Just before her 80th birthday, Ernest (“Big Daddy”) Bux’s octogenarian Auntie Delusional (Auntie Del) died without a will or any other estate plan in place to give guidance to her husband (Uncle Tom) and their two adult children. “Who needs one?” was her retort for decades. And, “Wills are so over-rated.” Was Auntie Del right? Is a will or other estate planning really necessary?
Not legally. As a resident of Texas dying without a will (intestate), Auntie Del’s estate and her survivors – Tom and their two adult children – are now subject to Texas intestacy law. More than not having a will, Auntie Del’s refusal to implement any estate plan created unnecessary financial and healthcare issues during her extended hospital stay and hospice treatment. As to her estate, her surviving husband, Uncle Tom, will inherit all of Auntie Del’s community property plus one-third of her separate personal property and the lifetime right to use one-third of all separate real property in her estate. Their two children will inherit the balance of her estate, per stirpes (that is, equally, even if one child is deceased and had ten children).
Practically speaking, you may not need a will (setting aside other important planning documents) IF you have:
- No minors / special needs dependents. Your minor children / special needs dependents need both care and financial planning if you are gone – typically a will-directed guardian or trust. Without a will designating a guardian, the court will appoint one – regardless of your intent.
- No titled / recorded assets. Generally speaking, ownership held in Auntie Del’s name in real property, brokerage / bank accounts, vehicles and other titled / recorded assets must be transferred by probate. However, if the estate assets, excluding homestead and exempt property do not exceed $75,000, a Small Estates Affidavit may be an option. If the estate requires probate and there is no will, the estate will be “administered” by the court – often at a sizeable cost in time and money, and the appointment of an ad litem to determine the correct heirship.
- No unpaid estate debts. If the estate has unpaid debts, there is a risk that a creditor may sue Auntie Del’s estate to demand a probate and payment.
- Not too much value. With the federal gift and estate tax exemption doubled (for the meantime) by the Tax Cuts and Jobs Act from $5 million to $10 million (with a 2018 inflation-adjustment to $11.18 million), the rationale for serious tax planning is currently gone for many. However, if you are planning to live beyond 2025 – or if you are mindful that a changed Congress might change its mind – you should plan accordingly.
But what about Auntie Del’s family? Are there more considerations than legal or practical to take into account? A properly handled will and estate plan should:
- Leave a compass. Without a will, the law disposes of Auntie Del’s property. The survivors, the court and its representatives will attend to the objective distribution of Auntie Del’s assets and somewhat surgical care of any special needs dependents / heirs. Leaving a will, in and of itself, can be an expression of caring for her family and her faith. Unspoken by Auntie Del will be her expression of love for the important things – sharing her lifetime good fortune with others, perhaps including those less fortunate through her church, synagogue or favorite charity.
- Avoid family conflict. Sadly, without a will Auntie Del should plan for the very real possibility of a fight among her family (and, perhaps even others who might claim to be her heirs) – the likelihood of which increases in direct proportion to the amount of money involved.
- Avoid publicly airing dirty laundry. Without estate planning, every asset must be filed and every decision – minor or otherwise – about management and distribution of the assets and payment of liabilities likely requires court approval. The lengthy process could take years, AND be available for all to see.
Tilting the Scales – Weighing in for the Family
First and foremost, it’s family. Be thoughtful. Model good planning. The long-lasting consequences of failing to plan for your family with something as important as your financial and parental legacy cannot be undone. Arguably, everyone really does need a will. It’s more than an item on your eternal checklist. If you are reluctant or unwilling to have “the family meeting” with your spouse and children outlining your plans and what you expect from them when you are gone, a will is about the only way for you to:
- Provide for children or other dependents
- Avoid or simplify probate
- Protect assets from creditors and predators
- Ensure great care if and when you get sick
- Reduce tax liability
- Provide for others
- Minimize family conflict
The bottom line is that dying without a will might be easier on Auntie Del but it likely costs time and money for those who follow. In the end, Auntie Del’s lasting legacy might be family enmity.
This Reminds Me of a Song
Stay Tuned for a New Gray Reed Blog Directed At “Families, their Businesses and Offices in Transition”
Family Matters. Increasingly, legal and business matters are surfacing in families due to family assets and family businesses being passed down from one generation to the next – creating a myriad of “Family Matters”, whether real property, closely-held entities and their governing documents, or, simply, who’s in charge. These proliferating family business, family office and legal matters make family communications even more difficult. Is the “answer” a legal answer, a business answer or a family answer?
This new blog, written by Gray Reed attorneys with knowledge and experience covering these wide-ranging issues, will tell the story of the Bux Family and its clan from Big Bux Ranch, Texas. Perhaps their legal / business / family dilemmas resemble yours, or you may think, “Well, at least we haven’t had to deal with that!” or even the more bodacious, “My family would NEVER do that!” Or, would it?
Estate Planning Resources
At Gray Reed, we have a robust trust and estate planning team. I work with them to pick up the pieces when one or more of these estate planning stumbling blocks erupts into a full-fledged fight between families over their businesses, family offices and estates.