Estate Planning

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.

Generational Approaches to Texas Retirement Planning

Published on: May 31, 2022 | By Thomas W. McCulloch

Like with music, pop culture, and politics, members of different generations tend to approach issues differently than others. Generations also approach retirement differently—both in how they are planning for retirement, along with their expectations about retiring. Some generations are more optimistic about retiring at an earlier age, while simultaneously changing their retirement strategy based on economic and technical changes—like incorporating cryptocurrency into their investments. With over 60 million people currently planning for retirement as active 401(k) participants, it is important to discuss these differing strategies, how people feel about retirement planning, and how estate planning attorneys can provide additional advice to make people feel more secure.

Expectations About Retirement Age

Studies have shown a difference in opinion on when individuals in each generation expect they will be able to retire. Younger generations, like Gen Z, expect to retire at an earlier age than other generations. For example, the median age that Gen Z believes they will stop working at is 57 years old; however, Generation X—individuals between the ages of 42 and 57—do not expect to retire until they are 64 years old.
Despite this information, only 57 percent of all Gen Z members believe they will retire at some point—indicating a significant difference in opinion among people in this generation—whereas 62 percent of millennials believe they will retire at some point.

Retirement Plans Differing by Generation

While most individuals in all generations are planning for retirement, they are doing so in different ways. For example, Generation X and baby boomers plan to rely upon Social Security benefits, 401(k) and pension plans to support themselves. While members of younger generations do not assume that Social Security and Medicare will be available for them by the time they expect to retire, as many officials predict that Social Security benefits will be depleted by 2030. Because of this, millennials and Gen Z plan to rely more on their 401(k) savings as their major source of retirement income. However, younger generations also plan on relying on financial technology within their investment portfolio, like cryptocurrency. Many members of this generation believe that cryptocurrency will give them the highest return on investment, despite its current lack of regulation and potential volatility.

Cryptocurrency and Texas Estate Planning

Published on: May 31, 2022 | By David W. Miller

With the rise of cryptocurrency, many Texans are curious about how cryptocurrency can be implemented into various aspects of their lives—be it estate planning, investing, or other methods—along with its potential stability in the future. However, other individuals do not know the basics about cryptocurrency, including what it is or why they should potentially engage in this virtual currency. Because of this, below are explanations about the underlying nature of cryptocurrency, its potential in the future, and current government recommendations for how it should be implemented in estate planning and investing.

What is Cryptocurrency?

Cryptocurrency is a digital currency exchanged through a computer network. This computer network is often a blockchain that transmits the currency. Unlike many other currencies, it is decentralized, meaning there is not a primary government or bank used to maintain it. While one of the most infamous cryptocurrencies is Bitcoin, there are currently over 9,000 other cryptocurrencies in the marketplace.

Should Cryptocurrency be Included in My Estate Plan?

Since cryptocurrency is an asset that individuals may have, it should be included within a person’s estate plan. The individual writing the will—the grantor—should detail who should receive any cryptocurrency assets that remain after they have passed away. Cryptocurrency would then be treated like other assets in the will and provided to the designated beneficiary. As cryptocurrency is only online, it is also important for the grantor to detail how someone can actually access these records, making it easier for the estate executor to fulfill his duties and transfer the assets to the beneficiary.

Critical Mistakes to Avoid in a Texas Estate Plan

Published on: May 26, 2022 | By McCulloch & Miller, PLLC

When people begin the estate planning process, they often worry about making mistakes and the problems this could cause down the line. And it is true, when Texans have errors in their estate plan—or do not recognize something is a mistake and purposefully include it—there can be long-term consequences for loved ones attempting to execute the will after the person has passed away. Thankfully, many common estate planning mistakes can be avoided by careful consultation with an experienced estate planning attorney. Below are common estate planning errors and how they can be prevented.

Failing to Name Beneficiaries

In drafting an estate plan, some individuals will forget one of the most critical aspects: naming beneficiaries to inherit their assets after they pass away. While they may name beneficiaries for certain, obvious, assets like property or personal items, they may forget for other financial benefits like retirement plans and life insurance policies. It is just as important to decide upon a beneficiary for these financial accounts too in order to avoid the probate court process. Otherwise, a judge will determine who will receive these policies—and it is often the closest blood relative, regardless of the personal relationship the deceased and the person may have had.

