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Houston Estate Planning and Probate Blog

Wednesday, April 1, 2015

Beware of “Simple” Estate Plans

“I just need a simple Will.”  It’s a phrase estate planning attorneys hear practically every other day.   From the client’s perspective, there’s no reason to do anything complicated, especially if it might lead to higher legal fees.  Unfortunately, what may appear to be a “simple” estate is all too often rife with complications that, if not addressed during the planning process, can create a nightmare for you and your heirs at some point in the future.   Such complications may include:

Probate - Probate is the court process whereby property is transferred after death to individuals named in a will or specified by law if there is no will. Probate can be expensive, public and time consuming.  A revocable living trust is a great alternative that allows your estate to be managed more efficiently, at a lower cost and with more privacy than probating a will.  A living trust can be more expensive to establish, but can, if fully funded, avoid a potentially complex probate proceeding. Even in states where probate is relatively simple, like Texas, you may wish to set up a living trust to hold out of state property or for other reasons.

Minor Children - If you have minor children, you not only need to nominate a guardian, but you also need to consider setting up a trust to hold property for those children. If both parents pass away, and the children do not have a trust, the children’s inheritance could be held by the court until he or she turns 18, at which time the entire inheritance may be given to the child or alternatively, a guardian of the estate must be established by the court. By setting up a trust, which doesn’t have to come into existence until you pass away, you are ensuring that any money left to your children can be used for educational and living expenses and can be administered by someone you trust.  You can also protect the inheritance you leave your children or other beneficiaries from a future divorce as well as from creditors.

Second Marriages - Couples in which one or both of the spouses have children from a prior relationship should carefully consider whether a “simple” Will is adequate. All too often, spouses execute simple Wills in which they leave everything to each other, and then divide the property among their children. After the first spouse passes away, the second spouse inherits everything. That spouse may later get remarried and leave everything he or she received to the new spouse or to his or her own children, thereby depriving the former spouse’s children of any inheritance.  Couples in such situations should consider establishing a special marital trust to ensure children of both spouses will be provided for and/or they should consider making certain provisions for their children immediately upon their death, so their children don’t have to wait until their step-parent dies in order to receive something from their deceased parent’s estate.

Taxes - Although from 2011 forward, federal estate taxes only apply to estates over $5 million for individuals and $10 million for couples, (with such amounts increasing as they are indexed for inflation each year – in 2015, the exemption for individuals is $5,430,000) that doesn’t mean that anyone with an estate under that amount should forget about tax planning. Many states still impose a state estate tax that should be planned around, although Texas does not have a separate state estate tax. 

Incapacity Planning – Estate planning is not only about death planning.  What happens if you become disabled or incapacitated?  You need to have proper documents to enable someone you trust to manage your affairs if you become incapacitated.  There are a myriad of options that you need to be aware of when authorizing someone to make decisions on your behalf, whether for your medical care or your financial, legal and property affairs.  If you don’t establish these important documents while you have capacity, your loved ones may have to go through an expensive and time-consuming guardianship or conservatorship proceeding to petition a judge to allow him or her to make decisions on your behalf.  Simple incapacity protection planning up front can potentially avoid those problems.

By failing to properly address potential obstacles, over the long term, a “simple” Will can turn out to be incredibly costly and ineffective.   An experienced estate planning attorney can provide valuable insight and offer effective mechanisms to ensure your wishes are carried out in the most efficient manner possible while providing protection and comfort for you and your loved ones for years to come.


Sunday, March 8, 2015

Problems with Joint Accounts for Inheritance

When deciding who will inherit your joint financial accounts after you die, it is important to consider that you might outlive the beneficiary you choose.  If you have added someone to your financial accounts to ensure that he or she receives this asset after you die, (like a pay on death designation or a joint account with rights of survivorship), you might be concerned about what will happen should you outlive this person.

What happens to a joint bank account in this situation depends upon the specific circumstances. For example, if a co-owner that was meant to inherit dies first, the account will automatically become the property of the surviving co-owner and will not be included in the decedent’s estate.  Upon the death of the surviving co-owner, the account will be included in their estate to be distributed pursuant to their estate plan.

