Houston Estate Planning Law Blog

HOW CAN A LIVING TRUST HELP YOU AND YOUR ESTATE?

Most people in Texas who are currently looking into estate planning are more than likely informed when it comes to wills and what should be included in these important legal documents. But what they may not know about is the use of a living trust is a way of distributing assets to beneficiaries without all the probate associated with wills.

Let’s take a look at a couple trusts that can help you disperse your assets in accordance with your exact wishes. First, we’ll start with living trusts. These types of trusts become effective during your lifetime and can be revoked at anytime. Living trusts are a good choice for people who want to distribute their assets to beneficiaries without losing a majority of it to taxes and probate fees.

There may come a time when you may want to establish a trust but want to make sure you have complete control over what happens to the assets in the trust. Unlike living trusts which are managed by a trustee, a revocable trust allows a grantor the ability to have complete control over the trust, even making changes to it if necessary. They also have the ability to be revoked in the case that you no longer want to give assets to the intended beneficiaries. It’s important to note however that money placed in a revocable trust is subject to estate taxes and the assets within the trust can be reached by creditors.

In some states, the use of trusts can be far more efficient than wills not only because they avoid probate, but because they can be set up in such a manner that the grantor can control the assets in the exact manner in which they choose. Also, in many states, probated wills become public record. This can especially be a problem for people who want to make sure that the specifics of their assets stays private.

Because there are so many different types of trusts, it will be important to speak with a skilled attorney before making any definite decisions about your assets.

Source: The New Jersey On-Line, “Biz Brain: The benefits of a living trust,” Karin Price Mueller from The Star-Ledger, Feb. 18, 2013

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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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CLEANING UP THE CONFUSION ABOUT QTIPS

When most people in Texas think about a Q-tip they think of the small stick with white fluff attached to both ends that can be used to clean their ears. If you talk to an estate planner however, you’ll get a completely different answer.

So what is a QTIP and what is their function? Like most acronyms, QTIP stands for qualified terminable interest property, which is actually a trust established for a beneficiary. But it has a twofold purpose. One, it aims to leave part of your estate to someone other than your spouse; and two, it is often times used to guarantee inheritance to children from a previous marriage.

As many estate planning attorneys will tell you, QTIP trusts are generally used in second or third marriages when a person wants to guarantee that money goes to children from previous marriages instead of their current spouse in the event that they pass away. It is important to point out that you do not necessarily have to be divorced in order to establish a trust for your children. In fact, many estate planners suggest doing so regardless, as it gives clear directions as to how you want your assets to be divided after you pass.

It is important to remember that a QTIP trust is actually part of the will and not a separate document. Also, a person does not put any assets into a QTIP fund while they are alive. This is because funds are not distributed until after the trustor has already passed therefore it is possible for more money to be given to a beneficiary in the end.

Married couples may use a trust fund as a way of reducing their estate taxes as well which can actually save them money in the long run. Any questions you may have regarding trusts may be directed towards an estate planner who can help figure out which trust tool is right for your situation.

Source: The New York Times, “Yours, Hers, and the Kids’: Estate Planning After Remarrying,” Charles DeLuente, Oct. 19, 2012

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DECEASED FARMER LEAVES MILLIONS TO HELP A LOCAL LIBRARY AND CHARITIES

When it comes time to write your will, many people in Texas and across the United States, come across the difficult task of dividing their property and assets among family and friends. But what if you want to bequeath money to an organization or perhaps a business?

People have left money in their wills to people and organizations of their choice for decades, and one California farmer wanted to be no different. So when it came time to write his will, he set aside $2.8 million to be given to the Camarillo Public Library. Upon his death, librarian workers were shocked to hear that such a generous donation had been left for them.

According to the will, the multimillion-dollar bequest was intended for the expansion of the library’s collection of business books, digital media and other materials. “One of the keys to success of the business library is to perform outreach to the community,” a city librarian said. Librarian workers say this money will help them to reach more people in the community than they could before.

But the library wasn’t the only grateful organization who received a generous donation upon the farmer’s death in 2005. He also left $11 million to charities and public agencies such as the American Red Cross, the Camarillo Health Care District, the Salvation Army, as well as a children’s home.

