MSJ

Offices in The Woodlands281.419.6200


GLOSSARY OF ESTATE PLANNING TERMS

Frequently Asked Questions

Estate Planning Questions

Probate Questions

Guardianship Questions

Family Limited Partnership Questions

Firm Policies and Procedures

ESTATE PLANNING QUESTIONS:

Do I need a Will? Yes. Having a valid Will in place at the time of your death can help make the administration and distribution of your estate easier for those who are left behind. Even if you have a living trust, you should still have a Will to cover assets outside of the trust.

What is a Will? A Will is a document which controls the ownership of your property upon your death. In Texas, there are two basic types of Wills -- (i) the attested or formal Will, which is in writing and is witnessed by two or more witnesses, and is the most effective and (ii) the holographic Will, which is wholly in the testator’s handwriting and signed by the testator.

What Happens if You Die Without A Will? If you die intestate or without a Will, your state's laws of descent and distribution will determine who automatically receives your property. These laws vary from state to state, and may not distribute the property the way you would choose to.

How does a living trust differ from a will? A Will becomes effective at the time of your death and specifies how your property is to be disposed of. A Will must be acknowledged as valid through a court procedure known as probate. A living trust also specifies how your property is to be disposed of at your death, but since it exists before your death, its validity does not need to be acknowledged by a probate proceeding. It is this quality – the avoidance of probate -- that has brought the living trust most of its recent popularity.

Is a living trust better than a Will? Maybe. A living trust can be used as an alternative to a Will. Determining if a living trust is the best solution for you depends on your circumstances. We can help you   make that determination.

What is a living trust? A trust is a legal device used for the management of property. In a trust, legal title to the property -- the right to manage the property -- is held by one person, called a trustee, while another person, called the beneficiary, has the beneficial right to the use and enjoyment of the property. A living trust is a trust created while the creator is living (compared to a testamentary trust, which is created at or after the creator's death under the terms of his or her Will). A living trust may be (i) revocable or changeable by the creator prior to his or her death or (ii) irrevocable or unchangeable by the creator.

Are Trusts designed for the wealthy? No. Many young parents with limited assets choose to create trusts either during life or in their Wills for the benefit of their children the event both parents die before all their children have reached an age where they are mature enough to handle property. This permits the trust estate to be held and used for the health, maintenance, support and education of minor children according to their respective needs, with eventual division of the trust among the child or children when they reach the required age chosen by the trust creator.

When is using a living trust a good idea? An attorney should evaluate your particular situation to determine if a living trust is right for you. The use of a Living Trust may be beneficial if you have one or more of the following circumstances:

  • Real estate in another state.
  • Concerns about disability or incapacity in the future.
  • You are concerned about privacy.
  • You need post-retirement and wealth planning.
  • Contesting of your Will, is probable.

I see advertisements for do-it-yourself Wills and living trust kits. Can this work temporarily until I can formally plan my estate? A Will or trust created this way is likely to have some effect, but it may not work the way you intend. Wills are complex documents that should be prepared by an attorney.

I just moved here from out of state. Is my Will still valid? Yes. A Will that is valid in the state where it was drafted is valid in Texas as well. However, it is still a very good idea to have a Texas attorney review your estate planning documents. Each state has special provisions that should be included in Wills that will be probated in that state. These special provisions allow for a smoother, easier probate process. We will be glad to review your documents and make suggestions based on Texas law.

Should I update my Estate Plan, even if I have not moved out of state? Regardless of where you live, you should have your Estate Plan reviewed by an attorney or other estate planning professional periodically, to assure that it still meets your needs. You should have your plan reviewed if any of the following events occur:

  • The marriage, divorce, illness or incapacity of any member of your immediate family;
  • The death of any member of your immediate family;
  • A significant change in your financial condition (positive or negative);
  • You move to another state or country;
  • You or a spouse receive a large gift or inheritance;
  • You acquire property which requires special consideration and handling;
  • You change your mind about how to dispose of your property and/or who you want as your representatives; and
  • If there is a significant change in the tax laws which may affect your estate.