It is important to make sure you coordinate your estate plan Will provisions with your joint account designations and your beneficiary designations to ensure your overall estate plan benefits the people you intend to benefit.

If you are considering adding someone to your financial accounts so that they inherit it when you die, you should contact an experienced estate planning attorney to discuss your options. 


Sunday, March 1, 2015

Leaving a Timeshare to a Loved One


Many of us have been lucky enough to acquire timeshares for the purposes of vacationing on our time off.  Some of us would like to leave these assets to our loved ones.  If you have a time share, you might be able to leave it to your beneficiaries in a number of different ways. 

One way of leaving your timeshare to a beneficiary after your death is to modify your Will or Revocable Living Trust.  The modification should include a specific section in the document that describes the time share and makes a specific bequest to the designated beneficiary.
Read more . . .


Sunday, February 22, 2015

Know the Risks of “D-I-Y” Divorce

“Do it yourself” divorce is fraught with risks – even if your case is “simple” and both parties agree on all issues regarding division of property, support, and child custody and visitation. As many have learned the hard way, it is all too easy to make critical missteps today that will come back to haunt you down the road.

The proliferation of DIY websites and non-attorney legal document preparers give the impression that the process is simpler than it is. These services can help you deal with the court forms required to dissolve a marriage, including financial disclosures, motions, hearing notices and child support paperwork. It’s tempting to save money by using one of these services to prepare and file your divorce forms without using a lawyer.

Unfortunately, these services won’t be able to help you when things do not go as planned, as they cannot offer you any legal advice or engage in any negotiations on your behalf. Worse still, they cannot point out the pitfalls contained in your paperwork which can pose risks to your financial future long after you think you’ve put the marriage behind you.

The typical do-it-yourselfer believes that everything is correctly resolved because the court accepted and processed the forms and has issued the divorce decree. However, this may or may not be the case; and potential problems can remain undiscovered for years until, for example, one spouse embarks on a significant financial transaction such as purchasing a home.

A common scenario involves incomplete (or incorrect) provisions in a marital settlement agreement, leaving both spouses legally on the hook for a mortgage. What happens when the spouse who kept the home and obligated to make the monthly payments fails to do so? What happens when the other spouse applies for a mortgage on a new home, but the amount of the monthly payment of the previous mortgage is still considered when calculating the debt-to-income ratio? This is just one example of how “saving money” on the front end of your divorce can cost you greatly in the future.

Even if your divorce is “uncontested,” in that you and your spouse agree on all of the settlement terms, getting legal advice upfront will ensure the process goes smoothly and that you do not encounter any unpleasant surprises in the future. A consultation with a family law attorney can identify what issues must be addressed, point out potential negative consequences of certain decisions, and let you know what to expect throughout the divorce process.

If your divorce case is “contested,” meaning you cannot agree on terms regarding your property or children, it is important that you consult with a lawyer to obtain a realistic idea of what you can expect based on your legal rights under the circumstances. And, unlike the DIY services, an attorney can also represent your interests during settlement negotiations. If settlement negotiations are unsuccessful, your lawyer can ensure the court fully considers all information in your favor prior to making any rulings. 

Sometimes, it really is true that “you get what you pay for.”


Saturday, January 31, 2015

Executor’s Fees

An executor's fee is the amount charged by the person who has been appointed as the executor of the probate estate for handling all of the necessary steps in the probate administration. Therefore, if you have been appointed an executor of someone’s estate, you might be entitled to a fee for your services.  This fee could be based upon a variety of factors and some of those factors may be dependent upon state or even local law or possibly, specific provisions in the Will.

General Duties of an Executor

  1. Securing the decedent's home and property (changing locks, etc.)
  2. Identifying and collecting all assets, including bank accounts, investment accounts, stocks, bonds and mutual funds
  3. Consider the possibility of having all real estate appraised; having all tangible personal property appraised
  4. Paying all of the decedent’s lawful debts and final expenses
  5. Making sure all income and estate tax returns are prepared, filed and any taxes paid
  6. Collecting all life insurance proceeds and retirement account assets
  7. Accounting for all actions; and making distributions of the estate to the beneficiaries or heirs according to the provisions in the Will.

