10 Most Common Estate Planning Questions by Hammerle Finley Law Firm

Estate planning is the process of making a plan for how your property will pass to your intended beneficiaries at your death. It’s a rather big part of “adulting.”  It may seem unpleasant to talk about, but it’s crucial for people to address. That’s because, if you don’t do it yourself, the State of Texas will step in and do it for you. And honestly, most people don’t like the Texas back-up estate plan. It is generally more expensive and leaves your family with more of a mess to clean up than a solution. To demystify the process, let’s address ten frequently asked questions about estate planning.

  1. When should I start my estate planning?

Every adult should undertake some level of planning. Just how much planning depends on the assets the person owns. Even a newly-minted 18-year-old should have documents appointing agents for medical and financial decisions if he or she becomes incapacitated, and should think about his or her bank accounts and car. A beneficiary designation may be all that young person needs. However, as people acquire more assets, especially when they buy homes or become the beneficiary of a trust, they will need more detailed planning.  And when you have a child, you need to have the hard conversation about who would be a proper guardian for your child if you were to pass away, and how you would want your estate administered for that child.

  1. Can I do my own estate planning?

People who undertake their own estate planning tend to make plenty of mistakes.  Without a strong understanding of the terminology and operation of the law, even the use of online legal software can be dangerous.  For example, the gifts to particular beneficiaries get messed up, part of the estate fails to be disposed of, or the formalities surrounding the execution of the Will are not correct and the Will is not valid.  Just like other areas of the law, sometimes you don’t know what you don’t know.

  1. What does an estate planning attorney do?

An estate planning attorney starts with an in-depth conversation about your assets and liabilities, how your assets are owned, your family relationships, and your goals.  He or she will ask probing questions, possibly about things you hadn’t even thought of.  The attorney can identify the best vehicle to achieve your goals, and ensure that your beneficiaries are protected as much as possible.  He or she can also help you with estate tax avoidance, so your beneficiaries inherit as much as possible.  Your attorney will incorporate terms in your Will which are not just the legal minimum, but which are the “best practices” for the smooth recognition of your Will and its administration after your death.  He or she will ensure that all legal formalities are done correctly, and that you have a solid understanding of your own estate plan.

  1. What documents are necessary for estate planning?

A Will is the basic document that almost everyone should have.  In addition to setting out how your assets are to pass, it allows for the appointment of a representative of your estate to collect assets or pay your debts.  Beyond a Will, the “necessary” estate planning documents vary according to a client’s needs.  Some folks have revocable living trusts as part of their plans, or transfer-on-death deeds, or ladybird deeds, or various beneficiary designation documents.  Determining what is necessary for you, in accordance with your goals, is part of your attorney’s job.

  1. What is a trust agreement?

Trusts are vehicles for the administration (by a “trustee”) of money or other property for the benefit of a third party (the “beneficiary”).  Trusts can be drafted within a Will such that they only come into existence upon the death of the person making the Will (the “testator”), or they can be drafted as stand-alone documents which come into existence during the life of the person making the trust (the “grantor”). The trust agreement sets out the grantor’s intent as to who will benefit from his or her property, and under what terms. It also sets out who will or can be the trustee, and the trustee’s powers. Trusts have many benefits, but they are not for everyone. If you think you need or want a trust, you should discuss it with your estate planning attorney.

  1. What is probate?

Contrary to popular belief, a Will is not effective just because it is signed. A Will sets forth the testator’s intent, but that intent cannot be carried out until the Will is recognized as valid by a court. Probate is the process by which the Will is validated by the court and the executor is actually appointed. Until Letters Testamentary are issued by a court as part of the probate process, the executor named in the Will has no authority to handle the deceased person’s property. Your attorney will guide you through the probate process.

  1. What is portability in estate planning?

Portability is a term associated with the federal estate tax.  In 2021, each person has an estate tax exemption of $11.7 million (although this could be reduced by the Biden administration).  As a married couple, any portion of a deceased spouse’s estate can pass to the surviving spouse without causing an estate tax event – there is an unlimited marital deduction.  But what if the surviving spouse then has an estate above the individual estate tax exemption amount?  Enter portability.  The IRS allows a surviving spouse to claim, or “port,” the unused portion of the deceased spouse’s estate tax exemption so that the surviving spouse can claim up to double the amount of the individual estate tax exemption.  Portability can save a couple thousands of dollars in estate taxes without adding undue complexity to the estate plan.

  1. Is there anything I should not put in my Will?

Generally, there isn’t anything that would be “off limits” for a Will.  Usually, the more information regarding the testator’s intent, the better.  However, testators want to avoid inflammatory language, or comments that may cause a family member or friend to question whether there was undue influence by a third party or the testator’s mental capacity.  For example, if a testator wants to disinherit a child, he needs to state that, and perhaps give a reason.  But he certainly doesn’t want to say something like “because my son is a bum,” or “because my daughter says my son is a bum,” or “because the dog told me to do so.”

  1. What happens if I can’t make my own medical or financial decisions?

Every good estate plan includes the preparation of certain documents to assist the client in the event of the client’s incapacity.  Those include a financial power of attorney, a medical power of attorney, a HIPAA release, and a living will setting forth the client’s wishes regarding the use of life support.  A related question often asked is how the agent under the financial power of attorney relates to the executor, and whether their powers overlap.  The powers of the agent and the executor do not overlap.  The agent under the financial power of attorney has authority over the client’s assets during the client’s lifetime, but the agent’s authority ends at the client’s death.  At death, it is the executor who will have authority over the client’s estate (once appointed by the court).

  1. What happens if I die without a Will?

Without a Will, the State of Texas determines how your assets will pass.  If you have children from a prior relationship, your children and current spouse will likely end up co-owning some of your property (an outcome that rarely ends well).  If you have minor children, the court will decide who their guardian will be, and you will not be able to set out the terms of any trust for the children’s benefit.  In addition, the probate process will be longer and more expensive, tying up your assets for a longer period, as the court will have to make a determination regarding the identity of your heirs.

Start your estate plan today with Hammerle Finley Law Firm, located in Lewisville, Texas.  Kendra Rey, Robert Morris and Virginia Hammerle are estate planning attorneys who can walk you through the estate planning process and provide the peace of mind that your estate is taken care of correctly.

Kendra Rey is an estate planning attorney with Hammerle Finley Law Firm. She can walk you through the estate planning process and provide the peace of mind that your estate is taken care of correctly.