Houston Estate Planning Law Blog

HOW TO USE ESTATE PLANNING TO HELP A CHILD WITH A MEDICAL HISTORY

Planning for your own death is never an easy task to undertake; but when you have an ailing child, this process can be so much more difficult to bear. Any parent in Texas would want to see their child taken care of after they have passed. This is especially true for parents who have a child with a medical history or perhaps is completely disabled. Thinking about this during the estate planning process could make a huge difference when it comes to taking care of your children after you’re gone.

Most estate planning experts will agree that the best way to ensure that a beneficiary receives the maximum amount given to them is through the use of a trust. Especially in the case of children with medical histories, parents will want to make sure they are getting the necessary funds to pay medical expenses.

Experts warn however, that certain provisions will need to be present in a trust to make sure that the money in the trust is not sought after by creditors in the event the beneficiary falls into financial distress.

For people whose children may already be disabled and receiving Social Security Disability benefits or Supplemental Security Income, they would be well advised to speak to an estate planning expert on ways of making sure that the assets in the trust do not impact the amount of money received through these benefits.

It’s important to point out, of course, that it’s not just parents of ailing children who should think about the specifics of their estate, but the mass population as well. Remember, you can leave your assets to whomever you wish, not just your children;, but it’s important to make sure that the right stipulations are being applied to each share of your assets in order to maximize the amount received by the beneficiary.

Source: The MetroWest Daily News, “Examining estate planning options,” Christine Keane, Oct. 20, 2012

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HOUSTON WOMAN USES POWER OF ATTORNEY FOR EVIL, NOT GOOD

A 76-year-old Houston woman is trying to put her finances back in order after a 24-year-old Texas woman not only stole her driver’s license and social security card but used them to gain power of attorney over her bank accounts, getting away with nearly $30,000 of the elderly woman’s money.

In mid September, the 76-year-old woman went in to her local bank only to be told that someone had withdrawn $29,800 from her bank account. When the woman asked who, the bank gave her the name of a woman she did not know and explained that she had obtained power of attorney over her bank account. It was at this point that the woman contacted police.

Although investigators believe that a 24-year-old Texas woman is to blame for the theft, police have not been able to take her into custody as she remains at large at this time.

As Texas’ elderly community continues to rise, stories like this continue to emphasize the importance of talking with your family members about your estate before tragedies like this happen. And although power of attorney was used in the worst possible way in this scenario, in most cases, power of attorney can be incredibly helpful when distributing an ailing family member’s estate.

Many real estate planning experts point out that it’s always a good idea to not only have a power of attorney in mind but to let other people, including your financial institutions, know who that person is. And although rare, you may be able to offer yourself a safety net against the difficulties associated with identity theft such as this.

Source: KHOU News, “Houston woman accused of stealing money using power of attorney documents,” Feb. 4, 2013

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HOW IS TURMOIL IN DC AFFECTING THE ESTATE TAX IN TEXAS?

Since the recession, and probably sometime before it became more than just a few-year-slump, Texas legislators have been considering the very real possibility that the federal government may not be able to give them the necessary funds in order to balance their hefty budget.

So far, funds provided by the federal government account for more than a third of the state’s budget; but what if that money dried up? How would Texas legislators be able to subsidize an approximated $64.7 billion loss?

According to a bill introduced this month by Rep. James White, R-Hillister, the answer may be to bring back the state’s estate tax. Although calculations suggest that by re-instating the tax, the state would collect between $62 million and $317 million over the course of 2013, an increase in estate taxes could mean a significant decrease in the amount of money some people intend for their beneficiaries.

Though many Texans agree that weaning themselves off of federal funding could save them a large headache if there is another financial crisis from Washington D.C. in the future, they also point out that in the majority of cases that would be affected by the tax hike, the estates being given to beneficiaries would be going to people may be suffering financially. The additional money that would be spared because of an absent estate tax could mean a bigger difference than it would to the state government.

Although other state legislators are praising Rep. James White, R-Hillister for his efforts to protect Texas financially in the event of Federal financial turmoil, some people in the community urge representatives to reconsider the impact this will have on people and their beneficiaries.

Source: The Dallas Morning News, “Rep. James White files ‘Texas Self-Sufficiency’ bill to analyze reliance on federal funds,” Claire Cardona, Jan. 22, 2013

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LAWYERS TELL TEXAS COLLEGE TO USE ENDOWMENT TO HELP PAY MORTGAGE

“Where a charity’s endowment money goes after a bankruptcy filing is a gray area for the Bankruptcy Code, and it’s rarely explored.” It’s a statement made this month by the Wall Street Journal that highlights the issue some Texans have been having with Lon Morris College recently.

The problems began when the college was struggling to pay the mortgage on its dorms. It wasn’t until after the school’s collapse that bankruptcy lawyers suggested that they pay off their final bills using charitable funds located in the school’s endowment fund. Though this would likely solve many of the school’s financial problems, this is unlikely the wish many people had when they left the school approximately $11 million in various wills and family trusts.

Despite the fact that the money could right the school’s financial situation, the Texas Methodist Foundation, which holds the money, has filed a lawsuit to protect some of the endowment money stating that spending the money on creditors “‘is not consistent with the charitable intent’ of the endowment.”

