Articles Posted in Estate Planning

There are many stresses that come along with moving: saying goodbye to friends and family, figuring out the logistics of the move, and settling into a new environment. However, many people do not think about amending their will or estate plan when moving to a new state. While this may not seem critical, many estate planning laws vary, depending on the state of residence. Below are common questions and explanations that individuals have about estate planning when they are relocating to Texas.

Why Do  I Need to Change My Estate Plan?

When moving to a new state, it is important to amend a will and other estate planning documents. However, many people—despite hearing this advice—are confused about why this is necessary. Although a person’s will is still generally valid after moving, there tend to be state-specific laws and regulations that may impact the estate plan.

2021 is nearly over, with a new year around the corner. While this is generally a time of celebrating holidays and preparing for the new year, there are some estate planning considerations that should be taken into account before 2021 is over. Although this may not seem like a top priority, there are timing considerations because of proposed legislation that may impact estate plans by 2022. Below are some common items that should be reviewed and discussed with an estate planning attorney by the new year.

Estate and Gift Tax Exemption

While Texas does not have a state estate and gift tax, there is a federal tax. The estate tax is a tax levied on a person’s estate plan and is based on the amount of assets a person is giving to others in their estate plan once they have passed. Currently, estates under $11.7 million are not taxed; however, this amount is set to roll back to a lower level soon. While the current plan is to lower the exemption amount to $5 million in 2026, there are discussions in Congress about speeding up this rollback to the beginning of 2022.

Laws can be quickly passed through Congress, so it is difficult to predict whether this effort to lower the estate tax exemption by 2022 will be successful or not. Because of this, individuals should speak with an estate planning attorney who will advise them on whether their estate is likely to be impacted by this federal tax change—and changes they can make to their estate plan if they are impacted.

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There is a common misconception amongst lower- and middle-class families that estate planning is only for the wealthy. They assume if they do not have many assets—if any—to give to loved ones, there is no point in having a will in place. However, this is not the case. Everyone should draft an estate plan, regardless of their financial or family situation. There are multiple documents that should be included in an estate plan in order to remove a family’s stress in navigating life after a person’s death.

A Last Will and Testament 

A last will and testament, or a will, is the most important estate planning document a person can have. A will explains how assets should be handled after a person passes away. The will should also state who should be given the assets—these individuals are called beneficiaries. If all assets are not being left to the same person, the document should clearly state who is receiving what assets and property. Additionally, the will should name an individual to administer the estate; this person is called the executor of the will. If the drafter of the will has any minor children, it is also important to name a guardian for their children. This limits the potential for disputes, where family is fighting over who is the legal guardian of the child.

Whether you are young or old, married or unmarried, parenting or childfree, you need a will. A will is a basic courtesy to the loved ones left behind after someone’s passing. Even for people with minimal assets, a will is an appropriate Houston estate planning tool to ensure that any final wishes will be honored and to ease the burden on family and friends of making final arrangements.

Moreover, in Texas, when someone dies without a will, the state decides who gets the deceased individual’s assets, with zero regard to what may be obvious personal preferences. The operation of this law has led to countless unfortunate outcomes, such as estranged spouses getting the entirety of an estate that should have gone to the deceased spouse’s children.

For these reasons, it is important to write and then maintain an updated will from the time one enters adulthood. Fortunately, writing a will need not be a complicated nor burdensome process. For many people, a basic will drafted online or with a lawyer at an affordable rate will suffice.

Throughout time, the purposes of life insurance in the estate planning context have simultaneously remained constant, while also dramatically changing. These alterations have occurred because of state and federal regulations. And these changes impact how estate planning attorneys advise their clients. However, it can be difficult for Texans to know the ways that life insurance can protect them against tax liabilities, along with ensuring assets are left for loved ones. Below are common ways—both previously and currently—that life insurance can be used in a Houston estate plan to benefit both the estate plan drafter and their family.

Paying Estate Taxes

Life insurance can be used to protect individuals against estate taxes. Previously, life insurance was traditionally used in estate planning for this purpose. While Texas does not have any state estate taxes, there are still federal estate taxes to worry about. Currently, individuals with an estate valued over $11.7 million will have to pay a tax. In these instances, people are often advised to use part of their life insurance policy to pay this amount—otherwise, the person’s estate will be required to pay this tax, and it may be taken out of assets otherwise given to heirs.

