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Small Estate Planning/Probate

 

This section is intended to provide more information about some of the aspects of Estate Planning and Probate Issues. It is not intended to be legal advice regarding any one person’s particular legal situation. However, it may provide you with answers to some of the more common questions that we receive. For more information, contact Levatino|Pace by email at info@levatinopace.com or call (512) 637-1581.

 

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Estate Planning Overview

Estate Planning is a term that is sometimes misinterpreted. However, the true meaning of the term involves a comprehensive effort to examine the assets owned by an individual or married couple, and considers their objectives for dividing assets at death, and minimize the taxes paid as a result of either one or both of them.

Estate Planning is more than just drafting a Will with the assistance of an Austin Estate Planning Lawyer. Rather, it integrates three separate considerations — the type of assets, personal desires regarding division of the assets, and tax considerations — that must all be considered to ensure that an individual or married couple’s desires are effectively accomplished at death.

While estate planning has traditionally involved a well-drafted Will to lay out someone’s desires for their estates, it also involves the use of various trusts, annual gifting programs, and family limited partnerships as tools for estate planning. Following is a brief discussion of the topics we have covered on this website:

Estate and Gift Taxes. In many cases, tax considerations drive much of the estate planning process. Many clients feel strongly that the money they have worked hard to accumulate during their lifetimes should go to their children or descendants, rather than being paid to the government as taxes. Estate and Gift Taxes are taxes imposed on the transfer of wealth from one generation to another, either during life or at death. This section provides a brief description of both the Estate Tax and the Gift Tax. It includes a discussion of the Annual Gifting Program, which can be an effective Estate Planning tool.

Family Limited Partnerships. A family limited partnership is a fairly complex estate planning tool which involves the members of a family creating a business entity to hold and manage the assets owned by the family. In combination with the joint management of the assets, the older generations of the family will generally give away part of their share of the business over time, which allows them the opportunity to make larger tax-free gifts for purposes of the gift tax.

Non-Probate Transfers. In recent years, the proliferation of non-probate transfers has complicated traditional estate planning. These transfers refer to life insurance, retirement plans, joint tenancy accounts, and payable on death accounts where the money from each of these vehicles is paid out to a beneficiary upon the owner’s death pursuant to the provisions of a beneficiary designation card. Because these assets pass according to that beneficiary designation, they pass completely outside of the parameters of the Will. Many times, these transfers can have unintended consequences and should be carefully coordinated with the Will and other assets.

Traditional Estate Planning v. Revocable Trust Planning. In recent years, Texas has seen somewhat of a battle between traditional estate planning methods and those methods that would favor the use of a Revocable Trust as the mechanism for controlling the distribution of someone’s estate at the time of death. This section provides a background behind each of these two methods of estate planning and highlights the similarities and differences between the two methods.

Coordinating the Estate Plan. Coordination of the various estate planning tools being used in someone’s estate and the various types of assets owned in the estate is extremely important. Because one of the fundamental goals of estate planning is the desire to minimize estate taxes, the coordination of the tax-savings provisions with the various distribution provisions and types of assets can have a significant impact on the effectiveness of the elements of a particular person’s estate plan.

In addition to the topics covered in this Estate Planning Information Center, it is important to note that proper estate planning also includes Powers of Attorney for both finances and health care. It may also include a Living Will giving instructions to your doctor related to your desires in the event you are needing life support treatment. As we have discussed more fully in other sections of this site, powers of attorney are used to allow you to designate another person or persons to make medical and financial decisions for you in the event that you are alive but unable to make those decisions for you. Although the powers of attorney cease to be effective once someone dies, they are critical to have in place if something happens causing incapacity prior to death.

As discussed more completely in our Guardianship Information Center, the failure to have proper powers of attorney in place when someone becomes incapacitated means that the Probate Court must step in and appoint someone to serve as the Guardian and make decisions for the incapacitated person. The guardianship process is very expensive and difficult to navigate. That expense and difficulty can be avoided with simple powers of attorney.


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Wills and Powers of Attorney

The vast majority of Americans are familiar with the concept of a Will, and while the majority of Americans understand the need for a Will, a large percentage never make one or consult a wills lawyer to draft one for them.

Wills can take a variety of forms and can be used for a variety of purposes in Texas. In general, however, a Will is used to spell out how a person wants their assets divided at the time of their death. It may also address the payment of debts, conditions upon certain gifts to certain individuals, etc. The Will should be drafted as part of an overall estate plan for the person or married couple considering the Will. Please refer to the Estate Planning section of this website for more information about a complete Estate Plan.

