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It is important to understand the probate process before deciding whether and how to avoid it.

Probate: Dissolving the Mystery

probate and estate planning
If you want to avoid probate, work with an experienced attorney to coordinate your plan and assets.

Probate avoidance is a common concern for our clients.  They frequently seek ways to pass their assets to their loved ones without going through probate.  Although it can be avoided with proper estate planning, probate avoidance should be done carefully and at the advice of an attorney as using piecemeal strategies usually don’t work, and sometimes create bigger problems.  For example, consider using trusts in your estate planning.  See this article for more information.  https://galligan-law.com/how-do-trusts-work-in-your-estate-plan/

Before considering whether you want to avoid probate, it is important to understand what the process is.  The Street’s recent article on this subject asks “What Is Probate and How Can You Avoid It?” The article looks at the probate process and tries to put it in real-life terms.

Probate is the process by which an Executor (person put in charge of the Will) goes to court to prove the validity of the Will and their authority to be in charge of the estate.  I find it helpful to remember that the word probate is essentially Latin for “prove it.”

Every state’s process is different, but in Texas, the Executor starts by filing the Will and an application to probate along with other documents necessary to that case.  Next, there is a hearing before a probate judge.  The Executor and her attorney ask the judge to admit the Will to probate as the valid Will of the decedent and ask that the Executor be empowered to handle the decedent’s affairs as directed in the Will.

Once the Will is admitted to probate and the Executor agrees to serve, there are many tasks for them to complete.  They include the following:

  • Giving notice to the beneficiaries in the Will;
  • Giving notice to potential creditors of the estate;
  • Gathering, valuing and categorizing the decedent’s assets;
  • Prepare an inventory of those assets;
  • Paying off any of the deceased’s existing valid debts or fighting invalid ones;
  • Paying final taxes or expenses of the estate; and
  • Distributing the deceased’s property to those directed by the Will

The above are just the basic responsibilities of the Executor.  The probate process becomes more complicated when a creditor appears, the family disagrees, assets are entangled or cumbersome, such as land or business interests, or the Will was written without the aid of an attorney.  Even worse, it is hard for an Executor to locate assets in the first place!  This can make estates drag on months or even years.  I recently spoke with a client whose family is still going through a probate 10 years after the decedent has passed.

With all of that uncertainty, it is worth discussing your wishes with an experienced estate planning attorney who will be able to explain what strategies are used to avoid probate, how to remove certain assets from the process, or whether it needs to be avoided at all.  The key, as with all estate plans, is to find the option that fits your goals for you and your family.

Reference: The Street (July 29, 2019) “What Is Probate and How Can You Avoid It?”

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What Should I Know About a Special Needs Trust?

Leaving assets to loved ones with disabilities in a special needs trust can provide support while preserving government benefits.

Your loved ones with disabilities may be eligible for a number of government programs. However, Pauls Valley (OK) Democrat’s recent article asks “Can your family benefit from a special needs trust?” The article reminds us that these programs don’t cover everything. You may need to close the gaps.

Many government programs have eligibility restrictions based on the amount and type of financial assets that are available to the recipient. This means the financial help you want to provide may do more harm than good, unless you establish a special needs trust.

A special needs trust, also known as a supplemental needs trust and by the acronym SNT, is a trust that provides assets for a disabled beneficiary in the discretion of the trustee.  The beneficiary typically can’t use the trust for basic support or to receive benefits that can be provided by the government. The special needs trust can be used to provide specialized therapy, special equipment, recreational outings and other expenses.  In short, for the needs not already served by the government benefits.

These types of trusts come up more often than people realize.  Often, clients consider making special needs trust for their children with disabilities.  But, it is also important to consider that elderly loved ones may utilize Medicaid for their long-term care.  If they do (or might) then it makes sense to set up a special needs trust for them as well.  This might be for elderly parents, siblings, or even spouses!  See our overview for more detail.  https://galligan-law.com/practice-areas/elder-law/

When considering a special needs trust, you’ll need to look at several issues with your attorney.  First, whose assets will it hold?  If the disabled individual is creating or funding a trust with their own assets (called a First Party Special Needs Trust), you have a very different set of rules which I won’t address here.  If you are creating the special needs trust for someone else (called a Third Party Special Needs Trust) you need to consider who will be the trustee.

You could name a family member or close friend as a trustee. While this works well for many, it has the potential to cause family conflicts and becomes a burden.  You could also name a trust company.  A trust company can provide professional management, expertise and continuity of administration, especially for younger beneficiaries who will outlive their care providers. A third option is to name an individual and a trust company as trustees.

The second critical issue with a special needs trust is funding the trust. You can fund the trust during your lifetime or have it activated when you die.  Note that you don’t have to be the sole donor. A special needs trust can be created so other family members can also contribute to it, as long as the person receiving benefits doesn’t contribute.  The trust can be funded with securities (stocks and bonds), IRA proceeds, insurance death benefits and other assets. 

You’ll need to understand the requirements of various federal, state and local benefit programs for people with disabilities, so that your loved one’s benefits are not at risk.

Speak with an experienced elder law or estate planning attorney about how you can to make life better for a family member with disabilities by using a special needs trust.

Reference:  Pauls Valley (OK) Democrat (August 1, 2019) “Can your family benefit from a special needs trust?”

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How to Begin the Estate Planning Process

The estate planning process can be intimidating, but doesn’t have to be.  Start by listing your assets, who they go to and who to put in charge.

The hardest part of the estate planning process is  starting it.  About 17% of adults don’t think they  need  a will, believing that estate planning is only for  the very wealthy. In fact, clients frequently ask  whether they have enough money for an “estate.”    Sometimes they think state law will already directs their assets and they don’t need a plan.

However, the estate planning process is not about how much money someone has.  It is about planning for the assets you have, however much or little that may be, your wishes for those assets, yourself and your family.  It is about empowering you to make the choices you want for you and your family, not leaving it up to the state.  Even completing a few simple documents can make a huge difference in the future.

valuewalk.com’s recent article, “Couples: Here’s How To Start The Estate Planning Process” notes that although the estate planning  process can seem overwhelming, taking inventory of assets is a terrific place to start.

Make a list of all your assets, including confirming how they are titled and whether there are beneficiaries named on the accounts, as well as the general value of the assets. Then, decide who you want to leave these assets to and who should be in charge of the process.  Our firm uses questionnaires as part of the estate planning process to help gather this information so we can focus on the issues most important to you.  I also did a video segment on Kevin’s Korner that walks through some of these issues as well.  See this link for the video.  https://www.youtube.com/watch?v=B2M_-tBoSiU 

Drafting a will or a trust may be the most critical step in the estate planning process. These documents serve as the directions for how assets are to be distributed and who is responsible to do it.  A well-crafted will or trust can simplify the distribution of assets at your death, provide instructions to your family, and avoid disputes, unnecessary taxes and protect your beneficiaries from predators.

Without an estate plan in place, your assets will be distributed according to state law, rather than according to your wishes. Don’t assume state law leaves everything to your spouse!  Many people assume if they are married everything they own goes to their surviving spouse, but in many situations, that isn’t true.  For example, blended families, children outside of the marriage and some non-marital property.  Speak with your estate planning attorney about how these issues impact you.

Once you have an idea of your assets, beneficiaries and who to put in charge, the next step in the estate planning process is to meet with your estate planning attorney to review the information so they can make recommendations on the best way to accomplish your goals and highlight other issues to address.  Our firm offers free estate planning consultations, so please contact us today to start the estate planning process.

Reference: valuewalk.com (July 22, 2019) “Couples: Here’s How To Start The Estate Planning Process”

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