Wills and Trusts 2017-11-16T23:31:59+00:00

Estate Planning

WE WORK HARD TO MAKE ESTATE PLANNING EASY FOR YOU

At RD Davis Law, we know that your estate is a reflection of years of hard work, careful planning, and good decisions. That’s why we dedicate considerable time to design plans that are tailored to meet your unique needs and help ensure a secure future for those closest to you. We provide practical solutions to estate planning and asset protection concerns to accomplish our clients’ wishes, including maintaining management and control of their estate, while at the same time avoiding probate, protecting family members, ensuring their financial privacy, obtaining peace of mind, and avoiding unnecessary taxes. We understand that every estate, regardless of size, is an important one.

RD Davis Law handles all aspects of estate planning including

  • Creating wills and trusts
  • Business planning
  • Asset protection planning
  • Wealth preservation planning
  • Planning for incapacity and disability
  • Minimizing or eliminating federal and state tax liability

A revocable living trust is usually recommended as a cornerstone of our clients’ estate plan. A fully funded revocable living trust offers complete control to clients during their lifetime, provides for them and their loved ones in the event of their incapacity, and on death allows them to pass their assets to their loved ones without the costs, delays and publicity associated with probate.

Our process usually follows this order:

  • Initial Conference
  • Assess personal objectives
  • Determine family structure and relationships
  • Assess business organization and financing structures
  • Drafts of Estate Planning Documents
  • Telephone conference to discuss edits
  • Signing Ceremony
  • Receiving Estate Planning Portfolio
  • Funding Phase
  • Provided funding instructions

ESTATE PLANNING CONSIDERATIONS

  • Selecting Personal Representatives / Executors
  • Selecting Trustees
  • Non-probate
  • Assets vs. Probate Assets
  • Distributions to Surviving Spouse
  • Distributions to Other Family Members
  • Widow/Widower Estate Planning
  • Distributions to Special Needs Family Members
  • Powers of Appointment
  • Contingent Beneficiary(ies)
  • Specific Bequest of Tangible Property
  • Charitable Bequests
  • Guardians
  • Beneficiary Designations
  • Life Insurance
  • Beneficiary Designations
  • Retirement Plans
  • Durable Power of Attorney
  • Health Care Surrogate
  • Living Will
  • HIPAA Release & Authorization

SELECTING EXECUTORS

The executor (sometimes called a Personal Representative) is responsible for administering the probate estate, including filing all probate documents as well as any estate and fiduciary income tax returns. It is much more than an honorary position and includes numerous responsibilities. Your executor can be an individual or a corporate fiduciary, or a combination of the two. If an individual is named, your will should provide for one or more alternate executors, in case the first appointed executor cannot serve for any reason.

SELECTING TRUSTEES

Each trust created under your estate plan will require that a trustee be named. Your estate plan might have several trusts, such as:

  • Trusts that are funded during your lifetime;
  • Trusts established at the death of the first spouse for the benefit of the family in general;
  • Marital trusts established at the death of the first spouse for the sole benefit of the surviving spouse; and,
  • Trusts established at the death of the second spouse for the benefit of children and grandchildren.
  • As with the executor, the trustee is responsible for carrying out the terms of the trust and filing trust income tax returns. It is much more than an honorary position and includes numerous responsibilities.

NON-PROBATE ASSETS VS. PROBATE ASSETS

Your will governs only “probate” assets, which are assets owned in your sole individual name, with no designated beneficiary. You might have other assets that will pass at your death by other means. Some ways by which non-probate assets can pass at death include:

  • If assets are held in trust, the trust’s terms will govern their disposition;
  • Retirement plans and insurance policies will be governed by the appropriate beneficiary designation; and,
  • Real estate can be co-owned as joint tenants with rights of survivorship.

