Houston Estate Planning and Probate Blog

Friday, September 24, 2010

Lapse in Generation-Skipping Transfer Tax Makes Giving to Grandkids Easier Than Ever

Wealthy grandparents have a unique opportunity this year to give their grandchildren gifts of substantial value without incurring a hefty tax. This is a huge savings opportunity!—so why aren’t more people taking advantage of it? 

Part of the reason may be lack of awareness. Everyone knows about the Bush administration’s year-long repeal of the estate tax, but very few people seem to be aware that the Bush tax cuts included a year-long lapse of the generation-skipping transfer (GST) tax as well, as discussed in this article in Reuters

But before you call the grandkids with the good news, consider whether or not you feel comfortable giving them a large sum outright.  If your grandkids are still young (and not yet responsible about money and finances) you may not want them having such a large sum to play with; and unfortunately, giving the gift in trust is not an option in this case.  “To take full advantage of the GST tax break, assets should be transferred directly to beneficiaries and not to a trust. Money placed into a trust may lead to taxes when distributions are made later on.”

If your grandchildren are responsible adults, and if you’ve been considering giving them a monetary gift anyway, this lapse in the generation-skipping transfer tax could be just the push you need.  Talk to your attorney or financial advisor about your gift-giving options.

Wednesday, September 22, 2010

Charitable Remainder Trusts: Philanthropy in Death Can Benefit You in Life

If you have a favorite cause, foundation or charity you have probably considered leaving some money to that organization in your will or living trust. Perhaps you’ve even taken it a step further and toyed with the idea of specifying that the executor of your will or trustee of your trust set up a trust in the name of your favorite charity, rather than simply giving a one-time gift.

If you have ever considered either of these options you may want to ask your estate planner about setting up a Charitable Remainder Trust, which, according to this Elder Law Answers article, not only supports your favorite charity after your death, it also benefits you during your lifetime.

“A charitable remainder trust is an irrevocable trust that provides you (and possibly your spouse) with income for life. You place assets into the trust and during your lifetime you receive a set percentage from the trust. When you die, the remainder in the trust goes to the charity (or charities) of your choice.”

The altruistic reasons for setting up a charitable remainder trust are obvious, but here are some other advantages you may not have considered:

  • Reduction of your taxable income
  • Charitable tax deduction at the time you fund the trust
  • Diversification of assets
  • Income from the trust during your lifetime

In addition to all of these financial advantages, setting up a charitable remainder trust provides you with the opportunity to leave a family legacy and impress your values upon your children and grandchildren.

 Please remember that charitable remainder trusts are irrevocable trusts, which means once they’re done they can’t be undone, so it’s not something to take lightly.  If you are interested in creating a charitable remainder trust, call our office or talk about it with your own attorney before you take action.

Monday, September 20, 2010

Help for Alzheimer’s Patients AND Their Caregivers

Shakespeare said that old age is a return to childhood; without teeth, without voice... and in the case of Alzheimer’s patients, without memories.  But if the elderly have to endure the drawbacks of childhood, shouldn’t they get some of the benefits too?

The Family Caregiver Alliance must have thought so too, because a few times a year they sponsor a weekend sleepover in Alamo California called Camps for Caring. The program provides campers with an experience “of shared meals and stories, of activities creative and expressive, of exercise in the outdoors and of new friends and memories made over the weekend.” But the significance of the experience can go far beyond that.

According to a recent story about Camps for Caring on NPR, although “campers typically don't remember details of the retreat... the experience significantly lifts their mood.”  In fact, “Post-camp surveys of family caregivers indicate that the ‘good feeling’ lingers, and it even can improve daily functioning.”

Beyond being a beneficial experience for the elderly attendees, Camps for Caring provides a much-needed break for overworked caregivers, who often attend to their elderly loved one around the clock, and can quickly find themselves dangerously close to the burnout breaking point.

Out of state residents may find it difficult to take advantage of the Camps for Caring program, but that doesn’t mean that caregivers or their elderly charges must leave themselves at the mercy of the effects of Alzheimer’s.  In addition to information about Camps for Caring itself, the NPR article includes some tips from experts that can make dealing with Alzheimer’s easier on everyone. Or you can go to the Family Caregiver Alliance’s Family Care Navigator to find organizations and resources in your area.

Friday, September 17, 2010

Those Who Hesitate Can Still Achieve the Liberation of Retirement

In spite of all the advice you see out there to start saving early for your eventual retirement, we’re realistic.  We know that many people—either out of choice, neglect or necessity—put off saving for their retirement, only to find themselves up against a wall of anxiety when they realize that retirement isn’t very far away.  However, according to Carla Fried of CBS Money Watch, it may not be as bad as you think. In fact, according to Fried, “he who hesitates can in fact win at retirement.”

