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Estate planning is how you can make sure your possessions and finances are handled the way you want when you’re no longer able to manage them. Here’s an overview from an Austin estate lawyer of the initial steps to take in planning how to manage your estate.

What Are the First Steps in Planning My Estate in Austin? Advice from an Austin Estate Lawyer

Identify What You Own and What You Owe

Before you start on any estate planning, you need a full understanding of what you actually own and what you owe. Make a list of all your assets. This would include bank accounts in your name, retirement funds, and investment portfolios. Be sure to include any valuable personal items on the list, as well as all real estate you own.

Make another list of all your liabilities, i.e., the debts you owe. This would include mortgages, loans, credit card balances, and any other outstanding debts. This full picture of where you are financially will give you a clear idea of what you have to pass on to beneficiaries, and help as you start thinking about the best way to divide your assets.

Decide Who Gets What

Family members, close friends, charities, or organizations: you might choose any or all of these as beneficiaries. Talk to your lawyer about the inheritance rights of your spouse and children so you know how the law could affect your choices. It is also a good idea to choose alternate beneficiaries in case your first choices are unable to inherit.

Once you’ve decided who you want to pass your estate along to, the next question is how you want to divide up your assets. If you’re planning on a relatively equal distribution and have only a small group of beneficiaries, this could be a fairly straightforward decision. However, if your estate is larger or if you have a complex family situation, it’s especially important to have legal help.

Consider Guardianship for Minors

If you have minor children, you should appoint a guardian in your estate plan to make sure that, if you are your spouse are no longer able to care for your children, they will be cared for by someone you trust. This not only provides for the day-to-day care of the children but also gives the guardian legal authority to make decisions in their best interest.

Before designating a guardian, talk it over with the person or persons you’re thinking of choosing. You want to make sure they’re comfortable with the role before putting it in writing. It’s also wise to designate a backup guardian if your first choice cannot fulfill the responsibility when the time comes.

Choose Who You Want as Executor

The executor or trustee is the person you designate to manage your estate and carry out your wishes when you can no longer do so. Choose someone that you trust. Also, make sure that whoever you choose is actually capable of handling legal and financial matters and can handle the emotional and legal pressures of the role. Many people choose a close family member or friend, but if your estate is very large or complex, it can be a good idea to choose a professional executor.

Draft Your Will

Your will is where you lay out clearly to whom and how you want your assets distributed. If you have any property or assets outside Texas, you will need to specify how these are to be handled, based on any differences in probate laws in those states.

You can also use the will to appoint guardians if you have any minor children, and to specify who you want to be the executor. In Austin, for the will to be valid, you must sign it in the presence of two witnesses who aren’t beneficiaries.

Think About Establishing One or More Trusts

If you want to your assets to be distributed over a period of time, trusts can help you control how and when that happens. This is often a good idea if you have beneficiaries who are not quite ready to manage property or large sums of money, but you want to make sure they receive financial support. For example, a special needs trust can be established for a child with special needs, to make sure they’re provided for but still make sure they’re eligible for government benefits.

There are a variety of other types of trusts to choose from, based on what best serves your purpose. A revocable trust, for example, lets you manage your assets yourself while you are still living. You can make changes to a revocable trust based on changes in your or the trustee’s situation. An irrevocable trust is a good choice because of the protections it can give your assets, especially from a tax perspective, but the terms of the trust cannot be altered after it’s been created.

Plan for Healthcare and Financial Decisions

An estate plan should also include plans for what to do if or when you are unable to make decisions due to incapacitation. Documents such as a durable power of attorney and a medical power of attorney make it possible for you to appoint the people you trust to make financial and healthcare decisions for you.

A durable power of attorney gives the person you have appointed the authority to manage your finances, pay bills, and oversee investments if you’re incapacitated. A medical power of attorney, or healthcare proxy, gives whoever you have chosen the authority to make medical decisions on your behalf.

Address Tax Considerations

Texas does not have a state inheritance or estate tax, but federal estate taxes may still apply, especially for large estates. There are many strategies to reduce taxes on your estate after you pass. You can gift assets during your lifetime, create certain types of trusts, or establish a charitable giving plan, to name a few. A charitable trust, for example, makes it possible for you to support the causes that are important to you and also receive certain tax benefits.

Plan for Long-Term Care

It’s important to plan for the possibility of long-term care, such as nursing homes and assisted living facilities, to prevent financial strain on loved ones. Medicare covers only limited types of long-term care, so explore options like long-term care insurance or Medicaid planning to offset potential costs.

Understand the Role of Probate in Texas

Probate is the legal process that validates a will and oversees the distribution of assets to beneficiaries. In Texas, probate can be relatively straightforward, but certain assets, such as those in a trust or with designated beneficiaries, may bypass probate entirely. If you can choose to transfer assets outside of probate, you can reduce time and expenses and give your beneficiaries faster access to their inheritance.

Revisit and Update Your Estate Plan Regularly

Life is constantly changing, and so should your estate plan. Revisit your plan regularly, and especially after a marriage, divorce, birth of a child, or a significant financial change. Changes in tax laws and state regulations may also impact your plan’s effectiveness. Regularly review your estate plan with an attorney every few years or after any major life event to make sure it still reflects your goals.

When you’re ready to start your estate planning process, get in touch with Ford + Bergner LLP in Austin, TX.