The Need for a Thorough List of Assets

To help understand how your probate and non-probate assets will pass at your death(s), you should have a thorough list of your assets. The type of list that is needed for estate planning is usually quite different than a personal financial statement you might have filled out for other reasons. We suggest that you create a summary that lists:

  • Each asset in detail;
  • The value of each asset;
  • The ownership structure, which will govern where the asset goes after your death; and,
  • The desired recipient at your death.
  • The desired recipient will likely vary depending on whether the asset is passing after the death of the first spouse or the death of the surviving spouse, so it is important to consider both.
  • Learn more about probate vs. non-probate assets.

You and your spouse should discuss how you want assets to pass to the surviving spouse at the death of the first- to-die. This issue can arise in two very different contexts. First, if your estate plan creates a Credit Shelter Trust (sometimes called a Bypass Trust or a Family Trust), then you may want the surviving spouse to be a permissible beneficiary of that trust. However, the surviving spouse cannot have too much benefit/control, or else that would negate the estate tax planning for such a trust.

Second, assets other than those funding the family trust usually pass to the surviving spouse, either outright or in a marital trust. A marital trust can give added control, professional management of assets, and protection from creditors, while still preserving certain estate tax savings. If a marital trust is used, consider how you want distributions to be made for the benefit of the surviving spouse. Many trusts for the surviving spouse allow liberal distributions for such needs as medical support, living expenses, and general welfare. To qualify for the estate marital deduction, trusts for a surviving spouse generally must at least distribute the trust income to the surviving spouse at least annually.

Consider how you wish your assets to be distributed to other family members, such as children and parents. For example, if a trust is used for children, consider the desired timing of distributions. It may be best to allow wealth to be used by the family as needed, while also protecting and preserving this wealth for several generations by minimizing taxes and protecting the assets from family creditors (which can include a future divorcing spouse). For these reasons our Houston estate planning attorneys feel that it might be advisable to have trusts continue until a beneficiary reaches a certain age or possibly even for the beneficiary’s lifetime.

If you want assets to stay in trust, under what circumstances should periodic distributions be made to your descendants? Many trusts for descendants contain restrictions, limiting distributions for such needs as medical support, education, and living expenses to maintain a beneficiary’s accustomed lifestyle. Some also contain provisions to allow descendants to enter a profession, start a business, purchase a home and/or help toward a wedding. You can also empower the trustee to make discretionary distributions, which can have the benefit of allowing more flexibility to address future circumstances. However, granting more discretion to the trustee must be balanced against your desire to maintain some control over when distributions are to be made.

If you have lost a spouse, your world has changed dramatically. With all the changes in your life, it is important to remember that you need to re-examine and update your estate plan.

Consider the following steps:

  • Take inventory of your assets. You should inventory your assets and determine how they are owned. There are certain assets that you may want to change how they are owned such as those that were owned jointly with your spouse. You may need to change the title to be in your name only or in the name of your trust. If you inherited assets from your spouse in trust, you will want to protect them from creditors by keeping them in trust. You should consult with your estate planning attorney on changes in tax basis for assets you held with your spouse.
  • Update your estate plan. Many times, the death of a spouse results in dramatic changes in your finances, which may require your estate plan to be changed. You should also review determine whether you named your spouse as trustee, executor or power of attorney. If so, you should appoint a new person. Additionally, if you remarry, you should update your estate plan to reflect how you want your new spouse and your children to inherit from you.
  • Protect your wealth. Even though you may have inherited a certain amount of wealth from your spouse, it is important to protect your finances. It is typically not a good idea to lend money to new love interests or friends, because there are many scam artists who target lonely individuals. You and your spouse worked hard to accumulate your savings, so safeguard your future by conferring with a seasoned Texas estate planning attorney who will help ensure your best interests are protected. If you consider remarriage, only do so with a premarital agreement in place. This can avoid a lot of grief for you and your family.

The parents of a special needs child are faced with five unique estate planning challenges:

  1. Providing for all of their loved ones without jeopardizing the special needs child’s eligibility for means-tested government benefits such as Supplemental Security Income (SSI) and Medicaid;
  2. Designing an estate plan that supplements the special needs child’s means-tested government benefits and enhances the quality of the child’s life;
  3. Treating the other children equitably while providing for the special needs child;
  4. Ensuring sufficient funds are available at a parent’s death to care for the child; and,
  5. Providing for the proper supervision, management, and distribution of an inheritance for the special needs child through a third-party created and funded special needs trust (SNT).

