When it comes to life and death issues, it’s important to know what are the critical legal documents you need to have in place to make that transition easier for your surviving family members. Today, my guest is Kelly Caperton Walling, and she’s here to talk about estate planning issues. She’s been an estate planning attorney for over 25 years and has helped countless families prepare for that ultimate transition. She’s served as general counsel for the Flower Mound Women in Business and has also served on the Lewisville ISD Committee in charge of helping children with special needs. I’m so happy to have her here today.
- What legal documents should everyone have, especially in the state of Texas?
- Why is it important to have a will?
- What happens if you don’t have a will?
- How expensive is the process when you don’t have a will?
- Do you handle probate, disputes, and matters?
- Under the laws of intestacy, where does the property go?
- What is the process like if you have a will?
- What is the usual timeline when you have an undisputed will in probate?
- How are assets transferred outside of probate, and what kind of accounts can be transferred?
- Can you use estate funds to pay for things like the funeral and final expenses for the deceased?
- Who should you select as an executor?
- Do executors get paid for the job?
- How does naming a guardian for your children work?
- Do you recommend a testamentary trust, a trust that arises upon death, as part of the will for minor children?
- Are there situations where it’s wise to have a guardian of the children that’s separate from the trustee who’s managing the assets?
- What rights does that give somebody?
- Does it go into effect right away, or is it something that goes into effect only upon incapacity?
- What happens if you don’t have a power of attorney?
- What kind of decisions can somebody with medical power of attorney make for incapacitated people?
- What happens if somebody doesn’t have a medical power of attorney?
- Do you recommend that parents of children who are now growing up into adulthood have similar documents prepared?
- What is a living will?
- What impact does divorce have on a will?
What Critical Legal Documents Should Everyone Have in Texas?
Kelly Caperton Walling
00:01:21
There are four legal documents that are absolutely critical. Those would be your will and your statutory durable power of attorney, which is also known as your financial power of attorney. There is also the medical power of attorney. With the medical power of attorney, you’re really supposed to have a HIPAA release now so that the person you appoint as your medical agent can actually see your medical records and therefore make a better decision about what’s going on with you.
Why Is It Important to Have a Will?
Kelly Caperton Walling
00:02:01
A will keeps your family from fighting over what’s going to happen next, and it can keep your probate process much shorter and less expensive. A will helps you decide how you want to position your assets before your death. And you can take care of a lot of things in it besides just giving the property away. One of those things, and probably the most important thing to me, is that you can provide for somebody to care for your minor children in the case that you and your spouse pass away before they are of the age of 18.
If you don’t do that, the court will do it for you, and the court doesn’t know you or your children. And it’s a really hard decision to make. We find some people who avoid doing wills for that reason, but it is absolutely the most critical reason to do it.
What Happens in the Event That You Don’t Have a Will?
Kelly Caperton Walling
00:03:24
If you don’t have a will, there are inheritance laws in the state of Texas that provide for how your property will be divided among your heirs. And the rules are very cut and dry. You don’t get to move them around, and you end up with people inheriting things you might not think should.
How Expensive Is the Process When You Don’t Have a Will?
Jennifer
00:04:01
A will is necessary in order to transfer a lot of different kinds of properties. So people may think they don’t want to incur the expense of preparing a will, but it actually can end up being a lot more expensive when there’s no will.
Kelly Caperton Walling
00:04:16
Definitely, that’s true.
Do You Handle Probate, Disputes, and Matters?
Kelly Caperton Walling
00:04:21
Yes, I do, and I have for a very long time. A lot of them involve the heirs as opposed to the people who get the property under a will because they don’t know what the wishes are of the person who passed away. So they’re more likely to fight for some part of the estate.
Jennifer
00:04:42
Having a will doesn’t avoid legal disputes. Similar to when we get married; there’s a whole body of law that wraps around the marriage that people often aren’t even aware of. So when you die, there’s a whole body of law that will wrap around. It’s just a sort of the default. So you can opt out of it by having a will, but if you don’t, you are under the laws of intestacy. Is that right?
Kelly Caperton Walling
00:05:11
That’s correct.
Under the Laws of Intestacy, Where Does the Property Go?
Kelly Caperton Walling
00:05:21
Well, your spouse is going to be the first in priority. He or she would get a life estate in the home and then a partial interest in the other property. A life estate is something that when that spouse passes away will go to the children. That is, the children would be next in order of priority. If the children pass away, then it would be grandchildren. But there can always be siblings who want to fight over things, both their siblings and the siblings of people down the line from that.
