Houston Estate Planning and Elder Law Attorney Blog

Critical Mistakes to Avoid in a Texas Estate Plan

Published on: May 26, 2022 | By McCulloch & Miller, PLLC

When people begin the estate planning process, they often worry about making mistakes and the problems this could cause down the line. And it is true, when Texans have errors in their estate plan—or do not recognize something is a mistake and purposefully include it—there can be long-term consequences for loved ones attempting to execute the will after the person has passed away. Thankfully, many common estate planning mistakes can be avoided by careful consultation with an experienced estate planning attorney. Below are common estate planning errors and how they can be prevented.

Failing to Name Beneficiaries

In drafting an estate plan, some individuals will forget one of the most critical aspects: naming beneficiaries to inherit their assets after they pass away. While they may name beneficiaries for certain, obvious, assets like property or personal items, they may forget for other financial benefits like retirement plans and life insurance policies. It is just as important to decide upon a beneficiary for these financial accounts too in order to avoid the probate court process. Otherwise, a judge will determine who will receive these policies—and it is often the closest blood relative, regardless of the personal relationship the deceased and the person may have had.

Not Explicitly Providing Assets to Children

Especially in blended families and second marriages, individuals will forget to explicitly provide assets to their children—instead, giving it all to their current spouse. While in an overwhelming majority of cases the spouse will then financially assist the children in the future—even if they are not their own children—estate planning attorneys still recommend leaving assets to the children themselves, just in case. For example, even if the surviving spouse knew the deceased wanted them to use some of the money to assist the deceased’s children, if there are not protections in the will, there is nothing requiring them to do so. But if the children are named as beneficiaries or provided their own assets, then they will be more financially secure and not have to worry about any changes the surviving spouse may make in the future.

What is a Texas Living Trust?

Published on: May 26, 2022 | By David W. Miller

When beginning the estate planning process, most people begin with creating a will and other documents like healthcare directives, medical power of attorney, and funeral arrangements. However, they often forget about living trusts, which have many unique benefits. Unlike a will, a living trust allows an individual to transfer assets to loved ones and avoid the probate court process entirely for the assets placed in the trust. Below are some of the most common questions about living trusts, along with answers to these questions.

What Should I Know About a Living Trust?

A living trust allows the creator—also known as the grantor—to transfer assets to beneficiaries after they have passed away without having those assets go through probate, unlike those bequeathed in a will. The grantor still holds ownership to the assets in the trust until they pass away, meaning the grantor can remove or add assets in the trust—or change the named beneficiary—until their death. Once the grantor dies, the assets are distributed to the beneficiary of the trust.

What Assets Should be Placed in a Trust?

There are some assets that estate planning attorneys recommend placing in a trust, and there are some assets and accounts they recommend do not go in a trust. Some assets that people can fund a trust with include financial accounts, like stocks, mutual funds, bank savings accounts, and money market funds. Property, like a title to a house, can also be put in a trust. While individuals may become hesitant about putting such valuable assets in a trust, it is critical to remember that the trust is revocable, and the assets can be removed at any time. Personal property, like family heirlooms, can also be put in a trust. While most people will instead put these items in a will, a will becomes a matter of public record, unlike a living trust.

How to Discuss Texas Estate Planning With Your Parents

Published on: May 17, 2022 | By McCulloch & Miller, PLLC

Some conversations are easier than others to have with your parents—as a child, a teenager, and even as an adult. And as parents age, there are certain aspects of life their children may be concerned about—especially when planning ahead can potentially avoid disasters in the future. One of these topics is estate planning. While starting the conversation about estate planning with parents may not be easy, it is critical to do so in order for children to know how their parents would like future decisions to be made. Below are some questions that children can ask their parents about estate planning to begin the conversation and ensure they are taken care of in the future.

Do You Have an Estate Plan in Place?

The first question that elder parents should be asked is if they already have an estate plan in place. Some individuals may assume they do not need a will, most likely because they do not have significant assets to pass on, but this is not the case. Having a will can ensure the assets and personal property a person does have is passed on to who they would actually like to receive the gifts and not have to go through a long, drawn-out process.

Additionally, there are other documents in an estate plan that are critical for aging loved ones to have, such as a financial and medical power of attorney—having these documents allows a designated loved one to make decisions on their behalf in case they are physically incapacitated or mentally unable to do so for themselves anymore. These estate planning documents can also identify how they would like to be cared for in the future and how drastic of medical treatment they should receive. This allows loved ones who have to make this decision the peace of mind, knowing they are making choices the person would approve of. Even if an aging parent says they do have an established estate plan, it is still a good idea to have an attorney review it every few years to make sure it is accurate and up to date.