Of these five unique estate planning challenges, items number four and five typically prove to be the most difficult to implement. This is especially true if most of the parents’ estate is composed of retirement benefits, there is no trustee in the parents’ special needs child’s vicinity who is experienced in administering special needs trusts, or if there is an experienced trustee available but its minimum fee is too high relative to the proposed size of the special needs trust.

At a minimum, the parents should have the following five estate planning documents prepared:

  1. Last will and testament;
  2. General durable power of attorney for financial affairs that permits the agent to make discretionary nonsupport distributions to or for the benefit of the child and to establish a third-party created and funded Special Needs Trust for the benefit of the child;
  3. Durable medical power of attorney;
  4. Revocable living trust containing language permitting the trustee to make discretionary nonsupport distributions to or for the child’s benefit; and,
  5. Third-party created and funded special needs trust.

You likely have certain items of tangible personal property that you would like to leave to particular people. These can include jewelry, artwork, an automobile, a collection, etc. It is very common for wills to refer to a memorandum that you would leave, listing these special items and who is to receive them, although some states do not allow this. If you would like to take advantage of such a memorandum, you should make sure that your will refers to a memorandum, and you should list the items and the intended recipient in that memorandum and store it with your valuable documents. This common technique is limited to tangible personal property. It would not be appropriate for real estate or intangible personal property, such as shares of stock.

You and your spouse should discuss any bequests you would like to make from your estate to charities, such as a church, an alma mater, a private foundation, cultural organization, etc. Charitable bequests can take different forms. An outright bequest is the simplest, but charitable trusts can offer other advantages.

You and your spouse should determine the primary and contingent guardians for your minor children. The guardians of your children might or might not be the same individuals who are named to manage your estate. Also pre-need designation of guardian for person and property is recommended in case of incapacity and facilitates the process if the situation requires a formal guardian proceeding.

You should determine the primary and contingent beneficiaries of all life insurance policies. Often it can be more tax efficient if life insurance policies are owned by an Irrevocable Life Insurance Trust (“ILIT”).

You might have several life insurance policies, each of which may serve a different purpose. Therefore, it is possible you might want different policies to have different designated beneficiaries, and for some policies it might be better if it were owned by an ILIT.

You should determine the primary and contingent beneficiaries of all retirement plans, which can include company-sponsored 401(k) plans and pension plans, traditional IRAs, Roth IRAs, etc. Your choice of beneficiary could affect the income and estate tax consequences of the distribution of any proceeds. It is often beneficial to name the surviving spouse as the primary beneficiary of your retirement plan assets.

A durable power of attorney is a legal document that empowers your designee to handle your affairs in the event you become incapacitated. You and your spouse should each appoint a primary and alternate individual (often called either an “agent” or an “attorney-in-fact”) who will be responsible for making decisions for you and executing necessary documents in the event you or your spouse becomes unable to do so.

Often, spouses name each other as their agent and often name an adult child as the alternate. However, there is no requirement that you name your spouse. If someone else, such as an adult child, would be in a better position to handle your affairs, which is fine too.

There is also no requirement that you name only one attorney-in-fact for all of your affairs. If there are particular assets (e.g., closely held stock) that would be more appropriately handled by a particular person, you can have more than one power of attorney to accomplish that by appointing what is referred to as a Limited Power of Attorney.

You and your spouse should each appoint a primary and alternate individual who will be responsible for making health care decisions in the event you or your spouse is unable to do so. A health care surrogate authorizes your designee to make these decisions for you. This power would not permit your designee to override your own decisions; it would merely permit decision-making where you have not previously made your wishes clear. A living will appoints an agent and directs that medical intervention, except to keep you comfortable, be withdrawn if your death is imminent.

Often, spouses name each other as their health care surrogate and often name an adult child as the alternate.

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