Estate planning involves putting your affairs in order to maximize the benefits your assets can provide to you during your lifetime (and to those you desire to benefit from them after your death).

Estate planning is more than just creating documents. It also involves understanding the big picture and how the legal documents will work in concert with the assets at the time they are needed.

Can you imagine seeing your favorite movie in a theater and the projector breaks causing you to miss the last two scenes? Or, what about reading an amazing book only to find the last two chapters have been ripped out of your copy? This is what it is like for your family when you fail to plan the last chapters of your life. That is what estate planning and asset protection can help you avoid. 

Estate planning refers to the preparation of estate documents in the event of incapacitation or death. An unfortunate truth of life is that everyone dies, and we cannot control when that will happen. However, we can put the documents in place to ensure our estate is handled the way we prefer. These documents can govern how bank accounts, retirement accounts, real property, and other assets are controlled.  Your estate plan will also include instructions on when/how your estate will be divided to and among your beneficiaries. When you have an estate plan, and update it as needed, the chances of avoiding guardianship, probate, or other problems for your estate and loved ones are far greater. 

A complete estate plan typically includes at least a Living Trust, a Will & Last Testament, a Healthcare Power of Attorney, and a Financial Power of Attorney. You worked for what you have. You sacrificed. Put plans in place now to protect what you’ve built.

Honestly, this is one of the worst ways to plan your estate. Here is how it canget complicated:

• If the assets are held jointly and one of the owners dies, the assets will go to the surviving owner(s). The assets do not go to the deceased owner’s children.

• It does not avoid probate. It just delays it until the last owner’s death.

• It may cause the application of estate, gift, and capital gains taxes.

• It is subject to the creditors of all owners.

• It will result in the transfer of the property to the joint owner when one owner dies, even if that was not intended.

• Also, if any of the owners apply for Medicaid, the entire account will be considered his or hers and may put them over the asset limit.

Unfortunately, probate and inheritance taxes may not be the most important things to avoid. If your child were to have an accident resulting in a judgment against them, your bank account could be used to settle the claim.

That could also happen if unexpected changes in employment resulted in credit problems. And if the child on your account is involved in a divorce, their spouse could claim a right to your assets.

Another problem could arise if you have more than one child. In the event of your incapacity or death, only one child on your bank account or deed to your home would receive the assets, no matter what your will says. Designated beneficiaries on accounts take precedence over wills.

We offer to meet with our clients every three years at no charge to review their plans to make sure the plans match the client’s current situation.  Conditions, as well as your desires, may change. Estate plans should be reviewed at least every three years but, additionally, any important change in your life demands immediate review.

These changes might include:

• Birth, death, marriage, divorce or disability of you or a beneficiary
• Large increase or decrease in the net worth of you or a beneficiary
• Substantial change in the type of your assets
• Purchase or sale of a business
• Change of residence to another state
• Change in tax law

Power of Attorney is a legal document that grants a trusted person the legal authority to represent you and make decisions on your behalf. There are two basic types of POA’s: Financial and Healthcare.

Financial Powers of Attorney enable you to designate an agent (trusted person sometimes called your “attorney in fact”) to make financial decisions or represent you in financial matters in case you are incapacitated or otherwise unavailable – for example, if you are out of the country.  Depending on how you word your POA, your agent can handle many things for you such as managing portfolios, buying or selling property, caring for pets, or running a business. However, care should be taken in the drafting of the document because most institutions such as banks or government agencies will not allow the agent to do something that is not specifically listed in the POA. Also, depending on how the document was prepared, the POA may not be valid unless and until you are shown to be incapacitated.

Financial POA’s are sometimes called “durable powers of attorney.” The word “durable” just means the document is valid even if you are incapacitated. In contrast, a non-durable POA is extinguished if you lose capacity. An example might be if you are leaving the country and you want someone to handle your affairs, you might execute a non-durable POA. It means your agent can act on your behalf while you’re away, but if you become incapacitated, you want their authority to cease. It is important to think about whether you do, or you don’t, want your POA agent to continue to have authority if and when you become incapacitated.  