Not Explicitly Providing Assets to Children

Especially in blended families and second marriages, individuals will forget to explicitly provide assets to their children—instead, giving it all to their current spouse. While in an overwhelming majority of cases the spouse will then financially assist the children in the future—even if they are not their own children—estate planning attorneys still recommend leaving assets to the children themselves, just in case. For example, even if the surviving spouse knew the deceased wanted them to use some of the money to assist the deceased’s children, if there are not protections in the will, there is nothing requiring them to do so. But if the children are named as beneficiaries or provided their own assets, then they will be more financially secure and not have to worry about any changes the surviving spouse may make in the future.

What is a Texas Living Trust?

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

When beginning the estate planning process, most people begin with creating a will and other documents like healthcare directives, medical power of attorney, and funeral arrangements. However, they often forget about living trusts, which have many unique benefits. Unlike a will, a living trust allows an individual to transfer assets to loved ones and avoid the probate court process entirely for the assets placed in the trust. Below are some of the most common questions about living trusts, along with answers to these questions.

What Should I Know About a Living Trust?

A living trust allows the creator—also known as the grantor—to transfer assets to beneficiaries after they have passed away without having those assets go through probate, unlike those bequeathed in a will. The grantor still holds ownership to the assets in the trust until they pass away, meaning the grantor can remove or add assets in the trust—or change the named beneficiary—until their death. Once the grantor dies, the assets are distributed to the beneficiary of the trust.

What Assets Should be Placed in a Trust?

There are some assets that estate planning attorneys recommend placing in a trust, and there are some assets and accounts they recommend do not go in a trust. Some assets that people can fund a trust with include financial accounts, like stocks, mutual funds, bank savings accounts, and money market funds. Property, like a title to a house, can also be put in a trust. While individuals may become hesitant about putting such valuable assets in a trust, it is critical to remember that the trust is revocable, and the assets can be removed at any time. Personal property, like family heirlooms, can also be put in a trust. While most people will instead put these items in a will, a will becomes a matter of public record, unlike a living trust.

How to Discuss Texas Estate Planning With Your Parents

Published on: May 17, 2022 | By McCulloch & Miller, PLLC

Some conversations are easier than others to have with your parents—as a child, a teenager, and even as an adult. And as parents age, there are certain aspects of life their children may be concerned about—especially when planning ahead can potentially avoid disasters in the future. One of these topics is estate planning. While starting the conversation about estate planning with parents may not be easy, it is critical to do so in order for children to know how their parents would like future decisions to be made. Below are some questions that children can ask their parents about estate planning to begin the conversation and ensure they are taken care of in the future.

Do You Have an Estate Plan in Place?

The first question that elder parents should be asked is if they already have an estate plan in place. Some individuals may assume they do not need a will, most likely because they do not have significant assets to pass on, but this is not the case. Having a will can ensure the assets and personal property a person does have is passed on to who they would actually like to receive the gifts and not have to go through a long, drawn-out process.

Additionally, there are other documents in an estate plan that are critical for aging loved ones to have, such as a financial and medical power of attorney—having these documents allows a designated loved one to make decisions on their behalf in case they are physically incapacitated or mentally unable to do so for themselves anymore. These estate planning documents can also identify how they would like to be cared for in the future and how drastic of medical treatment they should receive. This allows loved ones who have to make this decision the peace of mind, knowing they are making choices the person would approve of. Even if an aging parent says they do have an established estate plan, it is still a good idea to have an attorney review it every few years to make sure it is accurate and up to date.

Avoiding Common Texas Estate Planning Mistakes

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

Many experienced estate planning attorneys have a list of the worst estate planning mistakes that Texans can make. For many attorneys, at the top of the list is inadvertently leaving money to the wrong person in their estate plan. Most people have strong preferences on who should inherit their money and property after they pass away—this is why they have an estate plan in place. However, even individuals with estate plans may make mistakes that lead the wrong person to benefit from the error. Below are some of the most common estate planning mistakes and how they can be avoided, according to Texas estate planning attorneys.

Ex-Spouses Inheriting Money

One estate planning mistake that many people fear is their ex-spouse inheriting their money or property after they pass away. Most formerly married couples do not want their ex-spouse to receive their assets if they die first. While most state laws ensure former spouses lose property rights after a couple is divorced, individuals must change their beneficiaries on estate planning documents as well.

Before getting divorced, most individuals will name their spouse as their beneficiary—for pensions, insurance policies, and bank account beneficiaries as well. If the beneficiary designation is not changed after the divorce and one of the former spouses passes away, then their ex may inherit the asset. Estate planning attorneys can help advise clients on changing these designations as soon as the divorce is finalized and provide recommendations on who should replace the ex-spouse as the beneficiary.