The Basics of Estate Tax Planning
One of the questions most frequently asked of estate planning attorneys near The Woodlands is how a person can minimize estate taxes for the benefit of the heirs. Estate taxes are primarily a concern for individuals who plan to leave sizable legacies to their beneficiaries, but everyone can benefit from consulting an estate planning attorney to discuss how state and federal estate taxes might affect their loved ones. Skillful estate planning attorneys can recommend smart strategies that minimize estate tax ( E.g ., a living trust).
Texas Estate Taxes
Prior to 2005, Texas had a “pick up tax.” Although the pick up tax was a separate estate tax, it did not increase or decrease the total estate tax bill. Rather, the pick up tax allowed the Texas Comptroller’s Office to take a portion of the federal estate tax bill. On January 1, 2005, the pick up tax was phased out under the Economic Growth and Tax Relief Reconciliation Act (EGTRRA). This is a federal law that eliminated pick up taxes from all states, not just Texas. Some states later passed state laws to collect separate estate taxes. Texas repealed its inheritance tax , which means that state-level estate taxes are not collected if the property was transferred after the effective date of September 1, 2015. Estate taxes accrued prior to this date must still be paid.
Federal Estate Taxes
Federal estate tax laws are subject to change. An estate planning attorney can provide the most current information to clients who are concerned about minimizing inheritance taxes. Generally, individuals only need to worry about inheritance taxes if they plan to leave millions to their heirs. For 2019, the Internal Revenue Service (IRS) established estate and gift tax exemptions of $11.4 million per individual. This was an increase from 2018, during which the exemption was $11.18 million. This means that you could leave up to $11.4 million to a beneficiary without incurring inheritance taxes. Larger inheritances are subject to federal estate tax. The highest estate tax rate is 40%, but this is subject to change.
Creating a Will
Some of the most important decisions you’ll make naturally are those which influence the creation of your will. When you consult an estate planning attorney in The Woodlands, you’ll receive sound legal guidance on what to include in your will , how to choose an executor of your will, and how to reduce the risk of a contested will. Of course, when the time comes, the attorney can also probate the will.
When you watch this video, you’ll hear some factors you should consider when it’s time to create your will. This financial adviser recommends naming contingent beneficiaries in addition to primary beneficiaries, just in case the primary beneficiaries pass on before you. You should update your will whenever you experience substantial life changes.
The Basics of Estate Planning
Estate planning in the Woodlands can be complex, which is why you need assistance from a lawyer . While some people falsely believe that estates are reserved only for the very wealthy, anyone who owns something of value that they would like to pass on to a loved one upon death has an “estate.” Estate planning is the best way to maintain and enhance your financial security for the future. Continue reading to learn the basics of estate planning.
Drafting a Will
Wills are the cornerstone of estate plans . As your lawyer will explain, a will is a legally binding declaration of how you intend to dispose of your property upon death. A will can be changed at any time but allows you to control exactly how your finances are arranged. A properly drafted will contains explicit instructions for a personal representative to distribute your property following your death. You can choose anyone to be your executor, as long as that person is both mentally sound and not guilty of a felony.
Establishing a Trust
Under some scenarios, if you want to transfer assets to beneficiaries most efficiently, then a wills lawyer may suggest creating a trust. Trusts are established during an individual’s lifetime and involve the transfer of your property to an individual who manages your designated assets for the benefit of one or more beneficiaries. An “inter vivos” or living trust is effective during your lifetime and can be made to be either revocable or irrevocable. A testamentary trust only becomes operative upon death.
Understanding the Law
A lawyer who understands estate planning is essential to helping you use the estate tax system to your advantage. The government allows a certain amount of property, known as the basic exclusion amount, to pass between individuals free of tax. Different laws apply depending on your relationship to the beneficiary. For example, your spouse is entitled to certain more lenient provisions.
For all your estate planning needs in Spring, TX and Conroe, TX, contact will attorney Andrew J. Bolton, Esq. at (936) 435-1908. Our experienced attorneys offer a free confidential consultation, and we are dedicated to ensuring your current and future financial well-being. Call us today to speak directly to a lawyer.
