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Houston Estate Planning and Probate Blog

Wednesday, July 6, 2011

Estate Planning for Beginners Part 2: Powers of Attorney

Once you are secure in the knowledge that you’ve provided for your family and ensured that your wishes for the distribution of your hard-earned fortune are clear, it’s time to take steps to ensure that YOU will be protected and financially secure during your lifetime. It is not uncommon for seniors to need help with the finer details of their finances as they age, or in rarer circumstances for someone who is injured or incapacitated to require an agent to make financial decisions for them. A Power Of Attorney is the document that gives your chosen agent permission to make choices on your behalf, as well as giving instructions as to how those choices should be made.

Here are some of the most important things you should know about your Power of Attorney:

·         A Power of Attorney is only effective during your lifetime; it gives your agent (or attorney-in-fact) the power to act for you while you are alive.

·         A Power of Attorney can be created to go into effect immediately or only become effective when you become incapacitated.  This latter Power of Attorney is called a Springing Power of Attorney because it “springs” into effect once it is proven that the predetermined conditions (generally incapacity of the principal) have been met.

·         A Power of Attorney can be revokedat any time so long as you have mental capacity.

·         A Power of Attorney is for financial, property and legal issues only, a medical agent or power of attorney is granted in a separate document (to be discussed in our next blog post.)

Because your Power of Attorney grants your agent or attorney-in-fact such broad and sweeping powers it is of the utmost importance to choose an agent who will not only be able to make wise decisions for you but who will also have your best interests at heart. While a Power of Attorney does grant an agent very broad powers, there are ways to build a system of checks and balances into the document; some of these include using restrictive language in the document itself which sets limits on the agent’s power.


Wednesday, June 29, 2011

Estate Planning for Beginners Part 1: Wills and Trusts

Every new project has to begin somewhere, and most newcomers to estate planning choose to begin with a will and a trust. This is because wills and trusts form the foundation for how your property will be distributed, how your beneficiaries will be cared for, and how the probate process and estate taxes will be handled.

A will is the most well-known of all estate planning documents, it is generally the simplest and easiest to create (although some wills can be very lengthy and complex), and in most states a will can contain within it instructions for peripheral topics such as guardianship of minor children or the final disposition of your remains.  Although, there are valid reasons to have those other instructions contained in separate documents.

But everybody knows that the main purpose of a will is usually to dispose of your assets and effects. In its most basic form, a will in Texas should include at the very least, these important parts:

  • The testator’s (creator’s) name and crucial information
  • Nomination of an Independent Executor to carry out the wishes of the testator
  • The naming of the beneficiaries
  • Instructions as to how the estate should be distributed to the beneficiaries
  • Signature of the testator and the date signed
  • Signature of witnesses and the date signed
  • A self proving affidavit

As mentioned above, this is a will in its most basic form, but in fact most wills will also contain instructions for probate, instructions regarding the payment of debts and taxes, the names of any organizations to receive charitable distributions, a mention of relatives who may purposefully NOT have been named, and more.

Because a will can be so basic, many people believe that a will can easily be created on one’s own, without the help of an estate planning professional; in fact, there are plenty of companies who offer “Do It Yourself” will creation software for a fee. However, it is important to understand that while a will itself can be very simple; the federal and state tax and probate laws are rarely so. If you feel your estate is small and your wishes are modest then by all means keep your will short and sweet as well. However, we strongly urge ALL of our readers (even those with small and simple estates) to have an estate planning professional at least review your will and advise you as to its validity before you sign it and tuck it away.

Instead of using a will as your primary dispositive vehicle, many individuals and families choose to create revocable living trusts.  We’ve said it before on our blog and we’ll say it again: It doesn’t matter whether you’re a billionaire business executive or an office worker with a modest salary, it doesn’t matter whether you’re the patriarch of a large family or a stay-at-home mom of a newborn, a revocable living trust may be exactly what your family needs to protect their assets and their best interests. This is because a trust is probably the most comprehensive and versatile tool in your estate plan, and is a key part of helping you accomplish your goals.

There are two basic kinds of trusts—revocable and irrevocable. Revocable means that it is able to be revoked or changed so long as the grantor (the person who created the trust) is still living. Logically enough, an irrevocable trust cannot be changed once it has been signed. The reason this question of revocability is so important is because a trust is not merely a set of instructions for how your wealth should be distributed, a trust actually owns the property placed within it, with the person or people serving as trustee (usually for a revocable trust this is the grantors themselves, while they are living) controlling the trust property within. It is for this very reason that trusts can be such a powerful and flexible tool for tax planning and estate planning.

