Confessions of an Estate Planning Attorney

I feel like the heart surgeon you see outside the ER stealing a smoke on her break....what is my dirty little secret?  My estate planning documents, including my Will, are over 8 years old and outdated.  I advise all of my clients after they sign their estate planning documents to revisit their documents at least every five years (no matter what), but earlier in the case of: divorce, marriage, births, deaths, inheritance, changes in financial positions or other serious life changes.  In the last 8 years there have been births and deaths in my family, changes in the tax code and just a general re-thinking of how and who I want to administer my estate when I die.  I must admit this gives me immense anxiety when I think about the fact that should I die tomorrow, it would not be as seamless a process as it could be with an updated Will.  

I see so many of my clients struggle with completing their estate planning documents.  Like me, they know it needs to be done, but the reality is that it can be overwhelming to sit down and think about your own mortality and to make serious decisions like, "who will raise your children if you can't do it?"  For a busy family, it just seems plain unreasonable to review 30+ pages of legal documents!  I am just as guilty of procrastinating.  The tasks of practicing law, raising three children and the day-to-day obligations of life have been roadblocks to updating my documents too.  However, recently I have seen too many instances in my practice where an outdated Will has caused a lot of problems for the surviving family during the probate process.  Some of them simply made the probate process more burdensome for their families and others made dispositions of property that the family knew the Decedent would not have wanted.  If only they had taken the time to update their Wills.  So, last week I committed to updating my documents and my husband's documents.  There are so many stresses in life that you have no control over - updating your estate planning documents is not one of them.  I will be glad to have put this stress to rest by the end of this week...at least for the next five years.  

DIY Wills - Why Not?

Many times at the end of a consultation or during a conversation with a friend I get the question - "Why can't I just use one of those online programs (e.g. Legal Zoom, etc.) to draft my Will and save money?"  As a mother of three and solo practitioner, I can appreciate the desire to save money.  However, as an attorney, the ease with which non-attorneys can misinterpret these "plug-in" online documents makes me very nervous.  It seems that you can purchase any legal document that you need online for the equivalent of a decent meal these days.  

While I agree it is essential that everyone have important legal documents in place, such as estate planning documents, I don't think this is an area where it is always prudent to look for the "best deal."  Most people believe that they have a "very simple estate" simply because they are not multimillionaires.  Unfortunately, whether you in fact have a simple estate is not entirely dependent on your wealth status.  Do any of your beneficiaries receive government assistance, or are they disabled?  You may need special trusts set up in your Will.  Do you have minor children?  You will need trusts and guardianship provisions.  Do you have religious and/or philosophical beliefs that you hold strongly and want to make sure your Agent under a Medical Power of Attorney adheres to?  Do you anticipate a Will contest?  Do you have out of state property?  These are just a few of the questions that could ultimately turn your "simple Will" into one that requires more attention.

In the State of Texas, probating a properly drafted Will is a very simple, efficient and time effective process.  Probating a Will that is not properly drafted could result in a very different scenario - including a loss of estate resources that would have otherwise gone to the beneficiaries and long and expensive "dependent administrations," to name a few.  The difference between these two could be as simple as the omission or inclusion of one wrong word in your documents.  Another area where I see non-attorneys make mistakes in these documents is misinterpreting the form questions that the online service is asking.  For example, do you understand the difference between an Executor and Trustee?  What about the roles of your Guardians for your minor children?  What about trusts for your minor children - how will these work? How do you customize your documents to meet religious and philosophical needs?  Are you including language that is against public policy in your Wills and Trusts?  Do you understand how to determine if you have a taxable estate?  Beyond drafting the documents, there is also the matter of the execution of the documents.  Again, this is an area where non-attorneys are susceptible to errors that could damage the integrity of the documents.  Do you need a witness and a notary?  Can you just use a notary?  Are there rules about who may serve as a witness on these various estate planning documents? 

Hopefully these questions will help you make an informed decision about which method is right for you and your family.  

Customized Business Documents - A Must for Any Successful Business

You filed your Certificate of Formation or Articles of Incorporation with the Secretary of State.  So now you are ready to do business, right?  Not so fast….

First, will you be doing business under the exact name that you filed with the Secretary of State in your Certificate of Formation or Articles of Incorporation?  If not, you need to file a D/B/A (“doing business as”) with the Secretary of State and with the county in which you are regularly conducting business.   Before you can file the D/B/A, you must do a search of the county database to determine whether the name you want to use is already in use by someone else.  This may save you from being a party to a lawsuit down the road.

Are you a co-owner in the business?  If so, there are many questions that need to be answered at the outset.  How will you share ownership?  What about voting rights?  What about capital contributions?  How will you make important decisions regarding the business when you disagree?  What type of tax elections can be made and will you make?  These are just a few of the issues that can be addressed in the Company Agreement of a Limited Liability Company, the Bylaws of a Corporation or the Partnership Agreement of a Limited or General Partnership. 

