Estate Planning

2022 Tax Updates to Keep in Mind for Texas Estate Plans

Published on: January 11, 2022 | By McCulloch & Miller, PLLC

A new year often brings new changes. Along with New Year’s resolutions that individuals make to become healthier, improve their lifestyle, and be kinder, others may resolve to create or update their estate plan. Because of this, it is important to know the federal and Texas estate planning laws that impact estate plans. Some of these laws have provisions that changed at the beginning of 2022, so even individuals with estate plans in place may want to alter them so they can benefit from these changes. Below are some of the key tax concepts and changes that Texans should pay attention to in crafting their estate plan.

Increases to the Annual Gift and Lifetime Estate Tax Exclusion Amount

In a very notable change, the federal estate tax exemption amount has increased. If an estate is valued over the exemption limit, then the estate will be taxed before assets are distributed to beneficiaries. In 2021, if an estate was worth less than $11.7 million—or $23.4 million for a married couple—then the estate would not be taxed. However, in 2022, the exemption limit has increased to $12.06 million—or $24.12 million for a married couple.

Can I Include My Family Heirlooms in My Texas Estate Plan?

Published on: January 10, 2022 | By McCulloch & Miller, PLLC

Many Texans have family valuables or heirlooms that are passed down through generations. Whether it’s an antique ring or a grandmother’s china, some people do not think about including these items in their estate plan. However, putting these valuables in an estate plan can reduce family disagreements and simplify potential future issues. Below are some tips and advice from estate planning attorneys on how to handle family heirlooms and why it is better to include these objects in an estate plan.

What Are the Benefits of Including Family Heirlooms in an Estate Plan?

One benefit of listing heirlooms in a will is so the valuables are given to the person the deceased actually intended to receive it. While the individual may tell someone that they want them to have the heirloom after they pass away, there is no guarantee they will receive it unless it is included in the will. This could lead to family fighting where multiple people claim they are the rightful recipient of the heirloom. Only by including the valuables in the estate plan will the estate executor be able to make sure the objects go to who the deceased actually intended.

Common Mistakes Made in Texas Estate Plans

Published on: January 3, 2022 | By McCulloch & Miller, PLLC

Putting together an estate plan is often a long but well-thought-out process. However, last-minute mistakes can lead to future complications. These last-minute mistakes may be changing a designation in the plan at the last second, taking advice from someone and not consulting with their attorney, or not paying attention to changes to applicable laws. Individuals assume their estate plan is setting them up for the future, but if mistakes are made, then the estate plan may not work as intended. Below are two of the most common estate planning mistakes seen by attorneys, along with steps on how to avoid them.

Not Leaving Enough Assets to Fund a Trust

Many people create a trust as part of their estate plan. A trust allows a third party, a trustee, to distribute funds to a named beneficiary. The creator of the trust will provide specific instructions on how funds—or gifts—are to be disbursed to the beneficiary. But when creating a trust, certain individuals forget to make sure there are enough assets in the trust to pay for what has been intended to be given. Estate planning attorneys recommend putting additional funds in the trust in case assets decrease in value over time. Then, the beneficiaries will still be able to receive the amount intended.

How the COVID-19 Pandemic Has Texans Reevaluating Their Estate Plans

Published on: December 30, 2021 | By McCulloch & Miller, PLLC

The COVID-19 pandemic has impacted every aspect of life. From health concerns to mental well-being, people approach everyday life—and their future—differently than they did prior to March of 2020. Because of these changes, people are considering their goals and how to secure the financial security of loved ones in case they were to get sick. This can all be accomplished through estate planning. By creating health care and financial-related documents as part of an estate plan, Texans can ensure their affairs are in order before the need arises. Below are a few types of documents that all individuals should include in their estate plan, along with descriptions for why these directives are necessary.

Advance Health Care Directive and Medical Power of Attorney

An advance health care directive is a legal document that details the type of medical care an individual wants to receive if they are incapacitated and cannot make the choice for themselves. When crafting this document and deciding on the level of care a person would want, it is important to take into account one’s family medical history and potential treatments they would not want. The more detail an individual provides in their advance health care directive, the better.

How Do I Know if My Estate Plan Is Out of Date?

Published on: December 27, 2021 | By McCulloch & Miller, PLLC

Most Texans do not have an estate plan in place to dictate what should happen to their assets and finances after they pass away. And after they create an estate plan, they tend to not think about it often after that. While having the estate plan itself is commendable and important, estate plans can become out of date and less useful for the individual who created them. Because of this, it is important to know if an estate plan is out of date and have an experienced attorney review the document every few years.

Why Is It Important to Have an Estate Plan in Place?

It is a common misconception that estate planning is merely deciding who will receive a person’s assets after they pass away. While this is a critical part of estate planning, a person’s estate plan will often include other directives, including a fiduciary power of attorney and healthcare directive. These documents will provide someone else with the power to make medical and financial decisions on the other person’s behalf if they become incapacitated and cannot make these choices for themselves.

Texas Estate Planning for Families with Pets

Published on: December 21, 2021 | By McCulloch & Miller, PLLC

People love their pets. And in many households, pets are a beloved part of the family. Because of this—and since pets cannot take care of themselves—many Texans worry about who will care for their pets when they pass away. So while they may not be the first thought when putting together an estate plan, incorporating pets into the process is extremely important. Below are various questions that pet owners have about including their pets in their estate plan along with solutions to these problems.

Who Will Care for My Pet?

