Houston Estate Planning Law Blog

RECLUSIVE MAN LEAVES MILLIONS TO ORGANIZATIONS IN HIS WILL

Anyone who has read our blog knows that making plans for your estate after you pass is an important decision that can never be considered too early. But what seems to stop many people here in Texas from continuing forward with their estate planning stems from the fact that they do not have any family members to share their wealth with.

Such was the case for an elderly man in Washington, but instead of halting his estate plans entirely, he decided that he was going to give back to a community that had given him so much over the years.

When the president and chief executive of the group Family Matters-an organization that helps under-privileged people in the community-got the phone call from the elderly man’s attorney she says she cried; not just because the man had passed away at the age of 100, but because the generous donation left to the organization in his will was more than twice the charity’s annual budget in a given year. She tells reporters that it took her some time to compose herself before returning to the conversation with the trust officer.

In total, the 100-year-old man had left $43 million to three separate endowments, $28 million of which was promised to Family Matters. The remaining $15 million was divided evenly among the National Symphony Orchestra and the Washington National Opera.

The man’s 62-year-old cousin, who helped oversee his affairs over the course of the last few years, says that it’s no surprise to her that he left money to them in his will. He had no family of his own-many of them already gone-and mostly kept to himself because of his considerable shyness. When he did go out, he spent much of his time attending theater, music and ballet performances.

“It’s almost as if he did appreciate the great fortune of his life and knew that with a stroke of a pen in his estate plan he could do something wonderful for people less fortunate,” his cousin explains adding that his secrecy surrounding his donations until after he passed was fitting for a man who kept such a considerably low profile all his life.

Source: The Washington Post, “Philanthropist Richard A. Herman leaves fortune to D.C. charity, symphony, opera,” Annie Gowen, Feb. 5, 2013

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THINGS TO THINK ABOUT WHEN PLANNING YOUR WILL

Although this may seem like old news to many people here in Texas, it’s surprising to see how many people do not plan for their estate until it’s almost too late. Some of us feel the morbidity of it all-writing a will while you’re still in your prime-but others haven’t begun writing their wills because they simply don’t know where to start.

Most people usually start seriously considering a will when either someone close to them passes or they are told that they have a serious medical condition that could greatly reduce their time here on earth. No matter what gets you to start thinking about estate planning, sometimes people get so worried about ensuing arguments over their estate decisions that they put off making a plan to avoid the headache.

For those who find themselves in this situation, some estate planning exerts will advise you to calm your anxieties by simply thinking about one simple thing: give to those who you hold dear. Once you set aside the daunting idea of separating your belongings and financial assets equally amongst your beneficiaries, you allow yourself the freedom to show how much you cared about someone through the act of giving.

A majority of people, when planning their wills, focus most of their efforts on dividing their estate, often times completely forgetting about including their medical wishes as well. They’re another important part of any will that not only help ensure that your burial wishes are followed but help give directions to family members on how to follow through with your wishes.

Source: The New York Times, “In Writing Her Will, It’s the Little Things That Matter,” Laura Holson, Nov. 13, 2012

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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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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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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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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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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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WILL CONTROL: HANDLING YOUR WILL AFTER PASSING

As favorable gift-tax rules slated to end in December, will stipulations are becoming more relevant during the estate planning process. Whether it is forcing heirs to undergo drug testing or even requiring children to visit a family member’s grave, estate planners are becoming more creative in drafting the hurdles that heirs must clear before they are able to receive money or assets. However, even with the flexibility, Texas residents have to control their heirs after they are gone, some will stipulations could end up in a court battle.

Many people do not know that there limits apply to what people can and cannot require. One provision that could prevent people from certain requests is called ‘contrary to public policy.’ This provision prevents the promotion or encouragement of divorce or criminal behavior. Recent changes also include prohibiting racist behavior. As an example, a will that stipulated leaving money only for a scholarship for white students would likely be struck down in court.

Furthermore, discouraging someone from getting married could also wind up in a court battle. However, the law is flexible in this requirement because it allows someone to bypass their heir’s spouse or any future spouses. Vagueness could also be struck down. Anything that could be viewed as illegal, impossible or even ambiguous is likely to be thrown out in a court.

In the end, the law is typically favorable to people leaving assets as they wish, as long they don’t encourage any of the above mentioned cases. Texas residents planning their will who wish to use a unique stipulation may want to ensure they are familiar with all applicable state laws before adding such a requirement. Doing so could prevent heirs from having to deal with courts.

Source: The Wall Street Journal, “How to Control Your Heirs From the Grave,” Laura Sanders, Aug. 10, 2012

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ESTATE PLANNING IS A GOOD IDEA FOR YOUNG INDIVIDUALS

Many young Texas residents may think that estate planning is not applicable to their lives. However, if you are in this category, you may want to talk to someone about making potential arrangements. There are many benefits for individuals–young and old.

Sources say that younger people tend to feel that there is no specific need for estate planning. Nevertheless, legal professionals feel that it is a good idea for younger adults to work up a will. They add, at a minimum, individuals need to name a guardian for their children.

Young individuals should ask the following question: What would happen if I passed away immediately? If you have children and you do not name a guardian for their care, if you were to pass, a random judge would assign a guardian to your children.

In addition to naming guardians, experts suggest young parents should consider financial repercussions of an unanticipated death. For example, if something happens to a spouse in a younger family, there are income needs that need to be figured out for remaining family members.

Ultimately, if you die without a will, the state will essentially make one for you. While this may work out for some individuals, many people have inherent plans for their assets after they die. For this reason, if you do not have a current estate plan, you may want to begin to formulate one-especially if you are unfamiliar with the probate rules of your state. Remember, probate systems vary significantly across the nation.

Source: Cleveland Jewish News, “Estate planning wise at almost any age,” Michael C. Butz, March 15, 2012

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POOR ESTATE PLANNING MEANS JAMES BROWN FAMILY YET TO SEE A DIME

Residents in Texas and all over America often have a misconception that when a celebrity dies, surviving family members are immediately left to inherit the riches. That is only the case if proper estate planning was in place prior to the celebrity’s death.

The estate of James Brown, on the other hand, shows that poor estate planning can lead to years of lengthy and costly battles. His heirs have yet to see a dime, even five years after his death

Court battles have tied up the estate of James Brown since his death in 2006. Original estimates of his estate value hit approximately $100 million. A later settlement would have left half of his estate to a charitable trust, with 25 percent of what was left being passed to his widow, and the remainder being divided amongst his children. That settlement, however, has also been tied up in court with trustees who hope to undo it.

The Associate Press has reported earlier this month that his charitable trust has shrunk to $14,000, as a result of his estate remaining in limbo. This is in addition to $20 million in debt that grew.

This case shines light on the importance of estate planning and the complexities of estate battles.

James Brown reportedly did not update his wills or trust following his marriage or the birth of his last child. This lack of estate planning has left his estate in litigation for five years, and possibly even longer. None of his heirs, nor the charitable trust for college students in need, have been paid anything yet.

Texas residents can learn from cases like this, whether they have significant accumulated wealth or not. Though in the media we typically only find estate stories about the rich and famous, many everyday people have similar problems of a different scale.

It is never too early to settle estate planning matters, and ensure that heirs or beneficiaries will not lose inheritances in such lengthy fights.

Source: Forbes, “Court Battles and Debt Leave James Brown Estate Not Feeling Good,” Danielle and Andy Mayoras, Nov. 1, 2011

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