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Houston Estate Planning and Probate Blog

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.


Wednesday, March 9, 2011

A Way to Help Parents and Grandparents in Financial Need

Estate planning is often about how people can pass wealth on to their children or grandchildren, but what if a child wants to give financial gifts to a parent or grandparent? This article from Bloomberg discusses just that: how GRATs Let Children Pass Millions to Mom or Granny Free of U.S. Gift Taxes.

As the elderly population of the U.S. increases, and as the effects of the economic downturn hit, more and more adult children find that their parents or grandparents are not doing as well financially as they had hoped.  Many need help paying for medical expenses, home care expenses, mortgage or rent payments, etc.  Adult children would like to be able to help, and a properly executed GRAT can be the perfect vehicle for wealthy children to give financial aid to their parents or grandparents without taking away from their lifetime gift-tax exemptions.

“With a GRAT, a child sets up a trust with a term of at least two years and funds the trust with stock or other investments. The trust pays the principal plus interest back to the child over its term as if it were an annuity, based on an interest rate set by the Internal Revenue Service. Any appreciation of the underlying investments above this ‘hurdle’ rate passes on to the GRAT’s beneficiary, in this case the parents, without being considered a gift for tax purposes.”

However, this opportunity may not be around forever.  The Obama administration has recommended imposing a 10 year minimum term on GRATs, an act which would make the GRAT strategy significantly less useful for many families. Adult children who would like to use a GRAT to pass wealth up to their parents or grandparents should consult with a financial or estate planning advisor sooner rather than later.

If you do miss out on the GRAT window, however, there are other options for helping elderly relatives, including paying medical expenses for the loved one (so long as payments are made to the service provider directly, rather than to the relative.)  Contact our office for other options and more information about helping elderly parents and grandparents.


Friday, March 4, 2011

Tough Decisions Await Executors of 2010 Estates

If you are the executor of the estate of a decedent who died in 2010 you may think you’re in the clear.  After all, there was no estate tax in 2010 right?  Making distributions should be a piece of cake.  Wrong.  Because of the estate tax election available on the estates of 2010 decedents, administering those estates will actually be more work than you may think.

The repeal of the estate tax in 2010 also brought with it a repeal of the “step up in basis,” meaning that heirs selling inherited assets were taxed based on the original acquisition cost of the assets, not on their value as of the date of the taxpayer’s death.  This generally resulted in a higher tax paid on assets than the normal estate tax rate—not good for taxpayers. But 2010 estates don’t have to go by these rules. The legislation passed in December of 2010 gave 2010 estates the opportunity to elect whether they wanted to use the 2010 estate tax laws, or the new laws for 2011.  This article in Forbes explains what this means:

“The 2010 Tax Relief Act restored the estate tax for individuals dying in 2010 with a $5 million per person exemption and a maximum rate of 35%. It also repealed the modified carryover basis rules for property acquired from a decedent who died in 2010. However, estates of individuals dying in 2010 can elect zero estate tax and the modified carryover basis rules that would have applied before they were repealed. That means the basis of assets acquired from the decedent would be the lesser of the decedent’s adjusted basis (carryover basis) or the fair market value of the property on the date of the decedent’s death.”

In general this tax election is a good thing, it allows executors to choose which tax formula will cost the beneficiaries the least in taxes; but it does mean a lot more paperwork and a lot more attention to detail.  If you are the executor of an estate of a decedent who died in 2010, don’t hesitate to call us.  We can answer your questions and help you explore your options.


Wednesday, February 23, 2011

The Tax-Man Cometh

It’s that time of year again; the time of year when everyone starts gathering receipts, assessing income and expenses, and making appointments with tax advisors.  Tax time can be a very stressful time for many families, but—with the help of this article from MSN Money—perhaps tax season can be made a little bit easier. The article lists 13 tax breaks from 2010 that can help save you money, including:

  • The tax credit for first time homebuyers (if you’re not a first time homebuyer don’t give up, there’s a credit for existing homeowners too.)
  • The parking and transit credit
  • The college tuition tax credit
  • The credit for energy-saving home improvements

And then of course there are the two we’ve been mentioning here on our blog for the past few months:

  • The estate tax exemption, and
  • The annual gift tax exemption

Of course, not every item on the list is going to apply to every reader, but if even one or two credits apply to you or your family it can be a huge help. 

