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Tips For Young Lawyers

Five Basic Facts Every Young Lawyer Should Know About Estate Planning
By Rebekah Brooker

My husband—who is also an attorney—gets that deer-in-the-headlights look anytime a non-lawyer asks him about wills, trusts, or other estate planning matters. As a business trial lawyer, estate planning is admittedly not his specialty. However, as most young lawyers have experienced, it is not uncommon for friends, family members, or pro bono clients to ask newly-minted lawyers to prepare wills or answer other estate planning questions. This article provides a very basic overview that will enable you to answer five frequent questions young lawyers hear from friends at dinner parties, family at Thanksgiving, and potential clients at pro bono clinics.

1. Your client needs a will … and yes, you need one too.
Estate planning is essential to protect loved ones, and a necessary building block of any properly planned estate is a will. Having a will gives you complete control over the disposition of your assets in the event of your death. A will enables you to arrange your affairs the way you desire and rest comfortably knowing that your intent will be effectuated. If you pass away without a will, then Texas law controls how your assets will be divided. There is no way for your family to enforce your intent if you did not create a will that clearly defines—and gives force and effect—to your intent. One of the most important reasons why you or your client may need a will is that a will is the instrument through which you can name both a guardian and financial trustee for any minor children. You should encourage clients to create or revisit their wills if they have recently had any major life changes—i.e., marriages, divorces, children, relocations, or increases or decreases in wealth.

2. Does the United States have an estate tax?
This is a trick question. Currently, no, the United States does not have an estate tax. The Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) included a sunset provision that allowed the estate tax to expire at the end of 2009. But do not expect the window to remain open for very long. For example, George Steinbrenner, the owner of the New York Yankees, died July 13, 2010, thereby allowing his heirs to avoid an estimated $500 million in federal estate taxes on his approximately $1.15 billion estate. However—unless Congress decides otherwise—on January 1, 2011, EGTRRA’s self-repealing feature will be triggered, thereby eliminating the window for this tax break, reinstating an estate tax, and making any portion of an inheritance over $1 million subject to taxation. This brief window or loophole prompted the USA Today to write that “[in] life, George Steinbrenner beat the Red Sox. In death, he beat the I.R.S.”

3. A will is not effective until you pass away.
Often adult children whose parents’ wills name them as the executor of their estates incorrectly believe that they are allowed to control their parents’ estate while their parents are still living. (An executor is a person named in a will to perform the will’s instructions.) However, a will has no force or effect until (i) the testator—i.e., the maker of the will—passes away and (ii) the will is filed with the court. Because a testator can amend their will as often as they like, an individual named as executor in a will drafted today might not be the same person named as the executor in the will in effect at the testator’s death. A power of attorney—rather than a will—is the proper document to execute when a testator wants to name someone, or multiple people, to serve as their agent in the event that they are alive but unable to make their own medical and/or financial decisions.

4. A power of attorney is only effective during the principal’s lifetime.
A durable power of attorney and medical power of attorney are necessary documents in the event your client becomes disabled during their lifetime. Unlike a will, these documents are effective only during the principal’s lifetime and immediately expire and become void upon their death.

In the event your client becomes disabled, a durable power of attorney provides broad authority for their financial affairs. A durable power of attorney could also have a narrower scope allowing an agent to participate in a specific transaction only. Generally, a durable power of attorney is effective immediately, even though the principal may still have full capacity. As a result, you should carefully consider who you trust with such powers.

A medical power of attorney operates much like the durable power of attorney, but it exclusively covers healthcare and is the tool through which a principal will name agents to make health care decisions on their behalf in the event they lack capacity to make their own decisions. Even though these documents are generally drafted to go into immediate effect, it is important to note that as long as the principal has capacity, the principal’s consent must be obtained before any health care decisions are made. The principal remains in control and can modify or revoke this document at any time. However, once the principal’s treating physician determines that the principal lacks capacity and cannot make decisions, the medical power of attorney becomes effective.

5. What is probate?
When your client passes away it is highly likely their estate is going to need to go through probate. Probate is often portrayed as complicated and expensive, but in Texas, probate is generally a smooth process. If there is a will, the executor needs to file it with the court within four years of the decedent’s date of death. If there is not a will, the administrator of the estate needs to apply to probate the decedent’s estate within four years of their death. (An administrator is a person appointed by the court to administer (or clean up) the estate of a decedent who left no will.) Generally, the executor or administrator has three main responsibilities during the probate process: (1) taking an inventory and valuing the estate assets; (2) paying the decedent’s lawful debts and taxes; and (3) distributing the remainder of the decedent’s assets in accordance to the terms of the will, or if there is no will, according to Texas law.

It is a good idea to consult a probate attorney to walk you or your client through the probate process, or you may contact an estate planning attorney to discuss how to plan your estate to minimize or possibly eliminate the need for probate.

Mrs. Brooker chairs the Estate Planning Section at Passman & Jones, a Professional Corporation. She also co-chairs the Dallas Association of Young Lawyers’ Elder Law Committee and serves on TYLA’s Family Law, Children’s Rights, and Seniors Committee. She can be reached at brookerr@passmanjones.com.