What Your Bank Isn’t Telling You About Your Estate Plan

I often have to unravel misinformation for my clients when it comes to Wills, estate planning, and probate. Perhaps this is most common when it comes to banks. While bankers are not attorneys, they are often put in the position of navigating the legal world of estate planning and probate. It is vital that clients are informed for when, not if, they receive confusing information from a well-meaning banker.

Here are a few keys points to know:

  1. Powers of Attorney: A power of attorney is ONLY valid while you are alive. It is incorrect to ask for a power of attorney in the event of death.
  2. Account Options: You are not always given the advice on how you want to own your accounts. Every bank has its own policies, but here a few generalities to understand:
    • “Putting someone” on your account can mean a lot of things. Did you add him or her as someone who only has access while you are alive, but no ownership interest – somewhat like an internal power of attorney? Or did you add him or her as an account owner, meaning such individual has ownership interest? Or maybe you added someone as a “POD (pay on death)” or “TOD (transfer on death)”, which would only be distributed upon death? There is no right or wrong way to set up your account – the only concern is what is your intent? A POD or TOD overrides a Will, so if you’ve named someone with the desire to assist with your estate, you actually gave such individual a gift with no obligation on how your money is used.
    • Additionally, accounts set up by one or more persons as joint tenants with rights of survivorship will pass to the surviving account holder or holders. Not all joint accounts pass to the survivor. When joint accounts are set up as tenants in common, the portion of the account that was owned by the decedent passes under his or her Will.
  3. When an Account Holder Dies: Perhaps nothing baffles banks more in my experience than when a customer dies. Whether you have a Will, living trust, or nothing at all, the information many of my clients receive is completely contradictory. Often an individual is told they can just do a sworn statement filed with the court called a “Small Estate Affidavit” to transfer an account. Without knowing A LOT more about the estate, there is no way to make such a claim. First, if there is a Will, you cannot use this document. Second, with the exception of the house and some other exempt property, the total assets cannot exceed $50,000…and any debts cannot exceed the value of the estate either. Another misunderstanding is that a Will does have to go through probate BEFORE an Executor can act or have access to any funds. I could write a great deal more about how accounts are settled upon death, but suffice it to say, reach out to an attorney BEFORE you go to the bank when a loved one dies.

There are many other issues when it comes to financial accounts that can conflict with your intent. If you’d like to review your accounts, please let me know. I’m here to navigate the murky waters of Wills, estate planning, and probate!

Parents: Your Kids Need Legal Planning Once They Turn 18!

Did you know that once your children turn 18, you will not have automatic rights to make legal and medical decisions for them? You won’t even have access to medical information in case of an emergency! That’s right, once someone is of legal age, no one, not a parent, not a spouse, has automatic legal rights. Once many parents realize this, they have their kids rush in to sign legal documents, especially before they go off to college.

Here are some of the most important documents to consider:

  1. Medical Power of Attorney – A Medical Power of Attorney (or Durable Power of Attorney for Health Care) designates an agent to make medical decisions if you are unable to make them.
  2. Medical Record Release (HIPAA) – A HIPAA Release Authority is a document that specifies who may have access to your medical records.  For example, most clients will name the same individuals as in their Medical Power of Attorney so that they may have access to your medical records if they have to make medical decisions on your behalf.
  3. Financial Power of Attorney – A Statutory Durable Power of Attorney (or financial Power of Attorney) designates an agent to make financial decisions and control property on your behalf.  A Power of Attorney gives great financial responsibilities.  For example, if you are in an accident and are in the hospital, your agent could help pay your bills and manage your financial affairs in your absence.

There may be other planning that is necessary for your children, which is why it’s vital to consult a qualified attorney to guide you through your specific circumstances. There are other considerations as well in the event your child has a bank account or a vehicle. You may want to ensure that financial accounts are set up with pay on death clauses (POD) or with rights of survivorship to allow a parent to have access in the event of death.

These do not have to be complicated or expensive matters to address. While no parent wants to think of their children being hospitalized, disabled, or dying, it is possible and creates additional heartache to be powerless to act for your child.

For more information, watch our informational video:

If You Don’t have a Will…You’re a Bad Parent!

