Thoughtful estate planning is key to controlling your financial legacy for your family and loved ones, and there’s a lot more to it than simply having a will.
Taking a strategic approach to estate planning can make a serious difference in how well your efforts reflect your intentions, but diving in without much forethought can leave you with a less-than-cohesive plan that may not protect your assets or uphold your intentions as well as you’d hoped.
A critical element of effective estate planning is working closely with an experienced Killeen estate planning attorney from the start.
One: Putting Things Off
Many people wait to tackle estate planning. In fact, many people think that estate planning is only for the elderly and the wealthy, which is shortsighted at best. Your estate simply refers to your assets, regardless of their overall value.
And while it’s not a lot of fun to think about your own passing, taking the time to ensure that the wealth you have amassed in your efforts to support your family will be distributed according to your wishes – with as few tax consequences as possible – can take a considerable load off your mind, which can free you up to enjoy life to the fullest.
Tackling your estate planning needs head-on isn’t just a good idea—it’s key to ensuring that your loved ones are protected in the event that the unexpected strikes, such as a sudden illness, tragic accident, or any of the other risks that life throws our way.
Creating an estate plan sooner rather than later means that it will be in place when you need it, which could be just around the corner or a very, very long time from now.
The upside to making the effort now is that it will leave your family better prepared to cope with the multiple challenges they’ll inevitably face when the time comes. This should afford you considerable peace of mind.
If your instructions aren’t clearly spelled out in carefully constructed estate planning tools, you can expect your assets to pass through the time-consuming and costly probate process.
Not only is this the least effective approach, but it also means that your estate will pass according to Texas inheritance laws, which may not align with your wishes and may not support your family in the way you’d hoped.
Two: Counting on State Laws to Protect You
If you pass away and you don’t have a will in place, your estate will be distributed according to the state’s laws of intestacy. This means you’ll have no say in the matter, and anything that isn’t addressed in another kind of estate planning tool will go through the clunky probate process, which you can expect to eat up a lot of time and resources.
Further, the laws of intestacy in Texas may not come anywhere close to your wishes. While a lot of people harbor the belief that the state guidelines must be fair enough, your idea of fair and the state’s could be light-years apart.
Texas inheritance laws implement a default will in the event someone dies without a will. This will be based entirely on the state’s predetermined hierarchy of familial relationships. This is a blanket approach that doesn’t take the decedent’s personal wishes and attachments into consideration.
If, for example, you are married and have children from another marriage, the state’s laws of intestacy – due to their rigid rules and regulations – could leave your spouse with far less than you may have intended. And the complicated matter of community and separate property also plays into this.
Counting on the state to manage your estate planning for you ensures that any of the following people in your life – who may be very important to you – will be left out entirely:
A life partner to whom you’re not legally married
A stepchild whom you never formally adopted
A friend who may be closer to you than family
Any favorite charities near and dear to your heart will also be cut out. Finally, those family heirlooms that you’ve always intended to pass to specific people in your life will be distributed instead according to the state’s strict laws of inheritance.
The bottom line is that a better understanding of the laws of inheritance in Texas can help you appreciate the importance of having solid estate planning in place.
Three: Not Understanding Community Property Laws in Texas
Texas is a community property state, which means that community property laws play a critical role in estate planning.
Community property refers to anything that either spouse or both spouses came to own together over the course of their marriage. These assets belong to both spouses and must be split between them fairly—given a range of relevant circumstances—in the division of their estate.
Community property is distinct from separate assets, which belong to the estate of the spouse who owned the property prior to marriage and kept it strictly separate during the marriage.
These assets can be directly addressed in the original owner’s estate plan. It’s essential to recognize that any commingling of marital and separate assets can erode the dividing line between them.
Additionally, the amount that a separate asset grows in value during the marriage is generally considered marital, which means it must be divided fairly between both spouses.
Generally, both spouses own exactly half of their marital estate, but there are circumstances in which the division of these assets can be lopsided. Estate planning can’t be used to cut into one’s spouse’s ownership in the marital estate, which is theirs to begin with. Doing so will invalidate your will and can leave your estate subject to the rigid laws of intestacy in Texas.
Having a thorough understanding of community property laws is essential in terms of your estate planning. Fortunately, a dedicated estate planning attorney can help you with that.
