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Houston Estate Planning and Probate Blog

Monday, November 29, 2010

Estate Planning Through the Ages

Can you remember what you were doing in your early 20s?  Can you imagine what kind of life you’ll be living in your 70s or 80s?  We experience incredible changes as the decades roll by—not just to ourselves, but in the world at large. With our lives changing so much, our estate planning documents and strategies should hardly remain static. Here is a guide to how your estate plan may or may not evolve through the decades.

In Your 20s:You’re young, just finishing school and starting in your career, unlikely to be married yet... the last thing you’re thinking about is estate planning! At this time of life, who gets your “stuff” may not be as important as who will make your decisions. Choosing your financial and healthcare agents and creating your power of attorney and healthcare directive are the important things to do at this time.

In Your 30s:Marriage, children, home ownership—most of these things happen in your 30s, and your estate plan should reflect that. Now is the time to choose guardians for your young children, decide with your spouse how your joint property will be distributed, and get serious about life insurance.

In Your 40s:This is when your strategy may switch from simple direction of inheritance to more serious asset protection. You’ve worked hard and saved, and you’ll want to think about the best way to maximize your assets with trusts and tax planning.

In Your 50s:As your children start to become independent you may have more freedom with your income.  Some people choose to create charitable trusts, some prefer to invest for retirement, and still others decide it’s time to take a risk and start over with a second career.  Your estate planner can advise and help with all of these.

In Your 60s:Ah retirement! Making the big change from work to retirement means making changes to your estate plan as well. If you’ve been keeping up with your planning through the decades all that is required now will be some basic maintenance; changes to account for marriages of your children, the birth of grandchildren, and your own relocation to someplace warm and sunny.  But beyond the basic maintenance, you may want to start doing some simple Medicaid and long-term care planning—just in case.

In your 70s and Beyond: Health is the key word now.  Our life-spans are getting longer, but so are our illnesses, you need to be ready.  Tighten up your estate plan, invest in long-term care insurance, and although it may sound morbid, talk to your doctors and family about your end-of-life decisions.

The life alterations that come over a span of decades are difficult enough; you don’t want to have to find a new lawyer every time your circumstances change.  Our firm makes it our business to keep up with you at every stage.


Monday, November 22, 2010

How to Avoid Being “Strangers Rather Than Spouses”

Over the past few years certain states have taken steps to legalize same-sex unions, with many same-sex couples joyously taking advantage of the new laws... but in spite of state approval, these newly married couples do not have the same rights as traditional married couples under federal law.  This recent article from Elder Law Answers describes how one gay widow is suing the federal government for reimbursement of the estate tax bill she paid after her wife’s death.

“Edith Windsor and Thea Spyer became engaged in 1967 and were married in Canada in 2007, although they lived in New York City. Ordinarily, spouses can leave any amount of property to their spouses free of federal estate tax. But when Ms. Spyer died in 2009, Ms. Windsor, 81, had to pay Ms Spyer's estate tax bill because of the The Federal Defense of Marriage Act of 1996, which denies federal recognition of gay marriages. ‘While New York State considered us married, the federal government did not, so the government taxed Thea's estate as though we were strangers rather than spouses.’"

This story illustrates again how important it is for any non-traditionally married couple to take their estate planning seriously.  A properly drafted will, trust, power of attorney and health care directive can help ensure that you and your partner are treated as spouses rather than strangers. 

Contact an attorney in your state to find out how estate planning documents can help you achieve your goals.


Friday, November 19, 2010

Estate Planning for Adoptive Families

We’ve mentioned in previous posts how important it is to update your estate plan when you experience big life changes; this includes moving, getting married, having a child... and it especially includes adopting a child.

A recent article in Forbes reminds us that “An adopted child only has rights to your estate once the adoption has been finalized. The length of time it takes to finalize an adoption depends on where the adoption was initiated as well as a host of other factors. This process can take anywhere from six months to several years to complete. In the event that you pass away before this process is complete, it is likely the child would not be entitled to any of your assets.”

Creating or updating an estate plan is one way to ensure that the child of an adoption-in-progress receives the rights and benefits he or she needs. An estate plan can not only provide financially for your adopted child through your will or trust, but can also nominate guardians for the child, make provisions for the child’s medical treatment (if necessary), and specify your wishes for the child’s future education or living arrangements.

The article above points out that “Particularly in the case of an open adoption, it is important to establish a good relationship with the individuals outside your immediate family, such as the child’s birth parents, who will have a direct interest in your child’s life.” Making provisions in your estate plan for birth parents or grandparents can smooth the way for your child and for the guardians you’ve chosen if anything should happen to you.