Ok, not really, but I had to get your attention as to how important this planning is!

You love your children, you’d do anything for them. Yet you still don’t have a Will to protect them if the unexpected happens. Or you mistakenly think that an online form or program is sufficient enough to cover those who are most precious to you. Many do not realize the consequences of not having this planning completed…and having it done correctly!

Without a Will…

  • Your children will become wards of the state and a court will determine the guardian of your children.  Your family could end up in court fighting over the kids, or they could end up with a stranger.
  • The court will determine who inherits your estate as well as the trustee of your children’s inheritance.
  •  Your court-appointed administrator/executor may have to post a bond to guarantee that s/he is responsibly managing the money the state grants to your underage children.
  • In blended families, a new spouse may become partners with step-children or possibly an ex-spouse in handling your estate.
  •  The new spouse will not be legally required to use those assets for your children and when s/he dies, s/he will not be required to leave any of those assets to your children.

 Don’t Take the Risk of Going Online

There are a myriad of issues that are not addressed or are left incomplete when someone tries to draft their own documents through online forms or Will kits. I wrote more about this in a previous blog:

For parents in particular, going online is a huge mistake. Much of your estate, such as life insurance and retirement, is not controlled by your Will. Beneficiaries of such assets need to be carefully coordinated in order to ensure inheritance is distributed to your children in the manner that you wish.

Also, when you use online forms you are not aware of other planning that may be necessary. For example, a Will can cover guardianship of your children if you pass away, but what if you are in an accident or incapacitated? There is no one automatically designated by law to step in for your kids. There is; however, a document that can be created to cover such a situation. Bottom line, you are not aware of all the considerations and your options unless you consult an attorney.

So, no, you’re not really a bad parent. However, your children are counting on you to protect them. The reality is, you need to plan for the unexpected to ensure that no matter what, your kids will receive the best care possible rather than leaving it to chance…or to the state.

Because…If You Don’t have a Will, the State of Texas has One for You!

Think an Online Will is “Better than Nothing”? Think Again!

Unsatisfied Woman With Laptop Showing Thumbs DownSo many people are under the false assumption that drafting a Will through an online form or Will kit is “better than nothing.” I disagree. An online Will is actually WORSE than nothing!

You’ve been there. You and your spouse are frantically rushing around trying to get ready for a big trip that you’re finally getting without the kids and then it dawns on you: “What if something happens to BOTH of us?” Cue the internet and searching for a form to download. You quickly answer the questions, print it off, sign it, maybe even get it notarized and think “Well, we KNOW we should see a lawyer about this, but at least this is ‘better than nothing.’” This is one of the biggest misperceptions I hear.

There’s no “close” in Wills & Probate. If a Will isn’t signed with the legal requirements, then it is NOT valid and cannot be used in any way to show your intent! Many times these forms are not even signed correctly. Texas has specific requirements for how a Will is to be signed, witnessed, and notarized. I had a case awhile back where a single man with two adult children decided to use a website to draft his Will. “All” he had was a house, a bank account, and a car. Simple, right? Why go to a lawyer for advice and guidance! When do you find out a Will wasn’t signed properly? Usually when it’s too late…as in this case. When his daughter came to me after he died, I immediately noticed that he signed on one date; the first witnessed signed on a different date; and the second witnessed signed on yet another date. I looked at the daughter and said, “Your dad and both witnesses signed on three different dates.” And she said, “Yes, is that a problem?” Knowing that she is grieving, I gently told her that, unfortunately, the Will isn’t valid as the witnesses not only have to witness her dad’s signature, but also each other’s. Looking slightly defeated, she asked, “Well, can we at least show the court his intent to try and make this easier?” I had to tell her “no.” There is no “close” in Wills and probate. So what did we have to do? File a determination of heirship where the court has to appoint an attorney ad litem to research the heirs and present the findings to the court and then get her brother to agree that she can serve as the executor/administrator of the estate. If you think that sounds quick and inexpensive, you’re wrong. This extra time and expense could have been avoided by seeing an attorney. Why didn’t he go to an attorney in the first place? To save money. And in the end, not only did it cost WAY more money, but caused extra time and grief for his family.