This list is not all-inclusive and depending upon the particular estate more, or less, steps may be needed.

As you can see, there is a lot of work (and legal liability) involved in being the executor of an estate.  Typically the executor would keep track of his or her time and a reasonable hourly rate would be used. Other times, an executor could charge based upon some percent of the value of the estate assets. What an executor may charge, and how an executor can charge, may be governed by state law or even a local court's rules or the provisions of the Will itself. The decedent can put in his or her Will that the executor should receive a certain amount of compensation or that the executor should serve without compensation. However, the named executor is not obligated to take the job. He or she could simply decline to serve. If no one will serve without taking a fee, and if the decedent’s Will states the executor must serve without a fee, a petition could be filed with the court asking them to approve a fee even if the Will says otherwise. Notice should be given to all interested parties such as all beneficiaries.

If you have been appointed an executor or have any other probate or estate planning issues, contact us for a consultation today.


Monday, January 19, 2015

Role of the Successor Trustee

When creating a trust, it is common practice that the person doing the estate planning will name themselves as trustee and will appoint a successor trustee to handle matters once they pass on.  If you have been named successor trustee for a person that has died, it is important that you hire a wills, trusts and estates attorney to assist you in carrying out your duties. Although the attorney that originally created the estate plan would most likely be more familiar with the situation, you are not legally required to hire that same attorney. You can hire any attorney that you please in order to determine what your obligations are with respect to the trust.

 If the decedent had a will it is common that the successor trustee is also named as the executor.  Although the role of executor is similar to that of trustee, there are technical differences. If there was a will, you should consult with an attorney to determine if a court probate process will be required to administer the estate. If all assets were titled in the trust prior to the person’s death, or passed by beneficiary designation, such as in the case of life insurance and retirement plan assets (such as 401ks, IRAs, etc.), then a court probate may not be needed. However, if there were accounts or real estate in the person’s name alone that were not covered by the trust, a court probate may be necessary.

During the probate process, all of the deceased person’s assets must be collected and accounted for. This includes all bank accounts, stocks, bonds, mutual funds, investment accounts, retirement assets, life insurance, cars, personal belongings and real estate. All of these assets should be valued and listed on one or more inventories. Depending upon the value of the assets, an estate tax return may be needed. You should be aware of any final expenses, the person’s final income tax returns, and any creditors. Although this process is lengthy, once all of the appropriate steps are taken, the assets will be distributed and the estate will come to a close. 

If you have been named a successor trustee or an executor, an experienced estate planning attorney can help you through this process and make sure you carry out your legal duties as required.  Contact us for a consultation today.

 


Role of the Successor Trustee

When creating a trust, it is common practice that the person doing the estate planning will name themselves as trustee and will appoint a successor trustee to handle matters once they pass on.  If you have been named successor trustee for a person that has died, it is important that you hire a wills, trusts and estates attorney to assist you in carrying out your duties. Although the attorney that originally created the estate plan would most likely be more familiar with the situation, you are not legally required to hire that same attorney. You can hire any attorney that you please in order to determine what your obligations are with respect to the trust.

 If the decedent had a will it is common that the successor trustee is also named as the executor.  Although the role of executor is similar to that of trustee, there are technical differences. If there was a will, you should consult with an attorney to determine if a court probate process will be required to administer the estate. If all assets were titled in the trust prior to the person’s death, or passed by beneficiary designation, such as in the case of life insurance and retirement plan assets (such as 401ks, IRAs, etc.), then a court probate may not be needed. However, if there were accounts or real estate in the person’s name alone that were not covered by the trust, a court probate may be necessary.

