Family Estate Planning

A common misconception among young adults today is the lack of a need for any type of Estate Planning. I hear often that “I don’t have any money” or “it will all go to my spouse anyway, right?”. In response, I encourage young adults to consider the emergency planning aspects of Estate Planning that are overlooked.

Implications of Dying Without a Will

In a previous article, I discussed the implications of dying Intestate in Texas, in other words, dying without a Will. Of particular concern in this article are the issues of Separate Property and blended families.

For Separate Property (property that is received by gift or inheritance), the surviving spouse only has the right to a one-third life estate in the property. The remaining two-thirds is distributed outright to the children, no matter their age! To clarify, I will provide a hypothetical scenario:

Ralph and Sue get married and have a child Don. Ralph’s father passes away, leaving to him all of his real estate, bank accounts, and vehicles. One year later, Ralph passes away without a Will. Per the Texas Estates Code, Sue only has the use and benefit of one-third of the inherited real estate, bank accounts, and vehicles during her lifetime. Don, the child, is now the recipient of a large sum of property. While it may have been Ralph’s preference that Don receive the property at some point in the future, it is unlikely that Ralph would have wanted Don to have immediate access to it upon turning 18.

For Community Property (all other property), the surviving spouse will receive a distribution of all of the real property and separate property as long as all of the children born to the decedent spouse are of the marriage with the surviving spouse. If not, then one-half of all Community Property and one-half of all Separate Property will be distributed to the decedent’s surviving children. Back to Ralph and Sue: suppose Ralph was married previously and Don is the child of that first marriage. Ralph later remarries and starts his life with Sue. Ralph then passes away leaving behind substantial Community Property accumulated during Ralph and Sue’s marriage. Because Don is not a child of the marriage between Ralph and Sue, Don is entitled to one-half of Ralph’s estate.

For these reasons, it is highly recommended that parents of minor children and members of blended families meet with an Estate Planning Attorney to discuss their preferences in the distribution of their assets. Otherwise, dying without a Will may prove to cause unnecessary hardship to the surviving spouse.

Appointment of Guardians

One of the most important reasons for parents of minor children to establish an Estate Plan is to provide for the care of their children in the event that they pass away. This includes providing for their physical care and financial care.

Speaking to financial care first, and relating back to the scenario of Ralph, Sue, and Don, in the first scenario in which Don would receive his father’s estate, without the imposition of a Trust, Don would have free and unrestricted access to all of the estate at age 18. Many parents believe that 18-year olds do not have the emotional stability or financial knowledge to manage large sums of money. To counteract this potential issue, it is important to provide for a mechanism that allows the money to be spent on the child’s behalf, but not allow full, unrestricted access to the money for a specified period.

For example, had Ralph created a Will with a Trust provision for Don, Ralph could instruct his Trustee to pay for all of Don’s health, educational, maintenance, and support needs from the income generated by the Trust. Ralph could have also provided incentives to Don at certain milestones during his life, such as a 50% distribution of the Trust Principal upon turning age 30.

Estate Planning encompasses these proactive measures in the financial provision for children, and, for the reasons and examples shown above, is a critical step in an Estate Plan.

Speaking next to physical care, one of the more challenging decisions I see young parents make is the choice of who will care for their children if they both pass away. Parents work hard to instill core values in their children and want them succeed in life, even if they are no longer alive. To address this issue, the Texas Estates Code provides a manner by which parents of minor children can designate who will care for their children in the event they pass away or become incapacitated. The designated person is called a Guardian of the Person and the court-administered process is called a Guardianship.

Through a Designation of Guardian In the Event of Later Need, a parent can designate the person or persons whom they want to serve as their child’s guardian.If a designation is not made, then the process is left up to the Court and applications by any number of individuals seeking to serve in that capacity. This latter scenario is an important consideration for parents due to the fact that person appointed by the Court may not be the person that the parent prefers.

Every adult, including those recently turning 18, should consider preparing estate planning documents such as a Will and Powers of Attorney. Parents, in particular, should consider designating guardians for their children and making provision for their financial care.

Middleton & Middleton specializes family estate planning and in guiding families through the probate process and is available to meet with you to discuss your needs. Please contact our office to schedule an appointment.

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