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Social Security benefits can help older individuals in Texas enjoy their retirement without fear of becoming destitute. However, when people claim their benefits at the wrong time, it may leave them cash-strapped. When someone reaches the full retirement age, they can receive their full monthly social security benefits; however, many aging adults will choose to delay their filing for Social Security to receive more per month.

By delaying their filing for Social Security benefits, a senior can grow their benefits by 8% a year, up until age 80. For example, if a senior is entitled to $1,500 per month in Social Security when they reach the full retirement age of 66, they will instead receive $1,860 if they wait until age 70 to file. Many aging individuals wonder if they personally should delay their benefits. While this is a personal decision, below are some common reasons why seniors delay receiving their benefits.

Most common reasons to delay pulling Social Security Benefits

In Texas, a Last Will and Testament, commonly referred to as a will, allows a person to designate and gift property and other assets to a beneficiary. The beneficiary may be an immediate family member, relative, friend, or other charity or institution. There is a mistaken belief that wills are only necessary if a person has significant funds or property. However, in reality, a will is a crucial tool to distribute even modest savings and personal items. A will allows a person to clarify what they want to be done with their property, such as their home, investments, retirement plans, insurance benefits, and personal mementos. Furthermore, wills allow a person to appoint a guardian for their minor children.

There are many reasons people forego drafting and executing this critical document. Some hesitation may stem from the psychological and emotional connection between wills and the thought of passing away. However, putting off a will until a person is emotionally ready can have long-term consequences for their loved ones. If a person dies without a will, their loved ones may need to go through a lengthy and complicated probate process. The probate process can be emotionally charged and cause loved ones to experience hurdles and financial setbacks.

For example, the recent death of beloved actor Chadwick Boseman has shed light on the consequences of not having a will. According to a recent CNBC news report, the 43-year-old who died after battling colon cancer died without a will, leaving his estate’s distribution to the courts. His wife requested the court name her as the administrator of her deceased husband’s estate. Although some of the late actor’s accounts, such as qualifying retirement accounts and life insurance, may not need to go through the probate process.

Estate planning is a critical process designed to designate and distribute a person’s assets upon their death, among other things. A Houston estate plan documents a person’s wishes if they become incapacitated or die and specifies who will effectuate the deceased’s wishes. These plans usually involve drafting wills and trusts, designating powers of attorneys and medical decision-makers, and addressing insurance issues and tax implications. It is crucial that individuals seek an attorney’s assistance to determine the current and predicted state of the law and how it may impact their beneficiaries.

What is a Gift Tax?

One area of estate planning that is currently under scrutiny is the federal gift tax. A gift tax is a tax on the transfer of wealth from one individual to another, when the gift is made during the gifter’s lifetime. In most cases, the person making the gift is responsible for paying the gift tax. The Internal Revenue Services (IRS) requires individuals to pay this tax if they give a gift to someone worth more than a specific amount. Currently, gifts made in excess of $15,000 reduce a person’s federal estate exemption when they die. For example, if a grandmother gifts her granddaughter $30,000 in a year, the first $15,000 is not taxable under the annual exclusion. However, after that, the remaining $15,000 counts against a person’s lifetime gift tax exemption and federal estate tax exemption.

Many individuals – especially those with children – do not want to think about what would happen to their family if they passed away. Although many people have life insurance to cover the cost of raising a child in the event of their untimely death, they do not think about establishing a trust to hold the money for them. Despite the common misconception, trusts are not just for the rich. Rather, they are critical tools for young families and an important part of a comprehensive Houston estate plan. Below are some of the common questions that individuals have about life insurance trusts.

How Does a Life Insurance Trust Work?

Individuals will set up a trust as part of their overall estate plan, typically, when they are creating a will and naming guardians if they have minor children. A trust holds assets – including property and money – for the listed beneficiaries, and the individual creating the trust details how the assets should be utilized. Additionally, the person appoints a trustee to oversee the process and ensure the assets are handled as written.

In Houston and throughout Texas, living trusts allow property owners to use their assets during their lifetime while ensuring that their assets are securely transferred to their beneficiaries. The legal document is similar to a will in that it allows financial assets and personal property to be passed on to named beneficiaries. However, the terms of a will become effective after they die, whereas a revocable living trust becomes effective immediately. These trusts allow property owners to keep control of their assets while living even if they become incapacitated.

Establishing a legally binding living trust is crucial to ensuring that a person’s wishes are appropriately documented and carried out. The trust documents should list the property, the trustee, and the beneficiaries. The relevant property is transferred to the trust, giving the trust control over the assets. Trustees should designate a successor who will be responsible for effectuating the trustee’s wishes. These trusts are useful for controlling and transferring various types of assets, but it is incredibly helpful for property owners. Regardless of age, marital status, or wealth, living trusts are an inexpensive and effective way to reduce and eliminate the stress of distributing assets while maintaining control and privacy.

Not only do living trusts help individuals avoid probate and court control, but it also allows trustees to control the assets during their lifetime. The trustee maintains the ability to buy, sell, modify, or even cancel the trust. Further, revocable living trusts allow the trustee to efficiently transfer assets such as jewelry, furniture, clothes, and art into the trust.

