Estate Planning

How an Irrevocable Trust Can Be Incorporated into a Houston Estate Plan

Published on: June 13, 2023 | By David W. Miller

In the past, on our blog, we have gone over the possible benefit of establishing a trust when you are engaging in the estate planning process. Forming a trust can be complicated, and there are several different kinds of trusts that fit different sets of needs, depending on the nature and size of an individual’s estate. In particular, an irrevocable trust is a tool that might be right for you as you are thinking about how to organize your estate.
An irrevocable trust is a specific kind of trust that allows the trust’s creator to designate assets to a beneficiary – once transferred, the trust cannot be altered. The trust’s creator automatically loses control over the assets once the beneficiary receives them.

Advantages and Disadvantages: What You Need to Know

An obvious disadvantage to the irrevocable trust is that as soon as the transfer happens, you (the grantor) lose control over the trust property. The irrevocable trust can also be subject to higher tax rates than other kinds of trusts.
On the other hand, however, any assets that are part of an irrevocable trust do not contribute to the value of a person’s estate, which is what often determines how much an individual pays in taxes outside of the trust. In addition, property in an irrevocable trust avoids probate, which can be extremely beneficial for a person’s loved ones after that person is gone.

Irrevocable trusts can also allow individuals to continue accessing government benefits like Medicare and Supplemental Security Income. The government will generally refrain from counting money in an irrevocable trust as part of someone’s total net worth when deciding whether that person qualifies for important benefits, which allows those individuals to avoid being exempt from receiving the money they might need.

Choosing the Right Trustee to Manage Your Trust

Published on: June 10, 2023 | By Thomas W. McCulloch

Choosing the Right Trustee to Manage Your Trust

Organizing your assets in the form of a legal trust can be a valid and helpful tool in estate planning. If you are establishing a trust, you are likely trying to decide who to appoint as your trustee, which can often be a tough decision. A trustee, by definition, is an individual with the power to administer the trust’s property in accordance with the desires of the trust’s owner. In thinking through who to choose as your trustee, there are several main considerations you should keep in mind.

Trustworthiness

The most important quality of a trustee is trustworthiness. When you establish a trust, you articulate your goals, priorities, and desires for how the trust property will be administered. The trustee is the person that ensures this process goes smoothly and is in accordance with the owner’s goals. If you do not trust the person you appoint, there is always a risk that he or she will not work with your best interests in mind. Appointing someone trustworthy can help ensure that the entire process goes as you plan when you establish the trust.

If you appoint a trustee that is also a close family member or friend, consider possible implications if a conflict arises out of issues around the trust. While trustworthiness can be inherent in close personal relationships, sometimes hiring a third party can be helpful to make sure things run smoothly without additional interpersonal conflicts.

What Assets Must Go Through Probate in Texas?

Published on: May 31, 2023 | By David W. Miller

The probate process involves many logistical hurdles that often require time and money, and it can be frustrating for those individuals a decedent leaves behind. It is important to recognize, however, that not all assets must go through probate – in fact, there are some assets that are automatically exempt from the process altogether. At McCulloch & Miller, we specialize in separating these two kinds of assets so that families do not have to unnecessarily go through a process that will drain their resources during an already difficult time.

Probate Assets

Put simply, probate assets are those that are governed by the terms of a will. All real property and assets are subject to probate unless they fall under a category that allows them to be exempt from the process. So, for example, if a decedent had a home, a piece of land, or money kept in a non-exempt bank account, those assets will have to go through probate. The probate court learns of the individual’s death, makes sure all potential beneficiaries have received notice of the death, then divides the assets accordingly. This process can take anywhere from a couple of months to a couple of years.

Non-Probate Assets

The following assets avoid probate automatically, just by the nature of the way they are organized:

Trust assets: in the past, we have reviewed different kinds of trusts on our blog, and exempting assets from probate is another benefit to putting money or property into a trust.
Property owned in joint tenancy with a right of survivorship: when a piece of property is owned jointly with a right of survivorship, it means that multiple individuals own the property together and that when one person dies, the others automatically own the property. This kind of property, therefore, avoids any kind of probate litigation.
Insurance policies: life insurance policies, for example, allow a decedent to pass proceeds to a beneficiary as soon as that person dies.
Transfer-on-death accounts: certain kinds of bank accounts can be designated to transfer to another person the moment the account owner dies. These kinds of accounts, however, have to be designated as “transfer-on-death” before the owner dies.

What You Can Do to Avoid Probate Litigation

Published on: May 24, 2023 | By David W. Miller

As a general rule, a decedent’s assets in Texas must go through the probate process in order for those assets to pass on to the person’s beneficiaries. Because this process can be daunting and time-consuming, clients often come to us for help in figuring out how to avoid probate altogether. By organizing assets and planning ahead, there are ways to prioritize efficiency in passing your estate to your loved ones after your death.

Property

Real property (land, a home, or a building), is typically subject to probate. However, by owning property with another individual, you can automatically pass that property onto the other individual when you die. The property must be owned with the “right of survivorship,” meaning whoever else owns the property upon the decedent’s death has the right to continue owning it if and when they survive another owner.

A “transfer-on-death” deed is another way to pass along real property. This kind of deed must be recorded and processed before the property owner’s death. It essentially means that as soon as a person dies, the property automatically transfers to the beneficiary without any timely litigation.

Probate Considerations When There is Not a Will

Published on: May 23, 2023 | By Thomas W. McCulloch

For many decedents, the probate process involves a probate court judge reviewing that person’s will, ensuring that the will is valid, and then distributing the person’s assets to his or her beneficiaries. At times, however, the probate court has to decide how to proceed when there is no will in place. Even when there is no will, the decedent’s assets and debts must be somehow distributed; in Texas, there are certain rules that dictate how this process plays out.

