Houston Estate Planning Law Blog

CHANGE IN EXEMPTION RATE COULD MEAN LESS MONEY FOR HEIRS

Starting January 1 the federal tax exemption on estates and gifts is set to roll back from $5.21 million to $1 million which could present a problem for heirs if people don’t take advantage of the exemption now rather than at the time of their death.

Many people have argued that estate attorneys and other financial professionals have sounded the alarm before when estate and gift taxes were up for review, but experts are saying this time the alarm should be duly noted. Experts warn that in today’s political and economic climate Congress is less likely to keep the exemption rate as high as it is for very much longer.

One reason some experts are suggesting that people claim their estates now is that if an individual waits too long to begin the process, there is a good chance that they won’t be able to complete the paperwork before the year’s end. In some circumstances, not filing paperwork before the deadline may increase the amount of tax that they pay on their estate thus reducing the amount they give to their heirs.

Because estate planning involves a number of interlocking parts that all require some degree of time and attention, timing is crucial in most cases. Giving sizable gifts under the current limits in order to reduce estate size may avoid a potential tax hit at a person’s time of death. Estate planning attorneys point out that this will only be possible if people give ample time for the planning process, pointing out that it is difficult to finish the process in any time less than a month.

A managing director of one of the nation’s largest accounting firms summed it up by saying, “My guess is that these are the best rules you’re going to get in your lifetime.”

Source: The Wall Street Journal, “No playing chicken with estate tax deadline,” Charles Passy, Oct. 2, 2012

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WAYS TO PRESERVE FARMLAND FOR FUTURE GENERATIONS

For many Texas residents, estate planning goes beyond passing along assets such as stocks and bonds. Specifically, many families want to pass along farms and ranches and do so in a manner that their heirs can utilize those types of properties. It is no secret that often farms and ranches have to be sold off or broken down into plots for development just so heirs can pay the taxes on them. There are options, though, in estate planning that allows heirs to retain the family farm or ranch and still be able to afford it.

One option families may want to look into is known as conservation easement. This option can be very useful during hard times, such as seen now in the drought. There are currently three types of conservation easements: farm and ranch, wetlands and grasslands.

Grants are also an option for some landowners. Grants often provide matching funds but the landowners must also get funds from state and local governments. The entity is required to provide at least 25 percent of the purchase price. The property must be privately owned and must also be subject to a pending offer. Since 2008, grants of more than $2 million per year have been available.

For those who want to keep their property intact but do not want to farm it in an agriculture way, consider using a wildlife management option. This option allows landowners the ability to stay on the property and to preserve it in a manner that best fits their needs. To qualify, landowners must use the land to promote “breeding, migrating or wintering populations of indigenous animals for human use.” This “human use” can fall into the food, medicine or recreation categories.

These are just a few of the ways estate planning can be used to keep family farms and ranches within the family. When it comes to estate planning, there are many rules and guidelines to consider when hashing out a plan.

Source: The Elgin Courier, “Local landowners learn ways to preserve family lands,” Charles Wood, Nov. 16, 2011

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ESTATE PLANNING CAN SAVE YOUR LOVED ONES A LOT OF HEADACHES

Whether you live in Texas or New York, Alaska or Hawaii, planning for what happens to your assets after you’re gone is never an easy thing to do. No one wants to plan for that day or discuss what will happen upon their death or the death of a loved one. But estate planning is critical if you want things to go smoothly upon your death.

Experts say estate planning can be a difficult subject to discuss, but there are many reasons why it is a subject that simply needs to be considered. A recent news report detailed the story of a financial planner who found himself in a very difficult situation. A client of his had died and the adviser was left to divvy up the man’s estate between two ex-wives, one widow and four children. Each party believed they were not getting an equitable share of the man’s estate.

The difficult situation could have been avoided had the man done some estate planning ahead of time. Experts are no recommending families to counseling organizations in order rationally make future estate plans. They say it is absolutely key to discuss ahead of time with your loved ones how you intend to divide your estate upon your passing. That way, everyone knows what to expect after you are gone.

According to the Institute for Preparing Heirs, an organization that trains advisors, “70 percent of wealthy families fail to sustain their level of assets for two to three generations.” When estate planning involves multiple generations and a significant estate, the process can certainly be daunting. Throw into the mix blended families and a family-owned business and the waters can really get muddy.

Source: Reuters, “Your Practice: Tap shrinks, coaches to avoid estate battles,” Jessica Toonkel, Nov. 1, 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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