Estate Planning and BUSINESS LAW

last Wills and testament
Revocable living Trusts
medical Powers of Attorney
Financial powers of attorney
Declaration of Guardianships
directive to physicians

ANSWERS TO FREQUENTLY ASKED ESTATE PLANNING QUESTIONS

These are some of the most frequently asked estate planning questions to help you better understand the estate planning process. While some of the answers to the questions which follow may not apply in your situation, you may find the answers to be informative nonetheless.

Once Your Will and/or Trust is Signed:

Q. Where is the best place to keep my signed original estate planning documents?

A. The best place is probably in a safe deposit box because it will protect the documents from theft, fire, accidental loss, and most other types of damage or harm. A potential problem, though, is getting it opened after your death. If you decide to keep your estate planning documents in a safe deposit box, consider naming a family member or your Executor or trustee as a joint holder on the box. That should simplify matters following your death because someone will be able to get into the box without delay. Also, if you live in a flood zone, be sure to put the document in a water-tight plastic bag. As many shocked clients have learned, water damage caused by flooding can ruin the contents of a safe deposit box. Another place to keep your original estate planning documents is with the attorney who drafted them. However, I have decided not to retain original documents because of concern over theft, fire, flood, storms, or other loss of the document. It would also be prohibitively expensive to store hundreds or thousands of original documents. Also, what would happen if I were to die or my lawfirm were to cease operations? Many people keep their original estate planning documents at home in a secure place. If you have a safe at home, that can be a good place to keep them. Be aware though, when thieves enter your home and discover a locked safe, they often take the whole safe thinking they'll find cash and jewelry. The last thing they want is a file containing your estate planning documents, but that's one of the things they'll get if you keep them in your safe. Therefore, unless your safe is bolted to the foundation of your house, it may not be the best place to keep your originals. Another option with regard to a Will is to deposit it with the county clerk's office. Taking this approach can be a great idea, except that you need to be sure your records at home clearly indicate where the original can be found. Moving to a different county or changing your Will can cause problems as well. More people than you would expect keep original Wills and other estate planning documents in an air-tight plastic bag at the bottom of their freezers. Freezers are well insulated and heavy, and have a way of withstanding fires, hurricanes, and tornadoes. Also, they don't die or move away, and they are stolen far less frequently than in-home safes.

Q. If someone's Will is in a safe deposit box at a bank when he or she dies, how do you get access to it?

A. There are three ways to get the Will out of the box. The easiest way is if another person is named as a joint holder of the box. That person can retrieve the Will with no problems or delays. If no other person has access to the box, Texas law allows a spouse, child, grandchild or the Executor named in the Will to examine the contents of the box while in the presence of a bank employee. If a Will is found, the bank will be required to send it to the court. Note, though, some banks will give it to your lawyer and allow that lawyer to file it with the court. Another option is to go to court to request that a judge order an examination of the box. If a Will is found, it will be sent to the court. This should be the option of last resort because it takes longer, requires the filing of papers with the court, and usually involves a lawyer and the associated legal fees.

Q. Should I give copies of my Will and other estate planning documents to my children and to the Executors of my estate?

A. For some people, their estate planning documents are as private as their income tax returns, and nobody is ever given copies. For other people, estate planning documents are no different than a spare key to the house, and every family member and Executor and/or trustee named in the documents is given a copy. If you are the type of person who values your privacy, who does not especially trust your children, Executor, or trustee, or if you have written a Will or trust which does not treat all the children equally, then it may not be a good idea to hand out copies. Also, you may have more money than your children expect, and depending on how your Will or trust is written, giving them a copy may be letting them know too much about your personal business. On the other hand, if you have a fairly open relationship with all your children, you regularly discuss finances with them, and you are leaving your estate to them in equal shares, then go ahead and give everyone a copy. Of course, if you decide to change your Will or revocable trust, you should be sure to give all the same people copies of the new documents. If you don't, then there may be some arguments following your death over which document controls the disposition of your estate.

Q. I have a Will and I want to make a minor change. Is there a way for me to make the change myself without hiring a lawyer?

A. Yes, there are a few ways. One way is to make the change yourself by writing an amendment to your Will (called a "codicil") entirely in your own handwriting. You should be sure to date and sign the new document and clearly state which section of your Will you are modifying. When you write a codicil by hand, no witnesses or notary are required. You could also type the codicil, but if you do, you will need two witnesses to the signing. Of course, if the change is important and you want to be sure it's done right, you should not try to make the change yourself, but instead you should hire a lawyer to prepare a codicil for you.