Don’t rely only on this article to ease your 2010 tax burden, your own advisors and tax planners—who know more about your family’s personal and business finances—will be able to give you much more in-depth advice on how best to address your own tax situation.  In addition, talking to a professional advisor right now provides the perfect opportunity to tackle any issues in 2011, hopefully making this time next year a much happier and less stressful time for everybody.


Wednesday, February 16, 2011

Estate Tax Laws Aren’t the Only Things That Change

We’ve written before about the importance of reviewing and updating your estate plan, but it’s a topic worth mentioning again—especially in light of the many recent changes to estate tax law.  The plain truth is that no matter how perfect your estate plan is when you create it, change is inevitable, and when your life (or the tax law) changes, it’s important that your estate plan change with it. 

Reviewing your estate plan every 2-5 years is essential to keeping it up to date and working the way you intended it to work. Luckily, reviewing your estate plan can be quick and easy if you know what you’re looking for.  Here are 5 key components you’ll want to review:

1.    Fiduciaries-How have the people in your life moved or changed?

2.       Assets-Are your finances different than they were a few years ago?

3.       Distribution and Beneficiaries-Are there any new members of your family?

4.       Health Care-What changes have you experienced in your health recently?

5.       Legal Updates-Have the laws changed?

If we’re lucky, our lives are constantly changing—our families evolve, our finances improve or decline, we meet and form strong relationships with knowledgeable friends and professionals. It only makes sense that your estate plan should change too.  What seemed best for your family 4 years ago might not be the ideal situation now.  By reviewing and updating these 5 components on a regular basis, and touching base with your attorney, you will insure that your estate plan will continue to protect yourself and your family the way you intended it to when you first created it.


Wednesday, February 9, 2011

Estate Tax Lessons from 2010 and Things to Watch Out for in 2011

We all know from the many news stories of last  year that estate tax laws are not set in stone, they can fluctuate and change both at the state and the federal level; and as this article in Forbes points out, keeping up with those fluctuations can be of the utmost importance to you and your loved ones.

The many celebrity news stories we saw last year provide all the examples we need of what can happen when you plan well (as was the case with Brittany Murphy’s estate plan) or when you neglect your estate plan—or even worse, when you fail to plan at all. Here are some celebrity examples of common estate planning pitfalls and mistakes:

Failing to update your estate plan.We tell all of our clients how important it is to review and update your estate plan every 2 to 5 years; Gary Coleman provides a prime example of what can happen if you neglect to follow through on those updates and reviews. “[Coleman] created a handwritten codicil to his will in 2007 leaving much of his estate to his wife, Shannon Price. After they divorced, however, Coleman never updated his will or created a new one. That led to a court fight after he died about whether Coleman was still married to Price. Even though they never officially tied the knot for a second time, Price claimed they had a ‘common-law marriage,’ which would mean that the handwritten will would be valid.”

Failing to fund your estate plan.A revocable living trust is a wonderful tool, but it’s just an empty vessel until you fund it by re-titling your assets in the name of your trust.  Michael Jackson created what is most likely a wonderful living trust, but his failure to fund it properly means that 2010 saw “The estate of Michael Jackson... dragged on with no end in sight.”

Waiting too long to create your plan.If you are a senior citizen, waiting too long to create your plan leaves you open to the exploitation or undue influence of acquaintances or family members who might try to take advantage of you.  Even if nothing of the sort has taken place, just the suspicion of undue influence can land your estate in a lengthy court battle. “Does the Anna Nicole Smith case come to mind? The United States Supreme Court ruled in 2010 that it will hear her case for the second time. Did she wrongly take advantage of her 90-year old husband, or did his son use fraud and other improper means to stop the billionaire from leaving money to Anna Nicole?”

We can all benefit from the very public airings of these celebrity estates.  Our office can help you avoid the mistakes listed here, plus many more.  The new laws of 2011 provide the perfect opportunity to create a plan (or update your existing plan), and ensure that your family will be well protected now, and in the future.


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