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Looney, Smith & Conrad, P.C. Family Law Firm

Experienced Estate Planning Attorneys

What is the Purpose of Estate Planning?

The purpose of estate planning is to make plans for the disposition of an estate, money and property at the end of a person’s life. Everyone needs an estate plan so as to be able to control and direct the ownership, maintenance and management of their property upon death.

To understand what estate planning involves, it is important to know what is included in an estate:

1. All property in which a person has any interest, whether legal or equitable, including copyrights, trademarks, and other intellectual property
2. Equity in a home, automobile, and stocks or bonds
3. Rights in a retirement plan
4. Rights to receive payment under a contract
5. Equitable rights as beneficiary of an estate

Marital Property Rights in Texas

Marital property rights are somewhat more complex in Texas because of its designation as a community property state. Property is characterized as being separate property or community property.

Separate Property

Separate property is property owned before marriage or acquired during marriage by gift or inheritance. Damages awarded during marriage from a personal injury lawsuit, except damages representing the loss of earning capacity, are also separate property.

Community Property

Community property is all property, other than separate property, acquired by either spouse during their marriage.

Types of Property

• Separate Real property
• Separate personal property
• Community Real property
• Community personal property

Spouses can alter the statutory characterization by either pre-marital or post-marital (pre-nuptial or post-nuptial) agreements. Unless otherwise agreed by the spouses, the statutory characterization of property as separate or community property applies.

The community property aspect of a person’s estate makes estate planning more important in Texas than in states that do not have community property laws, especially for spouses that have community property and also have children by prior marriages.

For example, a person can only dispose of his or her one-half interest in community property. So, if a person, through a will, trust or other estate planning technique, tries to dispose of both his and his spouse’s interest in an item of community property, the surviving spouse might go to court to prevent the transfer of her one-half interest in the item that the deceased spouse did not have the right to give away.

For assistance with Will and estate planning, contact Looney, Smith & Conrad, P.C. at 281-597-8818 or 979-826-8484.  Text Us: 405-388-6191.
Our experienced estate planning attorneys are available 24 hours a day, 7 days a week for a free, no-obligation case evaluation

Absence of an Estate Plan in Texas

Most people care about who will manage and control their property if they become incapacitated and who will inherit their property when they die. If a person becomes incapacitated without any estate planning, the laws of the State of Texas control how the person’s estate will be controlled and managed. The Texas legislature developed a plan under the statutes of intestate succession (inheritance of property without a testamentary will).

Incapacitation

The Texas Probate Code defines an adult “incapacitated person” as:

An adult individual who, because of a physical or mental condition, is substantially unable to provide food, clothing, or shelter for himself or herself, to care for the individual’s own physical health, or to manage the individual’s own financial affairs.

Under Texas law, an incapacitated person cannot legally enter into a contract. Therefore, an incapacitated person is legally unable to buy or sell a home, car, stocks and bonds or any other type of property.

Guardianship

A guardianship must be established for a person who becomes incapacitated and does not have an estate plan. There are two types of guardianships:

• Guardianship of the person
• Guardianship of the person’s estate

The guardian can be a different person or entity for each type.

For a person judicially declared to be incapacitated, the person’s non-incapacitated spouse is:

1. Legally authorized to manage and dispose of the incapacitated person’s interest in community property without a court-supervised administration, and
2. Is first in line of eligible persons to be appointed guardian of the estate for the incapacitated person’s separate property.

A guardian of the estate must be appointed for an incapacitated person who is not married. Many organizations, such as a title insurance company, may require a guardian of the estate to be appointed for an incapacitated person before they transact business with the property of the incapacitated person, even when there is a non-incapacitated spouse.

This is because organizations want to make sure that they are dealing with a properly authorized person who is the proper representative for the estate.

When estate planning tools are not in place, a guardian of the person’s estate is usually required to legally buy and sell property for the incapacitated person. A court must appoint the guardian and approve any purchase or sale by the guardian of property owned by the incapacitated person.

Also, the guardian of the estate must file and the court must approve an annual accounting of all income and expenses of the incapacitated person’s estate. Lack of estate planning for incapacity can have a very negative effect on the incapacitated person and his or her family.

Living Will

Many people also choose to have a living will, which is also known as a Directive to Physicians. This document is a directive to your doctors as to what life savings techniques are to be employed — or foregone — in the event that you become either terminally ill or in an irreversible condition such that you will not live unless life support is applied. Often, family members become bitterly divided in attempting to make these decisions. A living will allows you to make this intensely personal decision for yourself, while of sound mind and body, and frees your family members from this responsibility.

Death

If a person dies ‘intestate’ — with no will or other provision for the continued ownership, maintenance and management of their property after death — Texas law provides for the transfer of ownership of the estate, money and property to the person’s heirs. The problems with intestate succession include that it is expensive to administer and not always consistent with the wishes of the person who died.

The objective of estate planning is to avoid unnecessary costs and create an orderly transfer of control of the property to whomever the decedent chooses to have that control.

Estate Planning Techniques

There are several ways to include transfers of property before incapacity or death as well as transfers at death including:

1. Gift transfers of property before incapacity or death
2. Retirement plans with post-death designated beneficiaries
3. Contracts with post-death designated beneficiaries
4. Payable on Death (POD) bank accounts
5. Property held as joint tenants with a right of survivorship
6. A Power of Attorney
7. A Trust
8. A Will

For assistance with Will and estate planning, contact Looney, Smith & Conrad, P.C. at 281-597-8818 or 979-826-8484. Text Us: 405-388-6191.
Our experienced estate planning attorneys are available 24 hours a day, 7 days a week for a free, no-obligation case evaluation

Tax Considerations

Depending on the value of the person’s estate, estate planning techniques may be necessary to avoid, minimize, or defer federal estate and state inheritance taxes. These taxes are imposed if the value of the decedent’s property exceeds the estate tax exemption in effect at the time of the person’s death, less the amount of any lifetime taxable gifts by that person.

Since the estate tax serves, in part, to tax capital gains that have not otherwise been taxed, some people have proposed taxing estates at the top capital gains rate, which the American Taxpayer Relief Act of January 2013 set at 20 percent.

Critics argue that the capital gains tax rate typically applies to all capital gains income, whereas the estate tax applies only to the part of an estate that exceeds the exemption level.

Under the current estate tax with a 40 percent top rate, taxable estates face an average effective rate of 16.6 percent. For estate tax purposes, a person’s estate includes his or her separate property and one-half of all community property, Life insurance, and other non-probate assets are considered when determining the value of the decedent’s property unless certain steps were taken during life to prevent such assets from being subject to estate tax at death (e.g., placing life insurance in a trust).

If a person’s taxable estate exceeds the applicable estate tax exemption at the time of the person’s death and proper planning has not been done, a significant portion of the person’s estate may go to pay estate and inheritance taxes rather than to the person’s intended beneficiaries.

Estate planning techniques are available to minimize death taxes and, in the case of a married individual, to defer payment of any taxes until after the death of the spouse. The ability to take full advantage of such techniques cannot be realized without a will or trust.

For assistance, contact the Hempstead Guardianship Attorneys at Looney, Smith & Conrad, P.C. at 979-826-8484 or

the Houston Guardianship Attorneys at 281-597-8818.  

Our Guardianship Attorneys are available 24 hours a day, 7 days a week for a free, no-obligation case evaluation. Text us: 405-388-6191.