By Sandra W. Reed


With the estate tax exemption at a combined excess of $22 million, Sheila and Bill, a childless couple, don’t need to avoid the death tax. However, they want to benefit the children of their nieces and nephews when they die. Each wants the surviving spouse to be able to use his or her half of the community property during the survivor’s lifetime. Bill wants his brother’s two children to be the ultimate beneficiaries of his estate. Sheila wants her sister’s three children to inherit her estate when Bill is deceased.


Can Bill and Sheila achieve their goals with simple wills?


If Bill and Sheila execute simple wills leaving all their community assets outright to the survivor with the assets going to the grandnieces and nephews if the spouse does not survive the testator, they cannot be one hundred percent assured that these persons will inherit. Their wills are not binding like a contract would be. Any individual can change his or her will at any time.


Suppose Sheila predeceases Bill and Bill remarries. His new wife insists that his will leave some portion of his estate to her children by a previous marriage. Bill may rewrite his will to accommodate his new spouse. Then the inheritance scheme that he and Sheila had prepared for is out the window.


How can Bill and Sheila assure that their wishes are followed?


Although a trust is not necessary for tax purposes, Bill and Sheila can assure their wishes will be carried out, through executing wills with a testamentary trust that leaves their community assets to the survivor during the survivor’s lifetime. The trust can terminate upon the death of the surviving spouse with the remaining assets in the trust distributed to the individuals they choose.


The trust can provide that the trustee with the discretion to distribute income and principal to the surviving spouse during his or her lifetime for the health, education and support of the surviving spouse to allow the spouse to live at the standard of living to which he or she has become accustomed. This protects the trust assets from being exploited or depleted to the detriment of the intended ultimate beneficiaries.


Sandra W. Reed practices Elder Law in Somervell County, handling probating of estates, drafting of wills, trusts, powers of attorney and deeds as well as estate and Medicaid planning. She lives in beautiful Chalk Mountain. She can be reached at (254) 797-0211; (817) 946-2809 or by at sreed@kattenbenson.com.hei