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Estate Planning

Estate Planning

One of the things few adults should do without is an estate plan.  Making sure this final method of protection is properly set up is highly advised in order to protect family members and other loved ones.  It can save the family from having to endure disputes, conflict, and frustrations which frequently arise when the deceased’s property is being distributed.  Planning for this ultimate distribution of assets in advance helps to eliminate wasted time and unexpected costs after one becomes disabled or passes away.   

Providing for Incapacity
Persons who are incapacitated to the extent that they are unable to manage their own financial affairs may assume that a spouse or other loved one can automatically begin handling their affairs for them.  This is untrue.  The truth is that in order for persons to be able to manage another’s finances, they must petition a court to declare the incapacitated person legally incompetent. This process can be lengthy, costly, and stressful. Even if the court appoints the person who would have been chosen by the incapacitated  individual, the appointee may have to come back to the court every year and show how he or she is spending and investing each and every penny.  A person may be specified ahead of time in a Declaration of Guardian in the Event of Later Need for a Guardian.

In order to have a family member to be able to immediately take over, it is essential that the person making the appointment work with an attorney to create the proper legal documents to appoint a trusted person, or persons.  The appointed person or persons will then have the proper authority to withdraw money from accounts, pay bills, take distributions from IRAs, sell stocks, and refinance the home. Many people mistakenly think that a simple will can provide protection in the event a person becomes incapacitated.  But the truth is that a will does not take effect until after the person who has  made the will dies.  A Durable Power of Attorney may establish the flexibility needed so that a family member can act in certain financial matters.
 
In addition to planning for the financial aspect of affairs during incapacity, it is critical that a plan for medical care be established. The law allows for the appointment of a trusted person, such as, a family member or close friend to make decisions about medical treatment options should a person lose the ability to make such medical decisions. This can be accomplished by executing a Medical Power of Attorney in which a person is designated to make such decisions on behalf of the incapacitated individual.

 In addition to a power of attorney for health care, a person should also have a Living Will which informs others of preferred medical treatments such as the use of extraordinary measures should the person become permanently unconscious or terminally ill.

Avoiding Probate
When an estate is passed via a will rather than a “self-proved” will, everything owned will pass through probate.  The process is expensive, time-consuming and open to the public.  The probate court is in control of the process until the estate has been settled and distributed.  It is not unusual for the probate court to freeze assets for weeks or even months while trying to determine the proper disposition of the estate.  This usually makes it difficult for the deceased person’s family to pay for living expenses.  Persons who are married and have children should make certain that the surviving family has immediate access to cash to pay for living expenses while the estate is being settled. With proper planning, assets can pass on to loved ones without undergoing probate in a manner that is quick, inexpensive, and private.  A person may plan ahead by preparing a Self-Proved Last and Will and Testament.
 
Providing for Minor Children

It is important that an estate plan address issues regarding the upbringing of children. If there are young children, the plan could allow the surviving spouse to devote more attention to children, without the burden of work obligations.  It is advised to discuss with an attorney the possibility that both parents may die simultaneously, or within a short duration of time. A contingency plan can include a list of persons to manage assets and name a guardian to raise children in the absence of parents. The person, or trustee, in charge of the finances need not be the same person as the guardian. In fact, in many situations, it is desired to purposely designate different persons in order to maintain a system of checks and balances.

The person named to be guardian should share the values parents want instilled in their children. The age and financial condition of a potential guardian should also be considered. Some guardians may lack the necessary child-rearing skills. . When persons who are making a will fail to plan, the decision as to who will manage finances and raise children will be left to a court of law.  Specifying a guardian and naming someone to handle finances can be done in a special provision in the Will.
 
Another issue to consider during the planning process is whether beneficiaries will receive assets directly, or have the assets placed in trust and distributed subject to conditions and circumstances such as age, need and incentives based on behavior and education. All too often, children receive substantial assets before they are mature enough to handle them in a prudent manner.   Trusts can be established external to or included in the Will.
 


Lucy Hicks Anderson, PLLC assists clients all over the world with legal matters originating in Texas, including Estate Planning, Elder Law and Real Estate matters.



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