Estate Planning

Investment Management Pitfalls in Estate Planning

Published on: July 18, 2022 | By David W. Miller

Investment Management Pitfalls in Estate Planning

Trusts offer a wide range of estate planning benefits depending on a trust’s structure and its ultimate goals. Of course, one of the primary purposes of estate planning is the preservation and growth of estate assets through the effective use of trusts. However, from the investment management perspective, trusts are only effective to the extent that they are well managed. Thus, it is imperative that those who are considering the creation of a high-value trust take special care in avoiding the most common investment management pitfalls.

Be Careful About Who You Put in Charge

When a grantor creates a trust, they must also name a trustee to oversee the administration of the trust. While selecting a trustee is almost always one of the most important decisions when creating a trust, the factors you should consider when reviewing potential candidates depend on the type of trust, the value of the assets contained in the trust, and your goals in forming the trust.

For example, many grantors name trusted loved ones to manage a trust. This is a workable solution in many cases. However, just because you have someone in your circle who is willing to serve as a trustee doesn’t necessarily make them a good fit. For example, managing a multi-million-dollar trust is very labor intensive and requires the trustee have significant investment experience. While some grantors may have loved ones who can adequately handle these responsibilities, those for whom an obvious choice doesn’t stand out should at least consider naming a corporate trustee. However, it is important to note that corporate trustees are typically much more conservative in their approach than individual trustees.

Texas Estate Planning and Cryptocurrency

Published on: July 10, 2022 | By Thomas W. McCulloch

Texas Estate Planning and Cryptocurrency

Crypto assets such as non-fungible tokens (“NFTs”), utility tokens, security tokens, digital wallets, and cryptocurrency funds are digital assets that implement public ledgers over the internet to establish ownership. While these assets can hold significant wealth, it also presents unique Texas estate planning challenges. It is critical to consider these digital assets while establishing an estate plan. An experienced Texas estate planning attorney can help individuals meet the needs of the growing number of digital assets.

Protecting Crypto Assets

Accessing cryptocurrency requires the owner to use a private key, a series of alphanumeric numbers stored in a digital wallet or cold storage. A digital wallet is a financial transaction application that runs on a mobile device and stores payment information. Cold storage refers to a physical device that keeps cryptocurrency offline. Many of these devices look similar to a USB drive. Anyone with the private key or password can purchase, dispose of, and use digital money. As such, these currencies are highly susceptible to fraud and theft.

Incorporating Cryptocurrency into an Estate Plan

Individuals should inform their family or fiduciaries of the crypto assets’ existence, where to find the assets, and what to do with them. Some options to accomplish this are sharing private keys with a fiduciary, using a hardware wallet, or using a digital-asset custodian service. Those in the custody of digital assets should also consider incorporating a digital legacy into an estate plan. A digital legacy can ensure that the appropriate parties can access the assets.

Advantages of a Revocable Trust in Texas

Published on: July 10, 2022 | By David W. Miller

In Texas, a revocable living trust, also known as a trust, is a legal entity designed to control one’s assets. Trusts are created when one person, referred to as the trustor, settlor, or grantor transfers a property interest to a trustee to be held for a beneficiary. Trusts creator during the trustor’s lifetime are intervivos or living trusts. Revocable trusts refer to situations where the trustor retains the right to dissolve the trust. On the other hand, irrevocable trusts refer to situations where the trustor does not maintain the power to change or dissolve the trust. In most cases, a revocable trust becomes irrevocable when the trustor passes away. Both revocable and irrevocable trusts provide certain benefits, and it is important for anyone considering a trust to consult with an experienced estate planning attorney to ensure they select the appropriate product based on their family’s needs.

Benefits of a Revocable Living Trust

The most significant benefit of a living trust is that the assets in the trust can pass to the beneficiaries without probate. The Texas probate process is more straightforward than many other states; however, a revocable trust is advisable in certain situations. For example, a revocable trust is recommended for those who:

Want privacy during the estate settlement process;
Own property outside of the state;
Have blended family, business interests, or estate taxes; and
Anticipate that someone will contest their estate plan.

Establishing a revocable trust can enhance privacy, avoid probate court, and prevent hefty tax implications. Further, revocable trusts can protect inherited property and assets in the event of a divorce.

Texas Estate Planning as You Reach Retirement

Published on: July 5, 2022 | By Thomas W. McCulloch

While retirement and estate planning are distinct areas that contribute to financial stability, there is significant overlap between these considerations. Texas estate planning typically involves creating a system and plan for transferring the creator’s estate. In comparison, retirement planning refers to establishing retirement income and taking steps to accomplish these goals.

Retirement and estate planning are critical to financial readiness and stability. However, estate planning focuses on protecting the interests of the creator’s loved ones and beneficiaries, whereas retirement planning allows the creator to lead a stress-free life. Estate planning relates to when a person becomes physically or cognitively incapacitated. On the other hand, retirement planning relates to the time when a person exits the workforce because of their age or tenure.

Importance of Retirement Planning

Retirement planning focuses on the financial independence of the creator. Those who retire without a plan often face significant difficulties maintaining their living standards or supporting those they love. An attorney can assist individuals in developing a retirement plan that addresses the various issues that may impact a person’s financial livelihood.

