Houston Estate Planning and Elder Law Attorney Blog

How Texas Estate Planning Can Contribute to Family Stability

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

When parents have a home that they would like to one day pass to their children, they may worry about the logistics of this process. It is safe to say that creating an estate plan is the best way to ensure children will one way receive the assets and property that the parents wish to give them. However, within estate planning, there are multiple ways to do this—whether including it in a will for the children to receive upon the individual’s passing or gifting the funds from selling the property. Below are various options on how to pass property onto children—along with the various legal and tax implications of each choice.

Giving a House to Heirs in a Will

The most common way that individuals will leave property to family, especially children, is to bequeath the assets in a will. In doing this, the parents would write in the will that the children are to be given the house after the death of the last parent. One benefit of including property, like a house, in the will is that children will be given the property on a stepped-up basis. This means the property’s value is adjusted to its fair market value and reduces the capital gains tax owed by the beneficiary. However, the beneficiary may still be liable for estate taxes, unlike if the property is gifted in a trust.

Gifting the Property to Children in a Trust

Some parents would rather be able to give their children more money, rather than property after they pass away. The best way to do this is to create a revocable trust rather than leaving the property to the children in the will. In this case, after the parents die, the property is sold, and the funds from the sale are given to the children. For example, the parents would create a revocable trust and name a trustee. Once the parents passed away, the trustee would then sell the property and then the funds from the sale would be given to the listed beneficiaries.

How to Use Roth IRAs in a Texas Estate Plan

Published on: January 18, 2022 | By McCulloch & Miller, PLLC

When people think about beginning the estate planning process, they often think about creating a will and power of attorney documents. They do not often consider how a Roth IRA can—and should—be incorporated into the estate planning process. Roth IRAs are a powerful tool that can benefit individuals as they plan for their future and make sure their loved ones are financially taken care of after they pass away. Below are common explanations to common questions about Roth IRAs and why they should be included in estate planning efforts.

What is a Roth IRA?

A Roth IRA is a retirement account that allows individuals to make tax-free withdrawals. Unlike traditional IRAs, individuals pay taxes on the money going into the account, which then makes future withdrawals tax-free. This is beneficial when individuals think their taxes will be higher in the future, once they are retired, than they are currently.

What Are the Benefits of a Roth IRA?

One benefit of a Roth IRA is there are no required minimum distributions—this is majorly beneficial when Roth IRAs are incorporated into estate plans. Required minimum distributions are minimum amounts that a retirement account owner must withdraw every year. Since Roth IRAs do not require the owner to make withdrawals every year, the funds can grow, tax-free, for the individual’s beneficiaries to use in the future. This is one way to include extra assets in an estate plan to help make sure beneficiaries are financially taken care of after the Roth IRA account owner has passed away.

2022 Tax Updates to Keep in Mind for Texas Estate Plans

Published on: January 11, 2022 | By McCulloch & Miller, PLLC

A new year often brings new changes. Along with New Year’s resolutions that individuals make to become healthier, improve their lifestyle, and be kinder, others may resolve to create or update their estate plan. Because of this, it is important to know the federal and Texas estate planning laws that impact estate plans. Some of these laws have provisions that changed at the beginning of 2022, so even individuals with estate plans in place may want to alter them so they can benefit from these changes. Below are some of the key tax concepts and changes that Texans should pay attention to in crafting their estate plan.

Increases to the Annual Gift and Lifetime Estate Tax Exclusion Amount

In a very notable change, the federal estate tax exemption amount has increased. If an estate is valued over the exemption limit, then the estate will be taxed before assets are distributed to beneficiaries. In 2021, if an estate was worth less than $11.7 million—or $23.4 million for a married couple—then the estate would not be taxed. However, in 2022, the exemption limit has increased to $12.06 million—or $24.12 million for a married couple.

Can I Include My Family Heirlooms in My Texas Estate Plan?

Published on: January 10, 2022 | By McCulloch & Miller, PLLC

Many Texans have family valuables or heirlooms that are passed down through generations. Whether it’s an antique ring or a grandmother’s china, some people do not think about including these items in their estate plan. However, putting these valuables in an estate plan can reduce family disagreements and simplify potential future issues. Below are some tips and advice from estate planning attorneys on how to handle family heirlooms and why it is better to include these objects in an estate plan.

What Are the Benefits of Including Family Heirlooms in an Estate Plan?

One benefit of listing heirlooms in a will is so the valuables are given to the person the deceased actually intended to receive it. While the individual may tell someone that they want them to have the heirloom after they pass away, there is no guarantee they will receive it unless it is included in the will. This could lead to family fighting where multiple people claim they are the rightful recipient of the heirloom. Only by including the valuables in the estate plan will the estate executor be able to make sure the objects go to who the deceased actually intended.

Common Mistakes Made in Texas Estate Plans

Published on: January 3, 2022 | By McCulloch & Miller, PLLC

Putting together an estate plan is often a long but well-thought-out process. However, last-minute mistakes can lead to future complications. These last-minute mistakes may be changing a designation in the plan at the last second, taking advice from someone and not consulting with their attorney, or not paying attention to changes to applicable laws. Individuals assume their estate plan is setting them up for the future, but if mistakes are made, then the estate plan may not work as intended. Below are two of the most common estate planning mistakes seen by attorneys, along with steps on how to avoid them.

