Houston Estate Planning Law Blog
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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PETER FALK’S ESTATE GIVES $3 MILLION TO UCLA
Do you know where you want your assets to go after you pass? Some Texas residents have very specific plans. If you do, you should make sure to formulate legal preparations for the distribution of your estate. This way, you can ensure that your loved ones receive their appropriate share without any problems. In a recent story, a former well-known actor decided to bequeath some of his life earnings to a university for education purposes.
Sources explain that the estate of former “Columbo” star Peter Falk has willed $3 million to the University of California, Los Angeles (UCLA), for student scholarships. The money will be used to create the Shera and Peter Falk Lt. Columbo Memorial Scholarship Fund. The first award will go to five students entering UCLA next fall. It will cover the students’ tuition for four years. The scholarship will focus on aiding undergraduates studying music, military veterans and those with disabilities.
After a long acting career on Broadway, in television and in the movies, Falk passed away last June at the age of 83. Specifically, the actor was best known for his role as a Los Angeles police detective on “Columbo,” which earned him four Primetime Emmy Awards.
Based on his probate arrangements, one might assume that education was extremely important to the former actor. If you are making estate plans, you should consider what is important to you. Do you have a preferred charity that you would like to support? Do you want your children to receive most of your assets? If you have particular plans for your estate, you may want to speak to an experienced lawyer. An attorney will guarantee that the people you care about are taken care of after you pass away.
Source: Washington Post, “Former ‘Columbo’ star Peter Falk bequeaths $3 million to UCLA to provide student scholarships,” Feb. 21, 2012
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TEXAS CONGRESSMAN’S LEGISLATION TARGETING ESTATE TAX GAINS STEAM
The federal estate tax, often referred to colloquially as the “death tax,” takes a cut out of the assets left behind by individuals at the time of their death. Currently, only estates valued over a certain amount are subject to the death tax.
However, while the estate tax is primarily aimed at wealthy individuals, many argue that it does not accomplish its goals and that it has a disparate effect on farmers and small business owners. Through careful estate planning, high net worth individuals can often circumvent the death tax entirely, while those with most of their worth tied up in land or business equipment may take huge hits. When a farmer or operator of a small business dies, their heirs may have to sell off land or other critical assets just to pay estate taxes, potentially resulting in the ruination of a profitable enterprise.
One Texas Congressman, Kevin Brady, is seeking to eliminate the federal estate tax entirely in 2012. Congressman Brady’s bill, the Death Tax Permanency Repeal Act, has garnered bipartisan support from over 190 members of Congress, as well as advocacy groups like the National Cattlemen’s Beef Association.
If full repeal of the estate tax proves impossible, supporters are still looking to make the 2010 estate tax relief package permanent. Under that legislation, still currently in effect, estates worth less than $5 million for individuals or $10 million for couples are exempt from taxation; an estate’s net worth over the exemption limits is taxed at 35 percent (under the former default law, there was only a $1 million exemption, with the excess taxed at a 55 percent rate).
Only time will tell if 2012 will mark the death of the death tax. In the meantime, prudent estate planning will remain the best tool to ensure generational continuity in important family assets.
Source: Iowa Farmer Today, “Time for permanent relief from the federal ‘death tax,’” Kent Bacus, Feb. 10, 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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