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Houston Estate Planning and Probate Blog

Friday, August 6, 2010

Jane Austen’s Will: It Used to Be So Easy

Many clients are shocked when they see the sheer volume of paper in a truly well-done estate plan.  A trust by itself can be hundreds of pages, not to mention the other 6 to 16 documents you may or may not have—depending on your family situation. You may find that the “simple” estate plan you thought you were getting has turned into something of a size that would rival War and Peace

It didn’t always used to be this way.  The last will and testament of the great Jane Austen, for example, was only one paragraph long:

I Jane Austen of the Parish of Chawton do by this my last will I testament give and bequeath to my dearest sister Cassandra Elizabeth everything of which I may die possessed, or which may be hereafter due to me, subject to the payment of my Funeral expences, & to a Legacy of £50. to my Brother Henry, & £50 to Mde de Bigeon - which I request may be paid as soon as convenient. And I appoint my said dear sister the executrix of this my last will & testament.

Jane Austen

April 27 1817

Although this simplicity may have worked in 1817 England, it isn’t practical in the here and now.  Things just aren’t that simple anymore.  First of all, although Austen appoints her sister Cassandra as the executrix of her will, the will itself neglects to specify what powers are included in that appointment, leaving Cassandra effectively unable to carry out Austen’s wishes.  Secondly, the will neglects to make alternative provisions—what if Cassandra had unexpectedly died before Jane? Also notably lacking (from our contemporary perspective) are any provisions for estate taxes. And finally, discerning readers may notice that the will does not include the signatures of any witnesses, something which is absolutely necessary in order to execute a valid will today (with the exception of holographic wills, which are often created in emergency situations, are entirely hand written, and do not require the signatures of witnesses.) 

We all may long for simpler times, especially when it comes to something most people think will only benefit their heirs and not themselves; but many of the rules and regulations that are dismissively thought of as “hoops to jump through” are there for your best interest.  They exist to protect your heirs and your legacy from fraud, misuse, greed and neglect.  Far from being a chore, creating a thoughtful and legally valid will these days is actually an act of love... One might even say it’s a matter of sense and sensibility.


Wednesday, August 4, 2010

You Know the Importance of Planning... But Do Your Aging Parents?

If you have been reading our blog then you know that this year—the year without a federal estate tax—is an important year, and that next year—when the estate tax returns—will be an even more important year for planning and reviewing your estate.  You know this... but do your parents?

Kimberly Palmer, author of this article in U.S. News and World Report says that “bringing up the estate tax with your aging parents can be as awkward as inquiring after their sex life.”  Talking about any kind of estate planning with your parents can indeed be awkward, but as Palmer points out it is extremely important... especially now when the repeal and reinstatement of the estate tax means that “ignoring the issue could mean giving Uncle Sam a big chunk of one's estate inadvertently.”

So how can you bring up the topic of estate planning with your parents without them thinking that you’re more interested in your inheritance than your parents’ well-being? The article mentioned above has a few ideas, including:

  • Talk about your own estate planning experienceand how relieved you are that everything is in place.
  • Talk about recent celebrity deathsthat have been in the news: George Steinbrenner, Michael Jackson, etc.
  • Mention how concerned you areabout the uncertain estate tax situation.

Of course, the best policy is to just be honest. Tell your parents truthfully that you are concerned about their financial stability, about keeping the family peace, about your grasping uncle Mickey taking the antique dining set you’ve loved since you were a child.  Explain that you only want to help... but remember that the choice is ultimately theirs.  As author Deborah Jacobs says in the article, "if they don't want to talk about money, then you need to drop it and accept that this is not something you should pursue... If you have tense times towards the end of your parents' life because you're talking about estate planning, it will stay with you forever, and it's just not worth it."


Monday, August 2, 2010

The Next Step In Elderly Home Care

Many adult children of an aging parent get to a point in their parent’s care where they feel they have only two options: move their parent in with them so that they (or their spouse) can provide around-the-clock care, or move their parent into a nursing home.  Reaching this point can be a very emotional time for both parent and child; with the parent feeling anger and frustration at the loss of independence, and the child feeling that they have somehow failed their parent.

Improving technology may never be able to remove the need for this decision entirely, but it may be able to postpone it a little.  A recent article in the New York Times describes some new technologies that help adult children monitor their aging parent right inside the home, therefore removing the need (or at least delaying the need) for physical around-the-clock supervision.

One of the new technologies mentioned in the article (called GrandCare) “allows families to place movement sensors throughout a house. Information — about when doors were opened, what time a person got into and out of bed, whether there’s been any movement in a room for a certain time period — is sent out via e-mail, text message or voice mail.” It is this kind of in-home monitoring that may allow seniors to remain in their homes longer.