During the probate process, all of the deceased person’s assets must be collected and accounted for. This includes all bank accounts, stocks, bonds, mutual funds, investment accounts, retirement assets, life insurance, cars, personal belongings and real estate. All of these assets should be valued and listed on one or more inventories. Depending upon the value of the assets, an estate tax return may be needed. You should be aware of any final expenses, the person’s final income tax returns, and any creditors. Although this process is lengthy, once all of the appropriate steps are taken, the assets will be distributed and the estate will come to a close. 

If you have been named a successor trustee or an executor, an experienced estate planning attorney can help you through this process and make sure you carry out your legal duties as required.  Contact us for a consultation today.

Role of the Successor Trustee

When creating a trust, it is common practice that the person doing the estate planning will name themselves as trustee and will appoint a successor trustee to handle matters once they pass on.  If you have been named successor trustee for a person that has died, it is important that you hire a wills, trusts and estates attorney to assist you in carrying out your duties. Although the attorney that originally created the estate plan would most likely be more familiar with the situation, you are not legally required to hire that same attorney. You can hire any attorney that you please in order to determine what your obligations are with respect to the trust.

 If the decedent had a will it is common that the successor trustee is also named as the executor.  Although the role of executor is similar to that of trustee, there are technical differences. If there was a will, you should consult with an attorney to determine if a court probate process will be required to administer the estate. If all assets were titled in the trust prior to the person’s death, or passed by beneficiary designation, such as in the case of life insurance and retirement plan assets (such as 401ks, IRAs, etc.), then a court probate may not be needed. However, if there were accounts or real estate in the person’s name alone that were not covered by the trust, a court probate may be necessary.

During the probate process, all of the deceased person’s assets must be collected and accounted for. This includes all bank accounts, stocks, bonds, mutual funds, investment accounts, retirement assets, life insurance, cars, personal belongings and real estate. All of these assets should be valued and listed on one or more inventories. Depending upon the value of the assets, an estate tax return may be needed. You should be aware of any final expenses, the person’s final income tax returns, and any creditors. Although this process is lengthy, once all of the appropriate steps are taken, the assets will be distributed and the estate will come to a close. 

If you have been named a successor trustee or an executor, an experienced estate planning attorney can help you through this process and make sure you carry out your legal duties as required.  Contact us for a consultation today.


Monday, January 12, 2015

First Party and Third Party Pooled Income Trusts, Explained

Generally, a "pooled trust" holds assets for people that have a disability, and/or elderly individuals. The trust is established and run by a not-for-profit organization, which will establish separate sub-accounts for each individual within their system. However, the money of all of the individuals served is added together (in other words, it is pooled together) for investment and management purposes.

There are typically two types of pooled trusts. The first type is sometimes referred to as a "first party" trust. In this type of trust the disabled person places his or her own assets into the trust. Doing so will cause those assets to be non-countable for government benefit programs, such as Medicaid. The trustee of the trust (the not-for-profit organization) can use that person's money to pay for things that Medicaid will not cover. So, the assets are still there for the benefit of the person but their use is restricted. In this type of "first party" trust, any assets that remain when the person dies must be paid to the state up to the amount that the state has paid out for the person's care under the Medicaid program.

The second type of pooled trust is referred to as a "third party" trust. This means that the money did not come from the disabled person. For example, a parent with a disabled child could leave that child's inheritance to a pooled trust for the benefit of the child. The benefit is that the money would still be there for the child but would not disqualify the child from receiving SSI or Medicaid because the money would not be counted for these government programs. Unlike the first party trust, upon the death of the disabled person (in this example, the child) any remaining assets do not have to go to the state but can pass to any other beneficiaries that the parent wanted to have them.

Whether a pooled trust would be of any benefit to you depends upon many factors. Seek the advice of a qualified estate planning attorney to determine your best course of action.


Monday, January 5, 2015

Top Ten Child Support Myths

Child support disputes can bring out the worst in many parents, conjuring images of greedy ex-spouses and children who are used as pawns in games of parental posturing and revenge. While there may be a certain degree of truth to some of the stereotypes, there are many myths that are prevalent in the context of children, support and divorce.

Myth: Child support payments are based on the needs of the children.
Fact: Support payments are based on the parent’s income and/or ability to earn income and have no basis in the actual costs to raise a child.

