What a Year It’s Been!

Yesterday marked the one year anniversary for my firm. It’s been the happiest, most fulfilling year of my adult life. When I started the firm, I never could have imagined how challenging, exciting, and fun it would be. 

I am deeply grateful to my family and friends for their encouragement, for my referral partners for entrusting their clients and loved ones to me, and my amazing clients, without whom this literally would not have been possible. But, above all, I want to thank two people: my incredible wife, who has been supportive every step of the way and who never doubted or worried even when I did. And, finally, I thank God for taking me on this journey. He’s taught me the truth of the commandment “Do not be afraid for I am with you,” and He’s taught me the blessing of stepping out in faith, taking a risk, and trusting in Him to provide.

Here’s to an even better year two!

What Happens if I Die Without a Will? Intestacy in Texas.

So, you may be wondering what happens if you die without having a will (not that you would ever let that happen). Well, it’s complicated . . . 

Does all of my property go to the state?

Almost certainly not. A surprising number of people seem to think that someone’s property goes to the state if they die without a will. This will only happen if you die without any heirs, so, for the vast majority of people, their property would pass to one or more of their relatives. Incidentally, the legal term for when your property passes to the state is “escheat,” which is one of my favorite legal words.

What does happen to my property, then?

It depends. Is it community property or separate property? Are you married or not? Do you have children? Are all of your children also the children of your current spouse or do you have a “blended” family? Like I said, it’s complicated. For a good summary of Texas intestate succession – what happens to your property when you die without a will – you can see this chart.

What is the difference between community and separate property, anyway?

There are a lot of rules that determine whether property is community or separate property, but a general summary is: if you owned it before marriage, it’s your separate property, but if you acquired it after marriage, it’s community property unless you acquired it by gift, inheritance, or devise. Of course, if you have a question about whether certain property is community or separate, you should consult an attorney.

What happens if I have minor children and die without a will?

That can be a bit of a mess. If the child’s other parent survives, they will retain custody of the child. If both parents die, then the court will appoint one of the grandparents as guardian of the child based on the best interests of the child. This can be a problem for a couple of reasons. One is that the grandparents are usually older and may not be the best choice to raise the child. Another is that, if there are multiple surviving grandparents, they may end up fighting over who gets named guardian, which is a nightmare scenario. All of which is another reason to have a suitable estate plan prepared by a capable attorney

Avoiding Probate? Do You Need a Living Trust?

Often when I speak about estate planning or probate, I get asked about "avoiding probate." Usually the proposed method for doing so is through the use of a revocable living trust. Many people are convinced that they need to place their assets in trust to avoid probate, though they know little or nothing about the probate process in Texas. Many people also think that a revocable living trust provides tax benefits or protection from creditors. As we'll see, these beliefs are largely mistaken. But, first, where did this idea about revocable living trust come from? Well, it's a matter of geography.

Goin' to California

Avoiding probate is a very good idea in many, if not, most states. This is particularly true in the birthplace of the living trust -- California. Probate is extremely expensive and time-consuming in California. California probate statutes provide for a mandatory cost to probate a will based on the value of the estate. Worse, in a California probate, the court supervises and approves virtually every transaction involving the estate, so the executor is always in the courtroom asking for approval to handle the estate's business. An estate of even a modest size can cost tens of thousand dollars and take several months of court supervision. Given that situation, it's no wonder that Californians are eager to avoid probate or that Californians developed the revocable living trust to do so.

Everything's Bigger in Texas . . . Except Probate Proceedings.

Texas tends to do things a little differently from California, and probate proceedings are no exception. Texas has developed what's called independent administration, a process that greatly reduces both the cost of probate and the time spent in the probate court. With independent administration, most probates are relatively inexpensive and only require the executor to appear in court a single time for a very short hearing. Most states don't have an independent administration option, but, for Texans, a revocable living trust will usually involve more time and expense than a simple probate does.

I Do Not Think This Word Means What You Think It Means.