Four: Being Satisfied with Just a Will
You may have a will in place, and this may keep your mind off the need to engage in any further estate planning. The truth is that you should have a will in place and that you should be pleased that you’ve gotten this far, but there’s more work to be done.
Probate is the legal process by which the court validates your will if you have one and ensures that your debts are addressed while overseeing the distribution of your assets, according to your wishes as outlined in your will or according to the state laws of inheritance if you don’t have a will.
Probate, in short, addresses administrative matters, but it’s by no means the most efficient mechanism for how your estate will be distributed to your loved ones at the time of your death.
In fact, you can expect the probate process to require more time, to be more expensive, and to afford virtually no privacy regarding the matter of your estate and its distribution.
Your will is a single piece in the estate planning puzzle, and a skilled estate planning lawyer can help to ensure that you have a more comprehensive plan in place that is carefully calibrated to reflect your wishes, to confirm that your assets pass to your loved ones as effectively and efficiently as possible, and to limit the tax consequences that apply.
Five: Failing to Take Trusts into Careful Consideration
Trusts are solid estate planning tools that few people take full advantage of. The most common is the revocable living trust, where you can hold assets for named beneficiaries. Upon your death, the assets you have in trust will bypass the probate process, which means their path forward will be more direct.
The process is less laborious with fewer expenses attached and more private – probate records are a matter of public information.
With a revocable living trust, the assets included in the trust are titled in its name, and management is assigned to a designated trustee. You can remain the designated trustee up until the time of your death, which means you retain control over the included assets.
At the time of your passing, the replacement trustee named by you in the trust will ensure that the assets included are distributed according to your stated wishes. A revocable trust can be altered or even voided at any time.
There are also irrevocable trusts that can offer considerable protection from taxation for very large estates and from debt claims or judgments against the estate. Depending upon your estate planning needs, there is a wide range of trusts that can be implemented to your advantage.
A key component of maximizing the benefits of trusts is ensuring that they are properly funded with the assets included. This involves transferring ownership of each asset to the named trust, which requires effort and knowhow. Having a practiced estate planning attorney backing you up can afford you the confidence you’re looking for.
Six: Failing to Put Careful Consideration into Choosing an Executor
The will you create will be managed by the executor you name, and any trusts you have in place will be managed by the trustee you appoint – when the time comes.
In other words, you are relying on this individual – or individuals – to shoulder immense responsibility on your behalf, which makes putting considerable effort into choosing someone whom you trust implicitly paramount.
You’re looking for someone who checks all the following boxes:
The ability to manage assets and pay all outstanding debts
The tax know-how to accurately address your estate’s tax liability
The commitment to distribute each of the assets according to your desires, as described in the governing document
In other words, you’re looking for someone with keen organizational skills and proven financial ability who is as trustworthy as they are responsible. This is a tall order that is worthy of careful consideration.
It’s also essential to address the matter frankly with the person you’ve chosen – to ensure they are willing to take on the responsibility, they can do the job justice, and they are well-prepared to serve.
Choosing someone who is either reluctant to assume this role or who doesn’t have the attributes you’re looking for can lead to delays or unexpected complications that do not serve you or your loved ones’ best interests.
Seven: Failing to Consider Your Own Incapacitation
Estate planning is a key tool when it comes to ensuring that your wishes are upheld upon your passing, but there is also the matter of making important decisions in the event you are incapacitated and unable to do so on your own behalf during your lifetime to consider. This is where powers of attorney come into play.
A durable power of attorney – sometimes called a financial power of attorney – designates someone whom you trust completely to make financial decisions on your behalf in the event that you become incapacitated as a result of injury or illness. A medical power of attorney plays a similar role in relation to your medical care.
Having these legal documents in force establishes that someone whom you trust to carry out your explicit wishes – in relation to your finances or your health care if you’re not capable of making the necessary decisions on your own behalf – is standing by to do so.
Taking care of these important details is a critical component of estate planning that sometimes gets lost in the shuffle.
Turn to an Experienced Killeen Estate Planning Lawyer for the Help You Need Today
At the Law Office of Brett H. Pritchard, our clients benefit from a dedicated legal team that includes attorneys with extensive experience in Texas probate and estate planning. Brett Pritchard brings decades of legal leadership and trusted client service to every case, ensuring you receive attentive and knowledgeable support.
Learn more by contacting us online or calling us at 254-781-4222 and scheduling a free consultation today.