Worried about getting on that plane because you don’t have a plan?  What will happen to the kids?  To the retirement plans?  The home?  You’re not alone if you have these concerns when you’re traveling on vacation.  We all worry about our mortality and capacity and how the inevitable will affect those we love.

Did you know that in 90 minutes or less you could have wills, powers of attorney, and HIPAA releases comprehensively created and executed?  Your plan can save amazing amounts of heartache, headache, time and money.

Some of my favorite client sessions have been for those about to fly off to some exotic locale.  Typically, they’re apologetic.  Like, “Matt, I know we’ve said we need to do this for some time.”  I respond, “Yeah, I was going to procrastinate but I decided to wait until tomorrow to do so!”

“We leave this Friday.  Can we have something done?”

“We’ll have it all ready for you Thursday, giving us enough time to make any changes necessary.”

“Really?”

“Yes.  Relax.  And know you’ll be able to completely enjoy your trip because it will be done.”

Admittedly, it’s more dangerous for us to drive on the freeway than it is for us to fly or board that big ship.  But we think about things differently when we’re traveling.  Whatever it takes to get it done.

Think of everything you own:  life insurance policies, annuities, IRAs, 401ks, retirement plans, pensions, brokerage accounts, all the bank accounts and money markets and CDs, your home, other real estate, business interest, autos and finally, all the stuff in and around your home and on your property, furniture, computers, TVs, firearms, tools, paintings, pianos . . .

We’re going to classify your assets as either probate or non probate.

Probate assets are those controlled by your will: the home and other real estate, the cars and the personal property, the stuff in your home and cars.

Non-probate assets include life insurance, IRAs, 401ks and 403bs, and certain bank accounts and brokerage accounts.  They go directly to the beneficiaries you have designated.  The will does not control their distribution.  Read the prior sentence again.   So accounts you own JTWROS (joint tenancy with rights of survivorship), or you’ve made POD/TOD (payable on death/transferable on death) go to those persons who survive you.  Life insurance proceeds and IRA’s go to the beneficiaries you’ve designated.

I can’t tell you how many times my clients have looked at me in shock when they’ve fully grasped this.  Let me tell a common tale:  Mom survived dad.  Her daughter has become her big helper again.  They re-titled accounts JTWROS and made daughter beneficiary for the other financial products.  Mom’s will is good and valid and says all her assets go equally to her two sons and one daughter.  They all think the estate, the probate and non-probate assets, will be split evenly when mom dies.  But oh no, they won’t.   Just the house and the stuff in it will be split evenly.  It’s worth $150,000.  The non-probate assets will go completely to daughter.  Those assets are worth $500,000!  Well, what can daughter do?  Two things:  One, she can receive the assets and make gifts to her two brothers and suffer transfer tax consequences (think “gift tax” and IRS form 709).  Two, she can disclaim the asset (if she officially and correctly does so fast enough) and then the assets become probate assets and then the will can control.  Do you know how to “disclaim” properly?

You see, planning means taking care of these things now, so that later it truly is simple for the survivors.  No guessing, no wondering, no need to fight.  Planning promotes harmony.

Stay tuned for how to make your non-probate assets probate assets, and vice-versa!

Who’s on your Dream Team?  Effective estate planning requires teamwork.  What do I mean by teamwork?  To ensure that your plan will accomplish and exceed your goals, you should create your Dream Team.  As a general rule, this Dream Team will include your accountant, attorney, financial advisor, and insurance agent; however, at a bare minimum, your team should include your attorney and financial advisor.

The two most important factors when assembling your team are trust and communication.  You should trust every member of your team completely and know that each member has your best interest and ultimate goals as their central focus.  This may mean that you have to “interview” several professionals for each position prior to making your decisions.  This is not as daunting as it sounds.  Most people have already picked one member of their dream team and are comfortable working with that individual.  Your existing team member should be able to point you toward other professionals that conform with your stipulations for team members.  Using referrals to fill vacant Team positions allows you to use trusted references instead of making blind decisions.