Leaving money to family members and friends after you pass is the general way of doing things, but for those that want to help their community as well, allocating money to a business or organization in your will may be another option.

Source: The Ventura County Star, “Camarillo library plans to expand business collection with $2.8 million bequest,” Jennifer Letzer, Sept. 17, 2012

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SHOULD YOU RETAIN A TRUST PROTECTOR?

When estate planning in Texas, it is important to leave your most trusted advisors in charge of administering your estate. It can never hurt to have more than one set of eyes on something. For this reason, some people are beginning to turn to trust protectors. Protectors are people who work together with the designated trustee to ensure that settlor’s intent is being fulfilled.

Trust protectors turned up on the estate planning scene when wealthy families wanted to establish trusts in foreign countries but felt that additional safety measures to protect their wealth were needed. These families hired trust protectors, who oversaw the administration of their trusts. Now, these protectors are used in the same way, but could have additional responsibilities. For example, they could remove or add trustees, move assts for protection purposes or withhold wealth from beneficiaries if necessary.

It may cost more money to hire a trust protector, but having a second person oversee things may be worth the cost. Normally, estate planning costs are anywhere from 1.5 to 2.5 percent of the estate’s gross value. A trust protector would add approximately .25 to .75 percent to the overall costs of the estate’s administration.

Even so, this cost may be worth it because it can ensure that the trust is handled professionally and efficiently. Trust protectors in Florida can act as a fail-safe for people, ensuring that others are not abusing their authority when it comes to estate administration. Adding a trust protector may help foster a harmonious atmosphere after the estate is divided, which for many families is worth its weight in gold.

Source: MontereyHerald.com, “Trust protectors,” Liza Horvath, July 9, 2012

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81-YEAR-OLD WOMAN CREATES A TRUST WITH HER LOTTERY WINNINGS

Many Texas residents wish they could win the lottery. What would you do if you won? Buy a boat? Purchase a new home? Or, would you save all of your winnings for your family and friends? In a recent story, a woman will have the opportunity to purchase nearly anything she wants with her new winnings.

It all started when a woman had a craving for dessert. She journeyed to her local Stop and Shop to ease her hunger, and while she was in the store, the woman decided to purchase a Powerball ticket. Much to her surprise, the 81-year-old woman won $336.4 million. She is the winner of the sixth-largest prize in the United States. According to sources, to protect her savings, the woman opted for a lump sum of $210 million and set up a trust under the name “Rainbow SherbetTrust.”

Sources say that the woman was so shocked. She did not claim her prize for about one month. In fact, she kept the ticket in a Bible and slept with it in her bed. Once she got over the shock, the woman was smart and set up a trust for her winnings. It is extremely important to make plans for such a large amount of money. With proper trust arrangements, the woman can ensure that her family and loved ones are financially cared for after she passes.

The woman made a statement about her incredible luck: “I’m very happy and I’m very proud and this will make my family very happy. We are truly blessed. Thank you.”

Source: New York Times, “$336.4M Powerball winner is 81-year-old woman,” Mar. 6, 2012

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WILLS AND TRUSTS: ESTATE PLANS ARE ESSENTIAL

Many Texas residents know that it is extremely important to make arrangements for your estate. However, did you know that over 50 percent of adults do not have a will? According to a 2011 survey conducted by Harris Interactive, 92 percent of adults under age 35 have not made any estate plans.

People assume their family will automatically inherit any assets they leave behind; however, assets are held in probate court and distributed according to state law. This process can be expensive and emotionally exhausting.

Efficient estate planning involves only a few fundamental legal documents. Experts suggest the following:

• Will: You should create a will when you have assets or start a family. Assets can be left to loved ones through this legal document. A will usually names an executor. This person manages the administration of the estate and distributes assets to the specified inheritors. Also, the will should designate guardians for your children in the event both parents were to pass.

• Healthcare proxy: This legally permits an individual to make medical decisions on your behalf in the event that you became incapacitated. Depending on the state, family members may make some healthcare decisions if no healthcare proxy is in place. However, the legal and financial process can be very strenuous. This is why a healthcare proxy is a good idea.