The article suggests that due to the recent economic downturn many people are choosing to put off their retirement until they feel more secure... a feeling that may never materialize.  But that hesitation can serve a purpose: It provides the opportunity to take a good look at your finances and your choices, “take a deep breath and make some smart tweaks to your plan [so] you can still pull off a successful retirement.”

These are some of the tweaks Fried recommends:

Put Off Your Retirement Date.  At best you give yourself a few more years to bulk up your savings account, at worst you’ve eased some of the pressure on the savings you already have.

Consider Downsizing Your Home.Moving into a more economical home not only gives you some breathing room on the monthly mortgage once you retire, but you may be able to put some of the proceeds from the sale into your savings.

And there’s one more that isn’t included in the article, but that you won’t want to overlook:

Talk to Your Attorney About Estate Planning.  You may not expect it, but estate planning includes thinking about health care, long-term care, and how to work with the departments of Social Security and Medicaid instead of against them. Making a plan before you retire can relieve a lot of stress.

Wednesday, September 15, 2010

State Of Washington Takes Action Against DIY Legal Document Retailers

There has been lot of hullabaloo in the news recently about Do-It-Yourself Wills and Estate Planning, most notably a debate on with articles presenting The Case For Do-It-Yourself Wills and The Case Against Do-It-Yourself Wills. Well, the state of Washington just weighed in on the subject with a settlement between the Washington Office of the Attorney General and Legal Zoom, a company that offers DIY legal documents online; and the ruling leaves no question as to where the Washington Attorney General stands in his opinion:

“’LegalZoom offers do-it-yourself legal documents online but can’t provide you with legal advice or tell you which forms to fill out,’ Attorney General Rob McKenna said.

Under a settlement with the Attorney General’s Office, LegalZoom can’t compare its costs to attorneys’ fees unless the company clearly discloses that its service isn’t a substitute for a law firm.

Simply selling legal forms doesn’t constitute the practice of law. LegalZoom can only provide an online form service that allows consumers to choose and complete their own legal documents, explained Consumer Protection Division Chief Doug Walsh.

The agreement filed today in Thurston County Superior Court also prohibits LegalZoom from engaging in the unauthorized practice of law, selling personal information obtained from Washington customers or misrepresenting the benefits of any estate distribution document.”

Regardless of your existing thoughts on the subject of DIY wills and estate planning, the comments and actions of the Washington Attorney General certainly provide food for thought.

Monday, September 13, 2010

How to Prepare for Dismaying Changes to Estate Tax Law

This may seem like we’re listening to a broken record, but once again Congress’ inability to act is creating uncertainty in the estate-tax-planning world.  We’re little over 3 months away from a major upheaval in the estate tax, and according to the New York Times the upcoming law is likely to cause a lot of grumbling unless Congress takes action.  And it’s no wonder when the new law will mean that more families are taxed at a higher percentage:

“The amount of each estate that is exempt from estate tax is scheduled to become $1 million in 2011 (down from $3.5 million in 2009, when the tax was last in effect). The tax on the balance is to rise to 55 percent in most cases (up from the 2009 rate of 45 percent). So now is the time to consider the various tax strategies available.”

What this lower exemption rate really means, however, is that more families will be caught off-guard when a loved one passes away and the survivors are suddenly hit with a massive tax bill.

That is unless families start planning now.

The Times article mentioned above suggests that “the easiest way to reduce the tax bill is to give as much as $13,000 a year each to as many people as you like — which you can do without paying gift tax;” but when you consider how little $1 million really is (especially when the value of your home, retirement savings, etc. are all included when adding up your total assets) we’re guessing that there are a lot of people out there who are over the exemption amount, but don’t feel they can afford to go handing out $13,000 every year. Much more appealing are some of the other planning strategies suggested in the article, including:

  • “Buy a one- or two-year [life insurance] term policy to cover the tax billif the exemption amount is only $1 million.” The policy will help your heirs cover what could be a hefty tax bill, but the policy “[could] be canceled if Congress eases your estate tax concerns;” and
  • “Create a trust.”The article suggests a GRAT (Grantor Retained Annuity Trust), which is a great tool for high-value assets that are expected to appreciate during your lifetime; but for married couples simply looking for a way to protect their children from a hefty federal estate tax down the road a Credit Shelter Trust may be a better option.

There are a number of other ways you might be able to prepare for the coming estate tax upheaval—the best way to protect your own family is to contact an estate planning attorney and ask about your options.