At its core, a Will has traditionally been the foundation of any estate plan. In addition to the Will, someone should consider powers of attorney, living Wills, trusts, life insurance, non-probate assets, etc. in their overall estate plan. As has been discussed in the Estate Planning section of this website, all of these elements of the estate plan should be carefully coordinated to provide the maximum benefit.

The person who creates a Will is generally known as the “Testator.” In the following pages, we discuss each of the following topics:

  • Simple Wills. A simple Will contains basic provisions related to the disposition of a person’s estate upon their death. The Will also appoints someone to handle the Testator’s final affairs after death. Although the simple Will does not address estate tax concerns, it is the most appropriate option for someone whose estate does not present estate tax concerns.

  • Wills with Tax Planning. In some cases, the Testator’s assets are great enough that they require consideration of various alternatives to avoid estate taxes at death. In these cases, the use of a Will that incorporates tax-planning provisions is most appropriate. These provisions allow the Testator to use the assets during their lifetime, but upon death, the assets are distributed in a manner consistent with the tax-savings goal of the tax provisions in the Will. Although a Will with tax planning provisions is obviously more complex than a Simple Will, it is appropriate for someone who has tax concerns.

  • Powers of Attorney. Anytime that someone is looking at their estate plan, they should consider the creation of powers of attorney to appoint someone to act for them in the event of their incapacity. In Texas, powers of attorney are created for both medical and financial concerns, and they are very important should something happen requiring that someone step in and make decisions for you.

  • Living Will or Physician’s Directive. In the wake of the Terry Schiavo controversy, the concept of Living Wills (more appropriately called a Physician’s Directive) has become very important to many people. The Living Will addresses your desires regarding life-support treatment in the event that you are not able to communicate these decisions to a doctor.

  • Handwritten Wills. Not surprisingly, many people have questions about whether or not a handwritten Will can be upheld as valid. Although they can, handwritten Wills require very specific elements. Without them, the handwritten Will is not considered effective and will not be used to dispose of the Testator’s assets at death.

We have found that many of our prospective clients frequently have questions and misconceptions about Wills and the disposition of their estates. If you have questions that we have not addressed in this section, please feel free to Contact Us with your questions, and we will be glad to answer them.


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What Happens if You Die Without a Will

Many clients ask the attorneys at Levatino|Pace about what happens if someone dies without a Will. We routinely advise clients that the probate process when someone dies without a Will is much more complex and expensive. Instead of the assets being divided according to the provisions of the Testator’s Will, the assets are divided according to the provisions of Texas law. Even if the Testator had expressed desires prior to their death about the division of their assets, those desires are not followed unless they are contained within a well-drafted Will. The costs associated with creating a Will pales in comparison to the problems and cost that can arise from not having a Will. We highly recommend that every adult in the United States should consider a Will, and we advise our clients and prospective clients to seek competent advice from a lawyer who practices in this area before creating a Will.


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Trusts

A trend has developed which encourages the use of Trusts as a part, or in place of, traditional estate planning. While attorney drafted trusts can be utilized effectively in a variety of situations, many questions exist for most clients about the nature of trusts, how they are used effectively, or when they may not be appropriate, etc.

This Trust section of our website is designed to answer some of these questions for you if you are seeking counsel from a trust lawyer in Houston, Dallas or anywhere in Texas. We provide information about Education Trusts, Testamentary Trusts, Revocable Living Trusts, Spendthrift Trust provisions, Crummey Trusts and Irrevocable Life Insurance Trusts. Each of these trusts has different uses and benefits, but an understanding of each is important before you consider creating a trust.

However, before you explore the different types of trusts, it is extremely important that you understand some basic terminology and definitions used widely when talking about trusts. Those definitions are as follows:

  • Trustee: The person designated in the Trust Agreement to take possession of the trust assets and manage those assets. He must also preserve and manage the assets according to the provisions in the Trust agreement.

  • Trust Agreement: The Trust Agreement is the document that creates the Trust and sets out the provisions related to the Trust. For instance, it will generally designate the trustee, the beneficiaries, and the purposes of the Trust. It will also typically include provisions designed to guide the trustee in fulfilling his duties.

  • Grantor: The person(s) who creates the Trust Agreement. In order for the Grantor to create a valid trust, he must designate a trustee and a beneficiary. He must also transfer assets into the Trust.

  • Beneficiary: The Trust Beneficiary is the person(s) who receives the benefit of the assets in the Trust.

