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Houston Estate Planning Law Blog

THINGS TO CONSIDER WITH YOUR LIFE INSURANCE POLICY

In a world of uncertainty, we try our best to inform our blog readers about important estate planning events before it’s too late. One issue we run across from time to time is life insurance policies. Incredibly important, these documents can often carry with them incredible burdens, especially if they aren’t prepared correctly and maintained properly. Hopefully this week’s blog post can clear up some confusion and get our readers on the right track again.

The first thing to consider when establishing a life insurance policy is who to name as a beneficiary. While most people only name a primary beneficiary, it’s often a good idea to list others just in case your primary predeceases you or dies at the same time as you. It’s also important to communicate your intentions with your beneficiaries. Letting them know who the policy is through and the general specifics about the policy before your passing can make sure they’re not blindsided by the process in the future.

It’s important to consider who you’re naming as a beneficiary as well. Consider for a second that you choose your minor child as your beneficiary. Some states will not allow that insurance policy to be paid out until the child is a certain age. On top of that, a guardian might be required which can end up adding additional costs to the process.

Consider too that Texas is a community-property state. This means that regardless of designation on the policy, if your spouse does not waive their right to the money, the policy could be paid out to them instead of the intended recipient.

Not having specific wording in your policy and not maintaining it properly can also cause headaches down the road. But considering these things and clearing them up with a skilled estate planning attorney before hand can help your loved ones from experiencing future frustrations down the road.

Source: Fox Business, “Naming Life Insurance Beneficiaries: 10 Ways to Screw up,” Barbara Marquand, May 22, 2013

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HANDLING ESTATE PLANNING MISTAKES BEFORE THEY’RE A PROBLEM

As readers of our blog know, estate planning often requires a lot of preparation and a lot of maintenance in order for everything to go relatively smoothly upon death.  Even the best of planned estates can hold their challenges. But as we’ve said in past posts, the better prepared your assets are upon your passing, the less likely your heirs will have these difficulties.

But to ensure smooth sailing, it’s important for people here in Texas, and the rest of the country for that matter, to remember that it’s easier to fix mistakes while you’re still able to.  And as many lawyers will tell you, these mistakes in estate planning can happen to anyone–even the professionals.

Most people never think about drafting a will or establishing a trust until they reach retirement age, the unfortunate truth about life is that anything that can go wrong, will go wrong.  That’s why we always stress the importance of having a plan in place.  But it’s important to know what you’re getting yourself into.  Although there are a lot of terms and laws to remember, knowing these before you speak to an attorney can actually help you in the long run.  Afterall, even professionals can make mistakes and it would be worth your while to be able to catch that mistake now rather than leave it to your bereaved after your passing.

While not having a plan is likely the worst-case scenario, having your loved ones find out a mistake was made during your planning process can often times be just as detrimental.  This can lead to arguments, family rifts, and even litigation.  Avoiding these unnecessary headaches now by double checking things before you pass can really save time and money for your family and loved ones down the road.

Source: Fox News, “Duck Estate Planning Fiascos Before It’s Too Late,” Sheyna Steiner, May 13, 2013

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HOW ONE FAMILY TURNED 5 CENTS INTO $3.1 MILLION

When it comes to our belongings, it’s often times hard to put a price tag on the things that hold sentimental value to us. Sometimes, when it comes time to sell those possessions, it’s amazing how much someone else will pay for something you may have thought to be worthless.

Such was the case for one family who wanted to see how much one particular family heirloom could fetch them. What started as the simple inheritance of a 1913 nickel that had been in their mother’s possession since 1962, soon turned into $3.1 million, providing the family with more financial security than they could ever imagine.

The heirlooms story began in 1912 when the coin was minted, along with four others, with the year 1913. Shortly after the coins were broken up in 1942, a man purchased one of the coins for a reported $3,750. When the man died in a fatal car accident in 1962, the nickel passed to his sister who was told that it was a fake.

