Imagine a situation where daughter is serving as the agent under mom’s financial power of attorney. Mom’s estate plan provides that her estate will pass 40% to daughter, 40% to son and 20% to mom’s favorite niece. The main asset in mom’s estate is a nice (and very valuable) Westlake home. In order to avoid probate on mom’s death, daughter files a lady bird deed, naming daughter and son as the only beneficiaries of the family home. Does the slighted niece have any recourse?
Under a new Texas Law, she very well might. Recent updates to the Texas Estates Code now impose a duty on behalf of an agent under a financial power of attorney to preserve the principal’s estate plan. See Texas Estates Code Section 751.122. Of course, there are some qualifications to this. First, the agent must have actual knowledge of the estate plan. If the agent does not know there is a will or doesn’t know what the will says, the agent cannot preserve the plan.
Second, preserving the estate plan must be consistent with the principal’s best interest. For instance, the agent under a financial power of attorney can consider the principal’s future need for maintenance, can consider the principal’s income tax and estate tax planning, and can consider the principal’s ability to qualify for public benefits like Medicaid.
Of course, the best offense is a good defense. By updating your plan to ensure someone you trust is serving as the agent under your financial power of attorney, situations like this can often be avoided. Additionally, in many circumstances an estate plan based on a revocable living trust can ensure your assets are preserved for your beneficiaries. Under a revocable living trust, if you ever become incapacitated, your designated successor trustee will step in to manage the trust assets for your benefit. Since the trust controls how your property is used, you can specify how your assets are to be used if you become incapacitated (for example, you can authorize the trustee to continue to make gifts or pay tuition for your grandchildren). Your home also should be owned by your revocable living trust, thereby eliminating the need for a lady bird deed to avoid probate (although there are circumstances where a lady bird deed should be used to avoid Medicaid recovery).
Get in touch with us today to go over the parts of your estate plan that may need updating to give you and your family the best possible outcomes. We are here to help and can quickly get your estate plan in optimal shape.
Nielsen Law PLLC provides family focused estate planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information and to learn about our firm, please contact us.