Estate Planning in Texas: Wills, Trusts, Power of Attorney, Living Wills and More

Estate planning is an essential process that involves the organization and management of an individual’s asset base in the event of incapacitation or death. The complexity of estate planning can vary greatly depending on the size of the estate, the number of potential heirs, and the specific wishes of the individual. At its core, estate planning serves to ensure that the individual’s assets are distributed according to their wishes while also aiming to minimize the tax burden on the estate and the heirs.

The Core Components of Estate Planning:

1. Will: A legal document that outlines how an individual’s assets will be distributed upon their death. It is also the instrument to appoint guardians for minor children.
2. Trusts: A fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be used to provide for the management of assets during life and after death, and can help avoid probate.
3. Power of Attorney: A legal document that grants an individual the power to act on your behalf in financial matters if you become unable to do so.
4. Healthcare Directives: Also known as a living will; it lays out your wishes for medical care if you become unable to communicate. Along with this, a healthcare proxy designates someone to make medical decisions on your behalf.
5. Beneficiary Designations: Certain assets, like life insurance and retirement accounts, are transferred upon death to a named beneficiary and are not governed by the will.
6. Guardianship Designations: For those with minor children or dependent adults, this is an essential part of the estate plan to ensure that there is legal provision for the care of dependents.

Why Estate Planning is Crucial:

• Protects Beneficiaries: It protects beneficiaries from the IRS and from potentially contentious probate proceedings.
• Minimizes Taxes: Proper planning can transfer assets to beneficiaries with the least amount of taxes due.
• Avoids Succession Hassles: Business owners need to consider who will manage or inherit the business.
• Clarifies Healthcare Wishes: It ensures that your healthcare wishes are followed and that a trusted person can make decisions if you cannot.
• Prevents Wealth Squandering: By setting up trust provisions, you can stipulate when and how heirs will receive your assets to prevent mismanagement.

Texas law provides for a simplified probate process in some circumstances, but proper estate planning can make the transition even smoother. Here are some Texas-specific considerations for your estate planning:

1. Independent Administration of Estates: Texas favors the independent administration of estates, allowing executors to act without court supervision in many instances, which underscores the importance of having a will.
2. Community Property State: Texas is a community property state, which means that any property acquired during marriage is considered owned jointly by both spouses. This can have significant implications for estate planning and the distribution of assets upon death.
3. No State Estate or Inheritance Tax: Texas does not impose a state estate or inheritance tax, but Texans still need to consider federal estate taxes in their planning.
4. Statutory Durable Power of Attorney: This is a legal document recognized in Texas that allows you to designate someone to manage your property and financial affairs if you become incapacitated.
5. Directive to Physicians and Family or Surrogates (Living Will): This document communicates your wishes concerning medical treatment when facing an irreversible condition.
6. Medical Power of Attorney: This allows you to designate someone to make healthcare decisions on your behalf if you are unable to do so.

Core Documents for Texans:

• Will: Specifies your wishes regarding how your assets should be distributed and who will care for your minor children.
• Revocable Living Trust: Helps avoid probate by placing your assets into a trust for your benefit during your lifetime and transfers the remaining assets to your designated beneficiaries after your death.
• Durable Power of Attorney: Appoints an agent to manage your property and finances if you are unable to do so.
• Advance Healthcare Directive: Details your healthcare preferences in case you become incapacitated.

Probate in Texas:

For those who pass away without a will, Texas has a detailed intestacy succession law that dictates asset distribution, but this may not align with the deceased’s wishes. Even with a will, the probate process can be streamlined if the proper directives are in place. Texas allows for independent administration, which permits the executor to administer the estate without court oversight, provided the will does not prohibit it.

Homestead Rights:

Texas has particularly strong homestead protections that affect estate planning. Upon death, a portion of the homestead property is reserved for the surviving spouse or minor children, regardless of the will’s directives, to ensure that they are not left without a residence.

Business Succession:

Texas’s thriving business environment means that many residents own small businesses or interests in them. Business succession planning is essential to ensure smooth transitions without disruptions.

Estate Planning for Blended Families:

Blended families might face complex estate planning issues, especially regarding children from previous marriages and the distribution of community versus separate property.

Regular Reviews and Updates:

Due to Texas’s unique legal landscape, it’s vital to review estate plans regularly, especially after changes in family circumstances or significant asset acquisition.

Conclusion:

Estate planning in Texas is a tailored process that should account for the state’s specific legal nuances. Whether it’s understanding community property rules or navigating probate procedures, Texans should consider state-specific elements to ensure their estate plan is robust, legally sound, and truly reflective of their wishes. Consulting with a Texas estate planning attorney can provide peace of mind and ensure that every angle is considered in creating a plan that stands the test of time and law.

*All information on this website or in the workshops is for educational purposes only and the information provided is general in nature. None of the information published on this website or used in the workshops are to be taken as specific legal advice. Use of this website or participation in a workshop does not create an attorney client relationship between you and the Escamilla Law Office. For legal advice, contact a licensed attorney in your state.