1. Do I need a Will? Most likely, Yes. If you have a home or any other real property, or a car, or a mutual fund or bank account, you need will to show the chain of title from you to your beneficiary. Generally, if your assets do not have “payable on death,” “transfer on death,” “right of survivorship,” or specific beneficiary designations, you need a Will. If you have any doubt, get a Will.
2. What is an Executor? The Executor is the person appointed in your Will to collect your assets and make distributions to your beneficiaries in accordance with the terms of your Will.
3. What is a Trustee? The Trustee is the person appointed in your Will to handle funds put in trust for the benefit of someone else (the trust beneficiary). Typically, funds are put in trust for someone who cannot handle the funds himself (such as a child), or for someone who has limited rights to the funds (such as only getting the income, and not the principal). A Trustee collects the property distributed to the trust from the Executor, and serves for the duration of the trust. So, this job is usually much longer-termed than that of an Executor.
4. When is the right time to get a Will? If you are over 18. Once you start collecting assets of any worth, and especially if you have children, you should look into getting a Will prepared. In addition, once you have your Will, it should be reviewed and updated whenever there is a change in the beneficiaries, or something happens to a named executor or trustee, or if your assets change significantly in value or composition. Also, Wills are state-specific creatures. If you move out of Texas, or if you just moved to Texas, you should have a new Will prepared.
5. Should I get a Living Trust? It depends. A Living Trust, also called a Revocable Trust, has several beneficial purposes, but in Texas it should NOT be used solely to avoid probate. In many other states, probate is a much longer and expensive process, so Living Trusts are routinely used to avoid the court system. But in Texas, the cost of setting up and administering a Living Trust can quickly outweigh the cost of probate of a Will. Also, there is a risk of inadvertently leaving something out of the trust, which would require a Will and probate anyway. Good reasons to consider a Living Trust may be to manage assets upon an anticipated incapacity (inability to take care of the assets yourself), to manage substantial out-of-state property, or to avoid a potential Will contest.
6. What happens if I don’t get a Will? Your property will pass according to the intestacy laws of the State of Texas. That means, for a married person whose children are all the children of his current spouse, the assets will all go to the current spouse. This sounds ok, but it gets complicated very quickly. For example, if the decedent had children from a prior marriage, all of his assets will pass to his kids; the spouse receives nothing from the decedent’s half of their community property. That means the decedent’s ex-wife could end up co-managing the widow’s home on behalf of the children. Not good. Any separate personal property of the decedent would pass 1/3 to the surviving spouse, and 2/3 to the children (regardless if they are the surviving spouse’s children too). And any separate real property would pass entirely to the children, with the surviving spouse only getting to use 1/3 of the property during her lifetime. See what I mean? Complicated.
If you are a single person, and you don’t have children, your estate will pass to your parents. If one of your parents has died before you, 1/2 of your estate will go to the surviving parent, and the other 1/2 will pass to your siblings.
Regardless of if you approve of the way the State of Texas would divide your assets, another problem arises. Your assets will not be immediately available to the spouse, as they will be tied up in an intestate (meaning “no Will”) probate proceeding . Intestate proceedings take much longer, and are much more complicated (read: “expensive”) than normal probates with a Will.
7. What if my kids are minors? You need a Declaration of Guardian, and an approved vehicle through which they can inherit. First, a Declaration of Guardian allows you to designate who you would prefer to raise your children if you are not around to do so. Without such a designation, the court will make this decision for you. And the court will not be privy to either your unique family dynamics, or the information on who would be the best suited to raise your children in accordance with your values. Second, children under 18 cannot inherit property outright. In order for them to receive their inheritance, the court will set up a guardianship of their estate, which is restrictive and overseen by the court. It is much better to have a contingent trust in place, with a Trustee whom you trust, and set guidelines for distributions according to your wishes.
8. Will my family owe taxes when I die? Probably not… but you could. The federal estate tax exemption is now approximately $5.5 million per person, and Texas currently has no estate or inheritance tax. Currently, 99.85% of estates owe no taxes (according to the Urban-Brookings Tax Policy Center).
9. Can’t I just get an online Will? Online Will packages can look very appealing, but there is no substitute for the counsel of a competent attorney in the structuring of your estate. Every family has unique circumstances which should be addressed in the drafting of Wills. Online Will sites will not review all of your available options with you. Also, the requirements for valid Wills are very state-specific; the online site you visit may not provide you with some essential Texas elements. Texas is also very particular about the proper execution of your Will. Because online Will sites do not oversee the signing of your documents, if done incorrectly, your online Will may be completely invalid. And finally, with an estate planning attorney, you have another barrier to any contest of your Will. Your attorney serves as another witness as to your competency to execute your Will, the fact that the proper formalities were taken in its execution, and the fact that it was drafted in complete accord with your wishes.