Estate Planning

Modifications to Your Estate Plan When You Learn You’re Pregnant

Published on: December 21, 2022 | By Thomas W. McCulloch

If you are expecting a new addition to your family, congratulations! This can be an exciting and exhilarating time with plenty of changes, but the changes do not stop at diapers. Secure your child’s future by updating your estate plans across the board. In addition to updating your beneficiaries, you will want to do the difficult work of establishing a guardian for your child. You may also want to consider establishing a trust to begin building wealth for your family and planning for their future alongside yours.

In any event, do not stress. In this exciting time, know that estate planning attorneys are there to help you make all the necessary plans for you, your children, and your family. An experienced attorney will leave no stone unturned in ensuring you have prepared for the care and financial wellness of your children, no matter your individual circumstances.

Updating Your Plans for Baby

The first step in preparing your financial future to include your child is addressing your will. Your will is crucial not only because it designates the heirs to your property and assets, which now will include more than just your partner and family, but also because it designates a guardian for your child in the unfortunate event that something happens to you and your partner.

Do Medicare and Medicaid Cover Psychiatric Services for Children?

Published on: December 21, 2022 | By McCulloch & Miller, PLLC

Statistics indicate one of every four children will have a childhood mental illness. And in Texas, in 2020, over 500,000 children were diagnosed with anxiety or depression. If you have a child or teen with mental health needs, you are not alone. But many families fail to consider mental health needs when planning for public benefits.

Public benefits programs like Medicare and Medicaid cover mental health services in addition to more traditional health care. Families that make over a certain income level may think they do not qualify for these programs. But these programs often increase access to health care and include benefits and programs not available under traditional employer-provided insurance, so it’s worth determining if your family qualifies via benefits planning or other income levels. In addition, Texas has programs for children of families that do not qualify for Medicaid. There are certain estate planning tools that can help aid in Medicaid qualification, such as Miller Trusts or lady bird deeds.

Medicare Coverage

Medicare is a federal health care program administered by the federal government and is available to anyone regardless of income, so long as they are over 65 years of age or have a specific disability. Medicare covers a wide range of mental health services but does not cover most long-term care costs. And Medicare patients may have to pay deductibles, copays, and other out of pocket costs. Medicare Part B covers outpatient mental health services that can include partial hospitalization, depression screenings, diagnostic testing, individual or group psychotherapy, and other medication and counseling needs. Medicare Part A covers inpatient mental health care at a regular or psychiatric hospital.

Can You Change Your Mind After You Transfer Assets in a Trust?

Published on: November 22, 2022 | By Thomas W. McCulloch

A trust is a legal entity set up during a beneficiary’s lifetime by a third party to ensure assets are spent in accordance with the person setting up the trust’s wishes. Trusts can also avoid certain tax consequences and the headache of the probate process. If you have set up a trust, you may be wondering if the terms of that trust are modifiable after it’s been signed on the dotted line. Changes in circumstance, such as a changed relationship with a beneficiary or a change in your financial situation, may spark reasonable questions about any trusts you have set up.

The short answer: it depends. If your trust is set up as a revocable trust, you can change the terms at any time. If your trust is set up as an irrevocable trust, it can’t be modified unless any and all relevant beneficiaries provide consent. There are different benefits to each type of trust, and different circumstances may indicate the need for one, the other, or a combination.

What is a Revocable Trust?

A revocable trust is also known as a living trust. The person who created the trust, or grantor, can change the terms of the trust at any time. Changed terms include changed requirements on asset management requirements and the removal or addition of beneficiaries, but the exact rules vary by state.

Who Makes Your Health Care Decisions if You Can’t?

Published on: November 22, 2022 | By David W. Miller

In the event of an unfortunate health emergency, you may become incapacitated. If you are incapacitated, you will not be able to make the decisions needed to consent to and direct your own medical care. The law provides for a plan in this unfortunate event. But the law’s provisions may not be sufficient to ensure your plans are executed according to your wishes. Advance directives can help.