The specifics of your trust will vary greatly depending on what you hope to accomplish. Parents of young children may wish to include a general trust for the benefit of all the children, with distributions made to the guardians or others as necessary. This general trust can be split into separate individual trusts when all of the children have reached a certain age or graduated from college. Parents (and often grandparents) may want to include education trusts under the umbrella of their revocable living trust. Many families feel it is important to include instructions for charitable giving in their estate plan, and may choose to set up a charitable trust with their children or grandchildren as trustees. Pet owners often create pet trusts to ensure that their animals will be well cared after the owner has died.

A trust, much more than a simple will, allows the grantor far greater control over their assets—and for a longer period of time—which is why trusts are particularly useful for anybody entering into a second or third marriage, or for any parent who worries about the choices a beneficiary might make once they come into their inheritance.  Additionally, revocable living trusts are much better incapacity protection planning tools than are powers of attorney. Unlike a simple will, trusts are designed to withstand the test of time, allowing you to leave a legacy that can last for decades.


Wednesday, June 1, 2011

The Importance of Estate Planning for New Parents

News sources such as the Washington Post entertainment sectionpromise that this summer will be flush with celebrity newborns and proud mamas and papas. Some of the stars expecting additions to their families include Natalie Portman, Kate Hudson, Jennifer Connelly and more.  Here at our office we wonder how many of these new parents will remember to update their wills or estate plans after the birth of their child... and how many of our readers have remembered (or will remember, if they are currently expecting a new child or grandchild) to update their own estate plans after an addition to their families.

Every parent knows that the time after the birth of a new baby can be a tired, busy and chaotic transition, and updating their estate plan is probably the last thing on any new parent’s mind. But after the first few months, when things have calmed down and you’ve settled into a routine, updating your estate plan to include and provide for your new little one should take top priority.

Here are a few things new parents will want to consider as they prepare to update their estate plan:

·         Guardians for your child. Who are the people who will raise your child if the unthinkable should happen to you and your spouse? Many people choose close family members, others choose trusted friends.

·         Keep your child’s inheritance in trust. Settling your entire estate on a 5, 10 or 16 year old is never a good idea.  Consider instead creating a trust for your child which will provide for him until he reaches maturity.

·         Trustees of your child’s inheritance. Who do you trust to invest and distribute the estate for your child while she is still a minor? Some parents choose to have the guardians also serve as trustees; others prefer to nominate separate trustees and guardians who will work together, providing a natural system of checks and balances.

·         Providing for your child’s special needs. If your child has special needs he will need special planning to ensure that his needs continue to be provided for. Ask us (or your own local estate planning attorney) about a special needs trust.

Guardians, trustees, trusts and special needs planning are the very basics of estate planning for families with minor children, and should serve as a jumping off point for further discussion with your estate planner.


Tuesday, May 24, 2011

New Portability Provision Should be Considered with Caution

A new “Portability Provision” in The Tax Relief, Unemployment Insurance Reauthorization, and Jobs Creation Act of 2010 has some couples excited about the financial possibilities.  As explained in this article in the Wall Street Journal, the new portability provision “permits surviving spouses to elect to use the unused portion of the estate tax applicable exclusion amount of their predeceased spouses. This provides the surviving spouse with a larger exclusion amount and allows married couples to transfer a collective $10 million estate.”

The new provision may seem like a boon, but the author of the article advises caution for a few reasons: “First, portability may encourage procrastination rather than planning; second, complications emerge with GST taxes, remarriages, and state exclusions; and third, the temporary nature of the act and the unpredictability of Congress make for uncertainty in estate planning for the future.”

Our readers will know that there are a number of planning tools and opportunities that crop up over the years; this new portability provision is certainly one of them. Our readers will also know that none of these tools will necessarily be the “silver bullet” of estate planning.  The fact is that estate planning is like anything else—to do it right and to do it effectively requires intelligence and research; a dedication of time and resources.  Most families simply don’t have the time or the resources to devote to researching every new “perfect planning tool” that crops up promising to save your family money.

This is why our firm is here; it is our business to research the best planning tools for your family.  We listen to your goals; we take into account your financial history and your current status.  We help you create the plan that works best for you.  If you think that this portability provision—or any other strategy you’ve heard about—might be your “silver bullet”, please call our office for an appointment.  We can give you the resources and information you need to make an educated and effective plan for your family.


