Frequently Asked Questions
Who needs Estate Planning?
If you care about what happens to you, your property, and your family, you need an estate plan. Essentially, all adults should have some form of planning in place.
Planning for yourself includes financial and medical powers of attorney, documents that come into play if you become incapacitated and cannot make decisions on your own. One often overlooked scenario: once your son or daughter turns 18 and heads off to college, they are legally an adult. Without a medical power of attorney, you may not be able to help make their medical decisions, or even speak with their providers, if they're in an accident.
Many people also assume they don't have enough assets to warrant a plan. But odds are you own a car or other personal property, and all of it needs to go somewhere when you pass away. Items with little financial value may hold significant sentimental value to a family member, and without proper planning for heirlooms and personal property, these items can create family discord after you're gone.
If you have children, naming legal guardians is especially important. Without a nomination, the court decides who raises your children if you and your spouse are incapacitated or pass away, and that choice may not be one you would have made. Properly nominating guardians helps ensure the right person is named and protects your children from being placed in foster care in the interim.
What is Probate?
Probate is the court process for transferring property after death. The court appoints an executor to oversee the transfer, and if you have a will, you can name your executor ahead of time.
Texas has made probate a relatively straightforward process compared to most other states. Still, losing a loved one is stressful enough without added legal complexity. Having the right documents in place, such as a valid will and proper beneficiary designations, along with an attorney experienced in the process, can make probate significantly smoother for your family.
What happens if I die without a will?
Probate, as described above, assumes a valid will. If your will is invalid, or you don't have one, the state has a plan for you: intestacy. The court decides how to divide your assets according to state statutes, and you may not like the result.
Intestacy also triggers additional formalities. The court appoints a separate attorney to represent any "unknown heirs," requiring formal notice and extra time to locate potential heirs. If minors are possible heirs, a third attorney may be appointed to represent them as well.
As a result, intestacy is the most expensive and time-consuming option available upon death, more formal than probate with a will, and involves at least one additional attorney. If at all possible, it's best to avoid dying without a will.
In the news
Supreme Court Case Update
It isn't very often that the Supreme Court hears a case that affects probate or trusts but this summer they ruled on a case regarding beneficiary designations. In Sveen v. Melin, the Court upheld Minnesota state law that states divorce revokes all beneficiary designations to the ex-spouse. Mr. Sveen passed away and had not updated his beneficiary designation, his ex-wife was still the primary beneficiary. The court said that divorce revoked this designation even though he had not changed it himself. Therefore, the proceeds of the contested life insurance policy went to the contingent beneficiaries, his two children from a prior marriage, and not the ex-wife.
Similarly, in Texas, if a person divorces and the ex-spouse is a named beneficiary in a will, that person will not receive anything. The assets will go to whomever is named next in the will. However, you may have not named a contingent beneficiary or you may have gotten remarried and want your assets to go to your new spouse. As this case illustrates, as life changes, so should your estate plan.
Current Estate Tax and Gift Limits
In the 2017 Tax Cuts and Jobs Act, Congress upped the estate tax exemption to $11.18 Million for an individual and $22.36 Million for a married couple. This is set to "expire" in 2025 and reset back to $5.59 Million in January 2026.
Currently, an individual can gift $15,000 per year per person. The $15,000 limit is how much an individual can gift to another person before they have to file a tax return declaring the gift. An individual may gift $15,000 to as many people as they want and a couple can double that number to $30,000. For example, that means grandparents can gift $30,000 to each of their five grandchildren, for a total of $150,000 per year, without filing a tax return.
Business Income Tax Deduction
Congress introduced a brand new tax deduction for business owners that goes into effect for 2018 tax returns. Basically, any business owner (besides a C-Corporation) will receive 20% off of their business income on their individual tax returns. This discount is subject to a few restrictions, such as income limits and types of businesses, you should contact a tax attorney or CPA for more details. But, in general if you are a small business owner you should receive a smaller tax bill in 2018.