If you have a stepmother or a stepdad, you find a lot of problems with that. For example, there’s wasting of the estate when one of the surviving spouses is in the home, and he or she is not taking care of the property. It can decrease tons in value. And then when the children inherit it, the value has decreased so much there’s just not as much to pass around. It’s very hard to do something with the step-parent who is in the home.
What Is the Process Like if You Have a Will?
Jennifer
00:06:53
When people are thinking of getting remarried after there’s been a divorce, how important it is to have your estate planning documents in place, just to help clarify what’s going to happen. We’ve talked a little bit about what happens when there’s the intestacy, and then let’s talk about when there is a will. Texas is a fairly cost-effective state to die in if you have a properly executed will, very complicated if you don’t have a will.
Kelly Caperton Walling
00:07:33
Compared to other states, there is a very streamlined process in Texas. We don’t know how lucky we are.
Jennifer
00:07:40
And I’m going to chime in here because a lot of people get their information from a TV where you hear what happens in California, or you hear what happens in New York, and Texas is very different. So what you may be familiar with in other areas won’t necessarily apply if you live in Texas. So I hate to interrupt you, but I just wanted to chime in. We need to emphasize that.
Kelly Caperton Walling
00:08:00
When you have a will, all you have to do is to file it in the probate court, and you ask to be an executor, which means somebody who’s going to distribute the estate and pay the bills and make sure everything goes to the right people. And if you ask in a will to be an independent executor, then it’s going to keep your executor from having to go to court for every decision they have to make, which is awful and very expensive. And if you don’t have a will, it is a dependent administration, which means the person does have to go get all that approval all the time and the attorney’s expenses are quite high when that happens.
But if you have a will, you file the application. There are just several rules about finding creditors and paying off creditors, finding beneficiaries and paying off beneficiaries. And they are really pretty simple. The time is much shorter than if you are doing inheritance when somebody doesn’t have a will. Then you only have to file one document at the end of this whole procedure. And it’s basically just an inventory of what you’ve done. Generally speaking, it’s only a few pages long and the person who is doing it, usually the executor, gets help from their lawyers in doing it. So there’s nothing to be fearful of in that regard.
Jennifer
00:09:41
Having a will just streamlines everything. So, especially when you’re working with a great estate planning attorney, then you can make sure somebody is helping you in the probate process. He or she makes sure the letter is testamentary, gets issued, and runs notices and all of that, but it can be wrapped up pretty efficiently.
What Is the Usual Timeline When You Have an Undisputed Will in Probate?
Kelly Caperton Walling
00:10:03
I do wills all over the place from Hunt County to Tarrant County, and with COVID, it has taken months in some counties to get the stuff done. Typically you can expect it to be done in no more than three months. If you’ve got what you need from your clients, it usually doesn’t take any longer than that, but there are still some lags like Denton county. Denton County is still lagging a little bit with getting them filed and set for hearing.
How Are Assets Transferred Outside of Probate, and What Kind of Accounts Can Be Transferred?
Kelly Caperton Walling
00:10:52
The kinds of accounts that already have a beneficiary on them at the time of your passing, those are the ones that are outside of probate. That would include your life insurance, your retirement accounts like your 401k, and anything with a right of survivorship on it, and that would be common with checking accounts, where you put somebody down, and instead of having to go through that whole process, you just have them get it straight off. Those can be nice too, especially with the checking account, because if you can access some of the estate money fairly quickly, that can be extremely helpful.
Can You Use Estate Funds to Pay For Things Like Funeral and the Final Expenses for the Person?
Kelly Caperton Walling
00:11:55
Yes, you are. But it’s hard to get a hold of that money. So what happens is they end up paying for the funeral expenses and expenses of the last illness. They can be reimbursed for a lot of those expenses because they are expenses of the estate.
Jennifer
00:12:12
If you have the checking account with the right of survivorship that can free up some funds to make sure that you do not have to pay out of your pocket. That makes sense. One of the things that trip people up when they are working on their wills is all the people they have to designate.
Who Should You Select as an Executor?
Kelly Caperton Walling
00:12:39
The first point I want to make not to select two or three of them. Select one because that avoids all kinds of conflicts. And I’ve seen co-executors before, mainly in my litigation practice. But select somebody trustworthy, somebody who knows how to manage money, somebody who is not hated by the other family members, somebody you are relatively close to. And just overall, somebody who wouldn’t mind doing it. That’s the big one.
Do Executors Get Paid for the Job?
Kelly Caperton Walling
00:13:19
They can. But most often, they do not because they are so close to the person who passed away. They are a best friend or a brother or something like that. And so, no, they don’t usually take payment.
Jennifer
00:13:32
You said not to name two, but is it prudent to name alternate executors?