A Will is not enough. Just having a Will is often not all that is needed when it comes to your estate and family planning. (see our other blog “Why a Will is not Enough” Many do not realize that much of their money and assets will not even be controlled by their Will. When you designate a beneficiary on assets such as life insurance, retirement accounts, annuities; those designations will override whatever you stated in your Will.

For parents of young children, you do NOT want to name minor children as a beneficiary on these assets even if you have a Will that creates a trust for them. Rather, you want to direct your beneficiary to your Will with the trust (or a living trust). Who is going to guide you with this if all you did was an online form? If you leave your young child named as beneficiaries on your life insurance or retirement then that money can get stuck in the court and then given to the child at age 18 rather than going through the Will that has a trust and trustees established for your child. But you don’t know that or have any help unless you consult a qualified attorney.

Overall, DIY legal planning is a huge mistake even when you perceive your circumstances to be “simple.” There is simply too much at stake and there is no substitute for sound legal counsel to guide you through these decisions, ensure your wishes will be upheld and that your documents are enforceable. No, an online Will is not “better than nothing”…it is worse than nothing, because it gives you a false sense of security when, in fact, you may still be left with nothing.

If You Died Today, Would Your Family Be Prepared?

Pretty depressing thought, right? I get it, I do. All I can tell you is that it is far less depressing than having your family sitting across from me sharing how you always planned to get a Will and powers of attorney put into place, but just hadn’t gotten around to it.

The problem is, you just never know when an unexpected illness or accident may occur. According to recent statistics in Texas, 1 person is killed every 2 hours and 29 minutes in a traffic accident. One person is injured every 2 minutes and 12 seconds! If you’ve driven on 635 during rush hour, you know this is true! A sudden heart attack takes about 325,000 adult deaths every year. This list goes on and on of how no one is immune from illness or death. So when is the best time to plan? NOW!

I much prefer a call to get your Will drafted than a call from your family that it’s too late. Even the seemingly simplest of situations can become a huge ordeal that could be avoided by some basic planning.

Did you know that without a Will:

  • The court will determine the guardian of your children. Your family could end up in court fighting over the kids, or the kids could end up with a stranger.
  • The court will determine the trustee of your children’s inheritance.
  • The state determines who inherits your estate.
  • The court will appoint an executor for your estate.
  • Your court appointed administrator may have to post a bond to guarantee that s/he is responsibly managing the money the state grants to your underage children.
  • In second marriages with children, a new spouse may become partners with stepchildren or possibly an ex-spouse in handling your estate.

Don’t let this happen to you…don’t put your family through the pain of having to bear avoidable costs and complications during a time of tremendous grief. You’re out of excuses and the time is now. Get your Will and other planning in place today!

And remember: If YOU Don’t Have a WILL, the State of Texas has One for YOU!

What Should I Do After I Sign My Will?

When clients walk out of my office after they’ve signed their Wills and powers of attorney, I often imagine they go home and put their folder in a cabinet or safe and then don’t think about it again. There are a few things; however, I recommend to my clients that they should do once they’ve signed their estate planning documents to ensure their family and loved ones are prepared.

  1. Tell your Executor and Agents. Inform those you’ve named as your executor, medical power of attorney, and other agents of their role and tell them where you keep your paperwork. You will also want to ensure that they have access to your Will Memorandum mentioned below.
  1. Decide the best place for you to keep your documents. I generally recommend keeping your documents in a safe location at home – preferably a fire-proof safe. Some suggest keeping your documents in a safe deposit box because it will protect the documents from theft, fire, accidental loss, and most other types of damage or harm. A potential problem, though, is getting it opened after your death. If you decide to keep your estate planning documents in a safe deposit box, consider naming a family member or your executor as a joint holder on the box. That should simplify matters following your death because someone will be able to get into the box without delay. However, if you and the person you name as a joint holder die at the same time, we are back to square one. Additionally, you may need access to the documents when the bank is not open.
  1. Provide a Will memorandum with vital information and instructions. There is no magic form to complete, but I do provide all my clients with both a hard copy and electronic version. (CLICK HERE FOR OUR DOWNLOADABLE FORM). The Will memorandum provides useful information that your Will or power of attorney alone will not provide, such as where you keep important paperwork (deeds, birth certificates, financial/banking information), people to contact (CPAs, financial planners, attorneys, doctors, friends, family), and your user names and passwords. Additionally, the Will memorandum allows you to make specific bequests of your personal effects. The will memorandum allows you to change your specific bequests without having to prepare a codicil (amendment) to your Will. You may add and cross-out items to this list as often as you wish. Please understand a Will memorandum is not legally binding, but it will greatly assist your family and loved ones with handling your affairs and fulfilling your wishes.