Does my Will change the beneficiary designations on my retirement plans and life insurance? No. Your Will only disposes of your probate property. Probate property is property that does not pass by a beneficiary designation. All property that has a beneficiary designation is called Non-Probate Property. The most common types of Non-Probate property are life insurance, retirement plans, annuities, bank accounts held as “joint tenants with rights of survivorship” or “pay on death” designations. It is also not uncommon to hold brokerage accounts with a “right of survivorship.” The beneficiary designations control who receives this property. If your Will gives all of your property to your sister, but the beneficiary designation on your life insurance lists your brother as the sole beneficiary, your brother will receive the life insurance policy. It is important to coordinate your estate plan and non-probate beneficiary designations to work together.

I set up all of my assets so that they pass by beneficiary designation, or are payable on death to certain persons so I can avoid the hassle and expense of doing a Will. Will this plan accomplish my objective? A plan like this may work in some situations, but in most cases it fails to cover many contingencies which may occur, with disastrous results. There also are potential negative tax consequences of using only beneficiary designations or pay-on-death designations to pass property at your death.

Are there any other documents that I should consider when creating my Estate Plan? Yes. The following is a list of documents to consider as part of your overall Estate Plan:

  • Statutory Durable Power of Attorney, in which you grant a designated individual(s) broad power and authority to deal with your property;
  • Medical Power of Attorney, in which you give a designated individual(s) the authority to make health care decisions for you, if you are incapacitated and unable to make the decisions yourself and your physician has certified that in writing;
  • Declaration of Guardian for Minor Children, in which you name the person or persons you want to be the guardian of your child(ren) and estate in the event of your death or disability;
  • Declaration of Guardian in Advance of Need, in which you name the person you want to be the guardian of your person and estate should the need later arise;
  • HIPAA Authorization, which limits the disclosure of protected medical information to those you designate in writing, and will be released only to those designated in the authorization;
  • Directive to Physicians, (sometimes thought of as the “pull the plug” or “don’t pull the plug” document) in which you indicate your personal wishes regarding medical treatment in the event of a terminal or irreversible condition;
  • Appointment of Agent to Control Disposition of Remains, which designates an agent to dispose of your remains after your demise; and/or
  • Anatomical Gift Forms, which states your intent that some or all of your body parts may be used to prolong or improve the life of others or to advance the purposes of medical science, or both.

I am getting ready to go to an attorney for estate planning. What should I do to prepare for the initial appointment? Please bring your financial and legal documents, including: personal financial information; current account statements for personal and retirement accounts; statements for your banking, investment, and brokerage accounts; life insurance documents; legal property descriptions; prior estate planning documents; divorce decrees and property settlement agreements; and corporate documents for any business you may own. If you have a doubt about what to bring, gather as much of the above information as possible, and we will determine at the initial meeting if anything else is necessary.

PROBATE QUESTIONS:

A relative just passed away. What should I do?

  • The first thing is to take care of your family. If you have already located the Will, look to see if there are any provisions regarding the wishes of the deceased. Also look to see if the person had a prepaid funeral contract.
  • Notify the person’s employer and the social security administration if he or she was receiving social security benefits.
  • Locate the original Will and review it to determine who is named as the executor. You have four years after the date of death to admit a Will to probate and have an executor appointed by the probate court. If you cannot locate a Will, it may be necessary to have determination of heirship.
  • Contact a probate attorney. You are not required to use the attorney who drafted the Will. Find an attorney in your area that is experienced in handling probate matters – like us! All of the attorneys in our Firm have years of experience handling probate matters.
  • Make a list of the person’s assets and debts. This will help your attorney determine whether or not you need to probate the Will. The probate procedure or trust administration will depend on the nature of the assets and debts and how they are titled. It may be possible to utilize a less complicated approach, such as an affidavit of heirship or a small estates affidavit, instead of probating the Will.

