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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 LEAVING A FAMILY BUSINESS TO YOUR CHILDREN CAN END BADLY

As we’ve said in past blog posts, if a person does not make the proper arrangements before their passing, the ensuing problems can often times lead to tenuous legal battles and ugly family rifts that never seem to come to a resolution. This is possibly the most true when it comes to family run businesses, which many people here in Texas can attest to.

But according to many business experts, some problems can be averted if a little more attention is paid to estate planning before a company’s owner passes the business on to their children.

It’s advice that could have been used by three Minnesota brothers who finally settled a long-standing legal battle that had been brewing since their father’s death in 2004.

Started in 1960, the men’s father began the family’s legacy by founding a company in the hydraulic brakes industry. The company quickly grew and now has an estimated revenue of around $52 million.

But it seemed that it was always the father’s dream to pass the family-owned business onto his sons, constantly urging them to take jobs at the company. Eventually, the eldest son was promoted to president of the company’s board of directors, soon followed by his younger brother who took up the position as executive vice president. All seemed well, and after the father’s passing, each son owned 50 percent of the company’s voting shares along with the responsibility of continuing what their father had started.

But eventually, the younger brother noticed that he was being left out of meetings, pulled from email lists, and was even being forced to take involuntary administrative leaves. It soon became apparent that his older brother was trying to force him out of the company. Their father’s wills and company plans never included provisions for such a thing and by 2006 the younger brother was forced to sue.

Though the lawsuit was settled in 2011, the division that occurred in the family likely could have been avoided. As some business experts point out, when leaving companies to your children when you pass, it’s often times important to plan meticulously so as to avoid a sticky situation such as the one above to happen to you as well.

Source: Star Tribune, “Lawsuit over control of family-owned MICO ends with $21.8M award,” David Phelps, March 31, 2013

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ESTATE PLANNING WHILE MAKING RETIREMENT PLANS

When it comes to estate planning, many people in Texas want to leave a legacy for future generations by passing down any assets they may have accrued during life. But what some people don’t realize is that there is a lot of other planning that needs to be made before you pass away.

We’re talking of course about retirement planning and it may be surprising for some people to hear that estate planning and retirement planning tend to coincide more often than people think.

Let’s take for example your financial assets. People who want to leave behind a large sum of money to their inhabitants may have to realize that when they retire, their income may not be as large as they are used to. Keeping this in mind could greatly change when you retire and how much you end of leaving to your beneficiaries in the end.

It’s also important to think about any medical expenses that you may accrue. In a majority of cases, people don’t want to leave their loved ones with a mountain of bills. This not only lessen the amount they will receive from your inheritance but could cause considerable headache to the person in charge of your estate after your passing.

Making your intentions clear and in writing is probably the single most important piece of information that a person can hold onto when going into estate and retirement planning processes. If you don’t make your wishes known, the state could make many of the decisions for you which may make things harder on your loved ones in the process.

Whether you’re just beginning your career or a few years from retirement, it’s always a good idea to think about how your estate plans will affect your retirement, not to mention how your plans could be changed the other way around.

Source: CBS Money Watch, “Retirement planning: Get non-financial help,” Steve Vernon, March 6, 2013

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REAL-LIFE INDIANA JONES: MAN USES TREASURE HUNT IN ESTATE PLANNING

For some, the situation may sound too good to be true but for thrill seekers around the world, one man’s announcement regarding a real-life buried treasure is other people’s excuses to live out their lifelong dream of becoming Indiana Jones.

Forrest Fenn, an 82-year-old New Mexico man has been collecting valuable items for most of his life, but when he was diagnosed with cancer in 1988 he decided that it wasn’t about the life that a person lives that is important, it’s the mileage you accrue. “There is a wonderful and mysterious world out there to be discovered,” he’s explained to numerous reporters around the country.

It took 12 years of collecting, but after gathering an estimated $1million worth of artifacts, precious metals and rare gems, the old adventurer was ready to send someone else on a journey of their own. “I have had so much fun over the last 70 years collecting things, I wanted to give others the same opportunity,” he says.

