Articles Posted in Estate Planning

Although there has recently been a lot of news out of Washington, D.C.—particularly the COVID-19 Relief Bill—many individuals are interested in the 2022 fiscal year budget and the proposed changes that will be made. This includes expected capital gains and dividend tax rate increases for high-income individuals, along with any potential individual income tax rate increases. Another critical change is the expected estate and gift tax exemption. These changes will be made through the budget in order to fund the COVID-19 Relief Bill. While President Biden’s proposed budget will not be released until later this month, below are common questions about potential changes that will be made and how Texans should prepare their estate plan in the meanwhile.

What Gift and Estate Tax Changes Are Likely to Occur?

Currently, the estate tax and lifetime gift tax exemption is $11.7 million per person and $23.4 million for married couples. This means that if an estate exceeds $11.7 million, currently, when the person passes away, their beneficiaries—the people they are leaving the estate to—will pay a tax of 40% on the remaining value of the estate. If a person’s estate is valued at lower than this, their beneficiaries do not need to pay a tax. Additionally, if a person leaves their estate to their spouse, the spouse does not have to pay an estate tax—even if the value is above the exemption limit.

When a family member or close friend is upset by the contents of a deceased person’s will, they may contest the will’s validity. The most popular argument is to claim the will is invalid because of the person’s mental incompetence or that there was undue influence exerted upon them.

In a recent Texas appellate case, the court was tasked with determining whether the deceased’s most recent will should be admitted to probate after her sons argued their mother’s dementia meant she did not have the mental competence to execute the will. Ultimately, the court ruled that the deceased could understand she was making a will, so the will was admitted to probate—meaning the court will divide the deceased’s assets according to the will.

In this case, the deceased—before her death—created several wills over the last few years, but the last will left her estate to her one son and excluded her other two sons entirely. After her death, those sons argued this will was invalid because the deceased had dementia which made her incapable of understanding she was making a new will that would invalidate the prior ones.

The COVID-19 pandemic has caused many individuals to evaluate their future—however, this realization has come in different forms depending on an individual’s age. For the first time ever, young adults are now more likely to have an estate plan than older adults. And many of these young individuals cite the pandemic as the reason they created a Houston estate plan.

In a recent survey, 1 out of 3 people said the pandemic caused them to see the need for an estate plan; however, 30% of these people did not take any action. Below are reasons why the survey respondents said they did not have a will in place—and ultimately why these excuses should not stop an individual from drafting an estate plan.

“I Haven’t Gotten Around to Drafting a Will”

Many Texans incorrectly assume that estate planning is only for wealthy families. For people who do not have many assets, they often believe there is no benefit to themselves or their families to drafting an estate plan. However, this cannot be farther from the truth. Estate planning provides the opportunity to decide what to do with their property, assets, and who can make decisions on their behalf if they get ill. These are critical decisions that people should make for themselves, not allow state laws to dictate who makes these decisions. Below are reasons why people believe they should not draft an estate plan—and ultimately, why estate planning is for everyone and should be accomplished as soon as possible.

“My Financial Situation is Ever-Evolving, so I Will Wait to Create an Estate Plan Until It’s More Stable”

While it is understandable to hold off estate planning until a person feels their financial—or personal situation—is more stable, creating an estate plan now provides a baseline that can be altered in the future when things change. A person’s estate planning needs change throughout their lifetime; however, that is not a reason to hold off on the process. In Texas, it is easy to change all aspects of an estate plan—such as the beneficiary designations, health care proxy, and potential guardian for children—at any point. This means as a person grows—along with their personal situation—they have the opportunity to revise the estate plan to fit these new needs.

“Thinking About the Future is Something I Wish to Avoid”

It is understandable that some people want to avoid facing their own mortality or thinking about their future. However, this should not be the reason to not draft an estate plan. Instead, creating an estate plan is the perfect opportunity to evaluate important choices that while potentially overwhelming, are better to make now than under pressure in the future. When people make these choices last minute—or not at all—it can lead to some hasty, and often incorrect, choices. These decisions include who they would like to make medical decisions if the person cannot for themselves, who they would like to receive any assets or property, and who would care for any minor children.

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As more people become interested in drafting estate plans—recognizing the inherent benefits to planning ahead—they wonder whether they can do it themselves. This approach—called DIY estate planning—is when people utilize websites and books to draft their own Houston estate plan. While this may appear to be a more cost-effective and quicker solution, there are major drawbacks to DIY estate plans that Texans might not realize at first. Below are some aspects to consider when deciding whether to draft a DIY estate plan or to work with a knowledgeable estate planning attorney throughout the process.