Steps to Preparing Your Will
If you’re an adult, and if you haven’t yet prepared your will, it’s time to make an appointment with a lawyer who provides estate planning in Conroe, TX. It is worrisome that most Americans pass away intestate, which means they die without a will. When this happens, their estate is subject to inflexible state regulations and guidelines. Additionally, family conflicts over finances and legal guardianship of children may be more likely to occur when a loved one dies intestate. You can protect your family by having a qualified attorney draft your will for you.
Make a List of Your Assets
Before you meet with a lawyer to have your will drafted, you’ll need to make a list of your assets. This is not so much for inclusion into the will, but to give your attorney an idea of what’s involved in the estate. Such a list should include intangible assets such as your bank accounts, along with physical property such as family heirlooms and jewelry. Any assets you have that name a beneficiary, such as a life insurance policies or joint bank accounts, will go to that particular beneficiary. In other words, you cannot use your will to override your beneficiary designations. However, you can change your beneficiary designations, if desired. You can use your will to designate heirs for most all other assets.
Evaluate Prospective Legal Guardians
Choosing a legal guardian for a minor child can be one of the most difficult decisions a parent will face, particularly if there are no obvious candidates available. If you have siblings or other family members, then your will could name one of them to be the legal guardian of your child. However, you should carefully consider whether any particular candidate may be more likely than others to adhere to your preferences for your child’s upbringing. In sum, communication prior to tragedy often limits the scope of that tragedy.
Revisit Your Lawyer Periodically
Estate planning isn’t a “one and done” procedure. As your life circumstances change, so too should your will. Where large estates are involved, it might be wise to make an appointment with your lawyer at least every five years to re-evaluate your situation in light of any recent tax law changes. You should also schedule appointments if you experience a significant change in circumstances, such as the birth of a child, a divorce, a marriage, or the death of a family member if that passing affects your finances.
Tips for Discussing Your Will with Your Family
Many people hesitate to discuss estate planning because the subject is inevitably tied to death. Although estate planning may be an uncomfortable topic of discussion, it is quite often a necessary one. You may prefer to wait to discuss these matters with your family until after you have met with a lawyer and drafted your will. If you feel that a discussion about estate planning will turn into a contentious argument among family members, you could even request that your lawyer be present to serve as a neutral third party and answer legal questions.
Determine Your Priorities
Before you meet with the will attorney, write a list of your priorities. Remember that the assets you leave behind should ideally serve to accomplish your goals, rather than to reward deserving loved ones. For example, you might prioritize the care of an ill or disabled family member, the support of a favorite charity, or the education of grandchildren. Determining your priorities will help you when drafting the will and when discussing it with your family members.
Decide How Much Information You Wish to Disclose
Ahead of the discussion, determine how much information you’re comfortable sharing with your family. Some people prefer to say very little, informing their heirs only that they’ve drafted a will and that they believe that the will allows for a fair and equal distribution of wealth. Other individuals feel that providing detailed information about which heir will receive which asset will prevent future arguments.
Explaining Unequal Distributions
If your will is going to distribute more assets to one heir than to another, you may wish to explain your reasoning. For example, you may have two children, one of whom is a geologist with a lucrative salary and the other is a childcare worker with only a modest wage. You may prefer to leave more than half of your wealth to the latter child. If so, you could explain to your children that this does not reflect favoritism, but rather addresses a real financial need.
Consider Disclosing Information After Your Passing
If you feel uncomfortable explaining the terms of your will to your family, you could write separate letters to your heirs or one letter addressed to all of them. Yes, even the videotaped lecture is not uncommon. These procedures allow you to explain your reasoning in a manner which is separate from the will. Keep sealed letters of explanation with the will.
Do You Need to Set Up a Trust?
If you wish to make financial arrangements for your children, grandchildren, or other heirs, it’s a good idea to speak with a lawyer about estate planning , including the possibility of establishing a trust. An attorney in Conroe, TX, can help you explore the various aspects of a trust and how to structure your trust to accomplish your goals. For example, you could use the trust to leave a certain amount of money to your child, which could be distributed in set amounts at certain intervals. This arrangement prevents your child from spending his or her inheritance all at once. Or, you can place conditions on your child’s inheritance. For example, you can have your lawyer set up the trust to distribute small amounts of money over time and to only allow your child to receive the rest after he or she graduates from college.
Another reason why you might ask your attorney to establish a trust is for tax advantages. Life insurance policies provide tax-free benefits to your beneficiaries. However, the death benefit amount may be added back into the estate, which may make it [the estate] subject to federal estate taxes. Establishing an irrevocable life insurance trust protects the full death benefit for your beneficiaries.
