Texas Estate Planning

Blunders in Estate Planning May Lead to Breach of Family Harmony

The Financial Post’s recent article entitled “Avoid these five mistakes when estate planning to preserve family peace” provides us with some of the biggest mistakes:

1. Treating family members differently. People do this frequently. They may have valid reasons for doing so. However, it’s still not a great idea. Instead, comfortably tell your children in advance why you’re doing this. This will avoid anger and jealousy between the children when they discover this. Try to leave assets equally, even if you don’t think it is fair.
2. Pass the family vacation home to multiple children. It's best to either sell the home in your later years or, if you keep it, make sure it is openly discussed. You might set up life insurance to specifically pay taxes and perhaps one or two children, so the remaining children can afford to keep the cottage. Even so, a sale is the cleanest approach.
3. Don’t tell the children anything about your money. Not a good idea. This approach often eliminates any ability to understand what might be most meaningful to your children or beneficiaries. Maybe less so in terms of cash, but in terms of family heirlooms or property. Perhaps a favorite piece of furniture was really important to two children, but there was never any discussion about it. As a result, it’s now completely left to them to fight over. This may sound like a small issue. However, many families have split up forever over just this type of scenario.
4. Purposely or inadvertently leaving most or all assets to a new spouse. It can occur by accident due to poor planning around ownership titles, lack of pre-nuptial agreements or the unintended naming of beneficiaries on investment accounts or life insurance. However, sometimes, it’s meant to hurt the children. The hurt can certainly go both ways and is frequently a major issue when a spouse isn’t treated fairly. Ask an experienced estate planning attorney to walk through this with you.
5. Significant charitable giving. If your gifts to charity aren’t discussed with your so-called traditional beneficiaries, there can be conflicts with the charity that can be drawn out.

Communicate what you’re doing and why to your family.

Reference: Financial Post (Nov. 9, 2022) “Avoid these five mistakes when estate planning to preserve family peace”

 

Some Expenses Increase with Retirement

U.S. households led by an individual who’s 65 or older spend an average of $7,030 a year on health care, according to the Bureau of Labor Statistics’ latest data on consumer spending, which is for 2021.

Money Talks News’ recent article entitled “How Much Retirees Actually Spend on Health Care in the U.S.” says this translates to about 13% of the total spent each year by senior households ($52,141) and makes health care the second-largest spending category among those households. Only housing accounted for a bigger share of seniors’ spending in 2021. By comparison, all U.S. households spend an average of $5,452 a year on health care, which translates to about 8% of spending across all households ($66,928).

Here's a detailed look at how senior households’ medical spending breaks down.

Health insurance. The average spending for a U.S. household led by someone age 65 or older is $4,974 per year. By comparison, the average spending across all U.S. households is $3,704 per year. Insurance is without a doubt the biggest health care expense for households of any age, but it’s highest for senior households. They spend $4,974 — around $415 a month — on insurance on average—roughly 10% of their total spending.

Medical services. The average spending for a U.S. household led by someone age 65 or older is $1,077 per year, compared to the average spending across all U.S. households at $1,070 per year. This type of health care expense includes a wide variety of care, such as:

• Hospital room and services
• Healthcare professionals
• Eye and dental care
• Lab tests and X-rays
• Medical care in a retirement facility; and
• Care in a convalescent or nursing home.

Drugs. The average spending for a U.S. household led by someone age 65 or older on medications is $726 per year, as opposed to $498 per year for the average spending across all U.S. households. This includes spending on prescription and nonprescription medications, as well as vitamins.

Medical supplies. The average spending by a U.S. household led by someone age 65 or older is $253 per year. The average spending across all U.S. households is $181 per year. This type of spending covers:

• Various supplies, such as dressings, antiseptics, bandages, first aid kits, syringes, ice bags, thermometers and heating pads
• Medical appliances, like braces, canes, crutches, walkers, eyeglasses and hearing aids; and
• Rental and repair of medical equipment.