Some seniors have reservations about these new technologies, however, something that they consider to be an invasion of privacy. Nancy Schlossberg is quoted in the article as comparing these new technologies to nanny-cams, “Big Brother is watching you — there’s something about it that’s very offensive.” Some seniors may agree with her, but if it comes down to a choice between technological monitoring or moving to a nursing home they may find that “Big Brother” is the lesser of two evils.


Friday, July 30, 2010

Living on the Edge: Small Business Owners and Retirement

Do you feel comfortable with your retirement plan?  If you’re a small business owner the answer to that question is probably no.  In fact, according to this report by Jules H. Lichtenstein, Office of Advocacy, US Small Business Administration, “Retirement account ownership, contribution, and participation rates for all business owners are low” and that “Having a micro-business with fewer than 10 employees reduces the probability of an owner having a 401(k)/Thrift plan from 17.4 percent to 10 percent!”

This is a concerning statistic.  Why is it that so many small business owners skimp on their own retirement?  It can’t be lack of knowledge, because most of them have enough financial savvy to keep their businesses doing well.  And it isn’t likely that the reason is lack of awareness, as most small business owners are well aware of the need for a substantial plan for the future.

Perhaps the reason is that small business owners feel the best investment in their future is to invest in themselves.  Where an employee in a large corporation is likely to take any investment income and put it in stocks or savings, a small business owner is more likely to turn around and put that money back into growing her own company. Perhaps small business owners feel that they have limited options when it comes to retirement—after all, they don’t have a large corporation offering to match their retirement contribution.  However, according to this article in the Motley Fool, small business owners actually may have more options than employees in large corporations.

“Several retirement plan options exist for small-business owners. They vary in how much money can be contributed, whether employees other than the owners may participate, what (if any) contributions the employer must make on behalf of employees, what deadlines there are for creating and putting money into the plan, and how hard it is to run the plan. Among the options small businesses commonly use are SIMPLE IRAs, SEP IRAs, profit-sharing plans, SIMPLE 401(k) plans, and single-participant 401(k) plans.”

So… are small business owners unaware of their many options for retirement planning, or are they merely more willing to live on the edge?


Wednesday, July 28, 2010

Not Just Estate Tax Anymore

Anyone who has been following the news the past 6 months knows that the expiring Bush tax cuts (including the repeal of the estate tax this year and the tax’s reinstatement next year) have given lawmakers no end of trouble as they struggle and debate—and debate and struggle—to agree on new tax legislation moving forward. In fact, The Wall Street Journal calls the issue “a ticking time bomb,” while the New York Times warns that “an epic fight is brewing.” It seems that the only thing everyone does agree on is that something has to be done before December 31, 2010.

Unfortunately, according to both news sources, politics takes precedence over legislation.  “The tax fight will serve as a proxy for the bigger political clashes of the year, including the size of government and the best way of handling the tepid economic recovery,” warns David M. Herszenhorn of the NY Times, “’...this is code for the role of the federal government, the debate over the size of government and the priorities of the nation.’”

According to David Wessel of the WSJ party lines are clearly drawn.  “The Obama administration is pressing to extend the Bush tax cuts for everyone with an income under $250,000 a year and to raise taxes on those above. A recent Pew/National Journal poll found that only 11% of Democrats favor extending all the Bush tax cuts.” Meanwhile, “Republicans are happily staking out the no-new-taxes turf, playing to their traditional constituency. Pew says 52% of Republicans favor extending all the Bush tax cuts.”

It would certainly give taxpayers some comfort if legislation could be passed quickly and decisively, but Herszenhorn warns that it’s not likely to happen, “Given the partisan gridlock of recent months, there is a chance that the battle could go down to the last minute, or even — in the face of a stalemate — that the tax cuts could be allowed to expire completely, a development that... lawmakers in both parties say could be the worst outcome.”

Either way, the best advice we can give our readers is to be prepared.  Just because lawmakers keep putting off a decision doesn’t mean you should.  Talk to your attorney about the best way for your family to weather the coming storm.  Be aware of changes to tax laws and update your estate plan accordingly.


Monday, July 26, 2010

The Comfort That Comes With Planning Ahead

Everybody thinks it won’t happen to them.  Or rather, everybody knows it’s going to happen to them eventually, but nobody thinks it’s going to happen tomorrow, or next week, or even next year.  The “it” of which I speak is, of course, death. It is this perceived immortality that allows so many people to put off their estate planning until it is too late. 

But today’s blog post is not a cautionary tale about a family who put off their planning and regretted it, today’s post is about the peace and relief that forethought and planning brings not just to your family, but to you as the person making the plan.