Deciding to keep it as a family heirloom, the coin was placed in a box with other family items and stuck in a closet. Upon her death in 1992, the coin was inherited by her children. Despite being told that it was a fake, the children wanted to know if their family heirloom carried any value to someone else. Surprisingly, it did and the coin sold at auction for $3.1 million. After taxes, the children will split $2.7 million amongst themselves.

Although it was bittersweet to part with the coin, the family now has the means to invest their newfound inheritance for future generations.  Proof that even the smallest of assets in a will can turn into something big in the end.

Source: The Twin Falls times-News, “1913 nickel fetches more than $3.1M at auction,” The Associated Press, April 26, 2013

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ESTATE PLANNING FOR THE 8 STAGES OF LIFE

Readers of our blog know that we stress the importance of starting your estate plans early and updating them as often as possible.  That’s because, no matter what stage of life you’re at, you’ll want to have the stability and financial cushioning most aspects of estate planning can offer.

But knowing what to do and in what stage of life can often times be a tricky thing.  So, to clear up a little of the confusion for our readers this week, we wanted to go over the commonly considered ‘8 stages of life’ and the specific estate planning measures that should be taken in each one.

Let’s start with the first stage which is your young and single years.  While most of your assets were taken care of when you were younger, after 18 financial responsibility sort of gets thrust upon you.  Assigning power of attorney and putting together a living will are probably the two most important things you can do at this time.

Grouping stages two through four cover the time between pre-marital relationship and ‘just married.’  During this time it will be important to change power of attorney to your spouse if desired and make sure that they are also included in your living will. This will also be the time to discuss combining assets, health insurance coverage, and getting a mortgage for your first home.

Stage five brings you into parenthood with a little one on the way.  It’s at this stage that you’ll want to not only start saving for your child’s future but thinking about guardianships in the event you and your spouse pass enexpectedly.

Because divorce is a very real possibility after gauging the most recent U.S. statistics, we’re including stage six which is divorce.  This is the stage in life where you may want to remove your ex-spouse from your financial accounts and will need to go through the sometimes painful process of dividing your assets.

In the last two stages is where you may want to invest in long-term care insurance and transferring power of attorney over to your children.  Most experts suggest that this be done before your health begins to fail so as to avoid incurring large medical costs that can eat away your retirement funds.

As you can see, estate planning often requires changes over time; but with a heads up you can make sure that you’re on top of the ball the entire way.

Source: Bankrate.com, “8 life stages of estate planning,” G.M. Filisko

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HOW TAX LAW CHANGES COULD AFFECT YOUR ESTATE PLANS DOWN THE ROAD

With tax season well behind many residents in Texas, most people have long put out of their minds the financial information they needed to gather during tax preparation time. But while most people won’t think about their assets until next year, many estate planners suggest that now is the perfect time to start planning-and they’re not just talking about planning for tax season either.

Many estate planners are suggesting that people start considering how the new tax code will affect their financial plans for the future. Though a majority of people will not be affected by the largest tax law change, the increase of estate tax, subtle changes to the tax code could actually have a considerable impact on a majority of people down the road.

Looking over financial assets such as insurance policies and retirement funds now before they go back into a filing cabinet is a suggestion many planners are making to their clients. It might be advantageous to check contributions to retirement funds now versus closer to tax season. Because of the recession, people may have wanted to protect their money by taking smaller risks last year. With the market on the rebound, it may be time to change things around to maximize assets in the end.

During the hectic panic of the fiscal cliff, many wealthy people made decisions about their estates that they may regret next year. With the fear of rising estate taxes and reduction of exemptions for gift tax, many people rushed to turn portions of their estates into trusts. While still protected, forgetting about it could prove ominous if the tax code does not shift the way people were previously predicting.

Although the process might seem long and cumbersome to undertake at this time, failing to do so now could become regretful down the road. The question we pose to you then is why not take the time to protect your assets now while you still can?

Source: The New York Times, “Estate Planning Remains a Moving Target Under the New Tax Law,” Paul Sullivan, April 26, 2013

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