As for those tax benefits . . . there are certain trusts that can provide estate or income tax benefits, but a revocable living trust is usually not one of them. That's because a revocable living trust is usually controlled by the settlor -- the person who created the trust -- and therefore remains in the settlor's taxable estate. For the same reason, a revocable living trust does not provide protection from creditors. If you have free access to the assets inside the trust, then your creditors can probably get to those assets as well.

It Still Has Its Uses.

That doesn't mean that you should never have a revocable living trust. What are some situations where you might want one?

  • You own out of state property. Placing property from a different state or states into a trust could help you avoid multiple probates or probate in a state that doesn't offer independent administration.
  • Avoid the publicity of probate. While probate in Texas is streamlined, it still involves publishing your will as a public record. A living trust is usually not filed with the court and therefore avoids that publicity.
  • Prevent an anticipated will contest. A will contest will shut down the probate of your will immediately -- usually for several months and usually at great expense to the estate. If you are pretty certain that someone will contest your will, you might place your estate into a revocable living trust, which is usually harder to contest in court.
  • Plan for disability or incapacity. While powers of attorney can do a great deal to help out an incapacitated person, if someone suffers from complete incapacity, they may need to have a guardian appointed for their person or estate. Guardianship proceedings can become expensive, particularly if they are contested, and a living trust may be one way to avoid a guardianship proceeding.

Revocable living trusts are not necessarily a bad idea, but, in Texas, they usually are a bad idea if your goal in setting one up is to "avoid probate." If you are considering setting up a revocable living trust, or think you may need another kind of trust or estate-planning document, I would love to discuss that with you!

The Legal Afterlife: Probate in Texas

Man has always contemplated what will happen after he dies. Usually this is in a spiritual sense, but you may also be curious about what happens to your estate after you pass away. If you have the good fortune of living in Texas and having a valid will, then your estate should be quickly placed in the hands of your executor for distribution according to your wishes.

I give a basic overview of probate in Texas on my probate page, but I'll provide a little more detail on the mechanics of the process for the executor in a simple probate here.

Step One: Find the Will and Take It to Your Attorney.

Yes, it needs to be the original will. You can probate a copy of a will but it adds some extra requirements. Also, don't unstaple the will and, please, don't write on it in any way. 

Step Two: Attorney Files an Application for Probate.

This will provide the court some basic information about the decedent and his estate. At the same time or shortly thereafter, the original will should be filed.

Meanwhile: Gather Information About the Estate.

A lot of the executor's work is behind the scene, trying to find and organize the decedent's assets and debts at the time of death. Hopefully the decedent left things organized, but that's not always the case.

Step Three: Hearing to Admit Executor.

This is usually about five minutes long. Your attorney will ask you some basic questions about the decedent, ask if you recognize his or her will, and ask if you want to be admitted as executor. Unless something unusual occurs, you should be admitted as executor without an issue, and the court will issue you letters testamentary, which give you the authority to act on behalf of the decedent.

Step Four: Notice.

You must provide notice to creditors and to the beneficiaries of the estate. The notice to creditors is provided through a publication in a local newspaper. The beneficiaries can be provided notice through certified mail, or they can sign a waiver saying they have received a copy of the will.

Step Five: Inventory or Affidavit.

Within ninety days of when you are admitted as executor, you must file with the court either an sworn inventory of the assets and claims of the decedent's estate or an affidavit in lieu of the inventory. This is ordinarily the last thing you will need to file with the court.

Step Six: Distribute the Estate.

This can really be done at any time after you are admitted as executor. This is your most important job, to carry out the wishes of the decedent. As an executor, you owe a fiduciary duty to the decedent's beneficiaries to follow the will as best you can. Once the estate is distributed, you can rest easy knowing that you carried out the final wishes of your loved one.

Of course, you should never try to handle a probate matter on your own (and many courts won't let you). If you need help with a loved one's estate, please give us a call!

Give It a Rest

In Genesis, we read that God rested after the six days of creation. This is my eighth week of blogging on this site, which means that I'm overdue for a break. With the New Year fast approaching, I'm going to take some time to reflect on 2014 and plan for 2015.