In this article in Market Watch Chuck Jaffe tells the moving story of his brother Rob, who insisted 2 years ago on creating an estate plan even though he and his wife were both healthy.  As Jaffe puts it, “While not pleasant subject matter, it was not morbid... you'd rather be drinking lemonade on the veranda, but it wasn't a sharp stick in the eye.”  However, when Rob became unexpectedly ill in May of this year the estate plan turned out to be a comfort to Rob and his family—such a comfort, according to Jaffe, that Rob “made me [Chuck] promise that I would write about him... when his time was up, because his story would help others.”

"People need to understand... how big a blessing it is to know -- when their time comes -- that they have everything in order, that they don't need to stress or worry about how things they worked their whole life for are going to turn out. ... I would not want to waste a minute of my life now having to do estate planning or worrying that I live long enough to get documents filed or whatever garbage comes with it... Focusing on death and dying while you are living, that's easy; having to focus on death when you are dying, that would be unimaginable."

In our business we frequently see how much easier it is for people to create a plan when they’re healthy, as opposed to the stress that comes with creating a plan when they are sick.  Thank you Mr. Jaffe for sharing your brother’s moving story.  We hope that your (and your brother’s) words will help motivate others to take comfort in planning ahead.


Friday, July 23, 2010

Should You Pre-Plan Your Own Funeral?

In just about every will or trust you will find something about the estate “paying the deceased’s final expenses,” otherwise known as funeral and/or memorial costs.  As a small portion of what can sometimes be a very large and intricate document, this “final expense” clause can seem unimportant—but we know better.

A funeral comes at a time when the death of a loved one is recent and close, and many people are still in shock and in some cases struggling with the reality of loss.  Funerals help grieving loved ones come to terms with death and say their final goodbyes… but for the person planning the funeral the experience can sometimes be a frustrating, painful, and expensive experience. Planning ahead for your own funeral—discussing it with your loved ones and even including your wishes in your estate plan—can remove this burden from their shoulders when the time comes.

Although pre-planning a funeral is essential, pre-paying for a funeral can actually be detrimental.  According to The Funeral Consumers Alliance there are just too many things that can go wrong, “[prepaying for] funerals may not cover every item of service you and your family expect, and there's often no guarantee the money you pay today will keep up with inflation to pay the cost of the service you've picked out.” In addition, “many state laws don't offer much protection for your prepaid funeral money.” If you change your mind or move out of the area there’s no assurance that you’ll get your money refunded. That having been said, although pre-paying may be a no-no, but setting aside funds—in an account, CDs, or a specially designated insurance policy—is always a good idea.

Talking about your wishes for “final disposition of your remains” is something that should always be discussed with your estate planning attorney. Whether you choose to pre-plan your funeral or not, having some basic instructions in your will or health care directive for your preferences regarding burial, cremation, organ donation and so on will be a huge help to your loved ones during a difficult and emotional time.


Wednesday, July 21, 2010

Falling Through the Cracks

Our country may be facing a simultaneous growth and recession... unfortunately, according to journalist John Leland, the two seem to be at odds.  What we are referring to is the growth of the elderly population and the recession of funds available to help this aging community pay for the care they need.

The economic downturn of the past few years has hit the elderly with a double-whammy.  Many of them lost close to all of their savings when the stock market bottomed out, and now budget cuts to state-funded home-care services threaten to force many of them out of their homes and into hospitals or nursing facilities.

“’I’m not getting a cost-of-living adjustment, and now I’m not getting food,’ said Joyce Plennert, 83, who is on a waiting list for Meals on Wheels in Palatine, Ill. ‘Now I’m worried my home services will be cut. Without that, I’d be in a nursing home, if I could find one with room.’”

According to the above-mentioned NY Times article, a number of states have already made cuts to home-care services, including Alabama, Arizona, California, Colorado, Florida, Kansas, Mississippi, Missouri, Nevada, New Jersey, New York and Texas.  “The situation is grim, and it’s safe to say that present trends are expected to continue,”

These budget cuts impact more than just senior citizens—they affect the professional caregivers and home aides who lose their jobs when state programs are cancelled, as well as the families of the elderly.  When these seniors lose their ability to live at home it’s their families who will have to pick up the slack either by contributing to the costs of care or more often by become the caregiver themselves.

If you or a loved one is facing a loss of benefits due to budget cuts don’t be afraid to explore your options.  Geriatric care managers can help families through confusing times, and other advisors such as elder lawyers, estate planners, financial planners and others can offer invaluable advice when creating your plan for the future.