Myth: Child support payments must be spent on the child.
Fact: No state requires child support recipients to account for expenditures or prove they were necessary to meet the child’s needs, or even whether they were spent on the children at all. In fact, some states view the purpose of child support as protecting the standard of living of the custodial parent.

Myth: I can move out of state to dodge my child support obligations.
Fact: Each state has its own child support enforcement agency and these agencies all work together. You cannot escape this obligation.

Myth: I can quit my job in order to avoid making child support payments.
Fact: The courts are permitted to “impute” income to a parent who intentionally quits a job, whether or not that parent is currently earning a paycheck. Obligations will continue to accrue and payments must be made.

Myth: I have lost my job and can’t make my child support payments, so I will be sent to jail.
Fact: You can be incarcerated if you have the ability to pay but refuse to do so. If you have lost your income and do not have the ability to pay, you will most likely not be criminally liable for non-payment.

Myth: My ex-spouse uses child support payments for shopping, dining and to support a lavish lifestyle; therefore, my support payment should be reduced.
Fact: So long as the custodial parent pays expenses to feed, clothe and house the minor children, which is the ultimate purpose of child support payments, whatever else she spends money on is generally not scrutinized.

Myth: My living expenses are high and I cannot afford the child support payments; therefore, my support payment should be reduced.
Fact: Generally, expenses must be necessary and extreme in order to be considered as a basis for child support calculations.

Myth: Child support payments are deductible on my income taxes.
Fact: Child support payments are not deductible to the paying parent; nor are they considered “income” to the receiving parent.

Myth: If I have children with a new partner, my child support payments will decrease.
Fact: The birth of a new child will not reduce your obligations to make child support payments to a prior spouse. New children may affect the existing child support order if you get another divorce and must pay child support for the second set of children.

Myth: My ex-spouse claims she can modify the child support order and take my house, bank account or other assets.
Fact: A future child support modification can only address the amount of child support payments going forward. Assets cannot be seized and typically are not considered in modifications.
  


Monday, January 5, 2015

Choosing a Guardian for Minor Children

If you are a parent and you are considering estate planning, one of the most difficult decisions you will have to make is choosing a guardian, or “back-up parent” for your minor children.  It is not easy to think of anyone else, no matter how loving they may be, raising your child. Yet, you can make a tremendous difference in your child’s life by planning ahead. 

The younger your child, the more crucial this choice is, because very young children cannot form or express their own preferences about caregivers. Yet young children are not the only ones who benefit from careful parental attention to guardianship. Children close to 18 years old will be legal adults soon, but, as you well know, they may still need assistance of a parental figure well beyond their 18th birthday.

By naming and talking about your choice of guardian, you can encourage a lifelong bond with a caring family. The nomination of guardians is a straightforward aspect of any family’s estate plan. It can be as basic or detailed as you want. You can simply name the guardian who would act if both you and your spouse were unable to or you can provide detailed guidance about your children and the sort of experiences and family environment you would like for them. Your state court, then, can give strong weight to your expressed wishes and designations.

There are essentially four steps to this process. First, make a list of anyone you know that might be a candidate for guardian of your children.  It is important to think beyond your sisters and brothers and consider cousins, aunts and uncles, grandparents, child-care providers and business partners. You might also want to consider long-time friends and those you’ve gotten to know at parenting groups as they may share similar philosophies about child-rearing. Second, make a list of factors that are most important to you. Here are some to consider:

  • Maturity
  • Patience
  • Stamina
  • Age
  • Child-rearing philosophy
  • Presence of children in the home already
  • Interest in and relationship with your children
  • Integrity
  • Stability
  • Ability to meet the physical demands of child care
  • Presence of enough “free” time to raise children
  • Religion or spirituality
  • Marital or family status
  • Potential conflicts of interest with your children
  • Willingness to serve
  • Social and moral habits and values
  • Willingness to adopt your children

You might find that all or none of these factors are important to you or that there are others that make more sense in your particular situation.  The third step is to match people with priorities. Use the factors you chose in step two to narrow your list of candidates to a handful.