Revocable and Irrevocable Trust Questions:

Q. For whom are living trusts most appropriate? What are the pros and cons?

A. For starters, while it is true that probate can be expensive and time-consuming in some other states, in Texas, we have a streamlined system of probate. As long as you hire a lawyer with experience in probate court, you have a well-written Will, and nobody files a lawsuit after your death, then probate is typically not so bad. Stories you read in the paper may lead you to believe otherwise. The heirs of multi-million dollar estates frequently fight it out in court for a larger inheritance. Also, bookstores carry dozens of books which talk at length about the delays and high costs associated with probate. Even so, living trusts are useful estate planning tools, and they do have their place in many people's estate plans. If you find any one of the following benefits appealing, then a living trust may be appropriate for you.

Benefit #1: No Court Involvement. When a person dies, most properties pass either under a person's Will or under a living trust. Some properties--such as life insurance, IRAs, and certain types of bank and brokerage accounts--pass directly to named beneficiaries. If property passes under a Will, then the Will must be probated at the courthouse. Probate typically entails hiring a lawyer, filing a number of papers with the court, attending one or more hearings, and providing a written inventory to the court valuing the properties which passed under the Will. (Note, though, the filing of an inventory can be waived under current Texas law, and instead, the executor is permitted to file a document called "Affidavit in Lieu of Inventory" which states that an inventory was prepared and given to the estate's beneficiaries, but that inventory does not need to be filed with the court.) Some people don't want this type of involvement with the court, so they opt for a living trust. By transferring all properties which would otherwise pass under your Will to a living trust, you can avoid the court entirely. For estates which don't owe estate taxes, there is usually less work for the lawyers, and that translates into reduced estate administration costs.

Benefit #2: Privacy. As mentioned above, when a person dies with a Will, an inventory must be filed with the court (unless an Affidavit in Lieu of Inventory is filed, as discussed above). You may not want your friends, neighbors, or the media to be able to read a listing of what you own and what it is worth. After all, an inventory is a public record. With a living trust, your properties and their values are all kept private.

Benefit #3: Plan For Future Incapacity. You may be worried that one day you won't be able to manage your own finances, and you may want to name someone to handle these types of matters for you. You can address this potential problem with a power of attorney or with a living trust. A power of attorney will usually be accepted by banks, title companies and the like, but there is always the risk that an institution's legal department will reject it. The same person who may be denied the ability to use a power of attorney will likely be allowed to do anything he or she wants when acting as trustee of a living trust.

Benefit #4: Harder to Challenge. If you are planning to disinherit one of your children or grandchildren, you may be better off with a living trust because there is nothing filed at the courthouse. Also, it is a little harder to contest a living trust than a Will. Many people are interested in doing as much as possible to prevent a successful challenge to their estate plan.

Benefit #5: Avoid Out-of-state Probate. If you own property in another state, you can avoid a costly probate proceeding in that state by transferring the property to a living trust.

Before you establish a living trust you need to understand the downsides, which include the following:

Disadvantage #1: Time-consuming to Set Up. Depending on how many different types of properties and accounts you own, it can take quite some time to switch everything over to the name of your living trust. Also, some financial institutions in Texas are not geared up to handle living trusts, so you can expect a little trouble and frustration in getting the trust fully established.

Disadvantage #2: Complicated. Wills are usually shorter and simpler to understand than living trusts. Also, with a Will, you can sign it and forget about it. But with a living trust, you need to put your property into the trust and run your life out of it for as long as you live. For many people, this downside outweighs all the potential benefits.

Disadvantage #3: Time-consuming to Revoke. A year after you set up the living trust, you may decide you don't want it any more. At this point, you will need to return to every bank and brokerage house, and undo everything you had done to establish the trust. You can expect more lawyers' fees too.

Disadvantage #4: Post-Death Costs Not Eliminated. If you have a taxable estate (which is generally an estate over $12,060,000), there will be a lot of work to be done after death regardless of whether probate is required. Typically, there are tax returns to file, trusts to establish, assets to value, and more. Avoiding probate will only marginally reduce the cost of administering a taxable estate.

Disadvantage #5: May Still Need to Probate Will. If you leave just one bank account or one piece of real estate out of the trust, probate will still be necessary. And probate takes about as long when there is one asset as when there are twenty.