 

With this brief explanation of the terms most commonly used when referring to Trusts, you are ready to explore the various types of trusts included on our site. Following is a brief explanation of each trust covered. 

General Information Related to Trusts: In this section, we provide you with a general overview of the concepts related to trusts. We recognize that many of our clients and potential clients often have misconceptions related to what a trust actually is, its proper use, etc. This section should help to provide a background on these issues so that you can then understand the specific types of trusts explained elsewhere in this site.

Testamentary Trusts: The concepts of Wills and trusts combine when you consider the creation of a Testamentary Trust. Theses trusts are created under your Will and will control the management of your assets after your death. These trusts have a wide array of uses, but they are very often used to provide for the management of assets for minors and young children in the event they might become entitled to receive property under a Will.

Revocable Living Trusts: In recent years, the use of Revocable Living Trusts as a substitute to traditional estate planning has exploded in many states. In Texas, however, the uses of these trusts as effective estate planning alternatives have limited usefulness. The effective use of these trusts is discussed, but also we discuss many of the myths and misconceptions related to the uses of these Trusts.

Educational Trusts: One of the primary concerns that many parents and grandparents have is setting aside money to provide for education for their children and grandchildren. In spite of this desire, those same parents and grandparents recognize that the best interests of their children is not served by giving large sums of money to minors or young adults who might rather buy a car than pay for an education. As a result, the use of an Educational Trust becomes a very appropriate option for providing money for education while ensuring a mechanism to make sure the money is used appropriately.

Spendthrift Trusts: Another concern of people creating trusts is that they want the assets of the trust to be protected from the attacks of potential creditors of either the Grantors or the Beneficiaries of the Trust. Spendthrift provisions can be incorporated into a Trust, which will then protect the trust assets from attack.

 

Crummey Trusts: People making gifts into Trusts generally make those gifts for a variety of reasons. However, regardless of the reason, they do not want to give up their money and pay gift taxes on top of giving away their money. The Crummeytrust provisions make it possible to make gifts to a trust while excluding some portion or all of the gift from potential gift tax complications.

Irrevocable Life Insurance Trusts: Life insurance policies can very often present estate tax problems for the person who owns the policy. To combat the estate tax complications, the Irrevocable Life Insurance Trust provides an alternative to own a life insurance policy while completely excluding the proceeds from the estate for tax purposes.

We hope that all of the information contained in this Trust Information Center will provide you with a background of information to understand decisions that you might consider related to Trust options. In addition to any education that you receive as a result of the information provided on this site, you should always consult an attorney to fully understand your legal options. The attorneys at Levatino|Pace LLP are always glad to discuss your Trust options, as well as all of your estate planning options.


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Probate: What is it and what happens?

The Texas Court procedure by which a will is proved to be valid or invalid; though in current usage this term has been expanded to generally refer to the legal process wherein the estate of a decedent is administered. Generally, the Texas probate process involves collecting a decedent’s assets, liquidating liabilities, paying necessary taxes, and distributing property to heirs. The executor or administrator of the estate, usually under the supervision of the probate court or other court of appropriate jurisdiction carries out these activities. Black’s Law Dictionary, 6th Ed.


Once a friend or family members has died in Texas, that person’s estate must generally go through the probate process in order to properly administer the estate. The probate administration of a Decedent’s estate involves identifying the estate assets, paying any debts owed by the Decedent at the time of death, and distributing the remaining assets to the Decedent’s heirs or beneficiaries under a Will. Likewise, the administration of the Estate involves paying any taxes that may be owed as a result of the death, pursing any claims against third parties that are owed to the estate, and determining the identity of the Decedent’s heirs if he died without leaving a Will.The process of administering a Decedent’s estate has become very complex in recent years. As a result, attorneys who specialized in other areas once attempted to assist clients with these matters. Today, however, clients needing assistance in administering the estate of a friend or family member should seek the advice of a lawyer whose practice is devoted to this area of law.

 

The Probate Process: Initiating the probate process is generally very easy in Texas. In most cases, the process begins with simply filing documents with the probate court to get the process started. From there, the steps to have an executor appointed and to have the estate opened will be easy to navigate if you are represented by an attorney who is knowledgeable in this area.

However, before the process is initiated, you and your lawyer should discuss the various types of probate and any alternatives that may exist. By understanding all of your options, you may be able to avoid some part or all of the probate process, and you are likely able to save time and money if your case does not require a full probate administration.