Monday, May 16, 2011

How to Protect and Pass On Artwork, Antiques, and Other Valuable Assets

Some assets—such as real property, stocks and savings—are fairly straightforward when it comes to leaving them to your beneficiaries; other assets—such as valuable artwork or antiques—are not always so easy.  How do you will an asset to a loved one when there is no deed or title of ownership?  And just as importantly, how do these paperless assets figure into the size and administration of your “taxable estate”?

According to this article by Bonnie Kraham, how you dispose of these assets can be extremely important to the administration and taxation of your estate.  One particularly dangerous method is referred to as “the empty hook” method, wherein “When the collector dies, the beneficiaries simply remove the artwork (from the hooks) in accordance with name tags on the items for the intended recipients. Thus, the estate is left with "empty hooks" of what may be part of a sizable taxable estate for estate tax purposes.”

The problem that arises with the “empty hook” method is that wealthy families who collect artwork or antiques as investments often have records of their purchases and sales, as well as a list of valuable items for insurance purposes.  Any of these documents and records would be reviewed during probate or administration of the estate. “If you don't fully disclose the value of your art collection, or don't properly plan to gift art in compliance with estate tax rules and regulations, you can pass on tax fraud, instead of art, to your beneficiaries.”

Perhaps the best way to hold and legally dispose of your art or antiques collection upon your death is to transfer ownership of these valuable assets into a trust. “Transferring your art collection to a trust may be the most effective, efficient and transparent way to administer your estate after death . . . Trusts are private documents and, although the tax reporting remains the same for trust assets, trusts protect the privacy of an art collector or artist, which can be an emotional protection for the beneficiaries.” Additionally, keeping valuable artwork in trust can provide an extra layer of protection from divorce or lawsuits during your lifetime.

Contact our office, or your own local estate planning attorney, for more information.


Thursday, April 28, 2011

Protecting Your Children with a Nomination of Guardians

Choosing a guardian for your minor child could be one of the most personal decisions you ever make—it’s also one of the most important, which is why many couples turn to an attorney they trust to not only help them draft their nomination document, but also help advise them in this crucial decision. With such a personal matter the decision-making criteria will stem primarily from the heart, but there are some legal factors and implications that may affect the decision, and this is where an attorney can be helpful.

Forbes online recently published an articleoutlining the specific ways in which an attorney can be indispensable when choosing a guardian for a minor child; these include:

Explaining relevant statutory framework regarding guardianship to parents.  As the article mentions, guardianship laws vary significantly from state to state.  The manner in which you choose to name your guardians will likely be different depending on which state in which you live.  For example, will you name just one guardian for both person and property, or will you need to name specific guardians for each of those two areas?

Discussing factors clients should consider when naming a guardian.There are so many criteria to consider when choosing a guardian that many parents get caught up in how to prioritize essential qualities of potential guardians.  An attorney certainly can’t tell you which of your friends and family may be most fit to care for your child, but an attorney can help you asses the financial ability, emotional willingness, and compatibility of values of your candidates.

Emphasizing economic implications of the client’s decision. Most parents, when considering guardians for their children, think primarily of emotional attachment, family dynamic, and parenting style; but an attorney will remind you that finances should also be a significant part of your decision-making process.  Guardians are not necessarily legally obligated to use their own funds to support their wards, which means that parents will want to discuss with an attorney the best way to provide financial support for their children.

Drafting provisions setting forth client wishes regarding the upbringing of their children.Parenting is an incredibly personal process; hundreds of small choices are made each day which shape the minds and values of our children.  Some parents may want to express their wishes for how their child should be raised, even after their death.  Guardians cannot be required to follow parenting guidelines when they accept guardianship; an attorney, however, can suggest a few ways that parents can encourage guardians to respect their wishes regarding upbringing.

A nomination of guardians may very well be the most important estate planning document you draft, our firm can help ensure that every bit of information has been considered and addressed before you make your final decision.


Wednesday, April 20, 2011

Understanding Your Last Will and Testament

Although recent news surrounding the estate tax—both its repeal and its reinstatement—has died down, many people are still talking about their estate plans.  Most people recognize that now is the time to create their estate plan, or to review and update their existing plan if they have one. This means that many people are asking questions about one of the primary documents in just about any estate plan: the Last Will and Testament.

What is a Will?

A will is, for many people, the cornerstone of their estate plan.  In fact, if you only create one estate planning document, (which we definitely don’t recommend) that document should probably be a will.  A will is the document which details your wishes about how and to whom your property will be distributed upon your death.  A will can list your property in great detail, or it can make a statement about distributing “all of my property” in general.  Your will also names an executor, the person who will carry out your wishes as detailed in the document. 