I wish everyone a blessed and prosperous year. Hopefully all the good seeds you planted in 2014 will bear bountiful fruit in 2015.

Getting the Last Word

When you think about it, a will is kind of a strange thing. Once someone is no longer with us, why should we let them control what happens to their property? Shouldn't we just divide it up among their heirs to do with as they see fit? Why let someone tie up their property for a generation or more after they're gone?

There's a scene in Dickens's A Christmas Carol that comes to mind: During the visit from the Ghost of Christmas Yet to Come, Scrooge gets to see how the world reacts the morning after he dies which, rather conveniently, falls on Christmas. His former maid and butler are rummaging through his things, dividing his bedclothes between them while his body cools in the next room. The idea is that Scrooge was so thoroughly detested that he is not given even the basic courtesy of deciding how his possessions will be divided.

We have a strong and visceral sense that, whether you've lived as miserly as Scrooge in the beginning of his story, or as generously as Scrooge at the end of his story, you deserve the dignity of having your last wishes concerning your property honored. None of us want to be like Scrooge and have strangers haggling over our property when we die. And, with a properly drafted will, you don't have to worry about that.

Who needs a will?

The easy answer is everyone, but a more accurate answer would be anyone who has property or minor children. These are the most important jobs of a will: to dispose of your property after you die, and to appoint a guardian for your minor children.

What are some options for disposing of property under a will?

A will provides you a lot of flexibility in dividing up your property. You can simply give it to someone outright, or you can place it in trust for one or more beneficiaries. And, as long as you don't violate the rule against perpetuities, you can control your property for one or more generations after you die.

What else can you do with a will?

One of the most important things you do in your will is to appoint an executor to handle your estate. You can also appoint trustees for any trusts created under the will. And, you can provide for the care of a beloved pet or leave instructions for your physical remains. 

How does having a will affect the probate process?

In Texas, one of the main benefits of having a will is that it makes the probate process very quick and inexpensive. It usually involves about five minutes in court and filing a few documents to discharge your legal duties as executor in the courthouse. Without a will, your heirs may have to pay about twice as much to probate your estate.

What are the requirements for a valid will in Texas?

A will must be in writing, must demonstrate testamentary intent, and must be signed by two witnesses. Testamentary intent just means that the document needs to show that the signer intends it to take effect upon his or her death. If there are no witnesses available, you can prepare a "holographic" will entirely in your own handwriting, but this is not recommended.

What is a self-proved will, and why is it important?

You can have your witnesses sign a self-proving affidavit before a notary and attach it to the end of your will. The benefit of this is that your witnesses will not have to appear in court and testify when your will is probated. 

Can you prepare your own will?

In my experience, this is a very bad idea. There are a number of formal and technical requirements to ensure that a will is properly drafted and executed, and if you do not meet them all, your will may not be admitted to probate, meaning that your property will not be disposed of according to your wishes. It is well worth the modest expense of having a capable estate-planning attorney draft a proper will for you.

You Have the Power!

So, you'll have to stay with me on this one. If you're part of my generation, you probably remember watching the Masters of the Universe growing up. The hero of the series was Prince Adam, who could transform into He-Man by holding up his sword and proclaiming "By the power of Greyskull . . . I have the power." It didn't actually look like much of a transformation; Adam and He-Man looked identical except that Adam wore more clothing. But, somehow, when Adam became He-Man, he was endowed incredible power which allowed battle Skeletor and his minions in a way that Prince Adam never could. He now had the power!

There are a couple of simple estate-planning documents that, though they seem rather benign, can give you the power to either do tremendous good for someone or wreak utter havoc on their estate. These documents are the medical power of attorney and the statutory durable power of attorney.

The medical power of attorney gives an agent the power to make medical decisions for someone when he or she can no longer make those decisions for him or herself. Similarly, the statutory durable power of attorney gives an agent the power to control someone's property -- including real property, personal property, and financial assets. The statutory power of attorney can either take effect when the principal (the one who signs the power of attorney) becomes incapacitated, or it can take effect immediately.

