ESTATE PLANNING IN TEXAS: WHAT EVERY RESIDENT SHOULD KNOW

In Texas, having a solid estate plan is more important than many people realize. With its unique community property laws, probate shortcuts, and specific requirements for wills and trusts, Texas offers both opportunities and pitfalls when it comes to planning your estate. And, without a clear plan, the state decides what happens to your assets, and that often leads to confusion or conflict among loved ones. 

So, in this blog, we’ll walk you through what every Texas resident should know to take control of their legacy. Let’s begin!

Core Estate Planning Documents in Texas

Last Will and Testament

A Last Will and Testament is fundamental to any estate plan, as it outlines how a person’s assets should be distributed upon death. It also names an executor who is responsible for carrying out those instructions. And, if minor children are involved, the will can designate a guardian. Without a valid will, Texas intestacy laws dictate how property is distributed, often resulting in outcomes that don’t align with the individual’s wishes.

Statutory Durable Power of Attorney

This document is crucial for estate planning in Texas, as it enables an individual to appoint a trusted person to manage their financial affairs privately and without court involvement, including tasks like banking, real estate transactions, and business operations. It also grants broad authority (unless specifically limited) and can take effect immediately or upon incapacity.

Medical Power of Attorney

A Medical Power of Attorney designates a healthcare agent to make medical decisions on behalf of a person if they become unable to communicate. This document covers a wide range of healthcare situations, from routine treatment to emergency interventions.

Directive to Physicians (Living Will)

The Directive to Physicians, commonly referred to as a Living Will, enables individuals to express their preferences regarding life-sustaining treatment in the event of a terminal or irreversible condition diagnosis. This is one of the essential estate planning documents in Texas as it ensures that the medical providers and family members understand and follow the person’s wishes concerning resuscitation, artificial nutrition, and life support. Including this directive in the estate plan also prevents confusion or disagreement among family members during critical moments. 

Note: Texas law requires this directive to be signed in the presence of two witnesses or a notary.

 

HIPAA Authorization

To ensure that designated agents and family members have access to medical information, a HIPAA Authorization is essential. This document complies with federal privacy laws and allows healthcare providers to share information with the individuals listed. Without a HIPAA release, even a named agent under a Medical Power of Attorney may face delays in obtaining vital information. 

Declaration of Guardian

Unlike a Statutory Durable Power of Attorney, this document only takes effect if a court determines that a guardianship is needed due to incapacity. It lets you name who you’d want, and who you wouldn’t want, to serve as your guardian if that ever becomes necessary. This applies to both personal care and financial matters, but only if no one else has already been legally authorized, such as through a power of attorney. Thus, it simply serves as a backup to guide the court and help prevent family conflict.

Trusts in Texas: When and Why You Might Need One

A trust is a legal arrangement in which one party (the trustee) holds and manages assets for the benefit of another party (the beneficiary). While there are different types of trusts available in Texas, what truly matters is understanding when and why you might need one:

When You Might Need a Trust in Texas? 

• Avoiding Probate

Creating revocable Texas wills and trusts allows assets to pass directly to heirs without court involvement, speeding up distribution and maintaining privacy.

• Protecting Beneficiaries

When beneficiaries are minors, have disabilities, or struggle with financial responsibility, a trust can ensure their inheritance is managed in a responsible manner. A special needs trust or spendthrift trust protects assets from misuse or disqualification from government assistance.

• Planning for Incapacity

In the event of incapacity, a revocable living trust allows a successor trustee to step in and manage your assets without court intervention. This provides continuity and avoids the need for a court-appointed guardian or conservator.

Why You Might Need a Trust in Texas?

• Privacy Concerns

Unlike wills, which become public record during probate, trusts remain private. This can be particularly important for high-net-worth individuals or families who value discretion in their financial affairs.

• Minimizing Estate Taxes

Although Texas does not have a state estate tax, large estates may still be subject to federal estate taxes. An irrevocable life insurance trust (ILIT) or charitable remainder trust (CRT) can help reduce taxable estate size, preserving more wealth for beneficiaries.

• Asset Protection

Assets placed in certain types of irrevocable trusts may be shielded from creditors, lawsuits, or divorce settlements. This is especially relevant for business owners, physicians, or individuals in litigious professions.

• Blended Families and Second Marriages

Trusts are an effective tool for ensuring children from previous relationships receive an inheritance, while still providing for a current spouse. A qualified terminable interest property (QTIP) trust can effectively balance the needs of both parties.

Texas-Specific Laws You Should Know

Once you understand what estate planning is, it becomes important to be aware of the following Texas-specific laws related to it:

Community Property Rules Apply

As a community property state, most assets acquired during marriage in Texas are considered jointly owned by both spouses.

Independent Administration of Estates

Texas allows independent administration, allowing executors to manage the estate without constant court supervision.

Muniment of Title Option

If the deceased has a valid will and no unpaid debts (excluding mortgages), Texas allows property to pass directly to heirs without full probate.

Homestead Protections

The law of Texas protects a surviving spouse’s right to remain in the homestead, regardless of will provisions.

Heirship Determination Without a Will

If someone dies without a valid will, a strict legal formula governs how property is distributed among children, spouses, and other relatives.

Lady Bird Deeds 

This allows you to retain control over real estate while naming a beneficiary. Upon death, the property transfers automatically, avoiding probate and preserving Medicaid eligibility.

Texas Trust Code Protections

Under the Texas Trust Code, both revocable and irrevocable trusts benefit from strong creditor protections. The spendthrift clauses prevent creditors of beneficiaries from seizing trust assets, ensuring better long-term preservation and control of wealth.

Common Mistakes to Avoid in Estate Planning

Recognizing why estate planning matters is the first step, and the next is avoiding the following common mistakes that could undermine your efforts:

• Failing to update the estate plan after major life events, such as marriage, divorce, births, or deaths, can lead to legal confusion and disputes among heirs.
• Not designating contingent beneficiaries may result in assets going through probate if the primary beneficiary predeceases you.
• Ignoring tax implications can significantly reduce the value of your estate; consulting a tax advisor helps minimize liabilities.
• Failing to secure digital assets, such as online accounts, cryptocurrencies, or cloud-stored documents, can leave valuable data inaccessible.
• Placing everything in a will instead of using trusts may lead to lengthy probate and potential challenges.
• Choosing the wrong executor or trustee without assessing their financial acumen and reliability can lead to mismanagement.
• Failing to coordinate retirement accounts and life insurance with the estate plan may lead to conflicting distributions.
• Not discussing intentions with heirs can result in misunderstandings and emotional strain during distribution.

How An Estate Planning Attorney From MBB Can Help

Looking for an estate planning attorney near you in Texas? At Mazurek, Belden & Burke, P.C. (MBB), we understand that planning for the future can be overwhelming. That’s why we take the time to get to know you, your goals, your concerns, and what matters most. From there, we guide the conversation with clarity and care, helping you make confident decisions that reflect your values and protect the people you love.