The second factor is communication.  Your team should be able to efficiently communicate with you in terms that you understand.  You should feel that you are able to question and ask for clarification of any issue that may arise so that you understand your plan and how your plan will achieve your goals.  Additionally, your Dream Team should be able to effectively communicate with each other to ensure that all pertinent information is shared and accessible.  The sharing of information will ensure that all members are fully informed and able to make the best decisions to fulfill your ultimate estate planning goals.

photo credit, Horia Varlan

The question I get asked most often is, “What happens to my property when I die if I don’t have a will?”  Unfortunately, that is not always a clear cut answer.  While the states have attempted to make the distribution of assets as fair as possible, many are surprised with the answers I give.  The most common misconception among members of blended families is that all property does not automatically pass to the surviving spouse upon the death of the first spouse.  I have seen this realization strike fear into the faces of spouses as they begin to contemplate that losing a spouse will often cause more than just emotional loss, but also financial.

To understand Texas’ laws of descent and distribution, we must first explore the two major categories of property in Texas:  community property and separate property.  Separate property is property that a party owned before marriage, and property acquired during the marriage by gift or inheritance.  Community property is simply all property acquired by either or both spouses during marriage other than by gift or inheritance.  For example, all earnings either from work or investments are community property as is the home or car you buy together.

This characterization becomes increasingly important to families who are blended together with children from previous relationships.  Let’s use an example of a fictional couple, Bob and Sally Smith.  Bob has two children from a previous relationship, Bill and Susan.  Sally has no children previously, but Bob and Sally have three children together: Jack, Jill, and Jenny.  Bob and Sally have been married 29 years and all their children are grown.  If Bob dies intestate, meaning without a will, how will his property be distributed?

First, we will look at the property owned at the time of Bill’s death.  He owned the home that they still live in before they got married.  They purchased a vacation condo in South Padre together a few years ago.  Bob had $20,000.00 is mutual funds when they got married, and that investment has grown to $220,000.00.  Sally owned no property when she and Bob married.  They own two cars and a boat.

The home they live in is still considered Bob’s separate property even though they have lived in it for nearly thirty years.  Upon Bob’s death, Sally gains 1/3 life estate in the property, while 2/3 passes to the 5 children in equal shares.  The life estate means she can live in and enjoy ownership during her lifetime, but the home will ultimately pass to the five children.

The condominium was purchased during the marriage and is therefore community property.  However, this does not mean that it all passes immediately to Sally.  Because Bob has children from a prior relationship, Sally will end up owning only 75% of the condo.  The 50% she owned to begin with plus one-half of Bob’s interest.  The other one-half of Bob’s interest will pass to all 5 children equally.  Again, this means 6 people now have an ownership interest in the condo that Sally and Bob bought together.  Sally’s rights concerning the condo are limited.

The cars will be split in the same way as the condo with Sally retaining her 50% share and gaining one-half of Bob’s share.  This leaves her owning a 75% interest in the cars.

The mutual fund account that started out as $20,000.00, but has grown to $220,000.00 is next.  The initial $20,000.00 is still considered the separate property of Bob and therefore is split 1/3 to Sally and 2/3 to be divided equally among the 5 children.  The $200,000.00 of growth is considered community property and is split 1/2 or $100,000.00 to Sally and 1/2 or $100,000.00 in equal shares to the 5 children.

In summary, Sally has lost her husband of 29 years and is now also having to give up property that they had accumulated together.  2/3 of her home, 2/3 of their condo, 1/4 of their personal property, and approximately 106,000.00 has passed at Bob’s death directly to his children.  This may not leave Sally with what she needs to continue taking care of her in the lifestyle she has become accustomed to.

The bottom line is this.  Everyone needs a will.  Don’t let the government decide how to take care of those you love the most.

photo credit: edanley

When it comes to estate planning, we get asked several questions repeatedly: (1) Do I own enough to justify the cost of an estate plan; (2) Is an estate plan really necessary; and (3) I’m young, do I need to think about estate planning now?  The simple answer to all three questions is yes, yes, and yes.  While most people believe estate planning is only necessary if there is a large fortune at stake, the reverse is often more true.  The less you own, the more important it is to preserve your estate and ensure your wishes are carried out.

Age, whether young or old, should not, in and of itself, serve as the sole push for estate planning.  We feel that a complete estate plan is essential for any individual over the age of 18.  At 18, despite the fact that most parents believe their children are still children, the law views these individuals as adults.  This change in “legal” status can have a profound impact on the parents’ ability to gain certain information or access to financial data should tragedy strike.