Does My Older Loved One in Texas Need a Guardian?

Published on: May 17, 2022 | By Thomas W. McCulloch

Parents take care of their children as they grow up and age. However, when these parents are getting older, children may get concerned about their parent’s health and well-being. In these cases, they may seek a guardian for their loved one, to take care of their personal and financial affairs. They, of course, want to take their parent’s wishes into account, but also may not want to leave them on their own anymore—especially if they are physically incapacitated or are in mental decline. Below is information about when Texans should seek guardianship for their aging parents, along with essential aspects of a guardianship.

What is a Guardianship?

Guardianship is obtaining the legal authority to make choices for another individual. A guardian is someone responsible for another person’s personal and financial affairs when they are no longer mentally capable of making these decisions for themselves. By law, individuals are assumed mentally capable of making their own decisions; because of this, people must go through a court process to declare someone incapacitated and appoint a guardian for them. A guardianship may be needed if the person cannot take care of themselves due to mental illness, disease, or mental incapacity.

Because guardianships can mean individuals do not have the ability to make decisions for themselves—including the ability to marry, vote, or even make certain medical decisions—courts will sometimes limit a guardian’s authority to the area they may need help with, like financial affairs.

Avoiding Common Texas Estate Planning Mistakes

Published on: May 10, 2022 | By Thomas W. McCulloch

Many experienced estate planning attorneys have a list of the worst estate planning mistakes that Texans can make. For many attorneys, at the top of the list is inadvertently leaving money to the wrong person in their estate plan. Most people have strong preferences on who should inherit their money and property after they pass away—this is why they have an estate plan in place. However, even individuals with estate plans may make mistakes that lead the wrong person to benefit from the error. Below are some of the most common estate planning mistakes and how they can be avoided, according to Texas estate planning attorneys.

Ex-Spouses Inheriting Money

One estate planning mistake that many people fear is their ex-spouse inheriting their money or property after they pass away. Most formerly married couples do not want their ex-spouse to receive their assets if they die first. While most state laws ensure former spouses lose property rights after a couple is divorced, individuals must change their beneficiaries on estate planning documents as well.

Before getting divorced, most individuals will name their spouse as their beneficiary—for pensions, insurance policies, and bank account beneficiaries as well. If the beneficiary designation is not changed after the divorce and one of the former spouses passes away, then their ex may inherit the asset. Estate planning attorneys can help advise clients on changing these designations as soon as the divorce is finalized and provide recommendations on who should replace the ex-spouse as the beneficiary.

How to Incorporate Bypass Trusts in Texas Estate Plans

Published on: May 10, 2022 | By David W. Miller

Because estate planning laws are constantly changing, individuals often wonder if they should be changing their estate plans or utilizing other strategies. Some of these changes are known—such as the reduction of the federal estate tax exemption in 2026—whereas others are passed by Congress last minute and can be difficult to predict. In order to prepare for these changes, estate planning attorneys have recommended two strategies for some married couples hoping to limit their federal estate tax liability: the spousal portability election and bypass trusts. Below is information about both of these strategies, and how they can be helpful to Texas married couples going through the estate planning process.

What is a Bypass Trust?

A bypass trust allows married couples to not have to pay the estate tax on certain assets after one spouse passes away. When one spouse dies, the assets within the estate are split into two separate trusts: a marital trust, and a bypass trust. For those assets placed in the bypass trust, the surviving spouse does not own those assets but can access the trust and utilize some of the funds within it. Someone must act as the trustee of this trust, it can be the surviving spouse, and ensures the assets are divided appropriately into each trust and that the trust’s assets are being carefully managed. The assets not placed in the bypass are placed into the marital trust, which the surviving spouse can access at any time and use the funds as they see fit.

Bypass trusts are useful for individuals hoping to limit their federal estate tax liability because up to $24.12 million in the bypass trust are not subject to the estate tax. And assets in a bypass trust are not overseen by the probate court process. Similarly, assets in a marital trust are not subject to the estate tax at all.

Digital Currency and Its Effect on Texas Estate Plans

Published on: May 2, 2022 | By David W. Miller

Technology is constantly changing, and sometimes it is difficult to keep up with all of these futuristic alterations. One big technology that has gripped Texas—and the nation—is digital currency and assets. Because more and more people are getting involved in digital currency, the federal government has started to regulate and mitigate the risks of digital assets and their underlying technology. These pieces of legislation and regulations may be confusing to individuals just learning about cryptocurrency. Because of this, explanations to common questions about digital assets and their legislation are below.

What Are Digital Assets?