Anyonewith children should have detailed and updated estate plan; but for families with adopted children having a plan in place is of the utmost importance.


Wednesday, November 17, 2010

Make It Easy for Your Heirs to Say “No”

People have been known to do crazy things when taxes are as unpredictable as they are currently.  No, we don’t mean “offing” their relatives (although there have been plenty of those kinds of jokes going around this year), we’re talking about saying “No thanks” to an inheritance (also called disclaiming.)  This article in Investors.com explains that “By disclaiming, one heir can abstain from taking an inheritance, leaving the assets for other beneficiaries. Planning in advance for such a move can save huge amounts of estate tax. That means more money for heirs.”

We realize that with no estate tax in 2010, disclaiming an inheritance is not a likely scenario this year; but next year the tax is expected to come back, although at what rate or with what exemption is still anybody’s guess. That means there are plenty of reasons why someone might want to pass on a large inheritance, including:

  • To pass the benefit of the inheritance on to another family member (generally a younger family member who could use the money for college, a first house, etc.)
  • To avoid passing the inheritance directly on to creditors if the initial beneficiary is in debt or involved in a lawsuit.
  • To avoid being bumped into a higher tax bracket.

The best reason to account for the possibility of disclaiming in your will or estate plan is that it provides your heirs with flexibility. “Even if a new estate tax law is passed, uncertainties will remain. You don't know when you'll die. You can't know for sure how much you'll be worth. Congress may create new exemptions, tax levels and other rules.”

You never know what the future may hold—for you or your heirs. When in doubt, it pays to make provisions for any eventuality.


Monday, November 15, 2010

Family and Future: The Keys to Top Notch Estate Planning

We write a lot on this blog about what estate planning is truly about: it’s about laws, taxes, assets, and documents of course; but deep down, estate planning is about relationships.

As estate planners and advisors, an important part of what we do is creating the best estate planning or asset protection vehicle we can for our clients; but achieving this goal involves far more than simply writing a document—it also involves listening to our clients, reading between the lines of sensitive family interactions, and it often involves looking into the future to catch potential problems before they happen. 

A recent article in the Wall Street Journal describes the unorthodox lengths to which advisors will go to help clients achieve their goals.  “For the family with the gridlocked siblings, [their financial advisor] arranged a session of personality-type charting with an outside expert. The tests showed one of the brothers-in-conflict to be a hard-driver who loved to make decisions on the fly. His brother was more analytical, and needed time to reach conclusions... Establishing that these conflicting traits are permanent characteristics has helped the brothers understand each other’s work habits and function better as a team. “

Our firm may not yet have had to arrange personality-type charting sessions, but this “running interference” or acting as a mediator and guide is exactly what we do. Evaluating goals, assessing relationships, identifying priorities and facilitating productive discussions is part and parcel of being a good estate planner and a great family attorney and advisor.

Estate planning and asset protection may sound like it’s about things and wealth, but a good advisor knows that it is always about family and relationships.  Consider this when you’re looking for an estate planner: Do you want an advisor who is simply protecting your wealth, or do you want an advisor who is looking out for your future and your family?


Friday, November 12, 2010

The Ins and Outs of Incapacity

Most people think that having a trust is about controlling (to an extent) what happens to your assets after you die.  This is true, but a trust actually has a much broader scope: a trust can also protect and provide for your loved ones—and more importantly, it can protect and provide for you—if you should ever become incapacitated.

In basic terms, incapacity means that you are no longer able to make decisions for yourself. Sometimes it is easy to determine incapacity: the person is in a coma or unconscious and obviously unable to make decisions.  But sometimes it’s more difficult.  What about whether or not a person is able to make rational decisions?  What if someone is suffering from Alzheimer’s, Dementia, or even a severe mental illness... should that person be making important financial decisions?

It is important to include a discussion of incapacity in your trust, because this one word carries a lot of weight.  It is when you are incapacitated that your successor trustee will take over, when the agent nominated in your Healthcare Directive will get the authority to make health care decisions for you, and when your financial Power of Attorney will go into effect.  With so much hanging on a single word, it’s important to know exactly what that word means.

Every standard trust should have a definition of incapacity as determined by a court of law.  This means that you are deemed incapacitated when a court of competent jurisdiction determines that you are unable to legally handle your own affairs.  A really good trust will also include a definition of incapacity as determined by two physicians; which means that two independent, licensed physicians have examined you and have determined that in their opinion you are unable to effectively manage your property or financial affairs.

