Houston Estate Planning and Probate Blog

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.

Friday, August 27, 2010

Caregiver Compensation Agreements Benefit Elders AND Caregivers

Caring for an aging relative is hard work.  Many of the people who serve as caregivers admit that they often feel as if they have two jobs—their day job, and the part-to-full-time job of caregiver. If you consider that in our fast-paced society time is money, then most of these caregivers are not only giving up their time, but also their potential income.  Caregivers need to know that it doesn’t have to be this way; caregivers can be compensated according to mutually agreed upon terms of a Caregiver Agreement, or Personal-Care Contract.

Elder law attorneys have known about Caregiver Agreements for a long time, but a recent article in the Wall Street Journal will hopefully raise caregiver awareness of this useful contract; especially, as the article mentions, given the “still-fragile” state of the economy.  A Caregiver (or Employment) Agreement “should document a caregiver's responsibilities and hours and set a rate of pay that's in line with local practices. Both the caregiver and care recipient should sign the contract and disclose it to the rest of the family.”

An agreement of this sort can be useful not only for the care-giver and the cared-for; it also comes in handy if you think you may need to rely on Medicaid to cover nursing home costs sometime in the near future.

“Before Medicaid will pick up the tab for nursing-home costs, it requires applicants to recoup certain payments made to relatives over the previous five years -- and use the money to pay the nursing home... But if payments to relatives are made under the terms of a written employment agreement, often called a personal-care contract, the law allows it.”

But remember, “to pass muster with Medicaid, it's important to have such a contract in place before the services are rendered."

This is why it is extremely important to talk to an attorney who is well-versed in elder law and Caregiver Agreements before any contracts are signed or money changes hands.

Wednesday, August 25, 2010

A Step-By-Step Guide to Getting Started With Your Estate Planning

You’ve heard all the arguments in favor of estate planning, you know it’s the right thing to do, you want to get your planning done... you just aren’t sure how to get started.  This is understandable; estate planning can feel like an overwhelming endeavor when you’re presented with everything at once.  The trick to getting started with your planning is to take it one step at a time.

Write down your goals. You may have a number of intertwined goals for your estate plan (this is especially true for blended and multigenerational families), or one simple-but-important goal such as “ensure my minor children have a place to go” or “keep the family business intact.” Knowing your goals from the outset will make all subsequent decisions much easier.

Make a list of the people you trust. Throughout your estate plan you’ll be nominating people to take over financial, healthcare, and guardianship responsibilities if something happens to you.  Have a rough list of people you would trust in these roles.  Begin with your initial goal and go from there.  For example, if your initial goal was guardianship of minors, make a list of people you would trust with the care your child, and move from there to financial decision-makers, etc.

Make a list of people you don’t trust.  If you’re having trouble coming up with people for the list above, it sometimes helps to consider the people you would NOT want to be responsible for your child, your finances, or your healthcare.  Write down those people and work backward from there.  If your kids must be kept from crazy Uncle Joe at all costs, would your cousin Emily be an acceptable alternative, even if she does have a different parenting style?

Know your assets. Make a list of all your assets and their approximate values. This will help your estate planner determine what kind of asset protection you need in your plan. Assets include:

  • Your Home
  • Investment/Vacation Property
  • Bank Accounts
  • Savings/Investment Accounts
  • Retirement Accounts
  • Life Insurance
  • Family Owned Business
  • Etc.

Bring In the Professionals. Estate planning is a very technical process, and the laws may frequently change, so you’ll definitely want professional help with the details of the process.  The good news is that now that you’ve completed the beginning steps, the follow-through with your chosen professional advisor will be a snap!  If you already have a relationship with a trusted attorney, insurance agent, financial advisor or CPA you’ll want to start there.  Let that person know your goals and that you’re ready to begin planning in earnest; he or she will be able to guide you onto the next steps, or give you the name of an estate planning professional who will help you build your ideal plan.

Although it looks overwhelming from the outset, estate planning is really just a series of small steps, each of which leads you to the achievement of your ultimate goal: Preserving your assets and protecting your loved ones.  Now that you know it’s so easy... what are you waiting for?

Monday, August 23, 2010

Debunking 5 Common Estate Planning Myths

There are five common myths that frustrate all estate planners—particularly because we know that not only are they patently untrue, but also because their continued circulation can be harmful. 

1. Estate Planning is only for rich people. This is probably the single most common estate planning myth there is—and it is a myth.  Many people believe that "estate planning"  deals only with saving estate taxes upon death.  But that is certainly not so.  A commonly used definition of "estate planning" includes ... I want to control my property while I am alive, take care of myself and my loved ones should I become disabled or incapacitated, and give what I have, to whom I want, the way I want, and when I want.  Furthermore, if I can, I want to save every last tax dollar, professional fee and court cost legally possible.  Everyone needs an estate plan of some sort, regardless of your net worth.

2. “I have plenty of time.”  AKA: Only old people need estate plans. First of all, just because you’re young doesn’t mean bad things can’t happen to you.  But you know this, and anyway, this post is not about fear.  Unexpected tragedies aside, an estate plan is useful even when you’re young because an estate plan is not just about death.  A good estate plan will include not only a will or living trust to transfer assets upon your death, but it will also include incapacity protection tools - including a Medical Power of Attorney, directives and HIPAA Authorization (which are useful if you find yourself facing a surprise stay in the hospital or are unable to make health care decisions for yourself), Designation of Guardian (should you later need a guardian to be appointed for yourself), Statutory and/or General Power of Attorney documents (which you may need if you are unable to sign for yourself on financial or legal documents), and various legal documents relating to minor children, including Designation of Guardians, (if both parents die, who would take care of the children?) and medical authorizations (in case you leave the children for extended periods of time with other family, friends or sitters).