Monday, July 19, 2010

Estate Planning Advice for Ex-Pats and World Travelers

Estate planning can be a pretty involved affair, even for people whose lives are fairly straightforward; but if you are an ex-patriot, have dual citizenship, or plan to leave assets to family members in another country the estate planning process can by downright mind-boggling. This is because each country is going to have its own laws regarding heirs and distribution, while some governments (according to this article in the New York Times) will even “require their citizens or residents to pass assets on to people other than those whom they would choose.”

The United States has avoided these “forced-heirship” laws (although your state’s laws regarding distribution of assets in the absence of a will or estate plan may feel like forced-heirship), but these laws “are prevalent in many parts of the world, notably the Middle East, where Islamic law predominates, and continental Europe.”  If you are a United States citizen residing in one of these “forced-heirship” countries—or if you are a citizen of one of these countries residing in the United States—you will definitely want to talk to your attorney about how best to protect your family and your assets.

Just how you will go about building your web of protection will depend on a number of variables, including your citizenship, your country of residence, and in which country the assets were acquired or are held. Most estate planners agree that a trust is generally the best way to go about protecting your assets, but a trust may not work in every situation.  “The legal systems that have forced-heirship rules tend not to recognize trusts.” You may find that you’ll have to set up a will or estate plan in two places: one in your country of origin and one in your country of residence. 

And of course international estate planning is not all about heirs and distribution—especially if you have young children. International guardianship documents should be carefully drafted and should include provisions for temporary guardians, travel arrangements, and medical powers of attorney for minors.

Living in a global community has its pros and its cons—the best way to successfully span two countries or cultures is to be flexible... and be prepared!


Friday, July 16, 2010

One Man's Trash is Another Man's...Heirloom?

Families have a way of acquiring great numbers of treasured objects and mementos: photo albums, antique books, Wedgewood China... a mounted deer head?  You just never know what’s going to end up in the trash-heap and what will be kept and passed on to the next generation.  Ellen Lupton mentions in her recent article in the New York Times that she and her husband kept the Wedgewood China and (surprisingly enough) the deer head.  But the question she puts forth is... why?

Lupton’s article, entitled How to Lose a Legacy, makes the point that the difference between old stuff as trash and old stuff as treasure lies largely with you and how you choose to leave all this stuff to your heirs. “You can’t buy an heirloom at Pottery Barn or IKEA. It comes via gift, bequest or a heated sibling brawl.”

Lupton says early on in her article that “Even folks in the ‘die broke’ crowd, determined to enjoy their remaining assets rather than leave them to the ungrateful grandkids, may secretly hope the family will love and honor their dearest possessions.” But secret hopes aren’t of any use to your children or grandchildren after you’ve passed away.  Part of the job of an estate planner is to help you express these secret hopes to your heirs and leave your treasured possessions in safe and appreciative hands.

Of course your heirs are going to have minds (and memories) of their own, and your treasured silver cake platter could still end up in the local antique store; but the best way to keep your treasures in the family is to make sure your family knows your wishes.  If they know how much your grandmother’s English tea set meant to you (and why it meant so much to you) it’s going to mean that much more to them.

You may share a life and history with your heirs, but you can’t expect them to read your mind.  If you can put your stuff into context—let each heirloom tell a part of your story and reflect a meaningful relationship—the legacy you leave will be priceless.


Wednesday, July 14, 2010

Will Billionaire Steinbrenner’s Death Inspire Congress to Reinstate the Estate Tax?

Common superstition says that famous deaths come in threes, but the death of New York Yankees owner George Steinbrenner on July 13 makes four billionaire deaths in 2010.  It’s hard to deny the significance of such events in a year when there is no estate tax.

According to the Associated Press Steinbrenner’s family is set to receive a tax break of “about $328 million” because of the estate tax repeal this year.  This number, along with the millions of dollars saved (that would otherwise have gone to pay estate taxes) by the families of Dan L. Duncan, Walter Shorenstein, and Mary Janet Morse Cargill may inspire Congress to take action on the issue of the estate tax before the year is over. The Washington Post quotes Senator Bernard Sanders of R.I. as saying, “In the midst of this terrible recession, the idea of giving billionaires a massive tax break is obscene... Already we have four billionaire families who are not paying taxes -- Steinbrenner's being the last one. Many billions are being lost. We have to address that reality right now.”

Although there is still some talk of the possibility of the estate tax being reinstated retroactively, most lawmakers and attorneys agree that the further into 2010 we get the less likely this becomes. But missing out on the estate taxes of four billionaires has to hurt, and the members of Congress are not likely to drag their feet much longer.  One way or another, we can soon expect to see the issue of the estate tax become a hot topic of debate in Washington.  Our firm will keep you abreast of any changes to the law that could affect you, your loved ones, or your estate.


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