Articles Posted in Estate Planning

It’s no question that estate planning can seem daunting. Beyond your last will and testament, there are a bevy of other documents that may seem unnecessary, duplicative, or just plain overwhelming. You may think making beneficiary designations, or forms that allow you to transfer assets directly to individuals without dealing with your will and the probate process, simplifies the entire endeavor. Unfortunately, there are a number of pitfalls that can happen when individuals simply settle for beneficiary designations without utilizing other estate planning tools with an experienced attorney.

1.) Your Beneficiary May Pass Away

Although this may seem obvious, many people do not consider that their beneficiary may pass away. With multiple assets, you may forget to change your designation in the event of your beneficiary’s death, leaving your asset stranded. You may be incapacitated in some way, which could render you unable to update your designations. Without proper mechanisms in place, you would be left without an avenue for passing on your assets.

2.) Your Beneficiary May Not Follow Your Wishes

You may name a beneficiary with the idea that they equitably share the asset or account you’ve left to them with other individuals, such as among siblings or children. Unfortunately, this may not always be the case. Proper planning can ensure your wishes are carried out exactly as you specify, without leaving it up to chance.

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For many business owners, the future of your business and life’s work is at the forefront of your mind. Business succession planning should also be at the forefront of your estate planning. Beyond the complexities of regular estate planning, business succession planning must carefully consider unique tax implications and asset protection strategies. In addition, choosing the right person to control your business—or the right plan for sale or closure—is imperative in ensuring your preferences and wishes are carried out.

Who Will Control Your Business?

When it comes to who will control your business, any business owner knows the right leader is crucial to the success of the company. If you can no longer run your business, you have several options.

First, you could transfer ownership to someone you’ve selected yourself. While many owners believe this will ensure their life’s work is carried out with their preferences in mind, owners should carefully consider who they should pass the business to and what training will need to be done. In addition, there are tax liability issues at play in the transfer of a business.

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Individuals thinking about estate planning may already be considering their spouses, children, and even important charities and foundations that are meaningful to them. It is important for planners to also consider implementing estate plans for their beloved cats and dogs. While you cannot leave money to your pet in your will, there are other tools to ensure your pets are cared for in your absence.

Choosing a Caretaker

In many cases, it may be clear and undisputed who your pet’s caretaker may be. You may think just telling your executor who will care for your cat or dog will be enough. But in the unfortunate event a dispute arises or your caretaker can no longer accept the responsibility, a formal arrangement in your will can ensure your pet is properly cared for. If you do not have a trusted loved one, many arrangements exist that will ensure your pet has a safe caretaker, such as SPCA programs, private pet sanctuaries, and veterinary school programs.

Pet Trusts

Some estates will leave a sum of money to their chosen caretaker to cover expenses related to animal care. Others, however, may choose to create a pet trust. Pet trusts are recognized in every state, including Texas, as legal estate planning instruments. Similar to other types of trusts, the trust creator places funds or assets into the trust for the benefit of the pet. The pet owner will name a trustee and even a successor trustee charged with managing these funds. Acceptable uses include veterinary and medical costs, food and care expenses, grooming needs, and even end of life plans for the pet, such as burial or cremation. Individuals creating pet trusts should clearly describe and identify their pet in the trust to avoid potential abuse.

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End-of-life planning is an emotionally challenging process. Without the aid of an experienced estate planning attorney, you may fall into some common pitfalls without realizing their harm.

Thinking you don’t have an estate

Some think only the very wealthy have an estate, but this is untrue. Everyone has an estate, and everyone’s estate plans will differ based on their individual needs. Common elements of an estate plan can range from a person’s post-death plans for their body to plans for their home to their vehicle. Even digital assets need to be included in a comprehensive estate plan.

If you’re considering your end-of-life plans and want to ensure your family’s safety and comfort, you may already know and understand the need for a last will and testament. Understanding what happens after the will is drafted, however, is crucial to best position your estate for a seamless and hassle-free probate process for your loved ones. This includes understanding the legal classification of your assets.

Probate, or the process of distributing a person’s assets after death, can be a lengthy and complicated process. Through this process, the executor of the estate as named by a will must file an application for probate in the relevant county. Then the court will post notice of that application, opening up the process for contesting a will. Even if there is no contest to the will, a court must still hold a hearing to ensure the validity of the will and appoint the executor. Once the executor is appointed, the process continues—the executor must locate and distribute all assets, notify creditors, and resolve any disputes.

Some assets, however, are not so clearly defined. Even if you have employed a Texas estate planning attorney to minimize the assets that must go through probate, there will likely be assets remaining that must go through this process. These assets may include community property.

According to a recent report, long-term care costs are rising. Genworth, a provider of long-term care insurance, surveyed 2017-2018 inflation rates in long-term care categories and discovered that for some categories, costs were rising at up to two to three times the rate of inflation. And with inflation rising even higher in 2022 than it did five years ago, careful planning for you and your loved ones’ futures is all the more critical.

