In our experience as Estate Planning and Elder Law Attorneys in Texas, we see people put off Estate Planning for a number of reasons. Most people know they should do it, but they either never get around to it or they are overwhelmed by the decisions they know they will have to make. Sometimes, it’s helpful to think about what would happen if you do die or become incapacitated WITHOUT executing certain important documents. Here, we provide several hypothetical scenarios to illustrate what your family might have to go through if you do not have even a simple Estate Plan in Texas.
Becoming Incapacitated Without Powers of Attorney
A Power of Attorney is a document that names an agent to act on your behalf in the event that you are alive but unable to make decisions. You can have separate documents for health care decisions and financial powers, or you can name the same person to do both. Here is an example of what could happen if you don’t have these documents:
Carly was unmarried and did not have living parents. She was involved in a tragic fall accident that left her incapacitated and unable to make decisions for herself. Someone needed to make medical decisions on her behalf, as well as pay her rent, her utility bills, and her medical co-pay charges while she was in the hospital. However, Carly did not have a signed Power of Attorney, so her friends and family members could not legally act on her behalf. Someone had to step up and go to court to file a petition for guardianship, which was time-consuming and expensive. During the guardianship process, Carly’s medical treatment and financial matters were delayed and even hindered by court proceedings. This delay caused additional stress on her friends and family.
Carly could have avoided this difficult situation by talking to her friends and family and naming an agent on a Power of Attorney document. While it might not be easy to decide on an agent, it is simple to complete the document.
Dying Without a Will in Texas
A Last Will and Testament is a legal document that allows the Will maker to express their wishes for the distribution of their property and assets and for guardianship of their children upon their death. Here’s what might happen with no Will if tragedy strikes a young family:
Tina and Tony had been married for 10 years and had two young children together. They were hardworking and had accumulated a significant amount of assets, including a family home, retirement accounts, and investment properties. However, they had never gotten around to creating a Will.
Tragically, Tina and Tony died together in a car accident. Their unexpected deaths left their family in shock and mourning. However, the situation was made even more complicated by the fact that they had no Will. Without a Will, the state's intestate succession laws dictated how their assets would be distributed. This meant that some of their assets were distributed to family members they would not have chosen or in proportions that they would not have agreed with. Furthermore, without a named guardian in a Will, the court had to appoint a guardian for their minor children. This led to uncertainty and potentially resulted in the children being placed with someone other than their preferred choice. Dying without a Will meant that Tina and Tony’s family faced unexpected outcomes, uncertainty, high court costs, and lengthy legal proceedings.
As this example illustrates, it is important to create a Will to ensure that your wishes are carried out and to provide peace of mind for your loved ones during an already difficult time. Even a simple Will can make a big difference to surviving family members, and Wills are just as important for families with few assets as they are for wealthy families.
The Difference a Trust Can Make to Surviving Family Members
If you have Powers of Attorney and a legally executed Will, you are already doing better than many people. However, there is one more Estate Planning tool that can make a big difference in how your Estate is handled upon your death: a Revocable Living Trust. In this example, we show how creating a Trust can give you more control over how your assets are distributed after your death:
Jim and Bill were both ranchers and widowers who had worked hard to accumulate significant assets, including neighboring ranches and substantial amounts of money. However, they differed in their approach to Estate Planning. Jim had created a comprehensive Estate Plan, which included a Will and a Revocable Living Trust. In contrast, Bill only had a Will.
When Jim passed away, his Estate was settled relatively smoothly. His assets were transferred to his adult children, as specified in his Will and Trust. Because Jim had a Living Trust, his Estate avoided Probate, which meant that his family did not have to go through lengthy and expensive court proceedings to settle his estate. It also meant that he could control what happened to the family ranch and when his children received each portion of their inheritance.
In contrast, when Bill passed away, his Estate went through Probate, which meant that the court had to verify the validity of his Will and determine how his assets should be distributed. This process was lengthy, expensive, and stressful for Bill's family, who had to wait months to receive their inheritance. It also meant that the ranch had to be sold in order to divide the proceeds among his heirs and that his 21-year-old irresponsible son was suddenly very rich—something Bill would not have wanted.
The importance of a Revocable Living Trust in Estate Planning cannot be overstated. A Living Trust provides several benefits, including avoiding Probate, maintaining privacy, and providing more control over how assets are distributed after death. With a Living Trust, a person can also plan for incapacity, naming a Trustee to manage their affairs if they become unable to do so themselves.