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Estate Planning usually involves the creation of Wills and Trusts. It also includes areas such as the creation of durable powers of attorney, living trust, living Will, and other tax planning vehicles such as Crummy Trusts, Insurance Trusts, Bypass Trusts, Family Limited Partnerships, and other custom Trusts designed to take full advantage of the Tax code.
Living Trusts are an estate planning alternative to escape probate and guard your privacy of your estate while your living and additionally providing planning for your estate legacy.
A useful alternative to a living trust is the creation of durable powers of attorney. Powers of attorney allow someone to designate another person to make medical and financial decisions for them in the event that they are incapacitated. These documents are relevant only when someone is still alive and incapable of making decisions for themselves. In most cases, people designate a spouse and/or trusted family member or friend as trustee.
You may also feel the need to have a Living Will, which is also known as a Directive to Physicians. This document is a directive to your doctors to either apply or withhold life sustaining treatment in the event that you are either terminal or in an irreversible condition such that you will not live unless life support is applied.
When considering your estate planning, it is important to consider each of these aspects as part of a comprehensive estate plan.
Simple Estate Planing includes:
- Durable Financial and Medical Power of Attorney
- Bypass Trusts
Executing A Will To Achieve Desired Property Distribution
What A Will Can Do
A testator is a person who leaves a will in force at his or her death. A will is a legal instrument which states how the testator’s property is to be distributed at death. A valid will avoids many of the problems that may arise from dying without a will and allows a person to leave property to the persons he or she desires. In addition to naming the recipients of the testator’s property, the will also designates the individual(s) who will manage the property and care for minor children. In larger estates, the will often contains provisions that minimize estate taxes.
A will can also set up a trust, a method by which property is held by one party (the trustee) for the benefit of another (the beneficiary). To establish a trust, the testator transfers property, with the specific intent to create a trust, to the trustee who manages and administers the property for the benefit of named beneficiaries. A testamentary trust arises under a will and becomes effective when the testator dies. A trust is an effective way of managing property for the benefit of minor or incapacitated persons or persons who are incapable of managing their own financial affairs. A trust also is useful to prevent a spendthrift child from immediately spending his or her inheritance by preserving the funds for the child’s education or other important needs. Further, a trust may be used to protect the child’s inheritance from the claims of his or her creditors because property placed in a trust generally may not be reached by a beneficiary’s creditors until it is distributed to the beneficiary. There also are many other legitimate reasons to create a trust in a will.
Requirements for Execution
For a will to accomplish any or all of these results, it must have been properly signed. Texas recognizes three kinds of wills:
- handwritten (holographic); and
- typewritten (formal).
To execute any of these wills, the testator must meet the following requirements:
- be at least 18 years of age, married, or serving in the armed forces;
- be of sound mind at the time of execution;
- not be unduly or fraudulently induced (forced or deceived) to make the will; and
- have testamentary intent (present intent to bequeath property at death).
Additional requirements as noted below must be met for each type of will.
An oral will applies only to personal property. Gifts of land and improvements on it cannot be made through an oral will, since transfers of title to real property must be in writing. Further, an oral will is valid only if made by the decedent in his or her last illness and at home, except where he or she is taken sick away from home and dies before returning home.
If the value of the personal property is more than $30, there must be three or more credible witnesses to the oral will. In addition, an oral will cannot be probated (proved in court) more than six months after death, unless the testimony or substance of it was reduced to writing within six days after making the will.
If these requirements of an oral will are not met, the decedent’s property passes according to the laws of intestacy. From the information above, you can see that the law greatly restricts the use of an oral will. Therefore, such a will should not be relied upon for disposing of property.
Handwritten (Holographic) Will
Under the Texas Probate Code, a valid handwritten will must be wholly in the handwriting of the testator and signed by him or her. It does not need to be witnessed and can be written on anything, including stationery. Typewritten words may not be incorporated into the will. The wording must reflect a present intent to dispose of property at death. The words, “This is my last will and testament,” generally are sufficient to show testamentary intent.
While executing a handwritten will sounds easy enough, problems can arise from its interpretation, especially when written by a lay person. If the instrument does not dispose of all of the decedent’s property, the undisposed property will pass according to the statutes regarding intestate distribution. If the handwritten will disposes of more property than the testator owns, complications may arise.
Remember, a spouse has only one-half of the community property to give to anyone because the other spouse owns the remaining half. If a will attempts to give all the community property to one or more persons, the surviving spouse is placed in the awkward position of having either to accept whatever bequests are made to him or her in the will or to renounce the entire will and instead claim his or her one-half community share.
If the bequests in a handwritten will are not written in clear language, then it may be necessary for the court to construe the meaning of ambiguous terms. As a general rule, the less clear the language and the more property and heirs involved, the more likely the will may be contested in court. Contesting a will is usually a very lengthy and costly process and may result in defeating the testator’s intent.
Further, if the handwritten will does not contain the proper language allowing the executor to serve without court supervision and waiving bond, the executor may be required to obtain court approval of many actions and to post an executor’s bond. This causes unnecessary delays and expenses in administering the estate.
For these reasons, although a handwritten will is better than an oral will, the best approach is to have an attorney prepare a typewritten (or formal) will.
Typewritten (Formal) Will
A typewritten will sometimes is referred to as a formal will. A well-drafted typewritten will is more apt to carry out the decedent’s intent. Although a typewritten will may be prepared by a lay person, an experienced attorney should draft the will.
For a typewritten will to be valid, it must meet these requirements:
- be signed by the testator or another person at his or her direction and in his or her presence;
- be attested by two credible witnesses above the age of 14; and
- be signed by the witnesses in the presence of the testator.
A beneficiary under a typewritten will should not serve as a witness to the execution of the will because this may preclude the beneficiary from receiving any property under the will.
Executing a will that stands up in court is only one aspect of “getting your affairs in order.” After execution, the original document should be safeguarded so that it is not lost, destroyed, or mutilated, which might result in complications in probate court as to the proof of its contents. Further, a will should be updated when there are changes in the testator’s heirs, property, or marital status. This can be accomplished by executing a proper amendment (a codicil) to modify the existing will or by canceling (revoking) the existing will and then executing a new one. It is not advisable to update a will by writing or making changes on it because such revisions may be totally ineffective.
Be aware that a will can also be canceled to some extent if the testator is divorced after making the will. In such a case, gifts to the ex-spouse in the will, as well as appointments of the ex-spouse as executor or trustee, are void and will not be recognized. Similarly, an ex-spouse who was designated during marriage as a beneficiary under the decedent’s life insurance policies generally is not entitled to the life insurance proceeds upon the decedent’s death. A temporary order issued by a divorce court prohibiting a party to a pending divorce case from changing his or her will until the divorce is final is unenforceable.
The subsequent marriage of a single testator will not cancel his or her will. If a person who signs a will before marriage wishes to give all or any portion of his or her property to the new spouse, he or she should sign a new will. Otherwise, the property will pass according to the provisions contained in the will that was signed before marriage, and the new spouse will receive no portion of the deceased spouse’s property.
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