Friday, September 10, 2010

Women and Retirement: Your Money, Your Future, Your Plan

You have a longer life expectancy than a man, different ideas about what constitutes risk, often work for a different pay-scale... and if you’re a woman, you likely need a different kind of retirement plan as well.

You may think that the financial advisor recommended by your husband/father/brother will suit you just fine, but this new article in the Wall Street Journal suggests that what works financially for men doesn’t always work for women—and this includes old-school financial advisors. According to the article, when women start seriously planning for retirement, “many find that the financial-services industry is an obstacle, not an ally. In a recent Boston Consulting Group survey of women investors, respondents said they routinely feel underserved by the financial-services industry, with more than 70% expressing dissatisfaction with the service they're getting. Among the complaints: disrespectful advisers, narrower investment choices based on the assumption that women can't handle risks and patronizing pitches.”

This isn’t just a case of emotional discomfort; it also hits women in the pocket-book, where it’s likely to hurt the most. “A recent survey by financial-services company MassMutual found that women's retirement accounts were, on average, just two-thirds the size of men's.”

Not all of this can be blamed on financial advisors though. Women have a dangerous (if generous) tendency to put their spouses and families first, with little thought for their own financial security until it’s too late. In addition, married women often count on their husband’s retirement plan to take care of the both of them—only to find that his plan works for his life expectancy, leaving her without a plan when he’s no longer around.

What can women do?  The first thing each woman should do is have is her own retirement account, and contribute to it each month.  Make sure your financial advisor recognizes your unique needs and listens to your hopes and concerns.  You can plan with your partner for golden years spent together, but it’s your responsibility to save for yourself.

Wednesday, September 8, 2010

Planning for the Future is Essential for Special Needs Families

If you have a special needs child, parent, or sibling then you know that planning for the future can be overwhelming under the best of circumstances; which is why so many parents and caretakers tend to live for today, while planning for tomorrow is always put off until... well, until tomorrow.  But if planning and caring for your loved one is this difficult for you, can you imagine how difficult it would be for a friend or guardian if something were to happen to you?  For this reason, the importance of planning for the care of your special needs loved one cannot be overstated. 

Getting started with your planning can feel like climbing Mt. Everest at first, especially if you’re trying to navigate through government programs and federal financial aid.  But as overwhelming as it can be in the beginning, with the right advisors the planning process can and should be a relieving and beneficial experience for all. The following article from CNN Money (and posted courtesy of the Special Needs Alliance) gives a few tips on how—and why—to begin planning for your special needs loved one.

If you would like to have a secure plan for the future but aren’t sure where to begin, perhaps the best way to start is to find an attorney in your area who specializes in Special Needs planning.  The laws and requirements for government aid will vary from state to state, but more importantly, there is no substitute for a knowledgeable expert who will listen to your family’s unique story and help you blaze securely into the future.

Friday, September 3, 2010

How to Help Your Elderly Parents When You Live Far Away

We write a lot on this blog about the concerns that caregiver children have for their elderly parents, but that’s only one side of the story. Many families also have an adult child living far from home, and though the concerns of the long-distance child may be different from the one who lives down the street, they’re no less important.  Here are some of the more common concerns we hear about in our office, and some suggestions for addressing them:

I worry that when I talk to my parents on the phone I’m not getting the whole truth about their health or situation. This is one of the most common concerns of long-distance children. The best thing to do is be up front with your parents.  Tell them that you want—and need—to know the truth, even if they think it will worry you.  If you still don’t think they’re being completely honest, enlist the help of a sibling or nearby friend or neighbor who can be your eyes and ears.  You can also ask your parents to sign a waiver with their doctor giving him or her permission to share their medical details with you.

I’m afraid that my mom is losing the ability to manage her money and could end up broke. Seniors are the most common victims of financial fraud, and it’s hard to keep tabs on mom or dad if you live far away.  The best way to prevent financial fraud is to talk about money with your parents early and often.  It may go against the grain, but discuss your own finances with them if it will help them open up about theirs.  Visit as often as you can and watch their mail for letters from promotion companies or shady looking “charities”; and put your parent's phone number on the National Do Not Call registry (1.888.382.1222 or

I feel guilty that my sister (who lives in the same town as my parents) is shouldering the bulk of the burden. The sibling who lives closest does often end up being the physical caretaker of elderly parents, but that doesn’t mean those who live far away can’t help.  The most common contribution from long-distance children is financial support—and that’s no small thing!  Offer to pay for a housekeeper, in-home care assistant, taxi service, etc.  And don’t forget to talk to your sister about what she needs.  Helping your caregiver sibling is another way of helping your parents.