What sort of decisions would someone make under a medical power of attorney?

Your agent may consent to surgery, treatment, therapy, or medication for you if you are unable to do so yourself. Likewise, your agent may refuse to consent to a recommended course of treatment if he or she believes you would have refused.

What information can the agent review?

The agent has the right to review your medical records before making a decision and has the right to seek a second opinion before making a decision. Basically, the agent steps in the principal's shoes and has all rights and powers that the principal would have.

When would I want a statutory power of attorney to take effect before I was incapacitated?

If you know you will be travelling but want someone to have power to take care of your property, you may want to have a power of attorney that's effective immediately so that your agent can take care of your property while you are out of town.

Is there any recourse against a "rogue" agent?

Yes. Your agent owes you a fiduciary duty, and, if he or she does something that is against your interest, you may be able to sue them for damages. Of course, rogue agents tend to spend the money that they steal, so you might not be able to get much back from them. That's why it's very important to appoint an agent who will be loyal to you (see my previous post).

What happens to my statutory power of attorney when I die?

It immediately terminates. Don't rely on a statutory power of attorney to allow someone to handle your estate. That's why you need a will.

What if I appoint my spouse as my agent and later divorce my spouse?

Under either power of attorney, a divorce terminates the appointment of the former spouse. If you want your former spouse to serve as your agent, you'll need to sign a new power of attorney.

Secret Agent Man

The most famous agent in history is probably Bond -- James Bond -- Agent 007. Well, not in history, but, you know what I mean. Expert, resourceful, and deadly, he is everything that a good agent should be.

Except that, well, James Bond is kind of a terrible agent. That's because, regardless of how capable and effective an agent is, his first responsibility is to be faithful in carrying out the intentions of his principal. Yet, Bond, in addition to being an alcoholic womanizer, rarely feels constrained by the parameters of the mission he is given. If he gets sidetracked from the path he is assigned -- hey, this other thing is more interesting anyway. If a few extraneous people get gunned down -- they probably had it coming. That's why poor M is always having to get Bond out of hot water with the ministry or Parliament or whoever. 

While we may never work for Her Majesty's Secret Service, we've all had to appoint an agent at one time or another. It's usually an employee, whether it's the new VP of operations or it's that high school kid you hired to mow your lawn or watch your kids on date night. Or, it could be someone you ask to speak for you or represent you in a particular matter.

A big part of any estate plan is appointing agents to act for you when you can't -- either because you are incapacitated or because you are no longer with us. Executors, trustees, or agents appointed under a medical or durable power of attorney -- each is essential.

So, what makes for a good agent? To sum it up in one word, trust.

What sort of person is worthy of your trust? The prerequisite is that they are honest and will faithfully carry out the duties entrusted to them. In the law, we call this the duty of loyalty, and it's the first and most important duty owed by any fiduciary, including agents. This is where our friend Mr. Bond falls short -- not necessarily that he's dishonest, but more that he goes beyond the duties entrusted to him. You don't want an agent like this -- one who thinks he knows better than you and will do something even if he knows it's against your wishes.

But, simple loyalty is not enough. You also need competence. So, you could have, for example, a child that you believe would be entirely loyal to your wishes, but they may have no experience in dealing with financial matters. This would likely render them a poor choice as executor or as agent under a statutory power of attorney.

We'll look more closely at two kinds of agents next week: those appointed under the medical power of attorney and the statutory durable power of attorney. But, if you haven't taken care of your estate plan, don't wait! Hire a capable -- and loyal -- estate planning attorney today.

 

To Rage or Not to Rage, That Is the Question.

When his father was approaching death, Dylan Thomas wrote what became his most famous lines, pleading with his father to hold on as long as he could:

"Do not go gentle into that good night,/Old age should burn and rave at close of day;/Rage, rage against the dying of the light."