Types of Probate: Texas offers essentially three (3) mechanisms for administering an estate — 1) the independent administration, 2) the dependent administration, and 3) the muniment of title. Each of these methods of probate has very distinct characteristics; very specific applications under the law, and in many cases are very unique to Texas. Understanding the types of probate will aid you in understanding which method(s) is/are available to you and which one will accomplish your goals in the best manner.

 

Role of the Executor: In Texas, an executor has very specifically defined responsibilities to fulfill in the course of administering a friend or family member’s estate. Before accepting the responsibility of becoming an executor, one should fully understand those responsibilities because failure to fulfill those obligations may subject the executor to being sued by the heirs or beneficiaries of the Decedent’s estate. Proper advice regarding these responsibilities is essential when serving as the executor.

 

Tax Issues: Most clients who need help with a probate matter have questions regarding the tax ramifications related to the probate case. These questions may include issues related to the Decedent’s final tax return, the Estate tax return, income tax returns for the estate, or even income tax consequences to the beneficiaries of the Estate. These issues can have far-reaching and complex implications. However, an executor (generally with the assistance of his/her attorney) has the responsibility of making sure that all of the appropriate tax returns are filed for the Estate.

Although many attorneys do not fully understand the tax implications related to Estates, it is important that 1) an executor understand what is required and 2) an executor retain an attorney who has the appropriate knowledge of these matters to assist them in fulfilling their tax-related duties to the Estate.

Alternatives to Probate: In some instances, an estate does not contain the level of assets or other issues requiring the formal probate of the estate to transfer the Decedent’s assets to his heirs. In those relatively few instances, Texas law has laid out a few alternatives to the formal method of probate. Although they may not be available in all cases, the alternative methods can generally reduce the amount of time and expense involved in navigating the probate process.

Avoiding Probate: In recent years and in many states around the country, people are bombarded with messages that they need to avoid probate at all costs. As a result, various tools have been developed to assist clients with this goal.

In many states, the probate process is costly and time-consuming, which has necessitated some of the efforts to avoid probate. Although the probate process in Texas is easy and uncomplicated, a couple of mechanisms exist which will assist a client in avoiding probate. Specifically, the Revocable Living Trust and payable on death or rights of survivorship accounts provide the ability to avoid probate. Inasmuch as many pitfalls exist, anyone considering these avenues should fully understand them.


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The Levatino|Pace Essential Estate Planning Package

The Essential Estate Planning Package: The attorneys at Levatino|Pace LLP have put together a package of documents that meet most family’s needs at a very affordable price. Please note that while this will meet most families’ needs, if your estate is complicated or vast, this package may not be appropriate for you. This will be discussed at your initial consultation.

From time to time, Levatino|Pace does offer special pricing on its Essential Estate Planning Package. Please contact us to find out if we are currently offering any such special packages

With the Essential Estate Planning Package, you will receive the following services and documents:

  • Initial Consultation with attorney to discuss your estate planning needs.

  • Wills: Preparation of a will for each spouse to dispose of your probate assets.

  • Guardianship: Wills include the preparation of a guardianship for minor child(ren) so that you may appoint a person(s) to be the guardian of your child(ren) should something happen to you.

  • Power of Attorney: Preparation of a Durable Power of Attorney for each spouse that authorizes someone you appoint to handle your financial affairs if you are incapacitated.

  • Living Will: Preparation of a Physician’s Directive (also called a “Living Will”) that discloses you personal choice regarding critical medical care and directs your physician to follow your desires easing this burden on your family.

  • Medical Power of Attorney: Preparation of a Medical Power of Attorney that authorizes someone that you designate to make healthcare decisions for you if you are incapacitated.

  • Final Conference to review, sign and notarize your estate planning documents. (Notary Fees included)

 

The documents are packaged in an Estate Planning Portfolio that contains all of your estate planning documents, which eases keeping up with them.


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Payment Options

We realize the protecting your family is important, but that it can also financially challenging. As a result, Levatino|Pace LLP offers both traditional payment methods (trust deposits, checks and cash) and alternative payment methods. While law firms have historically required large cash retainers up front to pay for legal services, we recognize that many clients may not have the cash resources to make such up-front payments. As a result, we are pleased to be able to offer our clients the option to pay for their legal services through the use of either a MasterCard or Visa. Clients have responded that the ability to pay for our services through the use of a credit card has allowed some clients to utilize our services who would not otherwise be able to do so, and it has given other clients the added benefit of being able to accrue airline miles or credit card points when they pay for their legal services.

For more information about Estate Planning, drafting your will, powers of attorney or any other Estate Planning question, please contact us at 512.637.1581 or email at info@levatinopace.com.


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