Rules of Intestate Succession

You may have heard the term “intestate succession” either on our blog or otherwise. This term refers to the distribution of assets to a decedent’s loved ones according to the state’s rules. Essentially, for a person that dies without a will, there are rules and regulations in place that say where that person’s money, property, and debts will go.

If the decedent has a spouse, that spouse will be first in line to inherit the decedent’s estate. If there are no children or parents, the spouse will, in fact, inherit the entire estate. If, however, the decedent and spouse had children together, the spouse receives 1/3 of the decedent’s personal property and the right to their physical property, while the children inherit everything else.

Should You Consider Avoiding Probate?

Published on: May 22, 2023 | By David W. Miller

In the past, our blog has focused on the probate process and the many different implications for decedents, family, and friends. As we have emphasized, the probate process is complex, and it involves many actors as well as a detailed procedure that can take anywhere from a couple of months to a couple of years to play out.

When getting to know our clients and their individual needs, we often end up recommending that people try to avoid the probate process altogether – that is, we encourage our clients to think about how to organize their assets and debts in a way that makes them exempt from having to be reviewed by a probate court at all. Because it is so common for a person’s estate to go through probate, it is also important to understand why avoiding probate might be worth considering.

Reasons to Consider Bypassing Probate

First of all, the probate process happens through the probate courts, so everything that goes on becomes part of the public record. If your estate or your family dynamics involve information you would rather keep confidential, avoiding probate might be right for you.

Does Texas Have a Simplified Probate Process?

Published on: May 18, 2023 | By Thomas W. McCulloch

In Texas, the probate process can be overwhelming for beneficiaries and those involved in distributing a decedent’s estate. The good news, however, is that for those whose assets are below a certain amount, there is a simplified probate process available. This process is shorter and more efficient, but it still comes with several important procedural steps that cannot be avoided.

Who Qualifies for the Simplified Probate Process?

There are three basic requirements to qualify for the simplified probate process: the decedent must not have left behind a will, at least 30 days must have passed since the individual’s passing, and the value of all property belonging to the decedent must not exceed $75,000. This $75,000 amount does not include certain exempt property, which is more closely defined in the state statute laying out this procedure.

What Does the Simplified Probate Process Entail?

As the name suggests, this process is less costly and involved, but it still has certain important steps that must be taken. First, inheritors must fill out a form called a “small estate affidavit.” This form essentially tells the court what property and debts are involved in the decedent’s estate, and it lists the people that stand to benefit from the estate’s distribution.

Who Can Benefit from a Texas Special Needs Trust?

Published on: April 30, 2023 | By McCulloch & Miller, PLLC

As we have discussed previously in our blog, trusts can be powerful tools to protect and distribute assets for individuals in a variety of circumstances. One particular kind of trust is called the special needs trust, which is designed specifically for individuals with a disability. This type of trust distributes assets without eliminating its beneficiaries from public benefits, allowing them to receive the care they need while also maintaining a high quality of life even with their disability.

What Are the Kinds of Special Needs Trusts?

First, there is a “first-party trust,” which forms when a trust beneficiary receives some kind of asset, whether it be in the form of money, property, or stock. Normally, when a person’s assets rise to a certain level, that person is disqualified from public benefits that could help provide care for their disability. By using the first-party trust, however, the individual can put the funds into a trust and still receive public benefits. The downside of a first-party trust is that when the beneficiary dies, the state Medicaid agency gets whatever funds are left over at the time of death.

A second kind of special needs trust, the “third-party trust,” forms when someone wants to give a person with a disability a gift or inheritance. The funds in the third-party trust don’t actually belong to the individual with the disability – they are only being used for that person’s benefit. One important upside to the third-party trust is that the government does not end up taking the remainder of the funds when the beneficiary dies, since the funds never belonged to the beneficiary in the first place.

Estate Planning Considerations for Gun Owners

Published on: April 30, 2023 | By David W. Miller

One question we occasionally get from our clients is how to manage any guns that might be part of their estates as they plan for the future. If you own a gun, as long as it is registered and legal, there are steps you can take to make sure your beneficiaries can receive the firearm after your passing. There are, however, important complexities to keep in mind when thinking about what that process look like for your estate.

What is Involved in Passing on Guns and Firearms?

If you have any gun or firearm that you would like to pass to a loved one after your death, there are a few steps you need to take in the short-term future. First and foremost, you must think about who exactly you would like to be your gun’s beneficiary. The beneficiary must be legally entitled to gun ownership in terms of their age, criminal history, and citizenship status. It is always safest to also leave a secondary beneficiary, in case something happens where the primary beneficiary is no longer able to accept the gun.

Secondly, it is important to think about the executor of your estate, or the person responsible for distributing the estate’s assets. That person must be able to legally possess the firearm – in certain circumstances, this means having a federal firearms license. Choosing an estate executor is an important decision, and it is important that you trust your executor will have your best interests in mind.

Preparing to Meet with an Estate Planning or Probate Lawyer

Published on: April 24, 2023 | By McCulloch & Miller, PLLC

At McCulloch & Miller, many of the clients we sit down with are meeting with an estate planning attorney for the first time. If you are looking to meet with an estate planning or probate attorney to discuss your long-term needs and don’t quite know what to expect, this guide will help you anticipate your first meeting as well as the process ahead.

Importantly, the estate planning attorney will likely start by setting up an initial meeting with you to understand your goals and provide you with options for how to achieve them. Before you have this initial meeting, it can be helpful to think about what, if any, preparation you could do beforehand.

Typically, when you call an estate planning attorney and set up a meeting, the attorney will send you a basic questionnaire for you to fill out before that meeting. The more information you can fill out on this questionnaire, the better, since it will save you time in the meeting itself if your attorney is already familiar with your family and financial information.