You will feel a sense of relief and peace of mind once you sign your Will, and you should! However, if your goal is to truly make a difficult time as easy as possible, I suggest you take these other steps to make sure your family and loved ones are as prepared as possible in the event the unexpected happens to you!

Why You Need a Will When Purchasing a Home

I am often asked when is it a good time to get a Will. There are many life events that may trigger the need for this planning, such as marriage, divorce, births, retirement. One of the biggest reasons to get a Will or to update your Will is when purchasing a home or real property.

Especially in Texas where we do not have joint tenancy (property ownership whereby the property would pass via rights of survivorship to a joint owner), it is critical to have a Will or trust created to ensure that your home will pass to who you choose. Even if you co-own your home with your spouse, he or she does not have automatic rights to inherit your share if you should die. In the case of blended families, in fact, your share would actually go to your children from another marriage rather than to your current spouse.

I often see the mistake for couples who’ve been married for years when one spouse passes away, the survivor does nothing about transferring ownership to him/herself. So long as you stay in the home, pay the mortgage and the taxes, no one is going to tell you that the title to your home isn’t clear. It usually is when the survivor passes away that the adult children discover that they not only have to handle the estate of their recently deceased parent, but they have to jump through hoops to clear the title from the first parent.

Bottom line, buying a home is one of your most important investments. Do not leave it to chance, or the default laws of Texas, to determine what happens to your home without careful planning.

Click here for our informational video!

7 Reasons YOU Should Get Your Will Before the End of the Year!

1. Increased holiday travel, unfortunately, increases the need for power of attorney and other emergency planning.

2. Many have more time during the holidays to finally schedule a meeting and get their affairs in order.

3. The holidays are an excellent opportunity to talk to your family about these decisions.

4. It’s a lot simpler and quicker than you think to get this vital planning in place.

5. Your Will is a great way to provide charitable giving that is top of mind during this time.

6. It’s your last chance to have peace of mind before it becomes another New Year’s Resolution.

7. If you don’t have a Will, the state of Texas has one for you!

The Myth of the “Simple” Will

I often get inquires about people who just “need” a “simple” Will. I am always curious as to what people perceive as “simple”. Do they think their family isn’t complicated? They don’t have many assets? They don’t want to spend a lot of money? Regardless of the reason, I am here to tell you that there is no such thing as a simple Will!

I know some believe that only those with a high net worth need the time and attention of a well-crafted Will or trust. Nothing could be further from the truth. In fact, the mechanics of how your estate is distributed is quite often the same regardless of how much money or property you own. More often than not, the ease of distributing your estate comes down to the way your Will is drafted or executed. A great example is a few years ago when a woman came in after her father passed away. He had created a Will online because “all” he had was a house, investment account, and a car. He wasn’t married and wanted to leave everything to his two adult children. Simple, right? Before I even reviewed the language of the Will, I noticed that her father and each of the two witnesses all signed on different days! Why? Because no one was there to guide them. My client asked if that was a problem and I had to gently tell her that it was a huge complication in that the Will isn’t valid. At all. She asked if we could at least show it to the judge, but the answer is no. If a Will is not properly signed and executed, it’s as if it never existed. Instead, we had to go through a lengthy heirship determination through an attorney ad litem. This took a great deal more time and a lot more money to settle this “simple” estate.

