Frequently Asked Questions about Estate Planning in Texas
Probate is the court and process that looks after people who cannot make their own personal, health care and financial decisions. These people fall into three general categories: Minor Children (under age 18 in most states); Incapacitated Adults; and People who have died without legal arrangements to avoid probate. Probate proceedings can be expensive and time-consuming. Additionally, the court proceeding and associated documents are all a matter of public record. Many people choose to avoid probate in order to save money, spare their heirs a legal hassle, and keep their personal affairs private.
This is the most common form of asset ownership between spouses. Joint tenancy (or TBE) has the advantage of avoiding probate at the death of the first spouse. However, the surviving spouse should not add the names of other relatives to their assets. Doing so may subject their assets to loss through the debts, bankruptcies, divorces and/or lawsuits of any additional joint tenants. Joint tenancy planning also may result in unnecessary death taxes on the estate of a married couple.
The document a person signs to provide for the orderly disposition of assets after death. Wills do not avoid probate. Wills have no legal authority until the willmaker dies and the original will is delivered to the Probate Court. Still, everyone with minor children needs a will. It is the only way to appoint the new “parent” of an orphaned child. Special testamentary trust provisions in a will can provide for the management and distribution of assets for your heirs. Additionally, assets can be arranged and coordinated with provisions of the testamentary trusts to avoid death taxes.
Sometimes called an Advance Medical Directive, a living will allows you to state your wishes in advance regarding what types of medical life support measures you prefer to have, or have withheld/withdrawn if you are in a terminal condition (without reasonable hope of recovery) and cannot express your wishes yourself. Oftentimes a living will is executed along with a Durable Power of Attorney for Health care, which gives someone legal authority to make your health care decisions when you are unable to do so yourself.
If you die without even a Will (intestate), the legislature of your state has already determined who will inherit your assets and when they will inherit them. You may not agree with their plan, but roughly 70 percent of Americans currently use it.
You may avoid probate on the transfer of some assets at your death through the use of beneficiary designations. Laws regarding what assets may be transferred without probate (non-probate transfer laws) vary from state to state. Some common examples include life insurance death benefits and bank accounts.
These allow you to appoint someone you know and trust to make your personal health care and financial decisions even when you cannot. If you are incapacitated without these legal documents, then you and your family will be involved in a probate proceeding known as a guardianship and conservatorship. This is the court proceeding where a judge determines who should make these decisions for you under the ongoing supervision of the court.
This is an agreement with three parties: the Trust-makers, the Trustees (or Trust Managers), and the Trust Beneficiaries. For example, a husband and wife may name themselves all three parties to create their trust, manage all the assets transferred to the trust, and have full use and enjoyment of all the trust assets as beneficiaries. Further “back-up” managers can step in under the terms of the trust to manage the assets should the couple become incapacitated or die. Special provisions in the trust also control the management and distribution of assets to heirs in the event of the trustmaker’s death. With proper planning, the couple also can avoid or eliminate death taxes on their estate. The Revocable Living Trust may allow them to accomplish all this outside of any court proceeding.
Whether you are young or old, rich or poor, married or single, if you owned titled assets such as a house and want your loved ones to avoid court interference at your death or incapacity, consider a revocable living trust. A trust allows you to bring all of your assets together under one plan.
Frequently Asked Questions about Medicaid Planning in Texas
TRUTH: The Medicaid Estate Recovery Program (MERP) can make a claim after you pass for repayment of money it paid for benefits received during life. BUT MERP CAN ONLY RECOVER AGAINST PROPERTY PASSING THROUGH PROBATE. Any property which passes outside of probate – like bank accounts with pay on death provisions – is not subject to MERP.
Lady Bird Deeds pass the homestead outside the probate process and avoid MERP for the biggest resource most Medicaid recipients have at death.
There are also exceptions for property passing by probate including:
- Property passing to the surviving spouse or
- where an unmarried adult child has been living in the home for more than a year prior to the death of the recipient.
For most people, there is a reason for MERP to apply!
TRUTH: Long Term Care Medicaid Benefits do have asset limitations, but significant resources can often be protected. Many items do not count toward the asset limitations, including:
- The homestead up to $536,000 for a single person, unlimited value for a married couple
- A car of any value
- An irrevocable pre-need funeral plan
- Real property up for sale
A single person can have $2,000 in “countable resources”. With a husband or wife still at home, you can protect up to an additional $115,920 in countable resources. With both husband and wife in a facility, one can get Medicaid regardless of their available assets
TRUTH: Any person whose monthly income is insufficient for their care at a nursing facility can meet the income requirements. If your gross monthly income is over $2,130 in 2013, you will be denied Medicaid benefits unless you have a Qualified
Income Trust, sometimes called a Miller’s Trust. A Miller’s Trust works by making income not counted for eligibility purposes. The income deposited into the Miller’s Trust account is simply disregarded when determining eligibility. You still pay your applied income to the facility, but Medicaid will pick up the difference between the income and the cost of care – often thousands of dollars a month.
avoid death taxes.
TRUTH: Medicaid will assess a transfer penalty for most transfers made for less than fair market value. Medicaid will start the penalty period on the first day of the month in which you have less than $2,000 in countable resources to pay the facility, though you will have to pay privately until the whole transferred amount is paid off.
Medicaid can look back for 5 years for transfers made without adequate compensation.
There are exceptions, including:
- Transfers between spouses
- Transfers made to a disabled child or for the sole benefit of a disabled child and
- Transfers to certain Educational Trust Funds for the benefit of people under the age of 21.
TRUTH: Long Term Care Medicaid and STAR+PLUS Waiver are work-based programs. In order to receive these types of Medicaid benefits, you must have paid into the system (either yourself or your spouse) and be eligible for a work benefit such as Social Security, Medicare, or Veteran’s benefits.
TRUTH: If you qualify for Medicare benefits, you can be eligible, even if you didn’t pay into Social Security, Railroad Retirement, or Civil Service.
TRUTH: If you are well enough to go home but still need help in the house, the STAR+PLUS Waiver program can help. STAR+PLUS Waiver is a program that can pay for some in-home health care and modifications to the home. STAR+PLUS can be applied for even if you don’t go into a nursing facility and get Long Term Care Benefits first, but there can be a wait list that way.