The Royalls - Will FAQ's
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Whose estate is it anyway?
Your estate consists of all the property that you own upon your death. This can be either real or personal property. Real property will include land and improvements, plus any mineral interests. Personal property will include cash, bank accounts, clothing, household furnishings, motor vehicles, stocks and bonds, life insurance and retirement or employee benefits.

When you die the title to the property must pass to your beneficiaries. If you die with a will you will determine who your beneficiaries will be. If you die without a will, the State of Texas will determine who your beneficiaries will be. A court action, or probate, will usually be necessary in either case, but if you die with a will it is almost always much simpler and less expensive.

What happens when you die without a will?
If you die without a will the state will designate your heirs for you. The assets will be divided in predetermined ways depending on whether they are community or separate property. Separate property is property that you owned prior to your marriage, or that you acquired via gift or inheritance during your marriage. Separate property will also include personal injury settlements, except any portion that is for loss of earning capacity.

If you die without a will there can be some undesired results in the distribution of your estate that go beyond the question of "Who gets what?". Take a look at the following example. Husband (H) and Wife (W) have 2 kids. When H dies without a will his estate will go to W who can use it to raise the kids. Suppose however that H had a child from a prior marriage. When he dies his half of the community property will go 1/2 to W and the remaining 1/2 will be divided among all 3 kids. Once this is done, W will have to file annual court reports showing how the money is being protected for the kids. W will not even be able to use any of "the children's money" to provide for their support, unless she gets court approval. All of this can end up costing a lot of money in unnecessary legal fees.

How can a will help?
A will can provide numerous benefits to you and your family. First of all it lets you determine who will receive your property upon your death. It also permits you to determine who will be responsible for your children and their property and give that person the ability to manage the kids' estate without court intervention. Another benefit is that you can take steps to minimize estate taxes.

A will can also be used to establish a trust. A trust is where a person or entity is appointed to manage property for the benefit of someone else. This is often used when you have a child or incapacitated person who will be inheriting property. You can use a trust to delay when a child will receive his or her inheritance, so that they will be older, and possibly more mature, when they get direct access to the funds.

A will should be updated whenever there are major life changes, such as a divorce or remarriage, birth of a child who has special needs, or you acquire a substantial estate that requires some tax planning. A will can also be changed to re-designate beneficiaries, executors or guardians.

What are non-probate assets?
There are certain assets that are not part of your estate, except perhaps for tax purposes. These assets will contractually pass to the designated beneficiaries. Non-probate assets include life-insurance proceeds, IRA's, and employee benefits. You should review your beneficiary designations periodically to make sue that the designations are up to date.

If you own property as a joint tenant with the right of survivorship, such as a bank account, CD, or stocks and bonds, then this property will pass outside of the estate and go directly to the beneficiary. Every time an account with a financial institution is opened, a type of account will be established. You should review your accounts to determine if they will pass under your will or by the contract established when you opened the account.

Can a will minimize taxes?
A will can be used to reduce or minimize federal estate taxes and state inheritance taxes. These taxes will be assessed if the value of the estate exceeds the Federal Estate Tax Exemption amount for the year in which death occurs. This valuation is based upon all of your separate property and 1/2 of the community property that you and your spouse have acquired. Life insurance and non-probate assets are used in determining the total value of the estate, even though they do not pass under your will. Federal tax rates range from 37 to 55 percent. The only way to take full advantage of estate tax planning is to have a will.
Some important decisions you will need to make
When drafting a will you will have to determine who you want to control your estate and the estate of your children. The executor is the person that you designate to marshal your assets, pay off the debts and distribute the assets to your beneficiaries. This person will make the court appearance, prepare the formal inventory for the court and handle the transfer of assets. Typically your surviving spouse will be designated as your executor, but this is not required.

You will also need to designate a guardian of the person and estate if you have minor children. This is the person who will physically have possess ion of your children. If there is a surviving parent, then the provisions in your will will not supercede the legal presumption that the surviving parent will become the guardian. If you have children from a previous relationship, then the other parent, not your spouse, will become the guardian, unless there is a court order to the contrary. In the will you can also designate who will control your children's inheritance. This person is called the guardian of the estate or a trustee if you establish a trust.

Beneficiaries will also need to be designated. These are the people that you want to receive your property. You should designate contingent or alternate beneficiaries.

What does a will cost?
To some degree that depends upon the complexity of your estate and whether or not estate tax plannng is involved. Typical wills for a husband and wife with minor children, that we prepare, will cost about $1,000 for the pair.
What is a living will?
A living will is also referred to as a Directive to Physician. This document allows you to instruct your physician to withhold or withdraw artificial life-sustaining procedures if you have a terminal condition. In the directive you can designate a person to make treatment decisions if you become incapable of making those decisions yourself. Another alternative is to designate a specific physician who will make those determinations on your behalf.
What is a power of attorney?
A power of attorney is a document that you can sign which gives someone else the authority to act on your behalf. A Health Care Power of Attorney gives you agent the authority to make health care decisions for you if a physician certifies that you do not have the capacity to make those decisions. This can be revoked at any time.

A Durable Power of Attorney gives someone the authority to manage your property. This can be limited to specific acts or cover any and all action that you could make. It can also be made effective immediately upon execution or only in the event of your disability.

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