Reference: Money Talks News (Oct. 25, 2022) “How Much Retirees Actually Spend on Health Care in the U.S.”

Exactly Why Do I Need a Will?

Some people mistakenly think not having a will allows their assets to bypass the time and expense of probate. That’s not true–if you die without a will, your property still must go through probate, says Fed Week’s recent article entitled “The Importance of Having a Will.”

If probate avoidance is an issue, you can create a revocable trust to keep control over the trust assets while you’re alive.

Assets placed in trust during your lifetime can be distributed at your death, under the terms of the trust, without going through probate.

There are many types of trusts, and they all establish a financial arrangement between three parties:

• The Trustor
• The Trustee; and
• The Beneficiaries.

The person creating the trust is known as the trustor or grantor. The trustee manages the trust and disperses income or principal from the trust according to specific terms.

When you draft a will, you shouldn’t forget about it. Any births, deaths, marriages or divorces all may create a need to revisit your so-called “last wishes.”

After each change, make sure your current will is both safe and accessible. You can leave your will with your executor. If you decide to keep your will somewhere else, your executor and other family members should know its location. The estate planning attorney who prepared your will should have a copy, as well as a memo revealing the location of the original.

Regardless of where you put your will, have another document for your funeral and burial instructions. Wills generally aren’t read until days or weeks after death, so that won’t help your family make prompt decisions about a funeral or a memorial service.

As a result, a separate letter should be used to specify your final wishes and your executor should know where these instructions can be found.

Ask an experienced estate planning attorney to help you write your will.

Reference: Fed Week (Nov. 2, 2022) “The Importance of Having a Will”

Does My State Have an Inheritance Tax?

Real Simple’s recent article entitled “Here's Which States Collect Zero Estate or Inheritance Taxes” explains that inheritance taxes are levies paid by the living beneficiary who gets the inheritance. And both federal and state governments can apply estate taxes, which are levied against the assets that are bequeathed.

Just five states apply an inheritance tax: New Jersey, Nebraska, Iowa, Kentucky and Pennsylvania. There are 12 states that have an estate tax: Washington, Oregon, Minnesota, Illinois, New York, Maine, Vermont, Rhode Island, Massachusetts, Connecticut, Hawaii and the District of Columbia. Maryland collects both. As a result, there are 32 states that don’t collect death-related taxes: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Kansas, Louisiana, Michigan, Mississippi, Missouri, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin and Wyoming.

To better estimate and project the possible outcomes, you should consider an intergenerational planning meeting. There are some families that like the transparency of establishing a trust. This can minimize fighting and avoid probate. Trusts are also taxed differently than individuals. There’s more certainty about who will bear the costs.

There are families that gift assets, while an elderly or chronically ill person is still alive. These gifts can be subject to taxation, but there are exceptions for tuition and medical expenses. Gifts to children may also be excluded.

There’s no one-size-fits-all approach to transferring valuable or sentimental assets. You can list the most important people and causes in your life. If that list has people in other states, it will be even more important to prepare everyone for their role and responsibilities with the help of an experienced estate planning attorney.

If inheritance tax sounds intimidating, start small with updating the beneficiary forms on your bank accounts and employer-led retirement accounts. Organize documents, such as insurance information and house titles and deeds. Make them secure but accessible to those who might need them, if you're unavailable.

Even if you're socially distancing, many estate planning attorneys offer consultations via video conferencing. There's no reason to delay another year to clarify your inheritance and estate plans.

