Houston Estate Planning and Elder Law Attorney Blog

Spotting Elder Financial Abuse: How to Catch it Early and Prevent it from Becoming a Major Issue for Your Loved Ones

Published on: February 15, 2023 | By Thomas W. McCulloch

Elder financial abuse, by definition, is when an individual takes money or other assets away from an older person without permission. Unfortunately, when older people begin to exhibit signs of memory loss or decreased mental functioning, this kind of abuse is more likely to occur. Thus, as your loved ones get older, it is prudent that you look after their finances and make sure no one untrustworthy has access to (or the possibility of exploiting) their financial information.

Examples of Elder Abuse

The specifics of elder abuse can vary from case to case, and there is no one thing in particular that indicates an older person is being taken advantage of. One thing to look out for, however, is an elder person’s caretaker taking possession of their credit cards. It is easy for these cards to go unmonitored and thus for a caretaker to use the money for expenses not related to their job.

Another possible indication of financial elder abuse can be with someone takes control of an elder’s power of attorney. If, for example, a lawyer, manager, or advisor abuses her or his position, this can be a form of exploitation. It is important to keep a close eye on who has power of attorney over the older people in your life to make sure this position is not taken lightly.

How the New SECURE Act 2.0 Can Affect Your Estate Planning Goals

Published on: February 8, 2023 | By McCulloch & Miller, PLLC

How the New SECURE Act 2.0 Can Affect Your Estate Planning Goals

In the final days of 2022, the U.S. Congress passed a federal law known as the SECURE Act 2.0. This law addresses retirement accounts and distributions throughout the country and was signed by the president in late December. While this law primarily affects how Americans manage their personal retirement accounts, the new mandates will also affect how revocable trusts and other financial instruments can be managed.

The SECURE Act 2.0 is based on an acronym meaning Setting Every Community Up for Retirement Enhancement. According to an analysis published by a professional legal publication, a primary feature of the act is an adjustment of the minimum retirement age to begin making mandatory distributions from a 401(k) or traditional IRA account. Under the new law, retirees are permitted to wait until they turn 73 years old to begin withdrawing funds from their retirement accounts without an additional penalty. This change puts more control in the hands of retirees, permitting them to keep earning interest on their money for longer.

Another feature of the SECURE Act 2.0 is to increase the allowable amount of “catch-up” contributions to 401(k) and other accounts. Under the new scheme, people between the ages of 60 and 63 who deposited less than the maximum allowable amount earlier in life will be permitted to deposit at least $10,000 per year to their accounts, up to the maximum allowable amount. This change in the law will allow the aging population to invest money they earned or received later in life into their retirement accounts for later use without tax penalties.

What is a Fiduciary Duty with Regard to Trusts and Estate Planning?

Published on: February 8, 2023 | By David W. Miller

There are many terms in the field of estate planning that have become ubiquitous in the field, however, their meaning is often misunderstood. Trustee, beneficiary, executor, and fiduciary are some of these terms. The personal term “fiduciary” comes from the type of duty that a fiduciary owes to a beneficiary in a trust or financial management decision. This “fiduciary duty” is generally based upon a relationship or contract between a beneficiary and a fiduciary, or trustee.

The fiduciary duty is built upon a contractual relationship whereupon the fiduciary agrees to accept responsibility for the duty to manage the beneficiaries assets in the best interest of the beneficiary. An example of a fiduciary in the field of estate planning is the relationship between the trustee and the beneficiaries of a trust. A trustee is a person or entity (often a bank or law practice) that takes legal ownership of the trust assets and manages them in a way to benefit the beneficiaries and honors the trust. This management may include investing money, purchasing or selling assets, paying taxes, and managing legal or financial issues and disputes.

Fiduciary duties related to trusts and estate planning may involve specific obligations. The fiduciary has a duty of care to diligently inform themselves of the details of the trust assets in order to exercise sound judgment to protect the interests of the beneficiaries. Furthermore, fiduciaries owe beneficiaries a duty of loyalty, which includes removing themselves from decision-making that could pose a conflict of interest. Another duty of a fiduciary is to act legally and in good faith. A fiduciary should not break the law or behave unethically when handling the beneficiaries’ assets, especially if such dealings collaterally benefit the fiduciary. Finally, a fiduciary owes beneficiaries a duty of confidentiality. The fiduciary should not release the identity or any information about beneficiaries without a mandate or good cause.