There are many reasons why you want to have more than just the standard definition of incapacity, the primary reason being that court proceedings can be lengthy and filled with red tape.  While your agent is spending days or weeks going through the legal process, your estate is languishing and your financial agent is powerless to take action on your behalf.  Giving two physicians the power to determine your incapacity will circumvent the red tape and prevent lengthy delays.

Call or come into our office for more information about incapacity and what it means in your trust or Healthcare Directive. 


Wednesday, November 10, 2010

Preparing Boomers for the Finance Sandwich Squeeze

Baby-boomers are called the sandwich generation—and with good reason.  They were expecting to pay for their own retirement and their children’s college education; but now recession upon recession has toppled their elderly parents’ savings, and Boomers find that they are faced with the prospect of shouldering the financial burden of their parents’ final years as well.  The pressure of providing for so many people at once can quickly become overwhelming, and using one’s own savings or retirement fund can begin to look like an easy solution to immediate financial concerns.

Although it may seem like an easy fix to looming financial debt, don’t give in to the temptation to use your own savings.  Before you give in to fear and drain your retirement, get some professional financial advice.  This special edition recently released in the New York Times shows that it is possible to prepare for what’s coming—both for your parents and yourself.

Ourfirst recommendation is to discuss your situation with a trusted financial advisor.  After that, one of the primary suggestions offered in the Times is to talk to your parents about their situation.  It may not be easy; be prepared for your initial advances to be met with resistance.  Aging parents often worry that they will lose control of their own finances, or that giving decision-making capacity to one child will lead to anger or hurt feelings among their other children.  Instead of gearing up for a fight, the article mentions a few ways to gently lead into the conversation (including talking about family philanthropic projects.)

Another discussion you won’t want to skip is one about Long-Term Care Insurance.  This article by Ron Leiber discusses different kinds of insurance, whether or not you’ll need it (you will), and how to pay for it. 

The world of “old age” is changing.  People are living longer, experiencing more long-term health issues, and without the same ability to rely on government “entitlement” programs as their predecessors. Serious discussion and serious planning are essential to surviving the challenges of the “new” old age. 


Monday, November 8, 2010

Estate Planning As A Multi-Generational Affair

Creating an estate plan is a very personal matter; the planning party usually consists of you, your partner, and your attorney.  Although you may consider and provide for your extended family, they are not often a part of the planning process itself.  However, there are some circumstances under which estate planning should be a family affair—perhaps even a multigenerational one.

Planning as an extended family has its time and place.  This year the the generation-skipping transfer (GST) tax exemption means that more people than ever are bringing multiple generations of the family into the attorney’s office to talk about making gifts before the end of the year.  But the GST tax exemption is not the only reason extended families might want to plan as a whole unit.  Here are some other specific situations in which families might want to consider multigenerational planning:

  • Planning for succession within a family business.
  • When multiple generations of families own property together.
  • If the family is responsible for significant debt.
  • If a family has a history of supporting certain charitable foundations and desires to continue doing so.
  • To provide for family members who live out of the country.
  • To make provisions for a non-traditional family situation, such as unmarried partners.

Planning with your extended family doesn’t necessarily mean you won’t be able to create a private plan for you and your spouse as well.  It is quite possible to create individual estate plans for each nuclear family while still respecting the decisions that the extended family made together.  Of course, this process will be made much easier if the extended family and each nuclear family works with the same attorney, but it is certainly not necessary so long as each attorney and family is willing to communicate and act together.

If you aren’t sure if you should plan privately for your family or include your whole multigenerational unit in the process, give our office a call. We can help you look down the road ahead and create a plan of action that will make every member of your family feel secure.


Friday, November 5, 2010

Estate Planning Is Easier Than You Think

Have you ever seen the “1001 Must Do” books series?  1001 Movies You Must See Before You Die, 1001 Books You Must Read Before You Die, or maybe 1001 Natural Wonders You Must See Before You Die?  Let’s face it, 1001 things is a lot of pressure!  This is why we like this article in the San Francisco Gate, which lists only 16 estate planning things to do before you die.

Creating your estate plan can seem complicated and scary, but it’s not as daunting as you think—especially if you have the right person helping you.  The article mentioned above lists 16 things to do in order to get your affairs in order, but even those 16 things can be pared down to only 5 essential tasks:

1. Make a list of your assets-include your home and other real property, checking and savings accounts, retirement assets, life insurance, investments, as well as high ticket physical items and heirlooms.