Healthcare Powers of Attorney allow you to name primary and alternative agents to make healthcare decisions for you in the event that you are not able to make the decisions on your own (incapacitation). This document also puts in place important guidelines for your agent to follow in making healthcare decisions for you.

Now, you may be thinking, “if I were in a situation where I was unable to make my own healthcare decisions, my family would be able to agree on a course of action in making those decisions for me.” While some medical facilities may choose to recognize your spouse or children as inherently able to make medical decisions for you, this is actually contrary to Texas law. Under Texas law, the only way someone truly has authority to make medical decisions for your is with a guardianship or a valid healthcare POA. So, to avoid the possibility of your family or loved ones being powerless to help, or, to avoid the possibility of someone you disapprove of making decision for you, best practice is to execute a carefully worded healthcare POA outlining your wishes.  

A Healthcare Power of Attorney and a Directive to Physicians are two forms of advanced directives that can provide instructions to your Health Care Provider not to artificially sustain life when there is no hope of recovery. These are “pull the plug” directives so that you will not live on for years in a vegetative state unless that is your desire. 

Probate is a court proceeding to transfer title from the decedent’s name to the living beneficiaries. Probate occurs in the state of your legal residence, as well as any state where you own real property.

The time it takes to complete a probate varies from state to state, but can take six to 18 months on average. Probate is frustrating to the heirs and has the disadvantage of being a public record.

If your loved one recently passed away and they had a trust in place, call the estate planning attorneys at Leigh Hilton PLLC to provide trust administration services. 

If your loved one died without a will and other estate planning documents in place, you will likely need to go through a court process called probate. If you must probate the estate of a loved one, we can guide you through this sometimes very difficult process and hopefully reduce stress and uncertainty for you and other loved ones who may be involved. 

Everyone should have a will and/or trust. Many people believe that if there is no will, all the decedent’s assets will be automatically distributed to those you want them to go to. This is not always the case. If you do not create a valid will, state law dictates where your assets go and who will administer your estate.

In other words, state law may not distribute your assets to the people you want to have them. The court will appoint someone to act as a private investigator to find family members. If you don’t have a will, a determination of heirship will be required, which is a very expensive and time-consuming court proceeding.

I have never seen a will that someone prepared for themselves (with or without an online program) that accomplished exactly what that person intended. This means costly court proceedings are likely for your heirs. In Texas, there are two different kinds of probate: an independent administration is simpler, lasts only two to three months, and costs between $4000 and $6000, if everything goes smoothly.

A dependent administration is more complicated, can take over two years to settle, and can cost over $15,000. Most do-it-yourself wills elect this more complicated process, also costing the family over $15,000.

I had a client show me a will that his brother prepared online. The brother was mad at his children, as the children had treated him badly and hadn’t spoken to him in over 15 years. He drew up his own will using a popular online program. In this will, he said, “I give my personal and business assets to my brother.”

What he meant was I give everything I own personally and in my business to my brother. He wanted to give everything to his brother, obviously. But the only thing he owned at death was a house. The court considered his house real estate and said it was not covered by his will. The way the court defines personal property is: items you own that are not real estate.

Most parents are concerned about being fair to all of their children. However, this does not mean that dividing every asset evenly between them is the best solution.

In other cases, the children are more likely to be stressed and unable to agree on what to do with the house or how to manage a business. Figuring out how to be fair to the children while minimizing joint ownership or responsibilities is generally kinder and more supportive.

Wills do not cover assets held as joint tenants (owned by two or more persons) with right of survivorship, retirement plans, annuities, life insurance, financial accounts payable on death, or transfer on death designations.

Out-of-state wills should be reviewed by an in-state attorney. The attorney should check for whether the will provides for an independent administration, which is simpler and easier probate, or a dependent administration, which is more complicated and expensive.

A will is not effective until it is legally proven in court through the probate process. I have people come to me all the time and say, “Here is Mom’s will. She left everything to Dad, so Dad owns it automatically.” I have to explain that until the will is admitted to probate, it does not have the legal authority of transferring title.