Do I have to probate the Will? Whether or not you need to probate depends on the nature of the assets and how they are titled (in whose name are they held). There may be shortcut methods to avoid a complete administration, if appropriate. We can help you answer questions like these at an initial client meeting.

My mother just passed away, but I have power of attorney for her. Can I use this to transfer her assets? No. Powers of attorney are only effective during the lifetime of the person who granted the power. Once that person dies, the power of attorney dies with them. The only person authorized to act on behalf of a deceased individual is the court approved or appointed executor or administrator.

My father named me as the executor in his Will. Do I still need to go through probate? Yes. Being named as the executor in a Will is just the first step. You are not qualified to act on behalf of the estate until the judge sign an order admitting the Will to probate and appointing you as the executor, you have taken your oath with the court, and you have posted any required bond. Once you have been qualified, the clerk will issue Letters Testamentary which is a court order stating that you have the right to administer the estate.

What do I need to understand about a Will I am filing for probate? It is very important to read and understand the Will or trust so that you will know:

  • Who are the beneficiaries?
  • Who is to receive what and when?
  • Who, if any, are your co-fiduciaries?
  • Does the Will give everything outright, or does it create new trusts that may continue for several years?
  • Does a trust mandate certain distributions or does it leave this to the trustee's discretion?
  • How many years the trust, if any, will be ongoing?
  • How are debts (if any) and taxes (if any) to be handled?

What documents will the attorney request to begin the probate process? The attorney will need to have the original Will, and a certified copy of the death certificate. The attorney eventually will need a list of all assets belonging to the deceased, valued as of the date of death. This will include bank accounts, investments, IRA or other retirement accounts with the balance as of the date of death and insurance, no matter to whom it may be payable. It will include all real estate owned by the decedent, whether alone or jointly with another person. Information about the decedent’s debts (including credit cards, medical bills, mortgage and car loans, if any) is also important. The attorney will need these to determine if the estate is subject to estate tax.

Do I still have access to joint accounts even before I probate the Will? In most cases, the bank or brokerage firm will allow a co-signer on accounts to access funds after the death of one of the co-signers. However, not all accounts with two co-signers automatically belong to the surviving co-signer. It is advisable to consult an attorney before using funds from these accounts for personal purposes, and it is a good idea to keep precise records of how these funds are spent.

ALTERNATIVE PLANNING

GUARDIANSHIP QUESTIONS:

What is a guardianship and how do they work? A guardianship is a court-supervised administration for a minor or for an incapacitated person. An individual, called the guardian, is appointed by a court to care for the person and/or property of the minor or incapacitated person (the “ward”). In some states, other than Texas, guardianships are called conservatorships.

What types of guardianships are there? There are two types of guardians and guardianships. A guardian appointed to take care of the physical well-being of a ward is called a guardian of the person, while a guardian appointed to take care of the ward's property is called a guardian of the estate.

What are the definitions of "minor" and "incapacitated person?" A minor is a person younger than 18 years who has never been married or who has not had his or her disabilities of minority removed by judicial action. A minor is considered an incapacitated person. An adult who, because of physical or mental condition, is substantially unable to provide food, clothing or shelter for himself or herself, to care for his or her own physical health, or to manage his or her own financial affairs is considered an incapacitated person. The definition of incapacitated person also includes a person who must have a guardian appointed to receive funds due the person from any governmental source.

FAMILY LIMITED PARTNERSHIPS QUESTIONS:

Someone told me I should set up a family limited partnership. How does that work? Family limited partnerships (FLPs) can help families keep business assets together and working, even in times of transition such as death or retirement. They are not for everyone and every situation.

What is an FLP? A limited partnership is a type of business organization recognized in Texas and most states where the management rights and responsibilities are vested in one or more general partners while most of the ownership interests are vested in limited partners. A limited partnership is a flow-through entity for income tax purposes, meaning that the partners pay income taxes or enjoy tax benefits individually, based upon their ownership interest in the partnership. A family limited partnership is not a different type of business organization. Rather, it is often used to describe a limited partnership where most or all of the general partners and limited partners are related to each other.