What happens if one of the owners dies becomes disabled or gets divorced (since Texas is a community property state, the non-owner spouse may have an interest in the business)?  Do the remaining owners have the first option to buy the departing owner’s interest? What if an owner wants to exit voluntarily from the business?  Do the other owners have the right of first refusal to buy the exiting owner’s interest?  How will the business and/or the remaining owners pay for the departing owner’s interest in any of these scenarios?  Will the business take out life insurance on each of the owners to cover the cost of a buy out in the event of death?  Will each owner take out life insurance on the other owners to fund the buy out?  These are just a few concerns that can be dealt with in a customized buy-sell agreement. 

So, before you start “doing business,” make sure you have all of your company documents in place.  In the end it will save you time, money and maybe even some friendships. 

Don't Use the "Form!"

Did you know that you can provide for your religious and philosophical preferences in your medical directives?  Yes, you can!  In your Medical Power of Attorney and your Directive to Physicians, you can provide detailed instructions regarding how medical care and end of life decisions should be carried out by your agents and your physicians.  This may be important for those practicing religions that do not allow for certain treatments, or that require end of life care.  Don’t use the “form” – make sure your documents meet your specific needs.

What Is Probate?

The word probate refers to the court process by which a Will is deemed valid or invalid.  Unlike other states, in Texas, the “probate process” is relatively simple, quick and cost effective.  So, what does it entail? 

After your death, the first thing that your loved ones will need to do is locate your Original Will.  It is extremely helpful to those tasked with this job that they have access to your Original Will.  If your Will is held in a safety deposit box at a bank or other institution, then make sure that arrangements for access have been made with the institution.  If you store your Will in a home safe, make sure someone else has the code to access the safe. 

Once the Original Will is obtained, the next step is to review it and determine who has been named Executor under the Will.  The Executor is the person who will “probate” the Will with the assistance of an attorney (note in Travis County there is a strict policy that an Executor may not represent himself or herself in a probate proceeding).  With the assistance of an attorney, the Executor will file the “Application for Probate” and the Original Will with the clerk in the appropriate county.  After the Application has been on file for ten (10) days, you may request a hearing on your Application. 

In a typical probate hearing, where no additional proofs to validate the Will are necessary, the Executor is the only person who provides testimony.  While the testimony is formal in the sense that it is sworn to and provided for in the record, in most counties in Texas, the actual process is very informal.  The Executor and his or her attorney generally stand right before the judge at the bench during the question-answer portion.  When the testimony has concluded, the judge signs the Order on Probate and sends the Executor to the clerk’s office to take his or her Oath as Executor and to receive “Letters Testamentary.”  What are these “Letters?”  It is really a one-page piece of paper that is created and signed by the Clerk.  The “Letters” provide the Executor with the power and authority to conduct the business of the estate. 

What does it mean to conduct the business of the estate?  Simply put, it is the Executor’s job to gather the assets of the estate, pay the debts and distribute the remainder of the assets to the beneficiaries of the estate.  These “Letters” allow the Executor access to bank accounts and other accounts that he or she otherwise would not have access to and also may grant other special powers to the Executor, including the power to sale real property.  In essence, with the “Letters” in hand, the Executor has the ability to act in the same manner as the decedent could have during life.

Top Ten Reasons You Need a Will

You have minor children.

Provide for the smooth transition of your children at your death by naming Guardians of their Person (those people who will physically take care of them) and of their Estates (those people who will take care of their property).

You own real property.

Filing your Will and other probate documents in the county records is an efficient and easy way to provide clear title to the property.

You own brokerage accounts, financial accounts and/or other accounts that do not pass directly at your death under the contract terms.

These institutions will require you to show proof of your beneficiaries or heirs in order to transfer the accounts – a Will is a simple solution.

You never got around to naming a beneficiary on your life insurance, 401K, IRA or other pension/retirement account.

In most instances the proceeds will go to the “estate” – having a Will in place is much more cost effective than having the Court determine who your heirs are on its own.

You want to continue Charitable Giving after your death.

You can establish gifts to charities in many different ways in a Will.

You want to pass your property to someone on a government program (e.g. Medicaid) or who may need to qualify for a government program in the future.

Inheriting property outright (rather than in a special trust contained in your Will or in another appropriate document) could substantially interfere with certain government benefits.

At your death, your property passes to minors, incapacitated persons (e.g. someone who cannot make decisions on their own due to medical/mental conditions) and/or disabled persons.

Establishing “contingent trusts” in your Will is an easy way to provide for the distribution of property to these groups of people.    

You own certain intellectual property (e.g. copyrights, patents, trademarks, etc.).

A Will provides an excellent mechanism for determining who will receive this property (e.g. maybe a museum, gallery, school).

You want to decide who will receive your property at your death.

If you do not have a Will, or other similar estate planning documents in place, the State of Texas has determined who will receive your property at your death.

 You want to decrease or avoid paying federal estate taxes at your death.

There are significant benefits to tax planning if your estate is over the allowable exemption.