Houston Estate Planning Law Blog
CHANGES TO ESTATE TAX MAY AFFECT ESTATE PLANNING
A recent news report highlighted some upcoming changes to the estate tax that may affect those who make a living in agriculture. However, the changes may be of interest to any resident of Texas and elsewhere. Indeed, those changes could be of keen interest to people who are currently contemplating the estate planning process.
Even those people who are young and healthy should consider estate planning. For farming families, the failure to plan adequately for one’s death could result in the necessity of selling the farm just to pay the estate taxes, as well as risking conversion of the property to non-farm uses. For everyone, a lack of estate planning could result in higher taxes and fewer assets for their heirs.
Currently, the top estate tax rate is 35 percent. However, there is also a $5 million exemption, meaning that estates valued below that figure do not have to pay a federal estate tax. That could change after 2012. At that time, the top estate tax rate is currently set to rise to 55 percent and the exemption is scheduled to drop to $1 million. This would mean that a $25 million estate would have a liability of nearly $13 million after 2012. Under current law, that estate has a liability of somewhat over $5 million.
In Texas and across the United States, people are often surprised by the size of their estate. It includes not just bank accounts, but also the house value and any other investments one may have. Taking the time to meet with an experienced estate planning attorney may help to ensure that the heirs of the estate do not have to sell assets just to meet the tax and debt obligations. Furthermore, the attorney may be able to assist with making sure that the estate is not mired in litigation and that one’s intentions are fully and correctly honored.
Source: Western Farm Press, “What’s the future of estate tax obligations?” Ron Smith, Oct. 19, 2011
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ESTATE PLANNING WHEN FACING SERIOUS HEALTH CONCERNS
No matter what point you are at in your life it is important to at least consider what sort of estate planning goals and strategies you may want to pursue. It is a great idea for even the young and healthy to begin talking about how they would like to structure their estate and pass along as many assets as possible to their future heirs.
But for those who are facing a chronic illness the utility of estate planning is all the more obvious. The importance of drafting a will, trusts and other long term planning documents is not related only to the fact that the seriously ill may not have as much time as others, there are also unique considerations that should be addressed for those with serious health problems.
For those that face an increased likelihood of physical or mental incapacity for extended periods, a health care power of attorney can ensure that someone you trust is appointed to make medical decisions on your behalf. A living will provides your instructions directly to your doctor on how you would like end of life medical decisions to be handled. You can also create a financial power of attorney so that someone you trust can access and manage your financial accounts when you are incapacitated.
A chronic illness can sometimes create a sense of powerlessness and a loss of control. Depending on individual health concerns it may be that in the near future you may not be able to personally express your wishes. By taking action proactively however you can put yourself in the driver’s seat for some of the most important decisions that will affect your future.
Source: Forbes “Declining Health Is Scary: Estate And Financial Planning Can Protect You,” Hani Sarji, Oct. 17, 2011
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ESTATE PLANNING MAY HELP MAXIMIZE THE SIZE OF THE ESTATE
Many Texas residents who are in or nearing retirement are probably considering estate planning, maybe even for the first time. As part of the estate planning process, they may be looking at investment decisions that maximize the amount of the estate without putting it at jeopardy. However, investments in financial assets that are traditionally viewed as safe also usually have a low return on investment.
A recent news report has highlighted one financial decision many parents are making that potentially offers a better return on investment. With so many unwilling to risk the stock market as of late and with the average return on a one-year certificate of deposit being only 0.4 percent, some parents are deciding to finance their adult child’s mortgage. Such a situation may offer a win-win as the parents get a return on investment they couldn’t otherwise and the child gets a mortgage at a lower rate than one offered by banks, without the red tape and attendant closing costs.
Although such parent-financed mortgages have always existed, their use has increased since banks tightened loan conditions following the housing crisis in 2008. Indeed, many in the housing market are unable to get a mortgage without having a nine-to-five job, even if they can make a 20 percent down payment. Likewise, having a full-time job may not be enough without the 20 percent down payment. This offers investment opportunities for parents who have grown children and may have a large financial portfolio.
Even parents of lesser means may consider financing the down payment for a child who is purchasing a home. By making these kinds of investments that potentially offer a better rate of return than other more traditional investments, parents may be able to maximize the size of the estate they leave behind.
Source: LoanSafe, “Some Home Buyers Bank on Their Parents,” Alex Ferreras, Oct. 8, 2011
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NAVIGATING PRIVACY CONCERNS IN ESTATE PLANNING IN TEXAS
It goes without saying that, when it comes to matters financial in nature, many people in Texas are concerned about privacy, regardless of their current financial situation. Members of the older generations, especially those who are just starting the estate planning process, are no exception. For people who find themselves concerned about financial matters after death becoming open to the public, there are ways to alleviate those concerns and maintain privacy.
In the state of Texas, the executor to an estate is required to complete a certain set of tasks to ensure the estate is allocated properly. This process must be conducted within 90 days of becoming executor and includes a public filing of bank accounts and investments for estate. In most cases, the information filed, including in-depth personal information, becomes a matter of public record. Needless to say, those who take issue with personal and financial matters becoming public find this disturbing.
Filing the information with the court is part of a series of events known as “inventory, appraisement and list” of claims and is a provision of Texas law. The goal of the procedure is to allow creditors to ensure the estate has enough assets to cover debts. The inventory is then filed with public records, which means essentially anyone can gain access to the information. In some cases, these inventories even make it onto an easily accessed website, depending upon specific recordkeeping policies.
Nonetheless, there are ways to avoid privacy panic. New Texas laws mandate that, if there are no unsecured debts held by the estate, filing an inventory with the court is not required and the information must only be provisioned to beneficiaries of the estate. However, revocable living trusts are often considered an even better option. In the case of a revocable living trust, an attorney can set up a trust for the estate wherein the trustee can distribute the assets in a completely private and undisclosed manner, avoiding probate court altogether. An attorney who has experience in estate planning may be able to help answer questions pertaining to privacy and the benefits of a revocable living trust.
Source: San Antonio Express-News, “Can estate inventory be kept private after mom dies?” Paul Premack, Sept. 27, 2011
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ESTATE PLANNING IS CRUCIAL IN A HARD ECONOMY
Texas is a great place to raise a family but leaving your family without the proper estate planning in place can lead to trouble. This seems to be truer now than ever before. Once thought of as only applying to the rich, estate planning is now essential for virtually every family in Texas.
One of the more pressing reasons families need to consider how and to whom they wish to leave their assets has to do with the current state of the economy. It is no secret that many younger Americans will have a more difficult time accumulating assets as their parents did in the past. According to a survey done by New York Life, only 42 percent of adults with children felt their kids would have a standard of living that was better than theirs.
Many parents want the best for their children and grandchildren. One way to help is to put into place the various legal documents needed to avoid probate court. Wills and trusts are just two examples of how parents can help secure the future for their children. Some families may need to have guardianship papers drawn up or may need to have certain types of powers of attorney established.
A main goal of estate planning is asset protection. Texas families want to leave their hard-earned money and properties to family members, not to expensive probate court fees and government taxation. The good news is getting this work done is not as difficult as some might think.
For asset protection and to ensure that survivors avoid long, drawn out legal proceedings, a consultation with an experienced estate planning attorney may provide important answers. With the proper advice and foresight, an estate plan can be set in place to preserve assets and save on estate taxes. A Texas lawyer devoted to helping individuals and families provide for the future may help achieve long range goals.
Source: CNN, “Are you living the American Dream? Will your children?” Dave Schechter, Sept. 21, 2011
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