The first step in including a pet in their estate plan is to list in their will who would have physical custody of the pets. Sometimes, it may be a simple answer to who would take care of a pet if its owner passes away. However, this is not always the case. Even if the answer seems apparent, it is important to include this in an estate plan.

There are many things to consider when deciding who will take care of pets. First, is the individual willing to provide lifetime care to the pet? This often can be a major commitment, and it is essential to discuss this with the person before naming them as the pet’s caretaker in the will. Secondly, are the pets comfortable around the individual? Considering that a change in owners can be emotionally challenging for the pets, it is important to choose an individual the animals enjoy being around.

Changing a Texas Estate Plan During a Divorce

Published on: December 20, 2021 | By McCulloch & Miller, PLLC

When going through a divorce, there are many complex emotions. And of all the tasks a person must accomplish during this process, updating their estate plan is often not the first thing on the list. However, it is critically important for recently divorced people to speak with an estate planning attorney and determine the appropriate changes that should be made. Below are explanations about how divorce can affect an estate plan and what people should do and change when going through this situation.

Changing the Will

In most situations, recently divorced individuals will have to change their will because their now ex-spouse was a primary beneficiary—meaning, they were set to receive most of the assets and property owned by the individual when they pass away. While most people assume they should only change the portions of the will that mention the ex-spouse, most estate planning attorneys recommend revoking the will and drafting a new one instead. Otherwise, making a series of slight revisions to the current document will often be more expensive and time-consuming than just creating a new will altogether.

Texas Estate Planning Advice to Keep Money in the Family

Published on: December 15, 2021 | By McCulloch & Miller, PLLC

When Texans think about passing on their assets to others, many wish to keep assets in their family through their inheritance planning. While they may assume this will automatically occur—and there is no need to create a will or estate plan—this is not necessarily the case. Instead, there are specific actions that individuals should take to ensure their money and property are handed down to the people they actually want to receive it. Otherwise, a probate court judge will have the final decision in who is given the deceased’s assets. Below are some tips and options for Texans who wish to better control where their assets go and ensure they are utilized responsibly.

Drafting a Will

When most people first think about estate planning, they envision drafting a will. And this is one of the most essential and basic estate planning methods, as drafting a will allows individuals to dictate how their assets will be divided after they pass away. However, in Texas, if someone does not have a will in place when they die, their estate will be divided in probate court. There, a judge will decide how the assets are split up—generally, the individual’s closest kin will receive a majority of the assets regardless of the deceased’s feelings toward them. Because of this, it is important to draft a will so Texans can leave their money to their family—or others—according to their actual wishes.

Creating a Trust

Other individuals may hope to keep their assets in their family but worry about how the beneficiaries will utilize the funds. For people like this, it may be wise to create a trust. In setting up a trust, the individual appoints a trustee, who administers the funds according to the purposes specified in the document. Not only does this allow the individual creating the trust to develop terms, but the trustee will also then make sure heirs follow the stipulations if they want to receive the funds.

Should I Include an LLC as Part of My Texas Estate Plan?

Published on: December 14, 2021 | By McCulloch & Miller, PLLC

When people begin drafting their estate plan, they often debate who to give their personal assets to after they pass away. Often, these assets include real estate, monetary funds and sentimental items. For those individuals who worry about gift and estate taxes and want to pass their assets onto their children, they should consider creating a limited liability company—called an LLC. While LLCs are often used for small businesses, they have tax and other financial advantages. Below are so common questions and explanations about including an LLC in an estate plan.

What Is an LLC?

A Limited Liability Company, or an LLC, is a popular type of business structure that protects owners from most legal liability, like a corporation. This means LLC owners are typically not liable for debts incurred by the LLC business—meaning personal assets like personal bank accounts cannot be collected. However, LLC owners do report income and losses from the company on their personal tax returns.

How Can I Include an LLC in my Estate Plan?

For individuals with large estates who are worried about taxes but want to pass their assets onto their children, attorneys will often advise them to create an LLC. To include an LLC in an estate plan, parents and children create the LLC together and transfer assets into it. These assets often include monetary funds and real property. The parents are then made managing members of the LLC; this allows them to have control over the assets. Then, the parents will transfer assets in the LLC to their children—often named non-managing members of the entity.

End of Year Estate Planning Checklist for Texans

Published on: December 6, 2021 | By McCulloch & Miller, PLLC

As the new year quickly approaches, many Texans have end-of-year goals they would like to accomplish before 2022. Be it buying presents for the holidays, reconnecting with friends and family, or cleaning out the house, the end of the year is often the busiest time. However, many people forget that this is the perfect time to ensure estate planning matters are handled. While this may seem overwhelming, there are many small tasks that can be accomplished to make the estate planning process easier and ensure Texans are up to date with their retirement, elder care, and other planning needs.

Review Power of Attorney Documents

When crafting an estate plan, most individuals create both health care proxy and financial power of attorney documents. The person listed on the health care proxy is able to make medical decisions on the other person’s behalf if they are incapacitated. On the other hand, the financial power of attorney is able to make financial choices for the person if the individual can no longer make them themselves. It is important to review these documents yearly or after a major life change has been made. For example, if someone moves across the country, it may be smarter to change the proxy and power of attorney to someone who lives nearby, so they can be close in case of emergency to make these life-altering decisions.

Revisit Your Will and Beneficiary Designations

When people draft their wills—often with the help of an estate planning attorney—it tends to be a well-thought-out endeavor. Despite this, it is critical to review the estate plan and the people listed as the individual’s beneficiaries. Beneficiaries are the individuals named in the will who will receive the individual’s assets.