If you do not have any advance directives in place, someone may still be available to make health care decisions for you. If you are incapacitated in Texas, the following can still make decisions and consent to treatment for you: your spouse, your adult child or children (either a majority or one designated to make such choices by your other children), your parents, a person you identified to make decisions for you before you lost capacity, or a nearest living family member or clergy member. The priority goes in order from first to last. If relevant parties disagree, the judge of a Texas probate court will make that decision.

Types of Advance Directives

If this priority-ranked system sounds stressful and you’re worried your wishes will not be accurately carried out, consider putting advance directives in place. Some advance directives allow you to outline your care without the need to name a third party to make decisions for you. These include directives to physicians and family or surrogates, or living wills, out-of-hospital do-not-resuscitates (DNRs), and declarations for mental health treatment. In Texas, living wills lay out your requirements for life-sustaining measures in the event you have a condition certified by two physicians as terminal. DNRs give emergency medical professionals, who cannot follow living wills, instructions not to resuscitate you. And declarations for mental health treatment help you make advance decisions about the type of mental health treatment you would like to receive in a mental health emergency, such as medication and therapy, in the event a court declares you incapacitated.

The Two Types of Special Needs Trusts in Texas

Published on: November 15, 2022 | By David W. Miller

Loved ones, family members, and parents of special needs individuals know they often need a unique approach in helping care for the special needs child or adult in their life. This approach is often augmented by help from government benefits established to make life easier for people with special needs, such as Medicaid and Social Security. These programs, however, become unavailable to individuals above certain asset thresholds.

To help preserve access to this much-needed medical and living expense coverage granted by the federal government, caretakers and financial providers for special needs individuals may wish to set up special needs trusts. In a special needs trust, a grantor names a trustee to administer the trust and a beneficiary, who is the special needs individual. Funds are distributed from the trust without impacting income eligibility for these government programs. Special needs trusts must not be used for living expenses or medical expenses already covered by Medicaid or Social Security, but can be used for supplemental expenses, such as job training or educational program tuition, and even luxury expenses and non-essential costs like vacations, hobbies, or home furnishings. The beneficiary never has direct access to the trust.

There are two main types of special needs trusts: first-party and third-party. The following summarizes the key differences between the two types of trusts. An estate planning attorney can help determine which type, if any, of these two trusts makes the most sense for your family.

How Often Should You Update Your Estate Plan?

Published on: October 27, 2022 | By Thomas W. McCulloch

A common pitfall for many individuals and families in estate planning is thinking that the work is done when the original plan is created. Changes in finances, life circumstances, health, or even the economy and the law mean that estate plans should be updated and reviewed regularly. Failure to do so can result in unpleasant surprises when the time comes, such as assets that aren’t covered, a hefty tax bill, or beneficiaries or a will that doesn’t comport with your wishes.

For many individuals, this review occurs annually or even more often. People who review their financials quarterly, semi-annually, or annually should also review their estate plans while their financial picture is in front of them. A natural time to do this is while preparing and filing your annual taxes.

Every two to three years, and at minimum every five years, have an attorney formally review your estate plan. An estate planning attorney can consider any changes to your circumstances and determine if your plan still fits your needs. Your lawyer will also know if any changes in the law will impact your plans or your assets and recommend updates to make and ways to proceed. For example, changes to tax laws may necessitate a change in strategy to protect your assets for your future beneficiaries.

Asset Protection: Who Are You Protecting Your Assets From?

Published on: October 27, 2022 | By David W. Miller

Individuals and families with up-to-date and comprehensive estate plans may think their work is done in protecting their assets. But many types of assets could use additional protection before death or incapacitation, which requires a more holistic strategy than many estate plans cover. And some individuals may need asset protection plans more than others, while everyone should have an estate plan in place. Asset protection strategies can protect your wealth from seizure or other losses. Asset protection and estate plans often coexist, but both sides need individual consideration and attention.

Why Do I Need Protection?

You may think your assets are relatively secure, but this can be a mistake. Even the most financially stable of individuals may fall into circumstances that lead to creditors at the door. And high net worth individuals or individuals in high-risk professions such as doctors and lawyers may be targets for lawsuits and scam artists, which can result in high damages awards or unwitting asset transfers without strategies in place to mitigate these losses and shield assets from these claims. Spouses and in-laws can also serve as surprising asset predators, especially if marriages dissolve and tensions become hostile, even if planning for that unfortunate possibility seems difficult to imagine. Finally, hefty taxes can be imposed on certain asset types by the government, which can be protected by certain trusts and a good tax strategy.

