Estate planning refers to the disposition of your assets after you pass away and planning for your affairs to be managed should you become incapacitated. It’s no surprise, then, that many of us in San Antonio really don’t want to spend a lot of time thinking about estate planning.
But the fact is, everyone should. Failure to engage in estate planning may cause financial and/or emotional harm to your loved ones. If you die without a will, for example, your estate – all your assets – needs to go through probate, which is a lengthy legal process. Your spouse and family members will not have access to the assets unless they have joint ownership (of accounts, say) or you have specifically set up accounts payable on death (and if you do, you’re engaging in estate planning).
Find out how estate planning is part of a long-term financial plan and how PAX Financial Group can help!
But lack of access during the many months probate can take is not the only harm that can be done by dying intestate (the word for dying without a Will or Trust in place). Without a Last Will & Testament or Trust specifying your wishes for the disposition of your assets, the probate court is in charge of who gets what, and how much. Much of Texas estate law regarding heirs relies on blood relations. The court may give it to blood relatives rather than those you would prefer, such as a partner or friends. The determinations of assets and amounts may be very far from what you would have wanted.
Finally, if the court cannot determine blood relatives, your assets may, in the worst-case scenario, revert to the State of Texas.
It’s not surprising, then, that financial advisors and lawyers have both seen dismaying scenes after an individual passes away intestate (without a Will). Without your wishes in place, family members and friends may disagree about what you wanted for your assets, with possible quarrels and lawsuits unfortunately part of the legacy. If you have business assets or worked with a charity that received some of your wealth, your business and charitable associates may get involved as well.
So sitting down with a Texas financial advisor to begin an estate plan benefits your peace of mind, your family, friends, and your legacy, plus your memory, your business activities, and your charitable interests.
Sometimes people don’t really know all the components of creating an estate plan. So here is PAX Financial Group’s Estate Planning 101:
The Components of an Estate Plan
The Last Will & Testament
The single most important element of an estate plan is your Last Will & Testament. Your Will contains your wishes on where and to whom you want your assets to go, from investment accounts to business assets to heirloom jewelry, along with amounts (if relevant).
A Will can also include your wishes on guardianship for minor children. It can also include end-of-life directives, such as how you would like your funeral and burial conducted.
Your San Antonio financial advisor can help you make a list of all your assets so that you can make an orderly planned disposition of them.
Other Assets
Note that assets such as joint bank accounts, bank accounts payable on death, insurance proceeds, and retirement accounts generally go to the beneficiary named in the paperwork. It’s prudent to keep the beneficiaries up to date.
Trusts
Trusts, briefly, are a method of holding and managing assets with named trustees. There are several types. A living trust will provide assets for your use during your lifetime. After you pass away, a trustee then manages the trust and gives the assets you specified to your beneficiaries. A testamentary trust, on the other hand, provides for your beneficiaries when you pass away. Trusts can speed the process of disposing of your assets and avoid the costs associated with probate.
Trusts can be revocable or irrevocable. A revocable trust can be changed during your lifetime. An irrevocable trust cannot be changed once it is set up.
You can have both a Will and a Trust, although care must be taken so that the provisions and bequests of the two documents do not conflict.
Special Deeds
Texas has a number of special deeds that make it possible for you to transfer real estate to your beneficiaries outside of the probate process. This simplifies the transfer of real property to your heirs without the time and expense of probate.
A Lady Bird Deed, for example, gives you the right to live in, sell, or mortgage the property and gives your beneficiaries the right to receive the property when you die, as long as you still own it. A Transfer on Death Deed (TODD) will transfer your property to a beneficiary when you die.
All special deeds need to be witnessed and filed properly to go into effect.
Advance Directives
Illness, accidents, and sudden emergencies can all leave people incapacitated: unable to talk to express their wishes or unconscious of decisions that need to be made. Advance Directives are instructions regarding your wishes about medical care and end-of-life care.
Advance Directives in Texas can include a Directive to Physicians and Family or Surrogates and Out-of-Hospital Do-Not-Resuscitate (DNR) orders.
Medical Power of Attorney
A Medical Power of Attorney gives a trusted individual the power to make medical decisions for you should you become incapacitated. You should discuss with that person your wishes and share your Advance Directives.
It is also prudent to sign a Health Insurance Portability and Accountability Act (HIPAA) authorization so that hospitals, providers, and insurance companies can allow them access to your health records.
Financial Power of Attorney
Designating an individual to have a Financial Power of Attorney allows them to look after your financial affairs if you become incapacitated. This can be the same individual as the designee for Medical Power of Attorney or a different person. A financial power of attorney gives the designee the power to oversee your financial affairs when you are incapacitated, such as pay your bills and withdraw assets to pay for extended care.
All the elements of an estate plan should be reviewed periodically to make sure that they still reflect your wishes and to take into account life changes, such as the birth of children, marriages and deaths.
PAX Financial Group Can Help You
At PAX Financial Group, we are CERTIFIED FINANCIAL PLANNER™ Professionals and fiduciaries dedicated to serving you. We can help you with setting up and periodically revising the components of an estate plan as part of a comprehensive financial plan. Contact us today to discuss your goals and to provide security for both you and your family.