Celebrity Wills Exemplify the Importance of Estate Planning

Published on: January 31, 2023 | By Thomas W. McCulloch

We have long expressed the importance of estate planning for everyone, regardless of status or income. One substantial step in estate planning is having a clear will that avoids dispute or probate issues. For most people, a will turns out to be a relatively straightforward document with little contention. For celebrities who commit certain estate planning mistakes, however, a will—or lack thereof—can become a public news story and topic of gossip. Some intriguing and even hard-to-believe celebrity will stories can show the importance of having a solid estate plan—even for people whose probate drama won’t be in the news.

Larry King’s Secret Will

Television and radio personality Larry King recently passed away in 2021, and his death prompted substantial court drama over his estate. He had a secret handwritten will—also known as a holographic will, which is not a will delivered by hologram!—which was allegedly written in 2019. His family did not find the will until he passed away. The handwritten will was contentious because, at one point, it left 20% of his estate to his children and the rest to his wife, whom he was still married to but estranged from. The two were going through a divorce, but it was not finalized at the time of his death. At some point, he crossed out this 20% figure and left all 100% to his children, disinheriting his wife. This handwritten change makes it difficult to verify on what date the change was made and whether or not King actually made the change himself. King’s estranged wife and his son eventually settled confidentially to avoid the legal battle after challenges and disputes.

What Are an Executor’s Duties?

Published on: January 31, 2023 | By David W. Miller

Many people familiar with Texas estate planning have heard of the “executor” of an estate. It is colloquially understood that an executor is a person assigned by a trustee to manage their final wishes and financial matters after the death of the trustee. Being chosen as the executor of an estate should be seen as an honor, as the selection demonstrates that the trustee has faith and confidence in the abilities and integrity of the chosen executor. Although the privilege of being selected as an executor is certainly a compliment, the responsibilities of executorship are often far more significant than a chosen executor may expect. A recently published article in a financial services trade journal discusses an executor’s duties.

The primary role of the executor is to ensure that the final wishes of the trustee are carried out in the best way possible. This includes both financial and other wishes, such as funeral arrangements, obituary, and the division of sentimental items. When a trustee has prepared a will, the executor is required to use that document as a guide to distributing the estate of the trustee. An executor’s duties may be extremely simple when the estate has little value or few beneficiaries.

High-value estates with more beneficiaries or complex financial assets (trusts, real estate holdings, stocks and options, businesses, annuities, etc.) may be more complicated for the executor. If the estate beneficiaries do not get along with one another or the executor and challenge the division in court, the work of the executor can include retaining counsel on behalf of the estate and working diligently to effect the trustee’s wishes to the best of their good-faith understanding of the will.

What Happens if Someone Challenges the Terms of a Texas Trust?

Published on: January 26, 2023 | By David W. Miller

While establishing a trust for your loved ones is often a wise choice, a number of pitfalls can make the experience more stressful than it has to be. Financial matters—and, in the case of a trust that goes into effect after the death of the grantor, grief—can make an already delicate situation even more challenging. While nobody wants to plan for the worst-case scenario, doing so can ensure your wishes are carried out, and your trust remains unchallenged. In addition to being very clear about your trust terms and working with an estate planning attorney to ensure procedural compliance, trusts can also incorporate a no-contest clause that removes a challenging beneficiary’s right to the trust if they challenge the trust and fail.

Reasons to Challenge a Trust

A trust can generally be contested in the same way that a will can. These include a wide range of reasons that can vary based on your own personal circumstances. For example, someone challenging a trust may claim that the person who formed the trust lacked the capacity to do so or did so under duress or undue influence. There are also certain procedural requirements a person must meet when establishing a trust, and a challenger can attack on those grounds if any steps are missed, or any T’s are uncrossed or I’s undotted. Specific terms of the trust can also be challenged if ambiguous or unclear or somehow against reasonable public policy. Alternatively, beneficiaries can sue the trustee directly if the trustee acts outside of the bounds or spirit of the trust.

How Recent Federal Tax Law Changes Affect Estate Planning in Texas

Published on: January 22, 2023 | By Thomas W. McCulloch

As control of the federal government changes, sometimes every two years, the tax laws often change as well. Recently, new tax laws have gone into effect, which may significantly affect many Texans’ management of their assets and estate. A recently released legal trade publication discusses some of the recent tax changes and how they may affect your estate planning.

The most significant changes to tax law that involves estate planning involve adjustment of the estate tax and the gift tax. As of 2023, the combined exemption amount from the gift and estate taxes has increased by nearly $ 1 million. With the new tax numbers, single persons are now entitled to give or pass on to their heirs up to $12,920,000 without incurring any estate or gift tax burden. A married couple can exempt $25,840,000 in this same manner.