On November 7, 2020, major news networks declared former Vice President Joe Biden the winner of the 2020 Presidential Election. With Biden’s election, there is likely to be a shift in many policies, from foreign diplomacy to tax incentives. One area that may soon be altered is an increase in the capital gains tax rate. What is this potential increase? Will it impact your Houston estate plan? And should you take action now before any new policy is put in place? Below are some common questions that Texans are asking in light of Biden’s election, specifically regarding capital gains tax considerations.

What is a Capital Gains Tax, and What Has Biden Proposed?

A capital gains tax is a tax on the growth of investments that an individual or corporation must pay when selling those investments. This means that the tax does not apply until an investment or stock shares are sold; however, capital gains taxes will incur every year until the investment is sold. The capital gains tax rate only applies to “long term capital gains,” which are assets held for more than a year.

With the recent election of Past Vice-President, Joe Biden, individuals are curious about how policies will differ after President-Elect Biden’s inauguration. As Biden has mentioned raising estate taxes and changing the taxation of capital assets upon death, many wonder if they should change their Houston estate plan now. While it is unclear what changes – if any – President-Elect Biden will make to estate tax exemptions and taxes, the issue is worth looking into for many families. Below are some of the most common questions individuals have about estate tax exemptions and what they should do.

What is an Estate Tax, and What Is the Current Estate Tax Exemption?

The federal estate tax applies to individuals who receive an inheritance from estates above a certain exclusion limit. In 2020, the estate tax exemption is $11.58 million per person and $23.16 million per married couple. This means if an individual receives less than $11.58 from an estate – or $23.16 if they are part of a married couple – they are not required to pay an estate tax. Currently, this exemption – which was doubled by the 2017 Tax Cuts and Jobs Act – is set to return to $5 million at the end of 2025, in what is called a sunset provision. It is important to note that surviving spouses are normally exempt from estate taxes.

Creating a Houston estate plan is critical to ensure an individual’s wishes are met after their passing. However, when estate plans include mistakes or are not done properly, they can cause major, costly headaches for loved ones. Below are some common pitfalls that individuals should avoid when drafting or updating their estate plan. Also, check out our eBook on the Top 15 Estate Planning Mistakes.

Not Naming Contingent Beneficiaries

A common estate planning mistake is not naming a contingent beneficiary on retirement accounts, trusts, and insurance policies. A contingent beneficiary is an individual who benefits from an estate plan if the primary, named beneficiary is deceased or unable to be located. If a contingent beneficiary is not named as a part of the estate plan – and the named beneficiary dies before the assets of the estate plan are distributed – the estate may be subject to Texas probate court, additional costs and delays.

Texas Veterans Benefits: Who Qualifies?

Under the Department of Veterans Affairs (VA) current framework, only individuals deemed a “veteran”, may be eligible for VA benefits. Assuming the member met the active service requirement, the VA relies on the individual’s character of service designation (COD) to determine whether a former service member was separated from their branch “under conditions other than dishonorable.” Despite their service, the VA consistently denies these soldiers access to necessary services and benefits. Under this framework, the VA fails to recognize hundreds of thousands of former members of the Armed Forces as veterans. This regulatory scheme has left many Texas veterans without VA benefits, such as service-connected benefits and the VA pension.

The Department of Defense provides service members with a discharge status which may be honorable, general under honorable conditions, uncharacterized, other than honorable (OTH), bad conduct (misdemeanor), bad conduct (general court-martial), dishonorable. Traditionally, the VA requires a COD for service members who received an uncharacterized, OTH, or bad conduct (misdemeanor) discharge. Historically, the VA denied benefits to service members who received Other Than Honorable (OTH) or Bad Conduct discharges. The VA would consistently find that these veterans engaged in “persistent or willful misconduct.” The VA would fail to find that the COD was “under conditions other than dishonorable.” However, many of these service members served in active combat and received these CODs due to their physical and mental wounds.

During these unprecedented times, Houston residents have many questions about a potential COVID vaccine and whether it will be covered by Medicare. Medicare is a national health insurance program that provides insurance for Americans 65 or older and some younger individuals with a disability. Similarly, Medicare Advantage is a type of health insurance plan that provides Medicare benefits through a private-sector health insurer, rather than the government. In Texas, over 4 million people rely on Medicare for their health needs. Because of this, it is important to know whether individuals with Medicare will have to pay out of pocket for a COVID vaccine – something many cannot afford – or whether it will be covered by Medicare. Those with questions about what Medicare covers can reach out to a Houston estate planning attorney for assistance.

Good and Bad News About The CARES Act

The CARES Act provides that if a COVID-19 vaccine becomes available, Medicare is required to cover the cost under Part B. Ordinarily, Medicare Part B helps to pay for doctor visits, preventive services, and vaccines such as the flu and pneumonia shots. Additionally, Medicare Advantage plans are required to include the basic coverage offered by Medicare Parts A and B, meaning a COVID-19 vaccine would also be covered for those with Medicare Advantage plans.

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