Not Leaving Enough Assets to Fund a Trust

Many people create a trust as part of their estate plan. A trust allows a third party, a trustee, to distribute funds to a named beneficiary. The creator of the trust will provide specific instructions on how funds—or gifts—are to be disbursed to the beneficiary. But when creating a trust, certain individuals forget to make sure there are enough assets in the trust to pay for what has been intended to be given. Estate planning attorneys recommend putting additional funds in the trust in case assets decrease in value over time. Then, the beneficiaries will still be able to receive the amount intended.

How the COVID-19 Pandemic Has Texans Reevaluating Their Estate Plans

Published on: December 30, 2021 | By McCulloch & Miller, PLLC

The COVID-19 pandemic has impacted every aspect of life. From health concerns to mental well-being, people approach everyday life—and their future—differently than they did prior to March of 2020. Because of these changes, people are considering their goals and how to secure the financial security of loved ones in case they were to get sick. This can all be accomplished through estate planning. By creating health care and financial-related documents as part of an estate plan, Texans can ensure their affairs are in order before the need arises. Below are a few types of documents that all individuals should include in their estate plan, along with descriptions for why these directives are necessary.

Advance Health Care Directive and Medical Power of Attorney

An advance health care directive is a legal document that details the type of medical care an individual wants to receive if they are incapacitated and cannot make the choice for themselves. When crafting this document and deciding on the level of care a person would want, it is important to take into account one’s family medical history and potential treatments they would not want. The more detail an individual provides in their advance health care directive, the better.

Texas Estate Planning for Families with Special Needs Children

Published on: December 28, 2021 | By McCulloch & Miller, PLLC

Because every family and their situation is unique, no two estate plans are the same. When families begin to create their estate plan with the help of an attorney, they will take their situation and family dynamics into account when deciding what to include in the plan. So for families with a special needs child, there are extra factors that should be considered in the formation of an estate plan. It can often be difficult for parents to think about the future—when they will not be around to take care of their child—but by creating an estate plan and taking some of the below recommendations, the special needs child’s future will be better secured.

How Does Having a Special Needs Child Impact Estate Planning?

One of the primary purposes of estate planning is to ensure loved ones are taken care of after a person passes away. Therefore, people will often give their financial assets and property to loved ones so they can use them in the future.

How Do I Know if My Estate Plan Is Out of Date?

Published on: December 27, 2021 | By McCulloch & Miller, PLLC

Most Texans do not have an estate plan in place to dictate what should happen to their assets and finances after they pass away. And after they create an estate plan, they tend to not think about it often after that. While having the estate plan itself is commendable and important, estate plans can become out of date and less useful for the individual who created them. Because of this, it is important to know if an estate plan is out of date and have an experienced attorney review the document every few years.

Why Is It Important to Have an Estate Plan in Place?

It is a common misconception that estate planning is merely deciding who will receive a person’s assets after they pass away. While this is a critical part of estate planning, a person’s estate plan will often include other directives, including a fiduciary power of attorney and healthcare directive. These documents will provide someone else with the power to make medical and financial decisions on the other person’s behalf if they become incapacitated and cannot make these choices for themselves.

Texas Estate Planning for Families with Pets

Published on: December 21, 2021 | By McCulloch & Miller, PLLC

People love their pets. And in many households, pets are a beloved part of the family. Because of this—and since pets cannot take care of themselves—many Texans worry about who will care for their pets when they pass away. So while they may not be the first thought when putting together an estate plan, incorporating pets into the process is extremely important. Below are various questions that pet owners have about including their pets in their estate plan along with solutions to these problems.

Who Will Care for My Pet?

The first step in including a pet in their estate plan is to list in their will who would have physical custody of the pets. Sometimes, it may be a simple answer to who would take care of a pet if its owner passes away. However, this is not always the case. Even if the answer seems apparent, it is important to include this in an estate plan.

There are many things to consider when deciding who will take care of pets. First, is the individual willing to provide lifetime care to the pet? This often can be a major commitment, and it is essential to discuss this with the person before naming them as the pet’s caretaker in the will. Secondly, are the pets comfortable around the individual? Considering that a change in owners can be emotionally challenging for the pets, it is important to choose an individual the animals enjoy being around.

Changing a Texas Estate Plan During a Divorce

Published on: December 20, 2021 | By McCulloch & Miller, PLLC

When going through a divorce, there are many complex emotions. And of all the tasks a person must accomplish during this process, updating their estate plan is often not the first thing on the list. However, it is critically important for recently divorced people to speak with an estate planning attorney and determine the appropriate changes that should be made. Below are explanations about how divorce can affect an estate plan and what people should do and change when going through this situation.

Changing the Will

In most situations, recently divorced individuals will have to change their will because their now ex-spouse was a primary beneficiary—meaning, they were set to receive most of the assets and property owned by the individual when they pass away. While most people assume they should only change the portions of the will that mention the ex-spouse, most estate planning attorneys recommend revoking the will and drafting a new one instead. Otherwise, making a series of slight revisions to the current document will often be more expensive and time-consuming than just creating a new will altogether.