About three years ago, Fenn packed up the treasure into a chest and buried it in the mountains just north of his Santa Fe home. Now all people have to do is extract nine clues from a poem he wrote, locate the spot where the chest was buried and the million dollar treasure is theirs.

Although this may seem like an extreme way of distributing your estate before you pass away, some would point out that this form of estate planning requires little to no paperwork and could allow people with large estates to avoid estate taxes at the time of their deaths. Even though becoming a real-life Indiana Jones may seem exciting, for the rest of us here in Texas, it’s still a good idea to speak with an estate planning attorney before burying our assets in the mountains for someone else to find.

Source: Metro News, “Forrest Fenn and the Raiders of the Stashed Gold: Real-life Indiana Jones stages treasure hunt,” Ross McGuinness, Mar. 8, 2013

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THE RICH, THE FAMOUS, THE UNPLANNED ESTATES

We’d like to think that when it comes to dying, because it’s an inevitable fact and we know it’s coming, that planning for it should be easy. But when death is sudden, often times even the people we think would be most prepared for their parting end up being the ones without a plan.

This is especially true for estate planning, and as history has shown us, sometimes not planning for the inevitable can make serious problems when you’re gone. Take these notable singers for example:

When Sonny Bono suddenly passed away, his third wife was left to manage an estate with no will, no trust, and no direction. It wasn’t until she had secured permission from a probate judge that she was able to exercise authority over the estimated $1.7 million estate.

Singer James Brown had the opposite problem when he passed away. He had a will and wishes he wanted carried out, but because he had failed to update his beneficiaries to include a special trust to benefit poor and needy children, and because he hadn’t discussed this with any of his surviving family members, his money ended up going to legal teams instead.

Although a majority of our readers may not be celebrities, it’s important to remember that it’s not just the rich and famous that should be getting their estate in order before they pass. Legal disputes can happen to anyone, no matter how large or small their estate may be. It may be as simple as who gets their grandmother’s favorite porcelain doll to as complicated as millions of dollars in assets; either way, it’s a headache you can save your family if you remember to plan ahead.

Source: Wealth Management, “Lessons of the Rich and Famous … in Death,” Jim Moniz, Dec. 24, 2012

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HOW YOUR GENEROSITY NOW MAY HURT YOU FINANCIALLY IN THE LONG RUN

With Christmas just around the corner, many people in Texas and across the nation are preparing for the shopping season with lists in hand and generosity in their hearts. Despite the troubling economy and even worse-off wallets, the general consensus this year is to try to spread a little more holiday cheer than last year. For many grandparents, this could even mean spending more than they may be able to afford.

But it’s within our nature to want to spoil our family members; they give so much to us, we want to return the favor. But many financial planners say this could be a huge mistake for grandparents whose desire to give gifts now could greatly reduce the amount of money they leave in their wills in the future.

“It’s a delicate balance between wanting to help your family and making sure that down the road you’re not a burden,” says one gerontologist who directs the MetLife Mature Market Institute. She suggests instead that elderly people use gifts as teaching tools that teach their grandchildren about the importance of financial planning at an early age. She also suggests leaving tax-free gifts after they die to make sure that they don’t run out of money now.

So how do you help your grandchildren without wrecking your own financial future? Many experts agree that scaling back on the amount of money you want to spend can make all the world of difference in the future. Though you might want to put away $10,000 a year towards your grandchild’s trust fund, you may only be able to afford $5,000 a year. As mentioned above, using gifts as teaching moments are also a good way to feel like you’re being generous, even if you may only be giving a small amount. A financial planner in Connecticut suggested that one of his clients give his grandchildren appreciated stocks as a gift. That way, he gets the stocks out of his estate meaning it may be subject to less tax when he dies.

It’s never too late to start planning for your future. With estate planning you can make sure that you’re helping yourself now, while also helping your family in the future.

Source: The Wallstreet Journal Market Watch, “The smart way to give to your grandkids,” Kelly Greene, Nov. 13, 2012

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SELLING LUCASFILM SAID TO BE SOLID ESTATE PLANNING MOVE FOR FILMMAKER

When Disney announced its purchase of LucasFilm, there seemed to be mixed reviews across the nation, including many from loyal Star Wars fans here in Texas.