Kelly Caperton Walling
00:13:39
Absolutely, yes. In fact, we encourage our clients to name two successors in my practice. And we encourage that as well on our power of attorney documents because it can be amazing how quickly they’re not available to do those things for you.
Jennifer
00:13:56
And so, in a will, you’re going to name an executor. And then, if you have children, you’re going to name a guardian for the children.
How Does Naming a Guardian for Your Children Work?
Kelly Caperton Walling
00:14:08
If you have children under the age of 18, you will have to appoint somebody to take your place in managing both their persons and their estate. So, it’s somebody who will have custody and decide where they go to school and where they get medical care. Typically, you can have a guardian of the estate who is also managing those assets as well.
And so, there are some similarities between a guardian and your executor. A guardianship, unlike an executorship, is usually a very long-term job. And it’s on a different level of commitment and work. So it’s common for people to appoint siblings for that purpose. These people are going to raise your children for you and take care of their money for you until they’re 18 and can do it themselves. And sometimes, if you have set up a trust for those children, where money goes into that, then you’re going to have a situation where they’re managing money beyond the age of 18, maybe until the trust goes away at the age of 25.
Jennifer
00:15:29
And so there are all sorts of things for people to consider. And one of them, I would imagine, is where do you want your children living? Do you have a sibling or somebody you can designate in your current area? Or, if not, are they overseas? Or where might they be living? And, of course, there’s no crystal ball when you’re making these designations, but it is important to put a lot of thought into them.
Do You Recommend a Testamentary Trust, a Trust That Arises Upon Death, as Part of the Will for Minor Children?
Kelly Caperton Walling
00:16:06
Generally speaking, yes, I do. I definitely do.
Do You See Situations Where It’s Wise to Have a Guardian of the Children That’s Separate From the Trustee Who’s Managing the Assets?
Kelly Caperton Walling
00:16:19
Definitely.
Jennifer
00:16:20
Okay. Alright, so we’ve talked about a will, we’ve even touched on the trust. Now let’s talk about the general power of attorney or the statutory durable power of attorneys.
What Rights Does Power of Attorney Give Somebody?
Kelly Caperton Walling
00:16:34
That gives people the right to invest your money, sell your property, collect on debts that may be owed to you, and incur liability on your behalf. Pretty much anything financially that you can do, this person can do it for you.
Does It Go Into Effect Right Away, or Only Upon Incapacity?
Kelly Caperton Walling
00:17:07
Yes, it’s only upon a person’s incompetence, and it would be a doctor that certified that you were no loger capable of making those decisions for yourself.
What Happens if You Don’t Have a Power of Attorney?
Kelly Caperton Walling
00:17:28
If you don’t have a power of attorney, you end up going to court to get some kind of designation from the judge as to who can make those decisions for you.
Jennifer
00:17:41
So if you go ahead and you designate power of attorney, you avoid a lengthy and costly legal battle as opposed to guardianship, right?
Kelly Caperton Walling
00:17:52
Yes. And guardianships, for one thing, can take a long time. You have to have somebody on behalf of the estate come and evaluate the person that you’re trying to bank a ward. And that alone can take forever. It’s very costly. You have to report to the court all the time. You have to do an annual accounting, and lawyers who do what I do like to say that “You better keep all your receipts. Every last one.”
Jennifer
00:18:26
Because you have a lot of liability, to the beneficiaries and the other people who will have a stake in the ward’s estate, right?
Kelly Caperton Walling
00:18:34
Definitely, that’s a huge responsibility. It’s a fiduciary duty, and duties don’t come any bigger than that.
Jennifer
00:18:45
So, similar to the general power of attorney which is the financial document, you mentioned the medical power of attorney.
What Decisions Can Somebody With a Medical Power of Attorney Make For Somebody Who Is Incapacitated?
Kelly Caperton Walling
00:19:00
Again, this will only start to come into effect when the person is incapacitated, and that will be determined by a medical doctor. And when they authorize you to proceed in that regard, then it’s going to be all your major medical decisions, any medical decision you would make on your own. Whether to have blood work done or dialysis, I mean, it covers everything from the least to the greatest.
What Happens if Somebody Doesn’t Have a Medical Power of Attorney?
Kelly Caperton Walling
00:19:42
You go to court.
Jennifer
00:19:43
So you have an opportunity to designate the person you want to be making financial decisions for you and the person you want to be making medical decisions in these power of attorney documents. And if you don’t take advantage of that, then the people will be fighting over who makes those decisions for you in a guardianship proceeding.
Now I just sent my oldest son back to school, off to college, and my middle son’s about to turn 18. This is related to the next question.
Do You Recommend That Parents of Children Who Are Now Growing up Into Adulthood Have Similar Documents Prepared?