10 Common Power of Attorney Questions

Published on: October 24, 2022 | By Thomas W. McCulloch

There are many types of powers of attorney (POA), and each covers different areas and has different purposes. Read on for answers to common questions about POA.

Can I Use a POA After the Principal Dies?

No. The person who gives the power of attorney is called the principal, and the person given the power is often called the agent. A valid power of attorney expires after the death of the principal, so the agent cannot act under the POA after the principal’s death.

If I am an Agent of a POA, Can I Stop the Principal from Giving Money Away?

Only financial—or durable—POAs allows the agent to make financial decisions for the principal. In this case, agents can be given the power to make gifting or donating decisions for the principal. But the agent also owes a fiduciary duty to the principal to act in the principal’s best interests. If stopping the principal from gifting or donating is contrary to the principal’s best interests, it may be possible for the principal or a third party to revoke the POA.

What Can I Do As a POA?

Medical POAs are authorized to make medical and treatment decisions for the principal. Financial or durable POA are authorized to make a wide range of financial decisions, including buying or selling property or assets, applying for benefits, managing a business, investing, or filing lawsuits on the principal’s behalf.

IRS Announces Increased Estate-Tax Exclusion for 2023

Published on: October 24, 2022 | By David W. Miller

Thanks to newly announced policies from the IRS, 2023 is shaping up to be a big year for estate planning. With several new opportunities for ultra-wealthy individuals to protect their assets, it is more important than ever to plan ahead and think about goals for the upcoming year. By planning, you can protect yourself from being double taxed and from facing penalties for failing to pay the required amounts.

In its recent press release, the IRS announced that it will implement several new policies that will allow ultra-wealthy individuals to protect more of their assets from taxes. The reason for the shift, according to tax law experts, is to account for annual adjustments in inflation. The reality, however, is that individuals that have been sitting with lower-value portfolios in 2022 can use the policies to their advantage and can begin developing more aggressive strategies heading into 2023.

One of the new policies will increase how much individuals can transfer to their heirs each year without being subject to federal taxes: in 2022, Americans could transfer $12.06 million, but next year the number will jump to $12.92 million. The IRS will also increase the limit on tax-free gifts next year, giving each individual a threshold of $17,000 per recipient instead of the current limit of $16,000.

Planning for Retirement with a Special Needs Child

Published on: October 12, 2022 | By Thomas W. McCulloch

Planning for retirement can already seem intimidating: it can be seen as time-consuming, stressful, and expensive. For parents of special needs children or adults within their care, retirement planning may seem impossible.

Retirement planning usually involves analyzing income, expected income, and assets and planning those inflows against expected outflows, or expenses, from retirement to the end of life. But parents of children with special needs may need to ensure their children are cared for even beyond their lives, necessitating a multi-generational time horizon in planning. In addition, one or both parents may make career and lifestyle changes to care for their children themselves, which can impact the cash coming in to fund retirement. If a caretaker passes on, extra expenses or decreased income to the surviving parent may result from hiring full-time care or taking on those roles. Finally, costs can be higher for special needs children and may increase as these children become adults. Insurance premiums, and the costs of health and medical care, caretaking, special programs, rehabilitation and therapy, and adaptive or assistive equipment may all need to be factored into the equation.

A skilled estate planning attorney can make this daunting process more navigable. One tool estate planning attorneys can use is to help their clients set up special needs trusts to protect their children’s government benefits while also giving them a stream of additional income.

Special Needs Trusts

Special needs trusts work like any other trust: a grantor establishes a trust to help the beneficiary receive property and assets and names a trustee to administer the trust. Special needs trusts allow an individual to receive funds without impacting their income eligibility for much-needed special needs benefits from the government, such as Medicaid or Social Security. These programs help fund direct medical and living expenses. Special needs trusts, in contrast, cannot be used for living expenses or anything covered by government programs, but can be used for supplemental expenses such as job training or tuition or non-essential costs like furniture, personal services, or hobbies.