Houston Estate Planning and Elder Law Attorney Blog

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.

Broker Steals from Client with Dementia

Published on: January 11, 2023 | By David W. Miller

Unfortunately, elder abuse is all too common. But the abuse is not only physical or psychological but also financial: seemingly legitimate brokers can manipulate and steal from aging communities, especially those with limited competence or memory issues. In 2019, $25 million was lost from individuals over 60 due to investment fraud. One recent instance exposes many of the problems with elder financial abuse.

In one instance, a former stockbroker for the firm LPL Financial was charged with multiple counts of exploiting and stealing from an elderly person. The losses totaled nearly $1.3 million from the client, who suffered from dementia and memory loss. The broker advised the client to move funds from her trust to her bank account to fund investments in one of the broker’s businesses, allegedly to make investments in real estate investment trusts. This happened over the course of approximately eight years. Instead of making the investments, the broker moved the funds from the investment fund’s bank accounts to his personal accounts, where he used the money to pay off personal debts and other expenses.

The broker exploited his personal relationship with his client and her late husband. After her husband passed, he “positioned himself as a friend and confidant” to the client, according to the SEC, and began to assert control and influence over the client’s affairs.

SECURE Act 2.0 Changes Required Minimum Distribution Rules

Published on: December 30, 2022 | By McCulloch & Miller, PLLC

SECURE Act 2.0 Changes Required Minimum Distribution Rules

Planning for retirement can already be daunting. IRAs, 401(k)s, 403(b)s, and TSPs can sound like an alphabet soup of hoops to jump through and requirements to know. On top of general planning for retirement, Congress occasionally will enact legislation that changes the taxation scheme for various retirement accounts and tools. While these changes can often be beneficial, knowing how best to navigate a new legislative environment can be half of the battle to planning for retirement in a savvy way.

For example, the SECURE 2.0 Act will change the required minimum distribution rules. Required minimum distribution is the amount of money a person must begin withdrawing from certain types of employer-sponsored retirement plans or traditional IRAs at retirement age. These required distributions can impact how you may plan for retirement, including avoiding hefty tax penalties or certain types of accounts. Talking to an attorney well-versed in estate and retirement planning can help you understand how these rules change and how they may or may not impact your plans. Furthermore, each of these rules has different implementation and start dates, and the impact of these changes can change depending on your birth year. Understanding these nuances is key to taking full advantage of the changes, which were designed to make retirement saving easier for people in the United States.

SECURE 2.0’s Changes

Under SECURE 2.0, the required age for federal employees to begin taking their required minimum distributions is now later than it was under SECURE 1.0 and before the passage of SECURE 1.0. The age has generally moved from 70.5 to 73 in 2023. In 2033, the age will be 75.

Why a Will and a Trust Do Not Make a Complete Estate Plan

Published on: December 27, 2022 | By David W. Miller

Horror stories abound of individuals with plenty of assets passing on without a will, throwing their loved ones into chaos and probate drama. You may have heard of these stories and made sure to establish a secure will. You may have even gone a step further and placed some assets into a trust for your heirs so those assets can avoid probate. Unfortunately, a will and a trust do not make a complete estate plan. Here are 5 other things to consider when evaluating the completeness of your estate plan.

Regularly Update Your Documents

First, even a will and a trust won’t do what you want them to if you do not regularly evaluate and update them. Changes to your financial or personal circumstances should prompt an update. For example, a divorce, marriage, death of a spouse or beneficiary, or a loss of a job or large inheritance could all require changes to your estate plans.

Include Health Care Designations

If you have a will and a trust, you still may wish to put specific documents in place that designate your healthcare wishes in the event you become incapacitated. These documents are called advance directives. A medical power of attorney grants a person of your choosing the right to make your medical decisions for you, while a directive to physicians will outline wishes for your care in advance.

Changes to Your Estate Plan After a Divorce

Published on: December 27, 2022 | By David W. Miller

A divorce is no doubt a challenging time in the lives of all who go through one. Even for the amicable splits, the time spent doing paperwork and discussing the best division of assets can be draining. Unfortunately, the issuance of a divorce decree or separation agreement is not the end of the journey. You will need to make changes to your estate plan to reflect your new circumstances and avoid regret down the road.

Do not think that changing your will is the only update you will need to make. After a divorce, any document may include your former spouse as a beneficiary. Pay special attention to your will, of course, but also consider your living trust and power of attorney documents. Also, be sure to update any life insurance policies or transfer-on-death provisions as well.

Updating Your Documents

If you’ve been through a divorce, consider revising your old will by executing a new one and destroying the old one. This will work to revoke the old will. Provisions that may need rewriting include arranging for any property previously designated for your spouse to go to an alternate beneficiary, updating the executor of your estate if it was previously your spouse, and designating a guardian of your children. Even though in all likelihood your spouse will be awarded custody of your children in the event of your death, if your wishes are for your children to live with another guardian, you should still include that language in your will.