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Frequently Asked Questions

What is an estate?

The term "estate" when used in the estate planning context refers to everything that a person owns including real estate, vehicles, bank accounts, stocks and bonds, mutual funds, stock options, cash, furniture, jewelry, art, and other personal items. An estate also includes a person's business interests, life insurance and annuity contracts, pension benefits, IRAs, 401(k)s; any debts; and any claims against others, such as claims involving a personal injury. These assets may be in the person's name alone, but can also include interests in trusts, partnerships, and jointly owned property.

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Why do I need to consider estate planning?

If you don’t have an estate plan, the State of Texas will direct distribution of your assets according to law, known as “intestate succession.” The typical intestate succession in Texas will give your assets first to your issue (children, grandchildren, great-grandchildren, etc.), then to your parents, or to your siblings if you have no children and your parents are deceased. If you want to control the distribution of your assets, you will need a will or a trust.

If the total value of all your assets is under $100,000, you might need only a simple will. You should also consider a power of attorney for financial matters and advance health care directive, both of which can make things easier for your family after your death.

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What is a living trust?

A living trust is a legal document that allows you to transfer ownership of your property from your individual name to your name as trustee of your trust so that all of your assets are “owned” by the trust. A revocable living trust is completely amendable, and as the creator and trustee of the trust, you have absolute, 100% control of the property in the trust during your life and capacity. Nothing changes except the name on the title to your property. The purpose of a trust is to avoid probate upon your death.

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How often should I have my estate planning review?

You should have an experienced Texas estate planning lawyer review your estate plan every five to seven years to determine if the distribution plan still fits your wishes, if the executors and trustees are still willing and able to serve, and to determine if your net worth requires advanced estate planning to shelter your estate from federal estate taxes.

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What does it mean to "fund" my trust?

Funding your trust is the process of transferring assets from your own name to the name of your trust. So, you will execute a new deed for your real property, change the title on your bank and brokerage accounts, and change the beneficiary designations on your life insurance policies. Generally, the assets that you want to put in your trust include all real property, bank accounts, securities investments, business interests and notes payable to you. You should discuss other beneficiary-designated assets with your attorney because there are special rules to consider.

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Who should I name as the beneficiary of my IRA?

The basic options for appointing a beneficiary of our IRA include naming your spouse, children, a trust, a charity, or some other individual. The benefit of appointing your spouse or child is to allow those persons to "roll over" the IRA to their own tax-deferred account or IRA, further delaying income taxes until he or she must start taking the required minimum distributions. However, you should know that your spouse or child will have full control of this money after you die and is under no obligation to follow your wishes for naming a contingent beneficiary of the IRA when they pass away. Naming a trust as beneficiary will give you maximum control over who receives the money after you die. When you pass away, the required distributions can be paid to the trust over the life expectancy of the oldest beneficiary of the trust. However, you should talk to your attorney or financial advisor about the implications of naming a trust as a beneficiary of an IRA because many trusts pay income taxes at a higher rate than most individuals, but this only applies to income that stays in the trust.

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Can I use legal software to prepare my will?

You can, but by doing so, you run the risk that your estate will not be handled according to your wishes. Texas has very specific requirements concerning wills. If a will does not comply with all these requirements, it can be declared invalid, meaning that your estate could be treated as though you never had one.

By doing your own estate planning, there is a chance you could misapply the law, use the wrong form, or prepare it incorrectly. Additionally, the one-size-fits-all character of a do-it-yourself plan does not take into account each individual’s unique circumstances, and consequently each of their individual estate planning needs.

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What's the difference between an inheritance tax and an estate tax?

An inheritance tax is a tax imposed on the people (beneficiaries) who receive property from the deceased. The tax is calculated separately for each beneficiary who is responsible for paying his or her own inheritance taxes.

An estate tax is a tax imposed on the deceased's estate as a whole. The executor fills out a single estate tax return and pays the tax out of the estate's funds. The heirs will only be held liable for the tax if the executor fails to pay it.

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What is a community property state and how does it affect estate planning?

Some states use a community property model to attribute ownership of the property of married individuals. The community property system of ownership segregates property an individual owned before marriage, as well as property received individually as an inheritance or gift, as that individual's separate property. Other property gathered during the marriage, such as wages and items purchased jointly or by either spouse individually, is community property considered to be half-owned by each spouse.

The important distinction of the system is that each spouse is considered to own half of the community property regardless of his or her contribution to the marital assets. Neither spouse can sell or give away part of the community property during the marriage unless the other spouse agrees.

Each community property state uses certain variations on the concept, but the basics are the same. Upon death without a will, community property either goes to the surviving spouse, or in some states, the late spouse's share is given to his or her descendants.

If one spouse dies with a will, that document can dispose of separate property and his or her half of the community property, but not the surviving spouse's half of the community property.

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How can a person change a will?

If a will is valid, it is effective until it is changed, revoked, destroyed, or invalidated by the writing of a new will. Changes or additions to an otherwise acceptable will can be most easily accomplished by adding a codicil. A codicil is a document amending the original will, with equally binding effect. Therefore, a codicil must be executed in compliance with applicable law, using the same formality as the original will. Wills cannot be changed by simply crossing out existing language or adding new provisions, because those changes do not comply with the formal requirements of will execution.

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