Some also believe that if their family isn’t complicated, then their Will should be as equally uncomplicated. This is one of the biggest mistakes I see parents of minor children make. Many families will assume everything will fall into place automatically and/or everyone will work it out. One of the best examples I can give is when it comes to beneficiary designations on life insurance, retirement, and brokerage accounts. I’ve had clients who felt like they either didn’t need a Will or, again, could just do a form online. What they are missing is the advice and planning outside of the Will, particularly with beneficiary designations. Did you know that your beneficiary assignments on these assets override anything a Will states? To make matters more complicated (or should I say less “simple!”), you absolutely should NOT name minor children as a beneficiary EVEN if you have a Will that establishes a trust for them. Unless your beneficiary is coordinated to actually feed into that trust, those assets will be tied up by the financial institution that holds them and a court will have to designate a custodian for the funds, which will be distributed to the child at age 18! I have yet to meet a parent who thinks 18 years old is a good time to have a chunk of money handed to a child. How can this be avoided? By realizing that even the simplest of circumstances require careful and thorough planning with a professional.

Finally, I believe many say they want a “simple” Will because they do not want to spend a lot of money. Now, I understand that; however, a friend of mine likes to say “cheap gets very expensive.” Just look at the example above about the man who didn’t have his Will witnessed properly. The cost and time it took to sort that out far exceeded what he would have spent if he had seen a qualified Wills & trusts attorney. One of the reasons I spend so much time educating families and individuals is to help them see the true value in creating a solid estate plan regardless of how “simple” their life and assets seem. In this consumer age where people don’t think twice about dropping thousands of dollars on the newest flat screen TV, fancy jewelry, or lavish vacations, I’m amazed that they don’t see the same value to those dollars when it comes to protecting their family from a reality that WILL face them…unless you’ve figured out a way to cheat death. I realize that is not nearly as fun to contemplate as buying the newest thingamajig, but I think everyone will agree that it is exponentially more important.

Does this mean you have to spend a lot of money to have advanced estate planning? No! But no matter your circumstances, it is worth taking a little bit of time and seeing the value of working with an attorney who can guide you in putting a plan in place so you can have peace of mind that you won’t leave your family in a bind when your time comes.

Life isn’t simple and neither is your Will!

Why a Will is Not Enough

Did you know that most of your estate may not even be controlled by your Will? One of the biggest mistakes I see people make is that they do not realize that much of their money and assets will not be controlled by their Will. When you designate a beneficiary on assets such as life insurance, retirement accounts, and annuities; those designations will override whatever you stated in your Will.

For example, if I have named my mother as the beneficiary of my life insurance, but my Will states that all of my estate should pass to my sister; my mom WILL receive my life insurance and my sister will receive other assets such as my home, car, and personal property.

Therefore, it’s important to work with your attorney and financial planner to ensure your beneficiaries are up to date and worded correctly. That doesn’t mean you will name the same beneficiaries as in your Will; the point is you need advice to help guide you to best accomplish your wishes. Furthermore, you do NOT want to name minor children as a beneficiary on these assets even if you have a Will that creates a trust for them. Rather, you want to direct your beneficiary to your Will with the trust (or a living trust). Alternatively, if you do not have a Will, this is the perfect opportunity to see an attorney to draft this vital planning and assist you with the proper beneficiary designations.

If you don’t have a beneficiary named, or if the beneficiary named is your “estate,” or if all the beneficiaries predecease you, then those investments will be paid to your estate and pass under your Will (if you have one). Please get legal advice before naming your estate as a beneficiary for any assets so that you can fully understand the ramifications.

Certain bank and brokerage accounts will also pass outside your Will. For instance, payable-on-death accounts (sometimes called “POD” accounts) will be distributed to the named beneficiary. Additionally, accounts set up by one or more persons as joint tenants with rights of survivorship will pass to the surviving account holder or holders. Not all joint accounts pass to the survivor. When joint accounts are set up as tenants in common, the portion of the account that was owned by the decedent passes under his or her Will.

You may find that most of your estate consists of non-probate property. Therefore, it is extremely important to coordinate the beneficiaries of all these properties to make certain your assets will be distributed as you want when you pass away.

 Conclusion: A Will is not enough to ensure that your final wishes are carried out and that your loved ones are properly cared for. Therefore, make sure you seek legal advice to assist you with this vital planning, because if you don’t do the planning, the state of Texas will do it for you!

For more information, check out our 4 minute video: CLICK HERE!