Why Do I Need Estate Planning?

In our work as estate planning attorneys, we have noticed that many Texas residents are vaguely aware of the concept of estate planning, but are not quite sure what it is or why they need to engage in estate planning themselves.

Thus, we thought we would write a post to elucidate some common aspects of estate planning and explain why they are important.

First, there are wills. A will is a document that directs how your assets, owned solely by you in your name alone and not governed by another mechanism, will be distributed after your death. The contents of a savings account that is yours alone would be a “probate asset” (an asset that a will would control), but a home that you jointly own with your spouse would be a “non-probate asset” that a will wouldn’t govern, because you don’t own it alone.

Having a will is important not only because it specifies how you would like your money distributed, but also because it can distribute other non-money things, like personal possessions, family heirlooms and the like.

Texas, like all other states, does have a default estate plan in place, but there’s no guarantee that it matches your wishes. Thus, it’s better to have a will of your own.

A second feature of a thorough and well-rounded estate plan is a living will. Formally known as a Directive to Physicians, this document specifies what kind of medical treatment you would like to receive in the event that you fall into a terminal or irreversible condition. This is the sort of document that many people were prompted to investigate in the wake of incidents like the Terri Schiavo case. We know that it is not pleasant to think about becoming unable to express your wishes yourself, but it is important to have this possibility addressed.

If you have children, you should also look into the possibility of naming a guardian for them in the event that you die before they have reached the age of maturity. Generally speaking, guardianships appoint someone to make decisions and look after vulnerable people.

These are just three elements of a comprehensive estate plan. At Ford + Bergner, we believe that every estate plan should be carefully customized to the individual it is being prepared for. For more information, we invite you to contact us.

Heiress’ Estate Litigation Has Lessons For Texas Readers

Huguette Clark was an interesting figure, to put it mildly.

Clark, who died in 2011 at the age of 104, was the lone heiress to a $300 million fortune her father made mining copper. In the last stages of her life, she became a recluse. She lived (by choice) in a Manhattan hospital for the last two decades of her life with her large collection of dolls; the only people with whom she had regular contact were her nurse and attorney.

Clark died testate, having had a will made in April 2005. The will left most her money to her nurse and to charitable causes. It was quickly challenged by some of Clark’s distant, living relatives.

Clark’s relatives have alleged two things, and we thought their accusations presented a good chance to illustrate two concepts for our Texas audience:

  • Mental Incapacity: Clark’s relatives have alleged that she was not mentally fit to make a will. This claim has largely been exhausted. The standard for mental capacity is quite low. As long as a person understands, in a general way A.) The nature and extent of his or her property. B.) The natural objects of his or her bounty C.) The disposition that he or she is making of that property and D.) Is capable of relating those elements to one another and forming an orderly desire regarding the disposition of the property, then he or she likely has capacity. Although Clark was eccentric and some of her choices were strange, that is not enough to indicate that she lacked capacity.
  • Duress: A will that is created under duress, meaning under overt coercion, it has no effect. Courts have a very high bar for what amounts to “coercion,” though. Essentially, if there is any question was to whether something amounts to duress, that means it probably is not.

The estate litigation that began almost immediately after Clark’s death seems to be winding down now, so it will be interesting to see the final outcome of this case.

If you have further questions related to estate planning concepts like estate, trusts, guardianships and conservatorships, you could contact us.

Nuts and Bolts of Trusts

A trust is a legal document used in estate planning to pass assets at your death without the cost and delay of probate court. Trusts are composed of four elements:

  • Grantor: The grantor is the person setting up the trust
  • Trustee: This person administers the trust. Frequently the grantor is also the trustee, with successor trustees named to manage the trust after the grantors’ passing.
  • Assets: The property, accounts, money and other physical property that give the value to the trust.
  • Beneficiaries: The people or organizations that will receive assets from the trust when you die.

Trusts are commonly used to pass on business assets that require management that would be tied up if the asset was subject to the control of the probate court. Additionally an estate with holdings in multiple states can utilize a trust to avoid the expense and travel involved in multiple probate proceedings.

Surviving spouses can receive the assets in trust and be granted control over the trust.