This isn’t the first time that courts have had to decide on whether an endowment, left by people in their wills and trusts, can be used to bail organizations out of bankruptcy. In fact, in 1987, a court denied a request from a college’s bankruptcy attorney to take charitable money declaring that it was not property of the bankruptcy estate.

As for the recent case, the attorney for the Texas Methodist Foundation says that “each of the endowments was created with the intent and the purpose of furthering educational, charitable and religious endeavors” not to pay off the school’s debts. It is unclear who the court will rule in favor of at this time.

Source: The Wall Street Journal, “College’s Bankruptcy Lawyers Target Endowment Money,” Katy Stech, Nov. 26, 2012

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IT’S NOT THE AMOUNT THAT COUNTS: LEAVING MONEY IN WILLS FOR THE RIGHT REASONS

Everyone in Texas has heard the saying “it’s the thought that counts,” but many people are saying that this really is the case when it comes to leaving money to others in your will.

It’s not a new concept to leave people money in your will but now a small-but growing-group of people are taking a public pledge to leave money to charities despite the fact that they may not have an exorbitant amount of wealth.

According to Giving USA, the research arm of the Center on Philanthropy at Indiana University, nationally, donations totaled approximately $218 billion, and not just from people with large fortunes. “As people have more confidence in their income, not only from their job securities but from the investments, then they feel more confident in giving their money away,” says Pierce Goglia, a spokeswoman for the Dallas-based nonprofit group Communities Foundation.

The nonprofit has seen an increase in donations since the economic crisis ended. Their annual Giving Day campaign raised a record $14.4 million this year from thousands of people in the Dallas-Fort Worth area, up from the $10.7 million in 2011.

Inspired by celebrities who are currently encouraging fellow millionaires to leave money to charities in their wills, a modest philanthropy movement has cropped up in cities across the nation. Dubbed “giving circles,” these groups allow for like-minded people to pool their money and give to causes they deem important. They are becoming the easy way for people who may not have a lot of money to help give a large donation to a charity or organization.

For many people, planned giving has to involve attorneys and legal advice, but according to some, that’s simply not the case. Though many aspects of estate planning do require legal help, some people would be shocked to learn that it can be as simple as changing the beneficiary on an IRA or adding a charity’s name as a “Transfer-on-Death” to a mutual fund.

Many people also have the idea that you have to leave thousands of dollars to people or organizations in their wills. More and more, people are beginning to see that this is not necessarily the case and that sometimes, it’s the sentiment behind the donation that really makes all the difference.

Source: The Dallas Morning News, “Charitable giving not just for the ultra-rich,” Hanah Cho, Nov. 10, 2012

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TEXAS GOVERNOR DRAWS CRITICISM FOR WHAT HE CALLS GOOD ESTATE PLANNING

Proper estate planning requires a lot of forward thinking and financial discipline. However, the payoff for good estate planning is huge. Individuals not only enjoy a better and more comfortable retirement, but they may also be able to leave behind assets to loved ones.

Recently, Texas Governor Rick Perry came under scrutiny for drawing retirement income from his state pension plan, but he defended his decision by simply calling it good estate planning.

Perry receives around $6,500 each month as part of his retirement income from the state. It may come as a surprise to some, but Perry and his campaign staff say it is perfectly legal.

Perry has been governor for the last 11 years, and previously served in other capacities with the state.

The governor’s income was unveiled after financial disclosure forms were released. In addition to the state pension, he also makes $150,000 a year as governor. He also has assets in real estate, trust funds and money market funds.

From the financial disclosure forms, it is clear that Governor Perry has taken the right steps to plan for his future. He has accumulated a sizable fortune for his family. With the right estate planning, he can be assured that his family will be provided for when he is gone.

Even those who aren’t running for public office would do well to begin estate planning. Estate planning isn’t only for the rich, and allows individuals to properly plan where their assets will go when they die. Although it is difficult to think about death, planning for the future is a wise decision.

Source: Star-Telegram, “Perry drawing five-figure retirement pay from Texas,” Maria Recio, Dec. 16, 2011

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EDUCATION FUNDING MAY IMPACT ESTATE PLANNING IN TEXAS

Even the relatively young and healthy should consider taking the time to think about estate planning. It is often beneficial to do so because it not only prepares one for the unthinkable, but is also a good financial management tool.

For those Texas residents who are currently working on estate plans, or are thinking about doing so, the present troubles faced by the education system may bear watching as they may lead to changes in property taxes. That, in turn, may impact how you decide to allocate your real estate assets.

Last May, Texas legislators passed a budget that provided $53.8 billion for school funding. Although that seems like a large amount of money, many Texas schools have previously been left underfunded.

While we all want Texas students to have the best educations possible, school funding needs to come from somewhere. At the moment, about 47 percent of all school funding comes from property taxes. These taxes are collected at the local level, meaning that more affluent counties have more money to spend per pupil than less well off areas. To address the problem, a program has been in place for the past ten years that redirects a portion of property taxes from wealthier to poorer counties. As an alternative, some have called for property taxes to be collected at the state level.

It is unknown what will happen to property tax rates in the future and those that are planning an estate need to be aware of the changes. If property is left to heirs, families need to sure that those heirs are capable of paying the necessary taxes. Although estate planning is an essential tool for many families, more thought may need to put into the planning to be sure assets are distributed responsibly.

Source: Bloomberg Businessweek, “Texas School Finance Fix Eludes Perry as Students Do Without Art,” David Mildenberg, Dec. 1, 2011

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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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