For many families, it is as easy as it looks. For others, however, these three steps are fraught with conflict. One common source of difficulty is disagreement between spouses. But, consensus is important. Explore the disagreements to see what information about values and people is important to one another and use all of your strongest communications skills to understand each other’s position before you try to find a solution that you can both feel good about. Step four is to discuss your ideas with your chosen guardians and then make it positive. For some parents, getting past this decision quickly is the best way to achieve peace of mind and happiness. For others, choosing a guardian can be the start of an intensive relationship-building process. An attorney who understands where you and your spouse fall on that spectrum can counsel you appropriately. 


Monday, January 5, 2015

Is there any way a disinherited child could receive an inheritance from an estate?

If your estate plan and related documents are properly and carefully drafted, it is highly unlikely that the court will disregard your wishes and award the excluded child an inheritance.  As unlikely as it may be, there are certain situations where this child could end up receiving an inheritance depending upon a variety of factors.

To understand how a disinherited child could benefit, you must understand how assets pass after death.  How a particular asset passes at death depends upon the type of asset and how it is titled. For example, a jointly titled asset with rights of survivorship will pass to the surviving joint owner regardless of what a will or a trust says. So, in the unlikely event that the disinherited child was a joint owner, that child would still inherit the asset because of how it was titled.

Similarly, if you left that disinherited child as a named beneficiary on a life insurance policy or retirement plan asset, such as an IRA or 401k, that child would still receive some of the benefits as the named beneficiary even if your Will stated they were to take nothing. Another way such a "disinherited" child might receive a benefit is if all other named beneficiaries died before you.

So, assume you have three children and you wish to disinherit one of them and you state you want all of your assets to go to the other two, and if they are not alive, then to their descendants.  If those other two children die before you and do not have any descendants, there may be a provision that in such a case your "heirs at law" are to take your entire estate and that would include the child you intended to disinherit. A carefully drafted Will or Trust can avoid that unintended result.

If you wish to disinherit a child, all of these issues can be addressed with proper and careful drafting by a qualified estate planning lawyer. 


Tuesday, December 9, 2014

Is a copy of a will sufficient?

Many people keep their important documents at home where they are easily accessible. It’s not at all uncommon to find people with a filing cabinet or even a shoe box containing passports, account statements, deeds, tax returns, birth certificates and social security cards. Wills are often added to these files once the estate planning process is completed. In choosing to store your important estate planning documents at home, however, you risk having the originals lost or destroyed in the case of fire, flooding or theft.

So what happens if the original version of your will is lost or ruined?

Generally when a person dies, state law determines what must happen in the state probate proceeding. In most cases, the "original" of the will must be submitted to the probate court in the county where the person resided. If the original of the will cannot be located and provided to the court, there likely is a provision in your state's probate code that would permit the submission of a photocopy of that signed will.

In many cases, the attorney who prepared the will maintains a copy of the estate planning documents. Assuming, that the copy your attorney has could be submitted to the probate court, additional steps may need to be taken, and additional pleadings prepared and/or proof presented in order to submit a copy.

Should you lose the original signed will, the best practice would be for you to execute a new will which would make things easier for your family and loved ones upon your death. In that case there would be better assurances that your wishes were followed and carried out. Preparing a new will should not take much time for your attorney. He or she likely still has the word processing file on his or her computer, and could easily modify it for you to execute again. If for some reason this is not done, you may wish to execute a document stating the original was destroyed in a flood or fire but that you did not intend to revoke it. However, it’s important to note that this may not be effective in every instance as many states have very strict requirements in terms of requiring originals and execution formalities.

To keep the originals of your estate planning documents safe, even in the face of disaster, you might consider purchasing a fireproof/waterproof safe for your home or rent a safe deposit box with a local bank where you can still easily access your documents but keep them secure off-site. If you choose to keep them in a safe deposit box, just make sure that your named Executors know where they are located and are authorized signers on the box so they can access the documents when needed.


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