Kelly Caperton Walling
00:20:21
Yes, I certainly do. In fact, I just did them for one of my best friends. Just Friday, we finished hers up.
Jennifer
00:20:30
I mean, I think it’s something that nobody wants to think about, but in a moment when you have to move quickly, and you have to make decisions if something tragic or traumatic were to happen, having those legal documents really gives you peace of mind.
Kelly Caperton Walling
00:20:46
Absolutely. Your child can become incapacitated at any moment, as frightening as it is. And you know, once they’re 18, they have the same rights as any adult does to make any of their decisions themselves. And I see this come up a lot with children who have disabilities, and they cannot do everything they need to do for themselves. And they hit 18, and there are many different options for what you can do with them that would match their level of need. But in that case, you can see how much benefit those legal documents would be.
Jennifer
00:21:25
And finally, you talked about the HIPAA release. If anyone has a doctor and is getting any kind of medical treatment or care, when such a person goes to the doctor’s office, he or she has to sign all these forms acknowledging the privacy practices. And there’s a lot of liability on medical doctors now if they inadvertently disclose information outside of a release. And so, it can be very difficult to get information about your 18-year-old if you don’t have a signed release.
Kelly Caperton Walling
00:21:59
Yes. And the school doesn’t have to talk to you either.
Jennifer
00:22:02
Yeah. And I think a lot of people are surprised, like “What do you mean? I’m still paying all these expenses for this 18-year-old.” But at that point, a parent has no right to access and cannot get that information. So it is important to have the HIPAA release signed as a part of taking preparations to make sure that decisions can be made when they need to be made.
What Is a Living Will?
Kelly Caperton Walling
00:22:26
A living will is also known as an advanced directive, and we don’t write those as much as we write the other documents. What they do is they deal with your medical care when you are terminal. Usually, it’s life-sustaining measures that they’re dealing with. And so it’s like a medical power of attorney, but it comes into effect at the very end of life. And it usually deals with bigger medical decisions.
Jennifer
00:23:00
So, for example, somebody is dying of cancer, and they are in hospice, and they don’t want to receive ongoing care anymore. This will allow the medical team to not come in with the crash cart when the heart rate stops.
Sometimes heart wrenching stories make the news about people who are in a vegetative state, and do you have to pull life support or not? Much better to be thinking through your options and making these decisions at a time when A, you have the ability to think about them and B, when you’re not in a crisis moment.
Kelly Caperton Walling
00:23:41
We’ve seen their usage increase in Texas over the course of my practice years. And I encourage them; I always suggest that people consider them and explain what they are, and I encourage them to look at the document. This is when people in your life have to make the hardest decisions they are making, and it can be really traumatic for them to have to make those decisions for you. And they can be life-changing and permanent.
Jennifer
00:24:17
And it’s one thing when you have the gift of time, but unfortunately, there isn’t always the gift of time to have the conversations about what you want to have happen in that moment. And so, its a great gift for those that we leave behind when we take those extra steps.
The very last thing I would talk to you about real quickly is something that’s near and dear to my heart because I deal with it every day, and that is the effect of divorce on estate planning. Maybe you and your husband or your wife worked together and had a will made during the happy years of your marriage, and now you’re getting a divorce.
What Impact Does Divorce Have On a Will?
Kelly Caperton Walling
00:25:01
A divorce would not invalidate your entire will, but it does invalidate the gifts you had made to your spouse, who is soon to be your ex-spouse or already your ex-spouse. And in addition to that, it’s going to make your estate roughly half the size that it was beforehand, and there can be some pretty big tax implications from that. Then you will need to revisit those issues.
You’re also going to have things like your life insurance and your retirement accounts. And if those now have your ex-spouse listed, then you’re not going to have that beneficiary status anymore. Either the ex-spouse is removed as a beneficiary, and that can leave you with no beneficiaries, which can be a challenge. This can prevent you giving those things to your children in trust, if they are younger or not in trust, and you might want those to go completely and quickly to your kids.
Jennifer
00:26:16
And so divorce is a great time to consult with an estate planning attorney and to look at redoing those designations, just to make sure everything’s covered. I always think it’s like an umbrella. You take your umbrella with you, and it won’t rain. Of course, when we don’t have the umbrella, that’s when it rains. And so estate planning documents are just one of those necessary things that we all need to attend to, and are really an act of love for the legacy we leave behind.
Kelly Caperton Walling
00:26:43
I definitely believe they are an act of love, yes.
Jennifer
So much helpful information! If you have found this content of value, and would like to find out more about estate, probate and guardianship law visit Kelly’s law website here: Caperton Walling Law.
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