Who typically sets up an FLP? Families with business assets which they wish to own in common, including assets which some family members wish to pass on to other family members, may benefit from an FLP.

FIRM POLICIES AND PROCEDURES:

What is the Firm policy regarding billing procedures, fees and expenses? In setting our Firm’s fees, we are guided by the State Bar Rules of the Supreme Court. The rules take into account various factors in arriving at a reasonable fee, including the time involved, the complexity of issues, the skills required, the results obtained and fees customarily charged for similar services. All legal services are provided to clients pursuant to a written agreement. Whenever feasible, legal fees for specific matters, and particularly those services relating to estate planning, are provided on a fixed fee basis when sufficient information is available upon which to base a fixed fee. All other services including litigation, real estate, and corporate matters, are provided at an hourly rate of compensation. After our initial consultation we will be able to provide you an hourly rate for those attorneys and staff that will be working on your matter. All time is billed in 1/10 of an hour increments. These services are billed monthly, as incurred, unless provided otherwise in an engagement agreement.

The Firm generally charges a retainer against which fees and expenses are billed. For fixed fee work this is typically one half of the fixed fee quoted to the client, with the balance due upon completion of the project or as specified in an engagement agreement. For hourly work, a reasonable retainer is charged based on the Firm's best estimate of the overall fees to be incurred in connection with the client's matter. For hourly work, the client will receive an itemized statement monthly, including expenses and disbursements. The account is due and payable when the statement is rendered. If payment is not received within thirty (30) days, a late fee may be charged.

When fixed fee estimates are given, the only basis for service charges in excess of such estimates will be the occurrence of any one or more of the following:

  • "Change of mind" redrafts of one or more of the client's documents. Changes made due to our misinterpretation of a client's instructions or a drafting error will be made at no additional charge;
  • Out of town meetings or other work requiring travel to another location which exceeds the time travel estimate made in the engagement agreement or at the time of such travel;
  • Consulting with a client and client’s advisors, post-execution, to assist the client in implementing his or her estate plan;
  • Additional work which was not identified in the original fixed fee estimate; and
  • Any services, including those for which a fixed fee estimate has been provided, which continue beyond the time allotted or term of an engagement agreement entered into with the client.

The Firm's fixed fee services do not include the following, unless specifically included in an engagement agreement with the client:

  • Valuation services for businesses and other assets;
  • Services provided by persons other than Martin, Earl & Stilwell, LLP, its principals and employees;
  • Filing fees, recording costs, special delivery and courier fees, and similar out of pocket expenses; and
  • Travel costs and per diem.

Other expenses, such as postage, photocopying, long distance and other communication charges (including cell phone usage), electronic research and other miscellaneous disbursements will be billed to the client separately each month or pursuant to the Firm’s written fee arrangement with the client. The Firm does not incur any unusual or large expenses before agreement is reached with the client.

What is your Firm policy regarding file ownership? All client-supplied materials and all attorney end-product (collectively “client materials”) are the property of the client. Examples of attorney end product include finalized contracts or estate planning documents, deeds, and corporate records. Everything else is attorney work product. Attorney work product is the property of the attorney. Examples include photocopies of client materials, as well as drafts, notes, internal memoranda, administration materials, correspondence, and electronic versions of both client materials and attorney work product.

What is the Firm’s record retention policy? After completion of the matter, the client has an affirmative duty to retrieve client materials or to direct the Attorney to forward the client materials at the client’s expense. The attorney may retain copies of all such documents as well as all other materials. If the client fails to retrieve the materials or request the attorney to forward them, this failure shall be regarded as the client’s authorization for the attorney to destroy the client materials without further notice to the client. The attorney may destroy any of the client’s files at any time with the client’s written consent and in any event, after five years from the conclusion of the representation. No further notice to the client will be required prior to such destruction