3. Married people don’t need estate plans. While many people think that a married person with straightforward wishes for the distribution of his or her property (all to their spouse) has less need of estate planning, it does not necessarily follow that they should skip estate planning altogether. Since many married couples hold their financial accounts as joint tenants with rights of survivorship, in that case, the property will pass to the surviving spouse upon the death of the first spouse... But what happens if the surviving spouse gets re-married?  What about the property you would specifically like to go to your children, or to your parents or siblings? And what if both you and your spouse die together? These are the reasons why even married people should consider drawing up at least, a simple estate plan.

4. All I need is a quick and simple will and I’m done. A quick and simple will is certainly better than no will.  And if you want to be technical, you don’t even need a will; after all, your state of residence has a plan already in place for you.  The problem is that it may not be the plan you want. There is a saying that “anything worth doing is worth doing well.” This goes for wills (or any other legal document) as well.  If you want the basics you can have the basics.  But if you want a well thought out, reasoned plan, you’re going to need to spend a little more time on it.

5. Estate Planning is only about money. Although money is often one of the main motivating factors behind creating an estate plan, money is absolutely not what estate planning is all about.  Estate planning is about people.  It’s about your family and doing what’s right for them.  Estate planning is not just about saving your family from estate taxes, or making sure Junior gets the house; it’s about leaving them peace of mind. A well thought-out will or trust saves them from a lengthy probate process, but also reassures siblings that they are doing what mom or dad really would have wanted.  An estate plan is full of documents designed not just to save you or your heirs money, but to allow you to express your wishes and values even after your death. Estate Planning is about more than just money—it’s about family, legacy, and love.

Friday, August 20, 2010

Women and Finances: How Estate Planning Can Help

When it comes to family matters, women are often the head (and sometimes the sole member) of the planning committee.  Vacations, dinner parties, school activities and celebrations... many of these wouldn’t happen at all if the women of the family didn’t take the lead.  Estate Planning tends to be no different: Many first phone calls, appointments, and attendance at estate planning or elder law seminars are initiated by women.  However, studies suggest that this tendency in women to plan ahead may not apply to financial planning.

A recent article from CBS news suggests that although women are actively involved in family and household finances, they are less likely to be involved in long-term financial decisions. According to the article, although many women “know how to spend and get by on a short term basis... they have a time getting a grip on their long term saving and planning." Of course this is a generalization, and won’t apply to everyone; but considering the importance of the topic, it is definitely a worthwhile subject for discussion.

Here are a few statistics to consider that impact women and their long-term financial decisions:

  • Older women (65+) outnumber older men by 22.4 million to 16.5 million. (Administration on Aging)
  • Poverty rates are higher among older women than older men by 20.4 to 13.1. (U.S. Census Bureau)
  • The median weekly earnings of full-time wage-earning women is $657, or 80 percent of men’s $819. (U.S. Dept. of Labor)
  • Not to mention that on average, it is the woman of the family who will end up putting her career on hold for caregiving duties at various times in her life (either to care for young children or aging parents.)

Put all of this together and it means that women need to take control of their finances, not the other way around!  Luckily, this may not be as difficult as you think. The CBS news article mentioned above has some suggestions on how to take charge of your finances; but beyond that, planning your estate can be a huge step toward planning for your financial future as well, because any estate planning includes taking stock of of your financial assets—including savings accounts, retirement assets, individually owned assets as well as those owned jointly by a married couple.

We encourage women (and their families) to let their estate planning contribute to their financial future—it’s not just about how your assets will be distributed after your death, but also what steps you’d like to take to preserve those assets during your lifetime.

Wednesday, August 18, 2010

Do Expected Changes to GRAT Legislation Affect YOUR Plans?

If you (or your financial planner) have been considering creating a Grantor Retained Annuity Trust (GRAT) to avoid gift taxes on financial gifts to family members you may want to read this article from Forbes before you take the final step.  According to author Seth R. Kaplan there has been much talk in Washington of late about what he calls “anti-GRAT legislation”, and although the offending bills have not passed in the Senate thus far, it seems as though it’s only a matter of time before the rules and regulations regarding GRATs change—and not necessarily for the better.

According to Kaplan, “a bill co-sponsored by 10 senators (relating to an extension of COBRA premium assistance) was introduced at the end of June containing provisions targeting GRATs, the most significant of which requires GRATs to have a minimum term of 10 years. So it appears that some form of this anti-GRAT legislation will eventually become law.”

This ten year minimum will put a stop to the short-term GRATs (2-4 years) which have been especially popular among elderly individuals (a popularity that is understandable considering that if the grantor dies before the expiration of the trust the assets will revert back to the grantor’s estate and are subject to estate taxes.) But Kaplan claims that long-term GRATs can still be “a powerful tool for effective wealth transfer planning, especially where interest rates are low and asset values are depressed but expected to rise.”

If you’ve been considering creating a GRAT, and know that you want the short-term GRAT, you’ll probably want to talk to your estate planner or financial advisor ASAP, before the restrictive legislation Kaplan is expecting comes to pass.  However, the proposed legislation doesn’t have to be a loss.  If you have the time, you may want to consider the benefits of the long-term GRAT.

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