2. Make a list of your debts-including credit card debt, remaining mortgage debt, auto loans.

3. Choose your beneficiaries-consider not only children or grandchildren, but also any charities you would like to support.  Think about what you want for your legacy beyond the first generation.  Also, although it can be difficult, consider what you would want should your children or grandchildren predecease you.

4. Decide who you trust to be your agents/executors to handle your affairs-getting your affairs in order means choosing people to make decisions when you are unable.  Agents with power-of-attorney will make financial decisions if you are unable, health care agents work with your doctors to determine your medical care, and trustees will control any assets you place in trust for the benefit of yourself or your beneficiaries.

5. Meet with an estate planning attorney-creating an estate plan is not as simple as checking a few boxes and signing a will. An estate plan requires an evaluation of your assets and goals, careful research into federal and state laws, and a determination of which of the myriad of documents best meets your needs. Have an experienced attorney help make your plan perfect.


Wednesday, November 3, 2010

Facing the Future with Long Term Care

November 2010 is Long Term Care Awareness Month, which means it’s the perfect time to talk about your thoughts, concerns, and plans for your own long term care.  According to this article by Ken Dychtwald, PhD, “average life expectancy is now at 78 and rising. And, if you're already 55 or more, life expectancy has soared to around 84.”  Furthermore, “Two-thirds of people over age 65 will need some kind of long term care.”  This means that it can never be too early to start planning for your future. 

Dychtwald points out in his article that “Uninsured medical expenses are the top financial worry among men and women age 55 and over. People... worry most about these expenses' unpredictability and potential for high costs.”  People know that their health is likely to decline slowly as they age, and people know that they will need care—possibly a lot of it—that the cost of this care is rising steadily, and that they will need a way to pay for it.  In spite of this, “many Americans are confused about what long term care actually is, and they're surprised to learn that Medicare and/or traditional health insurance do not cover most long term care needs.”

Life expectancy is rising, and the nature of “old age” is changing quickly.  We live longer, but we don’t necessarily live better; and what we’re headed for is an entire generation of people who are unprepared for the rigors and expense of “the new” old-age. Luckily, this doesn’t have to be the case.

The article above suggests that “There are three core topics in family conversations about long term care: (1) what care options are most preferred (e.g. if you needed some help, would you prefer to be cared for at home, in an assisted living facility or in a nursing home?); (2) potential roles and responsibilities of different family members' (and possibly, help from a professional care coordinator, aid or nurse), should it ever be necessary to manage care; and (3) how to pay for any required long term care (with your or a family members' savings, through Medicaid or with a long term care insurance policy?).”

We urge our readers to talk about these issues with their loved ones.  The conversations may be uncomfortable at first; but fear of the future—lack of preparation for the future—is far worse.  Discuss long term care with your loved ones and your trusted advisors. Be ready for whatever the future may bring.


Monday, November 1, 2010

The Quiet Devastation of Alzheimer’s Disease

According to a recent report put out by the Alzheimer’s Association, 5.3 million people have Alzheimer’s disease.  Chances are that you or someone you know has been touched by this illness.  In spite of these overwhelming statistics, Alzheimer’s continues to be a disease that sneaks up on individuals and their families, quietly tearing apart lives with uncertainty and confusion. Estate planners and elder law attorneys sometimes see this heartbreaking confusion in our own offices when elderly clients or their families come to us, concerned that a loved one no longer has the capacity to sign or make decisions about legal documents.

A new article in the New York Times discusses the slow and sometimes invisible development of Alzheimer’s disease, and some of the earliest warning signs that your loved one may be suffering.  “New research shows that one of the first signs of impending dementia is an inability to understand money and credit, contracts and agreements.” This comes as particularly bad news to families who put off their estate planning year after year, each time telling themselves “We’ll do this next year for certain.”

By the time families come into our office with their suspicions about their aging loved one it may be too late for us to help.  “Lawyers have guidelines, published in 2005, that include warning signs of diminished capacity, like memory loss and problems communicating and doing calculations. The guidelines instruct lawyers to look at the legal requirements for capacity in specific situations, like making a gift. But many questions remain.”

Plans created after the suspicion of Alzheimer’s or dementia has set in can be fraught with doubt, and often cause conflict among family members.  We have seen the rifts and heartbreak the illness causes in even the strongest of families.  We urge you to take care of important legal and estate planning issues early, before questions of competence can cast the shadow of doubt over your wishes.


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