Many saw George Lucas’ sale as a cash-out on an industry that hadn’t even reached its peak yet; while others, mostly financial experts, saw Lucas’ decision as “an estate-planning move worthy of a Jedi Master.”

The $4.05 billion buyout came at the perfect time for the Lucas family, said many reporters, who pointed out that none of the three adopted children in the family have any plans of taking over the family business. By cashing out now, experts say the filmmaker has made it easier for his family to distribute his estate in the future.

Because a majority of his fortune was tied up in stock in the Star Wars franchise, some financial experts said that it would be a long and difficult process of managing the inheritance if the 68-year-old filmmaker were to unexpectedly pass away.

For several years now, Lucas has been involved in charitable endeavors such as Edutopia and the George Lucas Educational Foundation. Having the headache of estate-planning out of the way now gives him time to focus the remaining years on his various philanthropy projects.

Though Lucas’ situation may make estate-planning look simple, this type of planning may be more complicated for smaller mom-and-pop businesses, points out one financial advisor in Dallas. “They may have to bring on a junior partner or work out a royalty arrangement with a new buyer,” he says. After all, he jokes, not every company has the luxury of being bought out by a Fortune 500 company when it comes time to sell.

Source: The Wall Street Journal, “George Lucas’s Jedi estate planning,” Quentin Fottrell, Nov. 1, 2012

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MAKING SURE ALL YOUR DUCKS ARE IN A ROW BEFORE YOU CROAK

The title may sound insensitive, but the sentiment is something real estate planners can’t emphasize enough: make sure everything is prepared before you die.

But it’s not just property division and wills they’re talking about either, it’s the little things that people tend not to forget about like, who have I named as the beneficiary on my insurance policies and my retirement accounts?

Few people know that the named beneficiaries supersede those designated in wills. That’s why many lawyers point out that it’s a good idea to make sure that the names matchup between both sets of documents. By making the necessary changes now to your personal insurance plans, annuities and other financial accounts, you can make sure that assets are distributed according to your wishes. This is especially true in cases of sudden death; making the changes now will ensure that there is little to no confusion down the road.

It’s a good thing to keep in mind that you may place primary and secondary beneficiaries on estates, trusts, retirement accounts, life insurance policies, and transfer of death accounts. Beneficiaries, as we have mentioned previously to the readers of our blog, can be individuals or organizations. They also do not have to specifically be family members either; they can be friends, trusts, charities or even institutions.

One good way of making sure that your assets are being distributed to the right beneficiaries before you die is to keep copies of your beneficiary designation forms. Don’t have any copies of your forms? Simply request copies from your account providers or complete a new beneficiary designation form. By ensuring that everything is in order before you pass away, you’re saving a lot of headaches for your beneficiaries down the road.

Source: Fox Business, “Protecting Your Assets Even After You’re Gone,” Rick Parmanand, Oct. 26, 2012

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FIVE EASY TIPS TO KEEP IN MIND WHEN SETTING UP AN ESTATE PLAN

According to some attorneys, having an estate plan can be more helpful to families than just a will. For those who may not know what an estate plan is, it is a series of documents that provide, among other things, instructions regarding how your assets should be distributed upon your death. It can include a will, the assignment of power of attorney, and a living will. The combination of all of these documents will give clearer communication to your surviving family members after you’re gone.

One thing to keep in mind when establishing an estate plan is to draw up a plan regardless of your net worth. Many people think that an estate plan is unnecessary if you don’t have a lot of money or any property to distribute, but this simply isn’t true. Providing input even on a little amount of money can go a long way.

The next thing to think about is establishing a will and a living will. A will explains exactly where you want all of your assets to go when you die, where as a living will dictates any medical wishes you may have in the event that you become incapacitated.

Also, take advantage of trusts. A trust can help family members figure out how and when your assets will be distributed. They can also help reduce your estate and gift taxes and allow your heirs to avoid probate court.

The last two things to remember in estate planning have to do with communication and understanding estate tax laws. Making sure that you understand exactly how much tax will need to be paid on your estate will allow you to better communicate all intentions to your family. By planning for problems now, you may be able to avoid them after you pass away.

Source: ABC News, “Why estate planning is critical for your family,” Sept. 11, 2012

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