Texas Medicaid Estate Recovery Program (“MERP”)

Published on: July 1, 2022 | By David W. Miller

Medicaid is a state and federal program that provides medical coverage and payment to eligible persons. The Texas Medicaid program strives to improve the health of Texas who might otherwise go without medical care and treatment. To qualify for Texas Medicaid, the individual must be a Texas resident, a U.S. national, citizen, permanent resident, or legal alien who needs insurance assistance/health care and whose financial situation is characterized as low income. Further, the person must also be:

Pregnant, or
Be responsible for someone 18 years old or younger, or

Questions to Ask When Creating a Texas Estate Plan

Published on: June 26, 2022 | By David W. Miller

For many, estate planning can be an uncomfortable topic requiring individuals to consider their mortality. While facing the fleeting nature of life can be difficult, estate planning can bring financial and emotional peace to an otherwise daunting topic. Consulting with experienced Texas trusts and estate lawyers can streamline this process and help individuals maintain autonomy over their decisions.

A person’s estate can include their:

Real estate
Securities and stocks
Personal property
Business interests
Cash
Jewelry
Retirement plans
Life insurance benefits

Although some people believe that estate planning is for the wealthy, in reality, almost everyone needs an estate plan. Estate plans are essential for those who:

Want to distribute their estate according to their wishes;
Have assets that may make their beneficiaries responsible for high estate taxes;
Want to plan their distributions; or
Have heirs that may require financial assistance.

Strategies to Reduce Texas Estate Taxes

Published on: June 20, 2022 | By Thomas W. McCulloch

Many worry that their estate will be left with significant taxes when they pass. Fortunately, Texas is one of 38 states that do not have an estate tax. However, residents may still be subject to federal estate tax laws. Other states’ inheritance laws may apply to a Texas resident. Thus, it is advisable that those who live in Texas consult with an experienced trust and estate planning lawyer.

What is an Estate Tax

An estate tax, commonly referred to as the “death tax,” is a tax applied on the estate of a deceased person before their money passes on to their beneficiaries or heirs. In contrast, the government takes an inheritance tax after money or items have been passed on to the deceased’s heirs.

Congress debated many changes to the federal estate and gift tax laws. While most of the proposals would have changed the amount a person could gift during their lifetime, the Build Back Better Act (H.R. 5376) did not present significant modifications to the estate and gift tax exclusion amount.

Federal Estate Tax

Those who pass in Texas will not owe any estate tax to the state. However, these individuals may owe money to the federal government. In 2022, the federal estate tax applies to estates worth $12.06 million. Thus, if an estate surpasses the applicable value, it may be subject to a federal estate tax. Moreover, the federal estate tax is portable for married couples. In other words, if the couple takes the appropriate legal steps, they will not have to pay a tax on up to $24.12 million when both spouses pass. However, it is critical that couples consult with an attorney to ensure that they do not waive their rights to these benefits.

Transferring Savings Bonds in Texas

Published on: June 20, 2022 | By David W. Miller

Savings bonds are low-risk, long-term investments that have the unique ability to serve as a gift to a loved one. In essence, these bonds are loans to the U.S. government. Purchasers often acquire these bonds as part of an investment, future gift, or retirement plan. However, there are many caveats to transferring savings bonds in Texas, and as such, it is advisable to consult with an experienced estate planning attorney to avoid legal hurdles.

Types of Savings Bonds

The two primary bonds are Series EE and Series I.

Series EE: these are low-risk savings bonds that earn a fixed interest rate until maturity at 30 years or when the owner cashes them. The treasury bond no longer issues these bonds in paper form, and purchasers must buy them electronically.
Series I: these are low-risk inflation-protected savings products that earn interest.

Both of these bonds can finance education, supplement retirement income, and serve as gifts to loved ones. In addition to these bonds, owners may have other bonds that are no longer available and have likely matured.

Texas Estate Planning and Online Accounts

Published on: June 10, 2022 | By Thomas W. McCulloch

With more people than ever with personal information online, Texans may have questions about how to incorporate this information into their estate plan. Can another person take over their accounts after they pass away? Even if someone provides their account information to another, can they legally access the accounts? As people have different preferences over how their social media, email, and financial accounts are handled, the below information can be useful for Texans navigating the estate planning process. Planning ahead and updating this access and estate plans regularly can make life easier for loved ones after they pass away.

Revised Uniform Fiduciary Access to Digital Assets Act

Texas, along with other states, provides access to online accounts to a person’s legal representative if they meet one of two conditions, per the Revised Uniform Fiduciary Access to Digital Assets Act. First, the deceased must have activated a setting within their online account that allows disclosure of the account upon their death, or the deceased’s will must explicitly allow their representative to access their online accounts. Without either of these conditions, the representative cannot access the online accounts, even if they have been given the login information.

To meet the first condition—activating a setting within the online account—many social media platforms will allow individuals to name a “legacy contact,” which provides them with access to the account if the account holder passes away. However, it is better to include this information in an estate plan and be explicit about what accounts—be it social media, financial accounts or others—the estate’s legal representative can access.

Risks of Handwritten (Holographic) Wills

Published on: June 10, 2022 | By David W. Miller

There are two primary types of wills under Texas law: 1) holographic and 2) non-holographic wills. Non-holographic wills are typed, witnesses, and attested wills. In contrast, holographic wills refer to entirely handwritten wills. In Texas, holographic wills are only enforceable when the entire document is written in the testator’s handwriting. While holographic wills might be valid and legally enforceable, more often than not, they result in Texas estate and probate disputes.

A notable example of the dangers of holographic wills involves the popular music group The Monkees. Michael Nesmith, a group member, left a lengthy will leaving his entire estate to his mother’s foundation. However, there were issues with the will’s legality because it was handwritten.

Holographic Will Formation in Texas

Handwritten will appeal to many people who believe that their situations are simple enough that they do not need the assistance of an attorney. However, making a holographic will in Texas requires strict adherence to complex estate laws.

Valid Texas holographic wills require the testator to clearly indicate all items in the will, the recipients of the items, and who should serve as an “independent executor.” In addition, the testator should take steps to ensure that the independent executor knows that the will is valid.