Reference: Real Simple (Nov. 24, 2021) “Here's Which States Collect Zero Estate or Inheritance Taxes”

Latest on the Queen of Soul’s Estate

The IRS said that Aretha Franklin’s estate owed more than $7.8 million in unpaid income taxes, interest and penalties from 2010 to 2017.
The Detroit Free Press’ recent article entitled “Aretha Franklin estate reaches deal with IRS to pay off claimed $7.8 million tax debt” reports a big breakthrough. It seems that Franklin’s four sons and the IRS have reached a settlement that would expedite the payment of the remaining tax burden and allow her sons access to some of the money from their late mother’s fortune.
Aretha’s heirs have not yet inherited anything from the estate because of the IRS situation.
In a petition filed February 19 in Oakland County Probate Court, the estate said the proposed arrangement includes an immediate $800,000 payment to the IRS. This is despite the fact that the estate continues to question the total tax bill owed.
Since her death, Franklin’s estate has been steadily paying on the tax debt, as well as the constantly growing interest, as it appeals the IRS’s claimed total. As of December 2020, the balance was $4.75 million.
The new petition says the final IRS bill will be determined “by agreement or litigation.”
The agreement between the estate and the IRS details the way in which Aretha’s posthumous revenue will be distributed, until the tax debt is resolved. Backdated to January 1 of this year, it includes new income from song royalties, licensing agreements and other money streams. This agreement states that 45% of quarterly revenue will go toward the existing IRS balance. 40% would also be earmarked for an escrow account to deal with the taxes due on the newly generated income. The other 15% of revenue would be used for managing the estate.
The agreement also provides an immediate $50,000 payment to each of Franklin’s four sons and approves quarterly cash payouts to them. This proposed deal, authorized by 10 attorneys representing the sons, was submitted to the court by attorney Reginald Turner. The Detroit lawyer and incoming American Bar Association president was appointed last year as temporary personal representative of the Franklin estate. The agreement has to be approved by Judge Jennifer Callaghan to be executable.
Franklin died in August 2018, after a long battle with cancer.
Reference: Detroit Free Press (March 1, 2021) “Aretha Franklin estate reaches deal with IRS to pay off claimed $7.8 million tax debt”

Dividing Pablo Picasso’s Estate, a Disaster

Picasso left behind 1,885 paintings, 1,228 sculptures, 7,089 drawings, as well as tens of thousands of prints, thousands of ceramic works and 150 sketchbooks when he passed away in 1973. He owned five homes and a large portfolio of stocks and bonds. “The Master” fathered four children with three women. He was also thought to have had $4.5 million in cash and $1.3 million in gold in his possession when he died. Once again, Picasso did not leave a will. Distributing his assets took six years of contentious negotiations between his children and other heirs, such as his wives, mistresses, legitimate children and his illegitimate ones.
Celebrity Net Worth’s recent article entitled “When Pablo Picasso Died He Left Behind Billions Of Dollars Worth Of Art … Yet He Left No Will” explains that Picasso was creating art up until his death. Unlike most artists who die broke, he had been famous in his lifetime. However, when he died without a will, people came out of the woodwork to claim a piece of his valuable estate. Only one of Picasso's four children was born to a woman who was his wife. One of his mistresses had been living with him for decades. She had a direct and well-documented influence on his work. However, Picasso had no children with her. Dividing his estate was a disaster.
A court-appointed auditor who evaluated Picasso's assets after his death said that he was worth between $100-$250 million (about $530 million to $1.3 billion today, after adjusting for inflation). In addition to his art, his heirs were fighting over the rights to license his image rights. The six-year court battle cost $30 million in legal fees to settle. But it didn't settle for long, as the heirs began fighting over the rights to Picasso's name and image. In 1989, his son Claude sold the name and the image of Picasso's signature to French carmaker Peugeot-Citroen for $20 million. They wanted to release a sedan called the “Citroen Xsara Picasso.” However, one of Picasso's grandchildren tried to halt the sale because she disagreed with the commission paid to the agent who brokered the deal—but oddly enough, the consulting company was owned by her cousin, another Picasso.
Claude created the Picasso Administration in Paris in the mid-90s. This entity manages the heirs' jointly owned property, controls the rights to exhibitions and reproductions of the master’s works, and authorizes merchandising licenses for his work, name and image. The administration also investigates forgeries, illegal use of the Picasso name and stolen works of art. In the 47 years since his death, Picasso has been the most reproduced, most exhibited, most stolen and most faked artist of all time.
Pablo Picasso's heirs are all very well off as a result of his art. His youngest daughter, Paloma Picasso, is the richest, with $600 million. She’s had a successful career as a jewelry designer. She also enjoys her share of her father's estate.
Reference: Celebrity Net Worth (Sep, 13, 2020) “When Pablo Picasso Died He Left Behind Billions Of Dollars Worth Of Art … Yet He Left No Will”

