Houston Estate Planning and Probate Blog

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.

Monday, August 16, 2010

The REAL Reason to Plan Your Estate

We write often on our blog about specific pieces of the estate planning whole: elder law, retirement planning, estate administration, etc... But sometimes it’s important to pull back and look at the big picture—to remind ourselves why we’re doing all this in the first place. And the plain truth is that there is one main reason we do this: Love

Now, “love” may sound sappy and sentimental, but when it comes down to it love truly is the only reason we would spend time and money thinking about the unpleasant subject of death, and planning for a time that we won’t be around to enjoy.

Estate Planning Ensures Your Minor Children Have a Home

Part of creating your estate plan includes nominating guardians for your minor children.  Without this nomination your children are at the mercy of the court should anything happen to you. Estate planning also allows you to ensure that your minor children and their guardians have the financial security they need to make a smooth transition during a difficult time.

Estate Planning Preserves Sibling Relationships

There are fewer things more stressful to a family than the death of a beloved parent.  And it is at this time more than any other that fights are liable to break out between normally loving siblings: Fights over what to do for mom’s funeral, over who gets treasured heirlooms, over who dad would have wanted to distribute the estate. All of these fights can be easily avoided by creating an estate plan that spells out your wishes in clear and loving terms.

Estate Planning Allows You to Provide for Your Children and Grandchildren

You spend a lifetime raising and caring for your children knowing that someday, when you’re gone, they’ll have to fend for themselves. Creating an estate plan allows you to leave a little bit behind, a cushion your children can hold in reserve in case of emergency.  An estate plan allows you to continue providing for your children even after you’ve gone.

Estate Planning Leaves an Enduring Legacy

Estate planning is not just about finances and paperwork, it’s about relationships.  Creating your estate plan allows you to brush away life’s minor details and minutia and focus on what’s really important, allowing you to connect with your loved ones in a more meaningful and lasting way than ever before.  Your estate plan expresses your enduring values, leaving a legacy for your family that will live on for generations to come.

Friday, August 13, 2010

Does Marriage Matter in Estate Planning?

How much does “marriage” matter when it comes to estate planning?  The recent California court ruling on gay marriage has thrown marriage and its meaning once again into the limelight, and has many people thinking about what marriage means on a legal level.  

Anyone who pays taxes knows that your marital status matters to the state and federal government.  Your marital status also impacts your rights when it comes to insurance, privacy, pensions, and even probate. For example, the property of a married person who dies without a will automatically passes to their spouse (and children)*—this is not necessarily the case for unmarried couples. Similarly, in an emergency medical situation a spouse will have access to information about his or her injured spouse, but unmarried couples do not always have this same privilege.  Although there is good reason behind these privacy laws, it can be particularly distressing when couples who have lived together for years may suddenly have trouble getting medical staff to recognize their partner when a medical decision needs to be made.

Luckily, your estate planning attorney can help circumvent some of the potential problems unmarried couples may face in case of incapacity or upon death.  Executing an Advanced Health Care Directive or Health Care Power of Attorney will ensure that medical personnel recognize the authority of a trusted partner to make medical decisions for you.  Similarly, by creating a Will or Trust you can nominate the person you want to act as executor of your estate upon your death, and who the beneficiaries of your property will be, regardless of whether you have a marriage license or not.

The issue of marriage is one that is obviously very close to the heart, but estate planners see it on a very practical level as well.  In the legal world of estate planning our goal is to ensure that your wishes for end of life health care and final distribution of wealth are honored—regardless of your marital status.  

*Please note: Probate laws will vary from state to state—be sure to talk to your estate planning attorney about the laws specific to your state of residence.

Wednesday, August 11, 2010

Will Long-Term Care Living Arrangements Prevent You from Leaving an Inheritance?

In our last post we wrote about what matters most when choosing a long-term care living situation, suggesting that it’s not always the place that matters most, but the mind-set of the elderly person who will be living there, and how involved that person is in the decision-making process. However, this does not mean that the quality of each living place doesn’t matter at all.  In fact, according to the Wall Street Journal great care should still be taken when selecting a long-term care living situation... especially if you’re considering a Continuing Care Retirement Community (CCRC).

If you are considering a CCRC for yourself or an elderly loved one, you may want to read this article in the WSJ, which mentions that although more and more older Americans are drawn to the benefits offered by a Continuing Care Retirement Community, those benefits “often come at a steep price and ‘considerable risk.’"

The article goes on to mention that “So-called CCRCs—which typically offer fine dining, health clubs and on-site long-term care—have grown in popularity along with the aging of the population, particularly among the upper-middle class and affluent,” but that “the economic downturn is making it tougher for potential new residents to sell their existing homes and fill openings in new and expanded communities, which are generally regulated by state governments. As a result, low occupancy levels are challenging the industry's financial models.”

We mention this because many of our clients are at a time in their lives when they or their elderly parents are looking into long-term care living situations, and we see how difficult it is to sort through all the choices and find a place that fits.  Not only is quality of life an important factor (maybe the most important factor), but for many people the cost of the place they choose may mean the difference between leaving their children an inheritance and dying penniless.

We urge any of our readers who are in the market for long-term care living arrangements to look carefully at all their options; ask questions, do the research, and don’t be afraid to ask for help or a second opinion.

Monday, August 9, 2010

What Matters Most When Choosing a Long-Term Care Living Situation?

Elderly people and their families can spend months—sometimes years—looking for the perfect long-term care living arrangement.  Most families try to avoid the nursing home option to the very end, believing that assisted living or small residential care homes provide a better quality of life.  But is this fact or fiction?

Paula Span in her article on the NY Times New Old Age Blog suggests that “what variety of facility an older person lives in may matter less than we’ve assumed. And that the characteristics adult children look for when they begin the search aren’t necessarily what makes a difference to the people who move in.”

Span’s suggestion is based on (among other things) a recent study published in The Journal of Applied Gerontology, which found that among 150 Connecticut residents living in various long-term care situations (assisted living, nursing homes, residential care homes), the type of living situation itself made little difference in the resident’s emotional well-being. Rather, happiness and contentment was more a matter of “the characteristics of the specific environment they’re in, combined with their own personal characteristics — how healthy they feel they are, their age and marital status.”

Logically enough, a resident of a long-term care facility of any kind is more likely to report satisfaction and comfort if they had a hand in choosing their living situation, if they were part of the decision making process. In fact, it is the process itself—researching options, visiting facilities, considering current and future social and physical needs and how they will be met—that is the beginning of acclimatization.

Whatever your choice, you’ll want to know that you have options for paying for your long-term care living situation. has published a chart summarizing and comparing the various options for long-term care financing. Or please feel free to contact our office for more information.

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.

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