While the terms “digital asset” and “digital currency” have become more popular over the years, many individuals are still unsure of what these terms mean. Digital currencies are a form of digital money or monetary value. Similarly, a digital asset refers to financial assets that are issued or represented in a digital form through the use of a technology ledger. A digital currency, therefore, can be a form of a digital asset, along with cryptocurrencies, securities, derivatives, and other financial products. Digital assets can be exchanged across digital asset trading platforms. Digital assets have grown exponentially over the past few years: by November 2021, non-state issues digital assets reached a combined market capitalization of $3 trillion.

What Are Some Recent Laws Impacting Digital Assets?

One regulation that impacts digital assets was an Executive Order—entitled Ensuring Responsible Development of Digital Assets—recently signed by President Biden. The goal of this Executive Order is to create a national policy for digital assets by addressing the risks of cryptocurrency while also encouraging Americans to take advantage of its potential benefits. The Order directs various areas of the federal government, including the Justice Department, the Department of Treasury, and the Federal Reserve System among others, to study the legal and economic implications of creating a U.S. central bank digital currency. This would be a form of digital money with a national unit that has direct ties to a central bank.

Including Gifts for Minors in Your Texas Estate Plan

Published on: May 1, 2022 | By David W. Miller

When crafting their estate plan, many individuals want to leave assets or gifts to their children, grandchildren, or other loved ones under the age of 18. However, there can be unique issues presented when gifting assets to minors, as compared to other adults. Most people do not consider these implications when crafting their estate plans. But there are ways in Texas to still gift property and assets to minors in which they can benefit from these gifts in the future. Below is information about these options, along with explanations of the most common questions asked about gifting to minors in Texas.

Why is Gifting to Minors Different than Gifting Assets to Adults?

One reason why individuals must gift differently to minors is that people under the age of 18 lack the legal capacity to own property. So, when a loved one passes away and has left assets in their will to a child, there are different rules that apply. Similarly, people may be afraid to leave assets or property to minors—worried they would mismanage the funds or not be responsible enough to handle such a gift. This is a common concern; however, it should not be the reason that minors are not included in a will.

The Texas Uniform Transfers to Minors Act

One method to still gift to Texas minors—while avoiding all of the complications above—is the Texas Uniform Transfers to Minors Act (TUTMA). Under this act, all assets gifted to a minor will be held in a custodial account until they reach the age of 21. As well as invoking the TUTMA in the will, the individual gifting the property must also name a custodian in their will. This custodian will manage the assets for the minor’s benefit until they can utilize them.

2022 Texas Gift and Estate Tax Changes

Published on: April 26, 2022 | By Thomas W. McCulloch

Because there are proposed and implemented changes every year to the federal and state tax code, Texans should always be vigilant as to how these changes affect their gifting practices and their estate plans. In many cases, without the assistance of an estate planning attorney, these changes may seem minuscule and not even be noticed. However, newly passed laws may have a major impact on Texans and how they should implement their estate plan—plus changes they can make to take advantage of these changes. Below are some of the proposed changes that may occur in 2022 that Texans should be aware of and strategies to combat these changes.

Reduction to the Estate Tax Exemption

In the past year, there were proposals to reduce the estate tax exemption—meaning, lowering the amount after which individuals will need to pay a tax on their estate. The current amount is $12.06 million; however, this past year, there were proposals seeking to reduce the amount to $3.5 million per individual. If the amount were lowered this significantly in the upcoming year, many individuals who currently will not have to pay an estate tax will be forced to. However, even if this proposal is not adopted this year, the current estate tax law is set to reset in 2026 to $5 million—this is unlikely to be changed. Therefore, individuals should start planning and strategizing now if their estate value is around $5 million. Most of the strategies involve reducing the estate amount below the exemption limit—either by putting funds in irrevocable trusts or gifting it to loved ones or charity.

Overcoming Retirement Risks for Women with Texas Estate Plans

Published on: April 19, 2022 | By David W. Miller

While families usually think about creating estate plans and planning for the future as a single unit, this is not always advisable. Every individual has unique estate planning needs that may differ from their spouse or children. For example, women may want to think differently about estate planning—and specifically saving for retirement—than many men. This is for a variety of reasons, including the gender pay gap and higher life expectancy, among others. Below are some of the explanations for why women should approach estate planning differently and how to overcome these obstacles.

Longer Life Expectancy

On average, women have a longer life expectancy than men. While this does not sound critical for estate planning and retirement purposes, it should. When saving for retirement, women may not be considering that they may live beyond their life expectancy. If they outlive their life expectancy, they may not have saved enough for retirement. Thus, they would not have enough money to live comfortably—and have the discretionary funds for health expenses.