At just a 3% projected inflation rate, Houston-area costs for in-home elder care services could rise to over $8,000 per month by 2041, in just twenty years. A private room in a nursing home facility could be nearly $170,000 annually. Even adult day care or assisted living facilities, which are lower-cost options, could rise to $23,826 and $92,003 annually, respectively. This is without considering that inflation in some of these categories could be higher than an average of 3%. Proper planning with an experienced attorney is crucial to ensure these costs are carefully considered and planned for.

Why are Costs Rising?

Many people know that planning for retirement and planning for the allocation of their estate are two inevitable tasks. Planning for incapacity, or the inability to perform various legal and medical functions, however, is just a possibility, not an inevitability. However, having a plan in place in the event you are incapacitated can help protect your assets and your medical wishes just in case the future does not go to plan. An advance directive is a written statement of your wishes regarding your medical treatment and are legally binding documents.

The state of Texas recognizes five common types of advance directives: directive to physicians, family, and surrogates; medical power of attorney; out-of-hospital do not resuscitate; durable power of attorney, and declaration for mental health treatment. An experienced Texas estate planning attorney can help you decide which of these documents best meets your incapacity planning needs.

Directive to Physicians and Family

A directive to physicians, family, or surrogates is also known as a living will. This directive will state your wishes regarding life-sustaining procedures or measures in the event you have a terminal condition and your death becomes imminent.

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For investors considering incorporating cryptocurrency into their estate plans, Web3 may already be an area of interest or curiosity—or apprehension. For others, it may be a concept completely unheard of. In either case, Web3—a decentralized form of data sharing not yet in existence—could be popping up more frequently in estate planning conversations. For now, Web3 is merely speculative, but with the speed of innovation, it’s worth considering how it may impact your estate planning needs now and into the distant future. In the same way the traditional Internet has rapidly evolved, Web3 could be the next big technological advancement to watch.

According to a recent article, Web3 is similar to the Internet we all know and have adopted in that it serves as a way of sharing data and connecting individuals. But different from the traditional Internet, Web3 would run on the blockchain, similar to cryptocurrencies. In the same way crypto assets take the middleman, such as financial intermediaries, out of financial transactions, Web3 could take platforms and companies out of the exchange of data on the World Wide Web, making Web3 truly run by the people. In a time when people are growing distrustful of the large companies such as Amazon, Google, and Facebook that coordinate and dictate our use and access to the Internet, Web3 could democratize data sharing and take the power—and our data—out of the hands of tech giants.

How Will Web3 Impact Estate Planning?

Because Web3 doesn’t yet exist, it is difficult to say how exactly it will impact or change areas with legal implications, like estate planning. If Web3 enables blockchain-based estate plans, personal smart contracts can be executed without a middleman upon a trigger event, such as death of the estate holder. Without a middleman, these contracts would be executed without going through probate court. Although this may be less costly for both the legal system and an estate and its beneficiaries, a good estate planning attorney with experience in new technologies and cryptocurrency assets will be needed to help structure these contracts and determine their tax implications.

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Estate plans are crucial to protecting loved ones and ensuring peace of mind. Despite thorough planning, unexpected events can happen that may change the disposition of a person’s assets. An experienced Texas estate planning attorney can work with individuals to plan for the unexpected.

What is a Beneficiary under Texas Law?

Broadly, a beneficiary is any individual who gains an advantage or profits from something. In the context of a Texas estate plan, beneficiaries refer to the individual who stands to inherit a decedent’s assets. The creator of an estate (Testator) typically designates these individuals through a will or trust.

Comprehensive estate plans often include primary beneficiaries and contingent beneficiaries. Additionally, beneficiaries do not have to be individuals or categories of individuals, such as grandchildren. The law permits testators to include organizations, such as non-profits, as beneficiaries. Primary beneficiaries are the first individual or organizations to inherit assets under the will. In contrast, contingent beneficiaries are those who are “second in line” to the primary beneficiary. Contingent beneficiaries only inherit assets in cases where the primary beneficiary cannot, for instance, if the primary beneficiary predeceases the Testator.

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Under Texas law, individuals (testators) may create a revocable living trust which allows them to use their assets during their lifetime and subsequently securely transfer them to their designated beneficiaries after the testator’s death. These trusts protect the testator if they become mentally incapacitated. With a revocable living trust, the testator’s assets are controlled, owned, and managed by the trust, eliminating the need for a conservatorship proceeding.

Pour-over wills are typically used in conjunction with a revocable living trust. A pour-over will refer to a specific type of will that assists in facilitating the transfer of assets in the event that the testator neglected to transfer all intended assets. Pour-over provisions can integrate the administration of a trust and probate assets.

Benefits of Pour-Over Wills

Carrying out a decedent’s wishes should be of utmost importance, and pour-over wills are another tool to meet this goal. There are many advantages of pour-over wills, including:

  • Simplicity: These documents allow an executor to efficiently wrap up a decedent’s estate after death.
  • Totality: A pour-over will address all the assets that a testator could not handle or transfer before death.
  • Privacy: Pour-over wills are part of a trust and, therefore, do not automatically become public after the testator’s death. They remain more private than will.
  • A pour-over will is a critical part of estate planning and can create a safety net that brings peace and certainty to an otherwise emotionally daunting process.

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