Estate Planning Lawyer, Wills, Intestacy, Probate Court, Inheritance, Asset Protection, Capacity, Guardianship, Executor, Personal Representative, Trusts, Trustee, Power of Attorney, Healthcare Directive, Living Will, Probate Attorney, Beneficiary Designa

First, a fiduciary duty is the requirement that certain professionals, like attorneys or financial advisors, work in the best financial interest of their clients. By law, members of some professions with clients are bound by fiduciary duty.
Forbes’ recent article entitled “What Is Fiduciary Duty?” explains that in a fiduciary relationship, the person who must prioritize their clients’ interests over their own is called the fiduciary. The person getting the services or assistance is called the beneficiary or principal.
You will frequently see a fiduciary relationship with certain types of professionals, like attorneys and financial advisors. A fiduciary duty is a serious obligation, and if a fiduciary doesn’t fulfill his or her duties, it’s known as a breach of fiduciary duty. Fiduciaries must act in a beneficiary’s best interest. They have two main duties: duty of care and duty of loyalty. Fiduciaries may have different or additional requirements, depending on their industry.
With the duty of care, fiduciaries must make informed business decisions after reviewing available information with a critical eye. Lawyers must act carefully in performing work for clients. Care is determined by the prevailing standards of professional competence in the relevant field of law and geographic region. To abide by the duty of loyalty, fiduciaries must not have any undisclosed economic or personal conflict of interest. They can’t use their positions to further their own private interests. For example, fiduciary financial advisors might adhere to the duty of loyalty by disclosing recommendations from which they’ll receive a commission.
Other common professions or positions that require fiduciary duties include directors of corporations and real estate agents, as well as those discussed below:
Trustee of a Trust. When you want your assets to transfer to someone after you die, you can put them into a trust. The trustee who’s in charge of the trust has a fiduciary duty to manage the trust and its assets in the best interests of the beneficiary who will one day inherit them.
Estate Executor. The person who manages your estate and handles your affairs is your estate executor. He or she has a fiduciary responsibility to your heirs and next of kin to distribute the estate according to your wishes.
Lawyer. Your attorney must disclose any conflicts of interest and must work with your best interests in mind.
Financial Advisors. Financial advisors who are fiduciaries must act in the best interest of their clients and offer the lowest cost financial solutions to fit their clients’ needs. However, it important to note that not all financial advisors are fiduciaries.
Reference: Forbes (July 28, 2020) “What Is Fiduciary Duty?”

Yes, You Do Have an Estate and You Do Need an Estate Plan

What many don’t understand is that they do actually have an estate, and if all of its parts are added up, people have more assets than they think, says Federal News Network’s article “Your bigger-than-you-think estate.”

The downside is that many don’t realize that this is the case, until after a loved one dies. When that happens, as it inevitably will, it’s far better to have planned for this eventuality than letting the courts, relatives, the IRS or the state decide what to do with what you possessed.

The trick is figuring out what you own and determining how you want it to be distributed after you die.

Someone who has worked all their life, has money saved in a 401(k) or other types of retirement accounts, owns a home that they bought in the 1980s or 1990s or even more recently, usually has a bigger-than-they-think amount of assets accumulated.