• Durable power of attorney: In the event that you were to become incapacitated, this grants a spouse or another individual the power to make financial or legal decisions on your behalf.

Trusts are another estate planning tool, which give you greater control over who receives your money. Furthermore, funds in some trusts cannot be attained by creditors. There are various types of trusts, which include the following:

• A special needs trust provides for a child in need. This does not compromise his or her access to government benefits.

• A Qualified Terminable Interest Property (QTIP) trust provides for the marital deduction and guarantees that a spouse cannot use assets to benefit a future spouse.

If you are ready to make arrangements for your assets, you should speak to an attorney about the various estate planning possibilities. There are many options that you can select to ensure that your loved ones are cared for.

Source: U.S. News & World Report, “What type of estate and tax planning do I need to do?” Susan Johnston, Feb. 27, 2012

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ESTATE PLANS FOR OUR CATS AND DOGS

As Texas residents know, estate plans guarantee that our loved ones are cared for. However, what are your plans for your pet? In a recent national story, a 76-year-old woman has decided to protect her cats after death. Her plan, a pet trust, surfaced after she found one of her late friend’s pets in a dire situation.

An article explains that the woman’s friend, who passed after an illness, made arrangements for one of her cats. The friend understood that her son would take her other cat. After her death, the caretaker backed out, and the son decided that he could not take more animals. Ultimately, one cat found a new home; however, the other was taken to a shelter.

Now, one lady does not want this same story to happen to her cats. To ensure that her pets are cared for, the woman has created a pet trust, which specifies that if the woman’s cats survive beyond her death, they will be taken to a local retirement community. The cats will be supported by money that she has set aside for them. According to the woman, “This way I know that they will not end up at a shelter, where they would be killed because they’re too old to be adopted.”

This type of trust elects a “guardian” who will carry out specific pet-related wishes. This ensures that the animal is cared for after the owner passes. The document includes instructions for care, and property is usually set aside for the new caretaker.

Pet trusts are not allowed in every state. However, sources note that including a pet in a will is not a good idea. Wills provide for how property should be distributed. Typically, they do not include details about caring for the animals, and pet care instructions in a will are not enforceable.

Pet owners tend to overestimate the likelihood that a relative will care for an animal. For this reason, the woman in this story has encouraged many of her friends to draw up these pet trusts.

Source: The New York Times, “The Pet Problem,” Alyson Martin and Nushin Rashidian, Feb. 3, 2012

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DOES MAN’S ADOPTION OF ADULT GIRLFRIEND REPRESENT AN ABUSE OF TRUST LAW?

The laws governing the creation and administration of wills, estates and trusts can be a bit tricky. In a lot of ways, they are fairly straightforward, but as in other areas of law, there are always those quirky little loopholes that, in some cases, can lead to surprising outcomes.

Such a loophole is behind the recent story out of Florida. It’s a story that some Houston readers might think reflects a clever and creative move and others might think shows a disregard for the intent of our laws and constitutes an abuse of the system: a 48-year-old man recently adopted his 42-year-old girlfriend so that he could move assets into a trust for his “children” and thus shield them from a pending wrongful death lawsuit against him.

The man is being sued by the parents of a college student whom he killed in February 2012 when he ran a stop sign when he was drunk. Their wrongful death suit is set to begin next month. Evidently worried that he might lose, the man apparently moved hundreds of millions of dollars into a trust set up to benefit his children. Since the assets now belong to the trust and not to the man himself, they are no longer considered “his” by a court.

By adopting his girlfriend, however, the man created a beneficiary who could access the trust, since she is now his “child.”

Naturally, the family of the deceased child has objected, and a judge called the move “surreal,” but at this point, there does not seem to be anything illegal about what the man did.

What do you think? Was the man just very savvy, or did he do something that, to you, seems underhanded and devious?

Source: ABC News, “Polo Club Found Adopts Girlfriend Amid Civil Suit Over DUI Death,” Christina Ng, Feb. 2, 2012

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