What does Thomas's poem have to do with estate planning? Well, you may not have known this, but the law allows you to decide whether or not you would like to "go gentle into that good night" or to "rage against the dying of the light." The mechanism for doing this is the advanced directive or living will, and it's the first of the four key estate-planning documents we'll look at:

Is a "living will" different than a "will?"

Yes, very much so. Your will disposes of your property at death. Your living will decides whether or not you would like to be kept alive by artificial means if you are suffering a terminal illness. They are very different documents.

That's confusing.

It trips clients up all the time. I often am told by someone that they had a "living will" drawn up some years ago leaving everything to their wife. Well, no, that would be a will; a living will doesn't dispose of property. Or, it could be a living trust, which acts more like a will than a living will does. . . It . . .well, talk to an attorney to make sure you have the right documents.

So, what does a living will or directive do, again?

It allows you to decide, in writing, if you want to be kept alive by artificial means if you are suffering a terminal illness or, rather, if you want to be allowed to die as gently and painlessly as possible. To put it crudely, it tells your doctor and the hospital whether or not to "pull the plug" when the time comes.

Why is it so important?

It saves your family from having to make an impossibly difficult decision when the time comes. If they know your wishes, it will save them a lot of guilt and anguish in deciding to either let you die peacefully or to keep fighting to the bitter end. It's hard enough losing a loved one without having to make the call on whether or not to let them go.

When does it take effect?

You have to be both (1) incapacited, and (2) suffering either a terminal condition or an irreversible condition. Incapacitated means you can't make decisions for yourself; often it means you are comatose or otherwise non-responsive. A terminal condition is one that you will die from in six months even with available treatment. An irreversible condition is both incurable and leaves you unable to make decisions for yourself. All of this has to be certified in writing by your physician. Both are extreme conditions; so the directive will only take effect if you truly are at the end of life.

Does this have something to do with "death panels?"

No. This has nothing to do with "death panels." People have been using directives in Texas long before anyone came up with the term "death panels." It is designed to honor your wishes, not to short circuit them through your doctor or insurance company or anyone else. You should not be afraid to sign a directive.

What if I change my mind?

The directive only takes effect upon your incapacity, so, as long as you are conscious and capable of making decisions, you can instruct your physician as to your wishes, and, of course, you can always have a new directive drawn up to reflect that you've changed your mind.

Are there any situations where a directive is not honored?

Texas law will not give effect to a directive if you are diagnosed as pregnant.

Is there any special language required?

Not required, but strongly suggested. Chapter 166 of the Texas Health and Safety Code governs directives, and the suggested language for the directive appears in section 166.033. Though this language is not mandatory, most careful estate planners will adhere to it pretty closely, since it's the language that health care providers will be looking for when the time comes.

 

A Foursquare Estate Plan

I've always been a bit of a collector or connoisseur of unusual words. One of the great and terrible things about the English language is that there are usually a dozen different words to convey the same basic idea. For example, if you want to say that someone talks a lot, you can call them wordy, chatty, verbose, garrulous, loquacious, prolix, or a dozen other things.

What's more, though we think of these words as synonyms, they each have their own unique shade of meaning and the true artist of language knows exactly when to use which one. Verbose or prolix each have a mildly negative connotation, while garrulous or loquacious are more complimentary. Your droning political science professor is verbose, while your favorite uncle who holds court at Thanksgiving is loquacious.

I think these odd and unusual words are great, and I wish I could use them more without appearing pedantic. Why call someone a crybaby when you can say they are lachrymose? Is it a better burn to call someone chicken or pusillanimous? Will your sweetie be more impressed if you call her pretty or if you say she is resplendent?

One of my favorite old-time words is "foursquare." It means solid, unswerving, firm, steady. But it's more than that. It originally referred to a city or building so solid as to be unassailable, one built on an unshakable foundation of four secure cornerstones. Your local bank is safe; Fort Knox is foursquare.

An effective estate plan is foursquare. It records the client's wishes in unassailable language and efficiently carries out those wishes to the greatest extent the law will allow. 