What is required to make a Will?

At its heart a will is very simple.  Requirements will differ depending on your state of residence, but there are some basic requirements that should be the same across the board:

·         A will must be created by a testator who is of legal age, of sound mind and judgment, and under no duress.

·         A will should be in writing and signed and dated by the testator.

·         In Texas, if the will is not wholly in the handwriting of the testator, the will should be attested by two or more credible witnesses over the age of 14. 

·         And in some states, it must also be notarized.

·         It’s also a good idea that the will revoke all previous wills and codicils.

It is important to note that there is no requirement that a will must be created by or with an attorney; however, there have been many instances where homemade wills have been found to be invalid, or have been contested by disgruntled heirs or potential heirs, so having the help and advice of an attorney is highly recommended.

What happens if you don’t have a Will?

If you don’t have a will your property will be distributed according to the intestacy laws of your state.  Property will generally be inherited by a spouse, or by a spouse and children in certain percentages.  If there is no spouse or children then property will generally go to living parents or siblings, then to nieces, nephews, or other living relatives who can be found. The state will choose an executor for your estate, as well as guardians for any minor children you have. Unfortunately, the people chosen by the state to serve in these roles may not be the people you would have chosen. Additionally, the probate process will be much more expensive and will take even longer than usual as the extent of your estate, as well as any outside claims to it, are investigated and your legal heirs will have to be formally determined and ordered by the court.

Luckily, there is very little reason for anyone to die without a will. Although wills can be designed to be as comprehensive and intricate as you like, they can also be very simple documents which can provide an incredible peace of mind for you and your family.  Contact our office—or another attorney you trust—to help guide you through the process of creating your own last will and testament.


Friday, April 8, 2011

Royal Couple Has Many Asking “How Effective Are Prenuptial Agreements?”

It’s all over the news lately that Prince William and his fiancé Kate Middleton will likely not sign a prenuptial agreement before the royal wedding on April 29th.  Although many reasons have been given as to why the couple will forgo signing a prenup, one of the reasons is that “while prenuptial agreements are common in the United States, they are far less prevalent in the UK. Only in the last year have British courts agreed to recognize such deals.” This is a statement that has some Americans asking exactly how legally binding are prenuptial agreements here in the States?

The answer to that question depends on a number of factors: your state of residence, the terms of your prenuptial agreement, how long you stay married, and more.  Fortunately, the longer prenuptial agreements are around, and the more common they become, the more respect they get from the courts.  But if you’re worried that your prenuptial agreement won’t hold up in court, here are few tips to help ensure the validity of your agreement.

Neither party must be signing under duress.  The more time each party has to review the agreement before the wedding the better.  Any prenuptial agreement signed the day of or the day before the wedding could be looked upon as being signed under duress.

The agreement should include full disclosure of income and assets.  If you live in a state where it is possible to waive full disclosure of assets then BOTH parties should specify that they do so knowingly.

Each party should have their own legal representation.In order to be sure that neither party is being taken advantage of, each party should have their own independent attorney review the document before it is signed. 

Details regarding children or child support in a prenuptial agreement may or may not be enforced by the courts.Partners my want to include details about possible custody or child support arrangements in a prenuptial agreement, but keep in mind that any court will always give the best interests of a child the highest priority, even if it means disregarding those sections of the agreement between spouses.

Of course, every couple hopes that a prenuptial agreement will never come into play, but these tips and many others can help ensure that your agreement will be considered valid by a court if the worst should happen.  Contact our office if you have any questions about prenuptial or marital agreements, we’d like to help.


Tuesday, April 5, 2011

Frequently Asked Questions: Does Your Family Need a Trust?

Estate planning attorneys are asked a lot of questions about how to protect every different kind of family and situation, and many of these questions are about trusts. For this reason, we’d like to take a moment to review with our readers the basic definition and benefit of trusts—which are, for most families, the most comprehensive, most reliable tool for protecting your assets and passing them on to your beneficiaries.

Although there are many different types of trusts, the fundamental basics of trusts include the following:  a transfer of property to someone who promises to hold the property for another according to the transferor’s instructions.  No matter how complicated or simple the trust instrument may be, the basics remain the same.