A properly funded trust can avoid probate, saving the family the hassle of probate.

A trust document is an agreement between three people dealing with assets: The trustor is the creator of the arrangement who appoints a trustee to hold the legal title to the subject assets for the benefit of the beneficiary. Although there are certain legal limitations, it is possible for the trustor and beneficiary to be the same person. It is even possible for the trustor to serve as his or her own trustee. In some situations, trustors may prefer that a bank or other entity serve as the trustee.

A will can be effective only after death. Because we are living much longer these days, we are more likely to become incapacitated before we die. For this reason alone, we need a way to have our affairs managed during a period of temporary or permanent incapacity as well as at the time of death. It may also be desirable for us to set the terms for how estate assets are to be distributed. For both of these reasons, a trust is a valuable part of everyone’s estate plan.

Here is why a trust (or trusts) might be a good choice for you and your family:

• Probate avoidance

• Retention of privacy regarding family assets and finances

• Avoidance of guardianship

• Creditor protection for your beneficiaries

• Control of the distribution and management of assets during life and after death

Once the trust is set up, you then have to title the asset in the name of the trust. Otherwise, they are not owned by the trust. If it is in any name other than the trust, the trustee will have no legal right to distribute or manage it. The asset would likely be subject to probate just as if there were no trust.

Most of the time, it is you and your spouse. If you pass away or become incompetent, someone else (or a trust company) will take over control.

The only way a trust works as it was intended is if the assets are in the name of the trust when something goes wrong (like death or disability). The assets must be in the name of the trust to avoid court involvement.

This is why we prepare a “pour-over will” as a safety net. If an asset is left out of the trust, then the will can be probated to put that asset into the name of the trust.

We prepare a “general assignment of personal property,” which will cover the property you own that does not have a title.

It is very important that out-of-state property is transferred into the name ofthe trust. Otherwise, your family will be required to probate the will in more than one state, which can be very expensive.

Those assets should be purchased in the name of the trust. My Child is Married, and I Don’t Trust his Spouse. 

Under Texas law, inheritances are the separate property of your child and not community property. His spouse has no right to the inheritance. Of course, what your child does after he receives the inheritance can change what was once his separate property into community property. The most typical example is the child who receives the inheritance and places the assets into a joint bank account. Once he does that, it may no longer be his separate property.

So, the best approach is to ensure he does not commingle these newly received assets with joint assets belonging to him and his spouse. Certain types of living trusts, like a Heritage Trust, can help greatly preserve these inherited assets as separate property.

Bypass trusts are designed to reduce or eliminate the Federal Estate (Death) Tax that would normally be incurred upon the widow or widower’s death. However, everything has disadvantages, including bypass trusts. One disadvantage is that the assets in the bypass trust do not get a step up in basis on the death of the second spouse to pass away.

Initial cost, complexity, and maintenance costs after the first spouse dies are some of these. So, whether the bypass trust is a good choice for you or not depends on your circumstances. A good estate planning attorney can help you decide.

One of the problems with out-of-state documents is that they are not on the forms doctors in your state are used to looking at. In an emergency situation, you want the doctors to be able to act quickly.

There should be a HIPAA consent form that will allow the parents (and anyone else your child chooses) to receive information in the event of his or her incapacity. There should also be a health-care power of attorney. This allows the child to name who will make medical decisions for him or her. Without these forms in place (and easily available to doctors and health care providers), parents could learn that their child has been in an accident, but no one would be able to tell them about their child’s condition. If the child is in a coma for an extended period of time and can’t give the appropriate consent, the parents might have to go to court to obtain guardianship in order to get information or participate in treatment decisions for their child.There should also be a directive to physicians in which the child gives instructions regarding if and when life support measures should be employed, as well as when they should not.