I love my parents; I want to do more to help than just give them money. A common complaint of seniors is loneliness and fear of being forgotten. One way to help your parent and help calm your own fears is to simply keep in touch.  Make a point of calling your parent on a weekly or bi-weekly basis. Send frequent cards or e-mails. Plan a family vacation that your elderly parent can be a part of.  You can help your parents with your expertise as well; try to be involved in “the big stuff” such as meetings with estate planners, financial planners, nursing staff, or geriatric care managers. And most importantly, work regular trips to visit your mom or dad into the budget.  There’s really no substitute for face-to-face communication.

I think that my siblings close to mom and dad are making the wrong decisions for them, or are pressuring them to make decisions they don’t really want to make. Undue influence is a serious accusation, and if you truly think your siblings may be threatening or manipulating your parent you should seek the help of a professional.  Before you take irreversible action you need to have a private conversation with your parent; ask if they are being coerced and try to determine if fear is a factor. If you still think your parent is being manipulated against their will contact an elder law attorney immediately. 

I don’t want to miss out on what could be my last moments with my parent. There’s just no way around it, your parents won’t be here forever, and nobody wants to feel that there were things left unsaid.  If you truly worry that your parent is facing his or her last days the best advice we can give is to go visit if at all possible, and make your visit matter. Look through old photos, talk about your memories, and say the things that need to be said. If you can’t visit in person make phone calls or send letters.  Don’t save your best sentiments for the eulogy—tell your parents how important they are to you today.

Wednesday, September 1, 2010

You’re Never Too Young to Need a Financial Planner

Most people don’t think about visiting a financial planner until they’re old enough to have some money to manage, but if your child is a recent college graduate, or in his or her final year, you may want to consider a joint trip to your financial planner.  A recent article in the Boston Globe lists a number of very compelling reasons why even young adults with little or no savings can benefit from a little bit of planning.

1. A visit to a financial planner can help young adults learn early the importance of budgeting: “If you are living on your own for the first time you haven’t had the responsibility yet of paying bills and learning to make your paycheck last until the next payday... One of the basic tenets of financial planning is to know where your money is going.”

2. Start planning for retirement while you’re still young.The earlier you start, the better off you’ll be. “A financial planner can go over the various fund choices in your 401(k) or other retirement plan and help you choose one or more funds that suit your needs.”

3. Learn how to turn big dreams for the future into a reality.  Whether you plan to get married, buy a house, or start your own business, “A Certified Financial Planner® can figure out how much you need to save and create a plan to make saving painless.”

4. And finally, a financial planner can help young adults learn the basic tenets and terminology of borrowing, lending, saving smart and paying off loans with interest.  “Learn about interest rates and how they work, whether they are for credit cards, auto loans, student loan or other borrowing. See how compound interest can help you reach goals faster.”  An early trip to a knowledgeable professional can ensure that your child doesn’t get taken in by persuasive credit card companies.

Monday, August 30, 2010

Planning to Live Through the 2010 Estate Tax Repeal? You Can Still Save on Taxes

It is common knowledge that 2010 is a great year for heirs.  If you didn’t know about the 2010 estate tax repeal, all the media coverage of George Steinbrenner’s recent death (and his heirs’ lucky tax break) probably alerted you.  Everybody is saying that 2010 is a good year to die...  But what about those of us who plan to live through 2010?

According to the New York Times even hale and hearty individuals can save on their taxes in 2010—it just takes a little more planning. “A bigger issue [than the estate tax]... has become the gift tax, which is linked to the estate tax to prevent people from giving away their fortune in life to avoid taxes at death. It now stands at 35 percent, the lowest rate since the 1930s.” The gift tax is a tax on money or property that you give to another individual while you are still living.  Currently an individual may give up to $13,000 per year (or up to $26,000 if you give as a married couple) without incurring gift tax. 

If you’re a wealthy parent or grandparent trying to decrease your taxable estate through gift-giving, this is the year to do it for a number of reasons.  First, of course, is the historically low 35% gift tax rate.  Second, “in addition to the historically low rate, another reason to make sizable gifts this year is that the values of many assets are still depressed. Long-held stocks, real estate and shares in private businesses could all increase in value, and giving them away now will allow them to appreciate with your heirs and not in your estate.” A final reason to consider giving your large gifts before the year is over is that the 35% rate won’t last forever; the gift tax is expected to rise to 55% next year.

How can you take advantage of this lucky confluence of events? Well, as always when you’re dealing with large sums of money (not to mention dealing with the IRS), you’ll want to be careful. We do NOT recommend that you simply write a check for $13,000+.  Contact your estate planner or your financial planner to find out how you can safely reduce your taxable estate while giving security to the people you love.

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