And, just as a foursquare building has four solid corners, most estate plans are founded on four documents: the last will and testament, the statutory durable power of attorney, the medical power of attorney, and the directive to physicians or living will. 

In the next four weeks, I'll take a closer look at these four documents. But, if you have not yet taken care of your estate plan, or, if you have one but feel that it's less than secure, don't hesitate: contact a qualified attorney to shore up your estate plan today.

Carpe Diem!

Earlier this year, we lost the beloved actor Robin Williams. In the wake of his passing, fans took to the Internet and social media to discuss their favorite scenes from his films and how he impacted their lives. My thoughts immediately turned to one of my favorite scenes from my favorite movie of his -- Dead Poets Society.

If you haven't seen the film -- um, stop reading this blog post and go see Dead Poets Society. It's terrific. But, if you're not going do that, I'll give you a little background. Williams plays John Keating, a high school English teacher at a stuffy New England prep school (at least I assume it's New England. I'm not sure if they ever really say. I digress). Through teaching methods that are . . . unconventional to say the least, he challenges his students to think for themselves and explore who they are as individuals. I won't spoil the rest; just go see it already.

The scene that came to mind for me was the first day of Mr. Keating's class. He walks through the classroom whistling the 1812 Overture and promptly turns around and walks out the classroom door. As his students are looking at each other wondering what this crazy person is up to, he sticks his head back in the door and waves them out into the hallway to follow him. 

Once in the hallway, he shows them pictures of former students of the school from fifty or a hundred years ago. He points out to them that everyone in the picture is young, full of life and hope and dreams. Then he says something shocking to them -- all of these men are, in his words, now "fertilizing dandelions." They all grew old and died, and his students, young and full of life as they now are, will one day die, too.

He doesn't tell them this to be depressing or morbid. Instead, it is a call to action. The moral of the story is captured in a simple two-word mantra he teaches them -- carpe diem. Seize the day! Make the most of the time you have, and make your lives extraordinary.

If there is one message I want to get across to people it is this -- to seize the day. Life is brief and precious, and we are not guaranteed anything, so we should -- we must -- redeem every moment that we have.

What does this have to do with estate planning? Almost everyone, if you ask them, will agree that they need to have a will prepared and need to take care of their estate plan. But, for some reason, estate planning is something that we always place on the back burner. It is a classic quadrant two activity: it couldn't be more important, but it lacks urgency, so we let it slide.

Don't do that! Take just a little time out and seize the day -- this day -- and talk to a qualified attorney about your estate plan. You will be happy you did because you will be able to face whatever lies ahead knowing that you have seized the day taken care of things for you and your family.

Be Prepared!

Last year, my nephew earned the great honor of being named an Eagle Scout. As I attended his award ceremony, I thought about all the years of hard work by him, climbing through the ranks of scouting, all the while dedicated to the simple motto of the Boy Scouts -- be prepared. Whether camping, hiking, or canoeing, a good Boy Scout always thinks ahead, planning for any contingency, however remote.

While most of us may never learn to tie a decent bowline knot, we do try to act like a Boy Scout in being prepared for the contingencies of life. For example, most of us spend thousands of dollars every year, year after year, on home and auto insurance. Why? It's not because we need it every year. Fortunately, most years we don't total our vehicles or have our houses burn down. Yet, we prepare for those disasters even though there is less than a 10% chance of them happening in a given year.

If we prepare for these things that have such a remote chance of happening -- and we should -- shouldn't we also prepare for something that we absolutely know will happen? Yet, less than half of Americans have a proper estate plan to prepare for death or incapacity, even though having a qualified attorney prepare an estate plan usually costs only a fraction of what we pay every year for casualty insurance. 

Don't be a part of the unprepared majority! Contact a qualified attorney today to prepare your estate plan and provide your family peace of mind. I would love to meet with you today to discuss the next steps in providing you a customized estate plan so you can rest easy knowing that, like a good Boy Scout, you are prepared!