The argument that the average 18 year old does not own anything, making an estate plan pointless is false.  It is a true that most 18 year olds do not own anything—before death.  Let me illustrate with an all too common example.  An 18 year old is severely injured in a car accident with an 18-wheeler and the other driver is at fault.   As a result of the accident, the 18 year old is in a coma and unable to make medical and financial decisions for himself.  Who gets to make those decisions?  Most would say the parents, but this is not automatic.

Now imagine the 18-wheeler is owned by a multi-billion dollar company. In all likelihood, the 18 year olds estate just went from zero dollars to several million dollars with a lawsuit.   Without a valid estate plan, the courts will rely on state statutes to divide the estate and much estate tax savings may be lost.

This situation can be easily remedied with a valid, basic estate plan.  With a basic estate plan, the 18 year old would appoint statutory and medical powers of attorney, guardians, and execute a valid will that would dictate the distribution of his estate.  The only certainty is that everyone will eventually die, but no one knows the time and circumstances; therefore, a basic estate plan should be executed by every “legal” adult as insurance against a certain result with uncertain circumstances.

Photo credit, Ewan Thot

This weekend I celebrated with old friends at my 10-year high school reunion.   This was the first time I had seen several of my classmates since graduation day.   Ten years ago I didn’t know what career I would have, or where I would live, but I knew I wanted to make a difference.

As I look back over the last ten years, I have many mixed emotions as there have been some really high points, such as my wedding day when I married the love of my life, graduation from college, and standing with my peers to be licensed as an attorney in the great state of Texas.  However, there have also been some deep valleys that I have walked through including the loss of family members, friendships dissolved and strained family relationships.  These are trials that we all face at different points in our life.  However, the relationships we make along the way are what counts.

This is why many of our clients come to see us.  They get to the point where they can’t ignore the fear of the unknown anymore; the fear of wondering how those they are close to will be taken care of if they don’t make it home.  The best part of my job is helping to ease that fear.  Our clients come to see us and we take the time to get to know them, who they really are.  We find out about their desires and their loves.  Then we look at what they have already done to provide for and take care of those they love.  Our goal is to create a relationship with that person, because to help our client we must know our client.  In the end, we have developed and executed a plan that melts the worry off our client and removes the weight from their shoulders.  Only when we see the relief in our clients do we know that we have succeeded and made a difference in someone’s life.

marissabracke, Photo credit

It was a cold, wet day when Yvonne and I presented at the Ecumenical Center, a great place smack in the middle of the South Texas Medical Center that opens its doors to many groups:  patients, caretakers, family members and organizations.  The local ALS Association had invited us to present basic estate planning to its members.  We were warmly welcomed.  We talked about wills, trusts, powers of attorney for legal, financial and medical decisions, HIPAA releases, directives to physicians, and declarations of guardianships.   We answered a lot of questions.  I revealed that my father’s twin died of ALS some years ago.

A few weeks later, a husband and wife who had attended the presentation set an appointment to come in and talk.  They asked and we gladly affirmed that their adult daughter was welcome to join us in our meeting.  The three of them worked through the issues with me, gently deferring to each other on decisions of who would do what, and when.  It’s different to do this when one of the clients is truly facing death.  The person holding the roles of wife and mother was graceful; strength personified in the midst of her mortality. The daughter seemed to have the steely reserve of her mother, yet as we progressed through the process, she began to soften, often sobbing gently.  The directive to physicians, a.k.a. the living will, was not some hypothetical discussion in this setting.  It was concretely real and we all knew that soon it may need to be shared with others so they would know what the writer really wanted at the end.

We quickly produced the documents, yet just days later when the couple returned to sign their plan, we could see the matriarch’s decline.  As they left, with our hugs, well-wishes and prayers, Yvonne retreated to her side of the office.  When I followed her and found her crying, she responded, “The woman. She’s so beautiful, so sweet, so brave.  She’s dying Matt.  And we’re seeing it.  I feel so sorry for her and her husband and her daughter.”  I tried to comfort Yvonne.  I felt the weight of our work and the honor we have to serve.

Photo credit, Ms. Abitibi