Trusts can be established to provide for the care of special needs individuals. They are also used when passing assets to an heir you feel lacks the capacity or responsibility to handle the assets in the estate.

Charitable trusts, just as the name suggests, allows for your assets to pass to the charities of your choice. An example would be the establishment of a local high school scholarship fund. Charitable trusts are one of the few that accord the originator tax benefits.

Setting up a trust is more complex than a will, and somewhat costlier. That being said the additional flexibility, along with the added assurance that your estate will be settled in accordance to your wishes, make trusts an estate planning tool worthy of examination.

The attorneys of Ford + Bergner LLP specialize in estate planning, as well as putting your mind at ease that your final wishes will be respected and that your heirs’ futures will be protected after you are gone.

Should I Include a “No Contest’ Clause in My Will?

Many people worry about disgruntled relatives challenging their will after their death. As a method of discouraging this behavior and preventing unnecessary probate litigation, testators sometimes include a “no contest” clause in their will. What is this clause and is it effective?

What is a “No Contest” Clause?

The idea of a no contest clause has been around for hundreds of years. Basically, its inclusion means that if a beneficiary challenges the will, he or she will lose their inheritance. However, for many years courts have narrowly enforced this clause. Judges have been reluctant to strip beneficiaries of their inheritance if they contested a will.  To clarify enforcement, in 2009 Texas Legislature passed law that makes no contest unenforceable if the beneficiary contested the will in good faith and with just cause.

Is It Worth Inclusion?

The answer to that question is maybe. Some states have completely invalidated the no contest clause because they do not find them to be effective. Here are two examples where a no contest clause may not work out as the testator planned. First, Texas law says that a testator must have testamentary capacity or a sound mind to create his or her will. The one contesting the will can argue there is no way the testator could have been in sound mind if they left him or her out. It seems simplistic, but it is usually a good enough argument to start a lengthy litigation process.

A second scenario that can create unexpected legal disputes among surviving relatives can occur when the testator clearly explains why a certain relative is not getting a bigger piece of the inheritance. For example, a testator may include that the relative is a known drug addict. The disgruntled relative can use this accusation to claim the testator was not in his or her right mind. Secondly, the alleged drug addict could bring a slander or libel suit against the testator’s estate. Even if it seems a court is unlikely to side with the heir contesting the will, the situation can still lengthen the litigation process and cause valid beneficiaries to pay legal fees.

In theory no contest clauses should work. However, the law is vague about what constitutes valid cause for challenging a will. Therefore, it’s important that testators seek experienced legal counsel to protect their estate. Contact us for a free consultation.

Estate Planning Also Includes Digital Assets

Wills, trusts, and other estate documents automatically include physical assets, such as your home, brick-and-mortar bank accounts, antiques, and boat. Such items have obvious value, if only because they are tangible and visible, and likely to be discovered by your executor if they go through your files and see supporting documentation.

Since the dawn of the 21st century, however, digital assets have also become important. In fact, they may be worth more, both financially and sentimentally, than what you physically own. Consider the following examples:

  • Email accounts most probably contain most of your correspondence with all the important people in your life, such as loved ones, colleagues, suppliers, and merchants.
  • You do most of your banking and investing online, having eliminated paper statements to save the environment.
  • As the family genealogist, you store your family tree, historical scans, and photos on sharing sites for easy access by your loved ones. You let them know of any additions through your Facebook updates.
  • Much of your income comes from your consulting website, where you not only accept payments from clients, but generate revenue from affiliate ads and eBook sales.

What happens to all these digital assets if you die or are incapacitated? If your heirs or executors don’t know anything about them, your online treasures could disappear due to lack of activity. They could also continue to generate income that cannot be touched because you never told anyone about the user codes and passwords needed to access the money.

At the very least, you need to make sure your estate plans document your email address and password. Much of your virtual property generates email statements that you executors will discover once they browse your messages. Even better is to list all your digital property, include website addresses, user names, passwords, what they generate, and their importance.

We can help you ensure that your virtual life’s possessions continue on as your physical property does. But only if you contact us first so we can discuss your estate planning options.