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Estate Planning: Your Family, Your Wealth, Your Legacy.

Estate Planning FAQs

What is a will?

A legal document expressing the wishes of an individual regarding distribution of his or her property after death.

 

What does it mean to be intestate?

A person died without a will.  A person who dies with a will is said to have died testate.

 

What is Probate?

A legal process whereby

(1) a judge determines whether or not the decedent’s Will is valid;

(2) a personal representative/executor is appointed to:

(a) collect the decedent’s assets in his or her probate estate,

(b) pay the decedent’s legal debts, and

(c) distribute the remaining assets in the decedent’s probate estate to the individuals or entities entitled to the assets in accordance with the Will or laws of intestacy; and

(3) the court approves the transfer of the decedent’s assets to the individuals and entities designated in the Will or the laws of intestacy. The probate court will also determine the rights, if any, of a spouse and children to the decedent’s property.

 

What are letters of administration?

An Order issued by a court, which states that the person named in the will has the authority to act on behalf of the deceased’s estate.

 

What are letters testamentary?

An Order issued by a court, which states the person named in the Order has the authority to act on behalf of the deceased’s estate.  These letters are issued when the decedent dies without a will.

 

What is a power of appointment?

The power given by an individual to another in a will or trust document to determine which persons will receive an interest in his or her estate.

 

What is a living will?

A legal document in which an individual states, in advance of final illness or injury, his or her wishes regarding procedures and equipment designed to extend life.

 

What is a medical power of attorney?

This document allows the person you name (“healthcare agent”) to make medical decisions for you.  The healthcare agent can make any medical decision for you that you could make for yourself if your were able to do so.

 

What is a power of attorney?

A legal document authorizing one individual to act as the agent or (“attorney-in-fact”) for another (the “principal”). If the attorney-in-fact is authorized to act in behalf of another for all matters, he or she has general power of attorney. Authority to act solely regarding specified situations is special power of attorney. If the authority granted extends beyond the disability of the principal, the attorney has durable power of attorney.

 

What is a HIPPA release?

HIPPA regulations allow physicians to release medical information about you that you have consented be released to a third party.

 

What is a directive to physicians?

A patient has a federal constitutional right to refuse medical treatment, even if such refusal is likely to lead to death.  This document, popularly known as a “living will” allows you to refuse medical treatment in 2 very specific circumstances:

  1. You have an irreversible condition
  2. You have a terminal condition.

These conditions must be diagnosed and certified in writing by the attending physician.

 

What is a DNR?

This is an order directing health care professionals acting in an out-of-hospital setting to withhold cardiopulmonary resuscitation and certain other life-sustaining treatment.  Your physician must sign this document.

 

What is a revocable living trust?

A type of trust that can be terminated by the settlor (the opposite of an irrevocable trust).  The person creating the trust is the beneficiary of the trust as well as the trustee of the trust.  Also called an inter vivos trust.

 

What is a Trustee? 

The individual or institution with responsibility for management of property placed in trust for the benefit of another individual.

 

What is community property?

Texas is one of nine community property states.  Generally, all property acquired during a marriage is considered the community property of both spouses.  Generally, property owned prior to marriage, acquired by gift, inheritance, or recovered for personal injuries is not community property when acquired during the marriage.  If a Texas couple acquires property in a non-community property state, it is considered separate property even if titled in the names of both spouses.

 

What is the marital deduction?

An unlimited deduction against the estate tax and gift tax for transfers made outright or in qualifying trusts to the spouse of the transferor.

 

What is a testamentary trust?

A trust created by a last will and testament upon the death of the testator.  Assets are  not transferred to the trust until after creditors are paid and other obligations are satisfied.

 

What is a marital deduction trust?

 A trust that qualifies for the marital deduction for estate tax and gift tax purposes.  There are several types of marital deduction trusts:

general power of appointment marital trusts,

qualified terminable interest property trusts, and

qualified domestic trusts.

 

What is an irrevocable trust?

A trust in which the trustor/grantor (maker of the trust) has, by the terms of the trust agreement, specifically given up the power to alter, amend, or terminate the trust either entirely or in part.  A trust that cannot be changed, canceled, or “revoked” once it is set up. A “living trust” is not an example of an irrevocable trust. Insurance trusts and “Children’s Trusts,” or “2503 Trusts,” are examples of irrevocable trusts. Irrevocable trusts are treated by the IRS very differently than revocable trusts.

 

What is a Trust Certificate? 

A summary of the trust’s terms prepared to evidence the trust exists and that the trustee has the power to take the action that requires their participation.  Usually required by financial institutions and insurance companies before dealing with a trustee

 

What is a fiduciary?

An individual in whom another has placed the utmost trust and confidence to manage and protect property or money.  In such a relationship, one person has an obligation to act for another’s benefit.

 

What is joint tenancy with right of survivorship (JTWROS)?

A form of co-ownership in which two or more persons hold interests in the same property with right of survivorship.  In Texas, the common law rule is reversed.  In order for the right of survivorship to carry, the joint owners must have agreed, in writing, that the ownership interest shall survive to the surviving joint owner.

 

What is the unified credit (applicable exclusion amount)?

A credit is an amount that eliminates or reduces tax.  A unified credit applies to both the gift tax and the estate tax.  This credit comes into play upon death.  You must subtract the unified credit from any gift tax that you owe.  Any unified credit you use against your gift tax in one year reduces the amount of credit that you can use against your gift tax in a later year. The total amount used during life against your gift tax reduces the credit available to use against your estate tax.  The unified credit amount for 2012 is $5,000,000 (reverts to $1,000,000 in 2013 unless Congress acts).

How does it work?  During your lifetime you can give away $5,000,000 without having to pay any estate or gift tax on that money.  Once you go over that amount, you will be taxed.

 

What is the estate tax?

The Estate Tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death.

 

What is the gift tax?

The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer to be a gift or not.

The gift tax applies to the transfer by gift of any property. You make a gift if you give property (including money), or the use of or income from property, without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.

 

What is the death tax?

This is the non-technical term used for estate tax.