Worms Escaping The Can – The Gay Marriage Ruling and Probate
The Supreme Court’s recent Obergefell ruling stated that two individuals of the same sex have a constitutional right to marry, and that ruling calls forth some interesting questions. For example, in law school we learned that, when the Supreme Court decides for the first time that a person has a constitutional right to engage in some activity, that right is a right which has always existed, and the Court is only then annoucing its intention to safeguard it.
If this is indeed so, then there are many states, including Texas, which have not previously recognized same sex marriage. This is important because, in those states, when a partner in a same sex relationship dies, the surviving partner, absent a will, does not inherit anything of the estate of his or her deceased partner. In such cases, it is the children of the deceased partner who generally inherit the estate.
Now, however, we find out that those individuals who did not have the ability to get married because such was not recognized by their state (or previously were married in a foreign state that did recognize same sex marriage), they should have been allowed to inherit the estate as a surviving spouse.
I wonder how many cases will need to be reopened to redirect inheritances towards spouses of gay decedents from that decedent’s children to the unconstitutionally-denied spouse? Litigation aplenty is in store.
The Importance of Having a Will
If you haven’t yet drafted a will, it’s time to schedule an appointment at a law firm that emphasizes estate planning in The Woodlands. Having a will is important for nearly every adult, especially parents who have minor children. An estate planning attorney can draft your will in a way that reduces the possibility of disputes. This can go far in promoting family harmony after your death. Even if you have already made your last will and testament, it’s a good idea to visit your lawyer periodically to update your will as your circumstances change.
Even if the distribution of your property after your death is not a matter of concern for you, you definitely need a will if you have minor children. If you die intestate (which means without a will) then a judge will determine guardianship for your children. This may not necessarily lead to an arrangement that you would have chosen yourself. Having your lawyer create a will for you is the only way to designate your children’s guardians in a manner pleasing to you.
It’s common for parents to name their children as beneficiaries for certain assets. However, if you die while your children are still minors, an adult must manage the property. You can use your will to designate a property manager and you can leave specific instructions with regard to how you want the property to be managed.
Sometimes, an individual’s beloved pets end up in an animal shelter after his or her death. You can prevent this from happening to your pets by using your will to designate a caretaker for your furry or feathery friends. You might also consider leaving money to the caretaker for the care of your pets. Many shelters and animal adoption centers offer plans which allow you to create very unique and satisfying arrangements for your pets should you pass.
People often consider it very important to ensure that specific assets are distributed to certain people after their passing. You can use your will to designate beneficiaries for certain financial accounts, vehicles, and similar assets. If you have family heirlooms, designating beneficiaries for them can be helpful for preventing family disputes after your passing.
Moving To Texas?
Welcome to Texas! Most newcomers find that, apart from our sometimes cranky weather, Texas is perhaps the best state in which to reside. Texas has low taxes, low regulation, low prices, and one of the country’s easiest probate systems! But to take advantage of our fast and easy probate process, it is often necessary to update your will to obtain the benefits of a Texas probate.
As with most things in the legal arena, there are often certain “magic words” which must be used in order to fast track and simplify the probate of your will. Whether you are young and just starting out, or whether you are closer to retirement than most, a redraft of your will can result in peace of mind–before and after you are gone.
It’s important if you are moving in from another state to seriously consider a will redraft. Although I’m not 100% certain, I hear that a will redraft is much harder after you are gone!
Contact us for an inexpensive review of your will. If one is not needed, we will tell you. If a redraft is in order, then it is the most cost-effective way of gaining peace of mind.
When to Start Estate Planning
The need for estate planning does not depend on the size of your estate. If you have any possessions, monetary or otherwise, that you would like to bequeath to friends, family members, or charitable organizations, you may want to speak with a will attorney in The Woodlands.
Some people may not think of estate planning until they have reached significant life milestones such as getting married, having a child, or buying a home. However, these events typically happen after an individual has already amassed significant assets. As soon as you accumulate possessions of financial or sentimental worth, consult a law firm that specializes in wills and trusts. A will lawyer can explain the differences between these documents and help you decide which one is right for your needs. When you go through a law firm for your estate planning needs, you can also better guarantee that your wishes for the division of your assets will be carried out as you wish.
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