they wanted a cut of the personal injury award held in trust. Maybe they would have fought even if she had named her husband as her healthcare agent – but the courts probably wouldn't have let the dispute continue for fifteen years through multiple appeals. Congress would probably not have intervened. WouldnÕt you prefer to name someone who you believe will follow your wishes to make these decisions?

It is important once you sign a healthcare power of attorney to talk to the person, and any alternatives, about your wishes. You may think they know that you don't want to end up on a respirator for years after doctors have declared you brain dead. You may think that they know that if you have Alzheimers, you wouldn't want to undergo extensive treatment for cancer. But when people are uncertain, they hesitate to make such hard decisions for someone else.

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Should I have a living revocable trust?

Setting up a living revocable trust is usually much more expensive than having a will prepared, and it is probably an unnecessary expense if you live in Texas. They are more popular in states that have more complicated and expensive probate procedures than we have in Texas. Living revocable trusts can also be a hassle – you have to transfer all of your assets into the trust. If you buy new property or a new car, open new accounts, inherit property, they all need to be placed in the name of the trust if your goal is to avoid probate. Most people fail to transfer all of their assets into the trust and any assets not in the trust will have to be distributed through probate, so you will still need a will.

A living revocable trust might make sense if you own real estate in another state and want to avoid the probate process there or you expect someone to fight your will and believe having an established trust will dissuade them.

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What Are the Non-probate Assets

Certain assets pass directly to a named beneficiary without having to be included in the probate of your estate. This includes:

  • Life insurance
  • Retirement accounts
  • IRAs
  • Pay-on-death accounts
  • Assets owned jointly with right of survivorship (rare in Texas)

Generally these are all contractual. You have a contract with the insurance company or the bank or brokerage house that holds your account. As part of that account, you probably designated a beneficiary to receive the benefits upon your death. By contract, the company or bank has to pay the money to the specified persons – even if your will says someone else should get the money. If you did not name a beneficiary or the named beneficiary dies before you, then the contract may specify a default person who will receive the money – often your spouse or your estate.

However, problems can result if you are not careful with beneficiary or pay-on-death designations or fail to coordinate them with your other estate planning documents.

For example, if you have named only one child as the pay-on-death designee on an account or the beneficiary of an insurance policy, then the money will be payable to that child alone. He or she will have no obligation to share with your other children, even if that was your expectation and even if your will provides for all children to share to proceeds. The named person might decide that mom or dad wanted him to keep all of the money, especially if he thinks other family members are being unreasonable about other assets.

If you name your estate as the beneficiary of a life insurance policy or retirement account, then the proceeds will be subject to the claims your creditors submit to your estate. If you name a person or persons, then the proceeds are generally not subject to the claims of your creditors – except possibly for any tax liability of your estate.

While the beneficiary of life insurance does not have to pay income taxes on the proceeds, the proceeds are included in your estate for tax purposes. So if your estate is large enough for this to be a concern, then you may wish to state where the money to pay the taxes on a non-probate asset will come from.

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Where should I keep my will?

If your original signed and notarized will can't be found, there is a presumption that you revoked it – possibly by ripping it into teeny tiny pieces. This presumption can be rebutted, but why make things more complicated? Make sure your family will be able to find your will. Wherever you put it, tell your family where it is.

Executor A good choice may be to give your original signed will to the person you have named as executor - assuming he or she is the organized type who will remember where he or she put it. Then tell the primary beneficiaries the name of the person who has your original will. If your executor moves away, no one may remember who has your original will – and he or she may not be able to find it after the chaos of a move. (This is one reason to review your estate planning documents annually.)

Someplace Obvious If you keep the original, then you need to put it somewhere that you know your family will look when trying to find it. And then tell them where it is. Maybe put it in a bright blue folder and tell your executor and a family member or two that itÕs in the bright blue folder in my desk in my home office. If you move it, tell them the new location. A fire proof safe or fire proof filing cabinet in your home is a good choice – if you have one.

County Clerk's Office You can file your original will with the county clerkÕs office in the county where you reside. There is a $5 charge and you will receive a certificate of deposit. The will is enclosed in a sealed wrapper until your death and you can replace it if you wish to make changes. However, if you do this, be sure to tell your family.

Safe Deposit Box A safe deposit box in your bank is a good choice, but be sure to tell your executor and/or family that your will is in a safe deposit box, the bank and branch in which it is located, and where you keep the key. The bank is authorized by Texas statute to allow your spouse, parent, a descendant who is at least 15 years of age, and the person named as executor in a copy of your will to access the box to examine the contents in the presence of a bank representative. If you name a friend or sibling as executor, they will need to have a copy of the will to get into the box. If your will is found in the box, the bank representative can deliver it to the named executor or to the clerk of the probate court in the county where you resided. Some banks are less cooperative and wonÕt allow you access without a court order. You may want to ask your bank what their policy is.

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