These are big decisions for anyone, but necessary for the benefit of young adults and their parents. An estate planning attorney can help you create well crafted documents that will reflect your adult child’s wishes. I create and provide an emergency document card for all my clients. It gives doctors quick access to the health care documents they need, as well as information on whom to contact. It is something you hope you will never need. But you can rest easier knowing you can be there for your child if a medical crisis should occur.

During your lifetime, it is taxed under your Social Security number. All income is reported on your 1040. The trust will not file a tax return during your lifetime.

Your trust is not designed to protect assets if you get sued. If you want a trust that protects your assets if you get sued, you cannot be a trustee or beneficiary of the trust without needing to set up an expensive irrevocable (unchangeable) trust in a state with stronger asset protection than Texas. The reason to put assets in the trust name is to avoid probate (court involvement) if you pass away or become incompetent.

One of the advantages of having a trust is that you can have an out-of-state executor/trustee. They won’t have to come to Texas for a probate hearing because all your assets will be owned by your living trust.

The Transfer on Death Deed is the more current version of the ladybird deed. Title companies prefer it. We add language to the Transfer on Death Deed that protects the house from a Medicaid lien if you ever need Medicaid for long-term care.

The property’s basis for capital gains tax will be the amount you purchased it for. If they sell it in the future, they will pay capital gains tax on the difference between what you purchased it for and the sale price. If they inherit it or you transfer it with a transfer on death deed, then they get a step-up in basis, meaning the basis for the purpose of calculating capital gains tax will be the amount it is worth on the date of your death.

As an example of a stepped-up tax basis, assume you purchased an asset for $100,000 and that the property increased in value to $150,000 at your date of death. If the asset were given away during life, the person who received the asset would take it with your tax basis of $100,000. Thus, if the recipient of the asset sells it for $150,000 after your death, a capital gains tax must be paid on the $50,000 difference, causing a tax due of $5,000 (at a 10% tax rate).

If you give a person $19,000 (2025 exemption amount) or less per year, then it is within the gift tax exemption and nothing needs to be filed. If you give over that amount, then your CPA will need to file a gift tax return showing the amount gifted over $19,000. That will reduce the amount to pass to your heirs after your death without incurring tax. The current exemption amount is 15 million (2025 exemption amount), so as long as the gifts plus what they inherit are not over that amount, it should not be a problem, and there shouldn’t be any estate tax.

If your house has both of your names on it, you each own ½ the house. If one of you passes away, the survivor will need to probate to get the house solely in his or her name.

The disadvantage of naming a trust that is not a Retirement Plan Trust or the estate as a beneficiary of a retirement plan is that the beneficiary will have to withdraw the money in five years. If individuals are named as beneficiaries or a Retirement Plan Trust is named as a beneficiary, then the beneficiaries can withdraw the retirement plan over 10 years (which lowers the amount of tax that will be paid on the distribution).

The advantage to a Retirement Plan Trust under current laws is that it protects the retirement plans when they go to your children from divorce, creditors, and lawsuits. It also makes sure your spouse leaves it to the children and not to a new spouse. The survivor of the two of you can spend the assets in the heritage trust on anything he or she needs. It also ensures that if one of the children passes away that the remaining amount in the heritage trust goes to the grandchildren.

The advantage to a heritage trust is that it protects the assets you leave behind when they go to your children from divorce, creditors and lawsuits. It also makes sure your spouse leaves it to the children and not to a new spouse. It also ensures that if one of the children passes away, the remaining amount in the retirement accounts goes to the grandchildren. Same protection as you have for your non-retirement assets in the Heritage Trust. It also assures that the survivor of the two of you leaves the assets to the children. The survivor of the two of you can spend the retirement plan funds on anything he or she needs.

The short answer is no. The will is only effective to transfer title after the person who created it has passed away and it has gone through the probate process.

A Medicaid Asset Protection Trust allows you to protect assets in the event you ever need to go to a nursing home. Our clients have created a Medicaid Asset Protection Trust to protect assets like a family farm, their home, or liquid assets. Assets transferred to a Medicaid Asset Protection Trust are protected five years after they are transferred to the trust.