Regardless of the makeup of a family, family dynamics can often be complicated. But fighting about food and what to watch on TV are simple problems compared to disputes about a loved one’s estate. These lawsuits can cost millions of dollars and tear families apart. Instead, there are steps that estate planning attorneys recommend taking in order to avoid these issues—especially during the emotionally charged times after a person has passed away. When it comes to estate planning—like with many other family disputes—communicating can go a long way toward minimizing future problems and estate lawsuits.

Communicating Estate Plan Intentions

Having ongoing conversations with loved ones about estate planning intentions is crucial. While discussing what assets a person intends to leave to others with those people may feel awkward, there can be major consequences otherwise. Lack of communication can lead to family rivalries—and even lawsuits—if a loved one feels they were unjustly excluded from the estate.

Many Houstonians have taken the laudable first step of creating an estate plan, so their assets can be passed off after their death. However, people will often forget to include provisions to handle the expenses that occur at the end of a person’s life. If these costs are not incorporated into a person’s estate plan—by putting money away for them—it can leave family members in a difficult financial situation. Below are some common end-of-life expenses—either that many forget to save for or forget to exist entirely—along with how to make sure on how to save this money.

Funeral Costs

It is important to incorporate funeral expenses into a person’s estate plan. When people either do not have the funds saved for a funeral—either in a savings account or as part of a trust that can be utilized after a person has passed away—they are often shocked by the high cost. According to the National Funeral Directors Association, the average funeral in 2019 cost $7,640. By putting this money away when drafting the estate plan, the family will not have to worry last minute about coming up with these funds during an emotionally difficult time.

No will is the same; however, some wills are more complicated than others because of family dynamics and related situations. One family dynamic that makes a will slightly more complex is when a blended family is involved. A blended family—made up of families that come together over time with new relationships—often requires navigating more family dynamics to discern who an individual will leave their assets to. This may involve updating the will as relationships change. Below are some of the most common challenges faced by blended families during the estate planning process—along with how to avoid these issues.

How to Divide the Assets in an Estate Plan

For many blended families, it can be difficult for the person drafting the will—called the testator—to decide who to leave their assets to. They will likely want to provide for their family, and this family may include stepchildren, children from a previous marriage, and other close relatives. Therefore, it might be challenging to decide how much to give to each—especially if some loved ones are either not legally connected to the testator or if family members do not get along.

While drafting their estate plan, many individuals do not consider the taxes that will be taken from their assets after their passing. Because every state has different tax rates—and there are both estate tax and inheritance taxes to worry about—it can be confusing for Texans to determine what taxes apply to them. Beyond this, once people discover the estate and inheritance taxes their beneficiaries will be forced to pay, they often ask about strategies to limit their tax implications. Below are common questions and explanations about not only estate and inheritance taxes, but also options to reduce a person’s overall tax liability.

What Estate Planning Taxes Should I Be Worried About?

When drafting an estate plan, individuals should be aware of both estate and inheritance taxes. An estate tax is based on the value of the deceased’s estate. Additionally, the tax is paid from the assets of the deceased’s estate. On the other hand, inheritance taxes are paid by the beneficiaries of the estate based on the amount of assets they receive.

There is a common phrase that says, “the days are long but the years are short.” While this phrase was not created with estate planning in mind, the sentiment runs true: people talk about drafting an estate plan but rarely do so over time. However, it is never too early to start a Houston estate plan, especially with the unexpected occurrences that happen in life. And without an estate plan—or by making common estate planning mistakes—families can become dysfunctional and loved ones may show hostility to one another. Below are two common estate planning mistakes that must be avoided to avoid family infighting after a person’s death.

Not Having a Will in Place

Not having a will in place at the time of a person’s death is the worst estate planning mistake that can be made. Families will face dramatic consequences and uncertainty if a loved one dies without a will. A will is the place to express a person’s wishes for how their assets will be handled after their death—without this document, it is called dying “intestate.” This means Texas law—as interpreted by a probate court judge—will determine who receives the person’s assets, regardless of their personal relationship. This may lead to family fighting where one person, who may be genetically but not personally close to the deceased, receives an inheritance and others do not. All of these issues could be resolved by drafting a will.

Not Appointing an Executor of the Estate Plan

While a will specifies a person’s wishes, an executor of the estate plan is necessary to enact these wishes. An executor handles most of the administrative tasks required in an estate plan: they distribute the estate’s assets to the specified beneficiaries, pay any debts the deceased may have, and file the final tax returns. However, if a will does not list an executor, it will lead to a much more complicated and emotionally fraught process. Beneficiaries will not receive their assets in a timely manner and loved ones will have to go to court to see who a judge names the executor. While a spouse or other close loved one is generally named the executor in these situations, this entire process can be avoided if an executor is named in the estate plan.

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