Why an Estate Plan is Not So “Simple”

Many individuals starting the estate planning process assume it will be simple: they only need a basic will, detailing who will receive their assets and belongings when they pass away. However, it is rarely that easy. Websites may be effective for filling out a generic form, but then people do not know what else, if anything, should be included in the estate plan. Not only are most Texans unaware of the other critical aspects of an estate plan—such as tax planning, financial planning, and senior care—but they assume a will can be a page or two long without getting into the details. Estate planning attorneys go beyond creating a will: they help people create healthcare documents—so doctors know what to do with end-of-life care—and financial planning documents so loved ones are secure in their future finances. This goes above what a DIY website can provide.

Estate planning is a crucial measure that ensures a person’s assets are given away according to their wishes; otherwise, the inheritance could be diminished by court costs and other fees. While many people have come to realize the importance of estate planning generally, they have many questions and fears about the costs of a Houston estate plan. This may deter Texans from creating an estate plan, but it should not. Below are common questions and answers about estate planning fees and the benefits of hiring an estate planning attorney.

Why Should I Hire an Estate Planning Attorney?

Many Texans believe that hiring an estate planning attorney is costlier than using an online website; however, there are innate benefits to using an estate planning attorney. Firstly, internet sites do not provide specified advice for clients and their specific needs. An experienced (key word) estate planning attorney will tailor all estate planning documents to the person’s desires and requirements. Especially for people with unique family circumstances, this is a must.

Being deceived by anyone can be upsetting. However, when it is someone who claims to have your best interests at heart—and it impacts your financial future—it can become downright infuriating. There are ways to discern between companies who are only out for their own selfish financial gain—and will even lie to clients about what is best for them—and those that actually care about an individual’s situation and their family. When it comes to Texas estate planning, finding an estate planning attorney who will handle the matter with grace, hard work, and efficiency is critical.

Texas-based CLA Estate Services, Inc. and CLA USA Used “Scare Tactics” to Dupe Seniors Into Buying Estate Plan Products

In Seattle, a judge ruled that a company providing estate planning services must pay more than $6.1 million to people in Washington because it pressured people to buy its products by using “scare tactics.” Specifically, the company scared seniors into believing they would be left vulnerable unless they purchased the company’s Lifetime Estate Plan and set up revocable trusts, which gave the company further access to their funds over time.

For individuals with minor children, thinking about who would care for them if the parents died unexpectedly may be difficult but necessary. This designation can be made as part of a Houston estate plan, which appoints a person to serve as the legal guardian of a child—only in case of their parents’ untimely passing. Parents without a will should prioritize drafting one, as this documents the individual’s wishes and intents.

When deciding who to name as guardian—or whether to change the designation—there are several aspects to consider:

Factor #1: Location

With the recent election and inauguration of the 117th United States Congress, new bills are being introduced that impact all aspects of a person’s life. According to a recent news source, one such bill is Senator Bernie Sanders’ proposed estate and gift tax reform legislation. For individuals with an estate plan in place, the introduction of new legislation gives cause for concern that it may impact their estate plan. The bill will reduce the estate tax exemption to $3,500,000 and increase the estate tax rate from a flat rate to a progressive one. Because the nuances of such a law can be confusing, below are some common questions and answers about the new estate tax bill.

What Does the Bill Propose?

The bill seeks to reduce the estate tax exemption from $11,700,00 to $3,500,000. This means if an estate is valued at over $11,700,000 currently, the heirs of the estate will need to pay a tax. If the proposal is enacted, the heirs of an estate valued at over $3,500,00 will have to pay the tax. Additionally, if the bill passes, anyone who received more than $1,000,000 in gifts from a loved one as a part of their estate plan will have to pay a tax too. The proposed exemption limits are per person; therefore, for married couples, the total exemption limit would be $7,000,000. After 2022, the exemption will continue to rise with inflation.

Texans who own their home often have thoughts about what they would like to happen to the property after their passing. While there are multiple ways to transfer property after a person has died, one of the easiest is called a Transfer on Death Deed (TODD). A Transfer on Death Deed names the individual—or individuals—who will receive the house after the owner’s death. Although Houston Transfer on Death Deeds are not exceedingly complicated, below are common questions and answers about this particular deed process.

What Is a Transfer on Death Deed?

A Transfer on Death Deed allows an individual to create a document that leaves real estate property to a loved one after they have passed away. The property will automatically go to the heir named in the document without the need for probate court proceedings. The TODD process is extremely simple: the owner must sign the deed, get the signature notarized, and file the deed with the county clerk’s office before their death. Within the deed, the following information should be included: the name of the owner of the property, the person, or people, receiving the property, and a statement that the property will be transferred upon the owner’s death. As many people can be named as heirs as the owner wishes.

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