So how do you begin? Start with this checklist:

Are your beneficiary designations up to date? Your beneficiary designations ALWAYS supersede your will. Some of your largest assets are not controlled by your will, but by beneficiary designations. For federal employees, this includes the Thrift Savings Plan (TSP) and Federal Employees’ Group Life Insurance (FEGLI), and any other life insurance policies. Do you want your beneficiary to be a surviving spouse? Children?

Is your will up to date? How about any trusts? Most people have their wills done and then forget about them. That’s always a big mistake. We experience changes in life, and our wills need to reflect those changes. If the people you named as executors thirty or ten years ago have died, did you have a successor executor named? Are they still alive, or are they still the person you want to execute your will? Make sure you also consider your children and their circumstances. If you have a child with special needs in your family, or if a child of yours is going through a divorce or likely to go through a divorce in the future, an estate planning attorney will be able to help you plan for their situation.

Are your financial and medical directives in place? Making plans for incapacity is as much a part of estate planning as your will. If you became ill or injured and could not make decisions for yourself, do you have the documents that will allow someone else to do so on your behalf?

An estate planning attorney can work with you on all these matters, so you can relax and enjoy your retirement. Don’t procrastinate—this task can be done before the year is out, if you start soon.

Reference: Federal News Network (October 2, 2019) “Your bigger-than-you-think estate.”

Interference with Inheritance Rights

If someone improperly convinces another person to change his or her will, then the people who are harmed as a result need legal remedies to undo that harm. For example, if an unscrupulous attorney convinces an elderly parent to change his or her estate plan to exclude the children and benefit the attorney, then the children need legal remedies.

The most common remedy is to go to probate court and make a claim of undue influence after the parent has passed away.

If the court finds that there was undue influence, then the changed estate plan can be disregarded in favor of an older one. Another possible remedy is filing a suit for tortious interference with inheritance rights.

Texas Supreme Court recently considered this issue as the Wills, Trusts & Estates Prof Blog discussed in "Unanswered Questions in Texas."

Instead of suing the estate in probate court, as is done in an undue influence case, in a tortious interference with inheritance rights, the person accused of improper influence is sued directly for the damages that he or she has caused.

Depending on the jurisdiction and the facts of the case, this is a cause of action that can be used instead of or in conjunction with an undue influence claim.

The Supreme Court in Texas was asked to determine whether the cause of action exists in Texas. Lower Texas' courts are split on the issue.

Instead of doing that, however, the court declined to do so.  It determined that where undue influence exists, a constructive trust is a sufficient remedy for damages.

Reference: Wills, Trusts & Estates Prof Blog (June 2, 2017) "Unanswered Questions in Texas."

What Will Happen to Aaron Hernandez's Estate?

The former New England Patriot Aaron Hernandez was convicted of murdering three people and was in jail pending an appeal, when he was discovered dead of an apparent suicide.

That puts an end to the criminal cases against him, but he was also facing civil suits from the families of his victims.

Those families are pledging to continue their fight against his estate, according to the Daily Mail in "Fight for Aaron's millions: The families of Hernandez's victims go to war over his estate (if there's anything left) as Odin Lloyd's mom says the NFL star's suicide was 'another form of justice'."

It is not known how much money Hernandez had left at the time of his death. Therefore, there might not be anything for the families to get. However, an old Massachusetts' legal principle gives them some hope, but also makes their case more difficult.

According to the legal principle, if someone dies while their appeal of a criminal conviction is pending, the conviction is vacated. This is good for the families, because if the conviction is vacated, then the Patriots owe Hernandez's estate $3.5 million from a contract signing bonus.

However, it also makes winning their case more difficult. This is because they would not be able to rely on the fact of the conviction in making their case.

Hernandez passed away with his heirs presumed to be his daughter and possibly his girlfriend.

It is not known if he had an estate plan or if there will be anything left for his heirs to inherit.

Reference: Daily Mail (April 19, 2017) "Fight for Aaron's millions: The families of Hernandez's victims go to war over his estate (if there's anything left) as Odin Lloyd's mom says the NFL star's suicide was 'another form of justice'."