One of the primary benefits of a trust is its versatility.  Trusts are so useful and versatile, in fact, that they serve as the backbone of just about every different kind of estate plan; from the plan created by an elderly grandparent, to the one executed by the new young couple. This isn’t to say that each trust is the same for every estate plan—far from it!  Each person and family will be different; from their property and assets, to the people (or charities) they’d like to name as beneficiaries, all the way down to their values and beliefs (which can be expressed and passed on through a trust.) With all of these differences, each living trust must be customized to suit the individual.

This is the beauty of trusts, they are indeed highly customizable.  Perhaps the most well-known and commonly-used trusts are the living trust or a testamentary trust, but trusts provide far more options than those mentioned above. Other options include special needs trusts, irrevocable trusts, life insurance trusts, retirement trusts, education trusts, gifting trusts, and many more . . . even pet trusts!

If you are considering creating a will or estate plan, or planning to update the one you already have, the best thing you can do is to know your options. Contact our office for more information about trusts, and which of the many trust options may be the right tool to protect your family and loved ones.


Wednesday, March 23, 2011

New POLST Program Raises Awareness About End-Of-Life Decisions

A recent article in the Wall Street Journal shines the light on a new program being instituted by a growing number of states called “Physician-Orders for Life Sustaining Treatment,” or POLST.  “A POLST, which is signed by both the patient and the doctor, spells out such choices as whether a patient wants to be on a mechanical breathing machine or feeding tube and receive antibiotics.”

Creating a POLST is an important step toward getting the care and medical treatment you want at a time when you may no longer be able to communicate those wishes to your family or medical staff. As estate planners we know just how important it is to communicate these preferences for health care; in fact, creating an estate plan with our office includes drafting an advance directive called a Directive to Physicians and Family or Surrogates, in which you specify whether you want certain end of life measures taken and which medical treatments or interventions you would or would not like.  We also prepare a Medical Power of Attrorney which is the document in which you nominate a health care agent to make health and medical decisions for you when you are unable to speak for yourself.

Keep in mind that although the POLST is an important step in making your wishes known, the POLST is not intended to replace an advance directive.  The POLST programs “are meant to complement advance directives, sometimes known as living wills, in which people state in broad terms how much medical intervention they will want when their condition no longer allows them to communicate.”

The WSJ article states that “A study supported by the National Institutes of Health last year found that patients with POLST forms were more likely to have treatment preferences documented than patients who used traditional documents such as living wills and do-not-resuscitate orders.“ This comes as no surprise, considering that executing a POLST includes getting the document signed by your doctor, thus ensuring that you doctor is not only aware that you’ve expressed your wishes for end-of-life care, but has also likely had a part in helping you understand exactly what your options are.

Our office recommends that our clients go one step further—give your doctor a copy of your advance directive and related documents.  We also recommend sending a copy of your directives and powers of attorney to the person you’ve named as your healthcare agent. 

The more informed your doctors and family are about your wishes for end-of-life care, the more likely it is that you will receive the treatment you prefer.


Wednesday, March 16, 2011

Tragedy in Japan Inspires Reflection: Are You Prepared for Disaster?

Only a few days ago the world was shocked by the terrible earthquake and tsunami in Japan.  Our hearts and prayers go out the people affected by the tragedy, and many people are asking what they can do to help.

The sudden violence of nature has many of us looking at our own situations as well, wondering if we are prepared—as a country and as individuals—should an equally devastating natural disaster strike our own shores. Of course the first thought most of us have in this regard is whether or not we have a well-stocked supply of emergency rations, but as this article from CBS MoneyWatch.com points out, there is much more to surviving a natural disaster than the first 24 hours. “Most people never think about the items to take that help protect your financial assets.”

Author Steve Vernon includes in his article a list of things you can do to prepare for what comes after the first 24 hours of a natural disaster, including:

·         A stash of cash in case ATMs are shut down for a long period of time.

·         Contact information for family members, close friends, and work contacts.

·         A cell phone and charger, plus batteries and chargers for other necessary electronic equipment.

·         A list of account numbers and contact information for all your regular bills and payment obligations. 

·         Your insurance company contact information.

These are only a few of the things you’ll want to have ready (or at least have thought about) if disaster strikes here at home. 

Some natural disasters are so big in scope they are almost impossible to comprehend, let alone try to prepare for; but preparation is the best way to keep fear and panic at bay.  It doesn’t help anybody to dwell too much on what “might happen,” but having a basic emergency plan in place gives you the freedom to go on with your everyday life, knowing that you’ve done what you can to be ready if disaster does strike. 

For more information about disaster preparedness please visit the FEMA website here: FEMA Emergency Planning Checklists.

For more information about how you can help the disaster victims in Japan please check the Crisis Response Page on Google.


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