This change may affect how some Texans construct and manage their estate because trusts, non-liquid holdings, and other financial measures may not be necessary to reduce the tax burden of your heirs upon your death. The exemption is the highest it has ever been and is set to reduce in 2026. With proper advice and counsel, Texans with significant assets may be able to arrange a “lifetime gift” to an heir, locking in the favorable tax exemption while it is part of the law.

How to Stay Vigilant Against Elder Fraud

Published on: January 21, 2023 | By Thomas W. McCulloch

The wide range of the internet and the increased interconnectivity of our society has led to an increase in financial frauds against the elderly. Older people lose $3 billion each year to financial scams, and more than 3.5 million individuals are impacted. People over the age of 60 are more vulnerable than other populations to scams, and individuals over 80 suffer even higher losses.

These scams can occur in a variety of ways. Sometimes, the elderly person is taken advantage of by a trusted friend or family member. In other situations, financial professionals and medical care providers abuse their position to commit these frauds. In other scenarios, complete strangers come into contact with elderly individuals through the internet or other means to perpetuate scams. While there is no limit to the ways your loved ones may be defrauded, the U.S. Department of Justice has identified several common scams to be on the lookout for.

Common Elder Fraud Scams

Many common scans involve fraudsters pretending to be representatives from federal agencies. For example, in a Social Security Administration imposter scam, victims are contacted via telephone and are convinced their social security numbers have been suspended because of suspicious or criminal activity. Victims will then confirm their social security numbers and even give imposters access to bank accounts, thinking it’s necessary for keeping their finances safe. Imposters use robocalls, caller ID spoofing, and U.S.-based money mules to convince victims of their legitimacy. Callers also use similar techniques to pretend to be the IRS, claiming victims owe substantial sums of money to the agency that they must pay quickly through wire transfers or gift cards. Victims who refuse are threatened with arrest or other official action.

How to Talk About Estate Planning

Published on: January 21, 2023 | By David W. Miller

Finances can be a touchy topic no matter the conversation—from salary discussions to planning for marriage or talking about debt, many people feel uncomfortable. It can be even more difficult when individuals are getting older and the financial topic is estate planning. Adult children of aging parents may wish to make sure their parents can manage their assets effectively. When a family business is concerned, the need to involve everyone impacted in the estate planning discussion can be even greater. Below are three things to consider when trying to start an estate planning conversation.

1. People resist change.

People generally resist change, but this can manifest in different ways. Considering which way your parent or aging loved one may be resistant to change—whether they fail to see a problem altogether or disagree with you as to the solution—can help you formulate the right questions to ask. For any level of resistance, involving a business succession or estate planning attorney can help pinpoint the best questions to ask and the right information needed to move the process forward.

2. Determine how assets are currently structured.

The current structure of your parent or loved ones’ assets can guide the next steps. For example, if your family member owns a business, they may already have a succession plan in place. But other issues may still be in play. For example, they may self-manage and own all assets themselves, which might require some separation in the future. Or they may have plans for their business, but not their own retirement or personal asset management—or the other way around. Asking questions to figure out the current state of affairs can guide your loved ones toward thinking about practical considerations. Sometimes some positioning is needed before transitioning to the next stage of estate planning.

Deathbed Gifting: Morbid Name, Bad Idea

Published on: January 11, 2023 | By Thomas W. McCulloch

As individuals near their final years, they often begin to think about their assets, accounts, and possessions. Who will receive property and funds? Which loved ones will benefit most? The idea of giving gifts can be appealing—especially if people think it may save their estate and their loved ones from a hefty tax bill. Or they may expect that a gift will help avoid probate for that asset. But this phenomenon, called deathbed giving, is not often a very good idea, according to experts.

What Are the Cons to Deathbed Giving?

Deathbed giving can negatively impact the tax bill of your heirs down the line in many cases. Most Americans do not have to worry about exceeding the approximately $13 million exemption on estate taxes. Getting rid of an asset that would otherwise neatly fit within that exemption can be problematic in terms of capital gains taxes. For example, say you have a second home that effectively has a zero tax basis. If you gift your second home to your children before your passing, and they someday sell that home, they would have to pay capital gain taxes on the proceeds of the sale—the difference between what you bought the home for and any appreciation in value. The tax basis carries over.

But in a scenario where your property remains in your name, it will be wrapped up in your taxable estate. When it is in your estate, the tax basis will become the value of the home, rather than the value you purchased it for—the asset will receive what is called a step up in income tax basis. When your heirs sell the property for a value close to the tax basis, the capital gains will be minimized. The taxes associated with the estate fell within the $13 million exemption, and Texas has zero inheritance tax.