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 Texas repealed its inheritance tax , which means that state-level estate taxes are not collected if the property was transferred after the effective date of September 1,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.
Should You Talk to Your Heirs About Your Will?
After visiting a will attorney in The Woodlands, you might consider discussing your estate plan with your family members or other beneficiaries. You do not have an obligation to divulge the details of your will, but there are many good reasons to consider doing so. For example, letting your beneficiaries know what they can expect to inherit may reduce the risk of a contested will .
Promoting Family Harmony
When one or more family members decide to challenge a will, financial gain is not the only issue at stake. A will contest can instigate hostilities among family members that can last for years and may even lead to permanent estrangements. It is not likely that this is the sort of legacy you wish to leave behind. Of course, deciding not to speak with your heirs about your will while you are still alive will not automatically result in family conflict. However, many individuals wish to avoid the possibility altogether by simply having a frank discussion with their heirs.
Explaining Your Decisions
Discussing your will with your heirs can grant peace of mind to everyone involved. You’ll have the opportunity to explain why you decided to leave the house to one sibling and the collection of heirloom jewelry to another. Decisions which may seem obvious to you might not necessarily be easily understood by your heirs. For example, it may make sense to you to leave the vacation home to the heir who used it the most and to compensate for this by leaving a larger sum of money to another heir. But since your heirs might not easily discern your reasoning after you’re gone, it may be wise to give them an explanation now.
Adjusting the Inheritances
Because estate planning is a sensitive issue and many individuals hesitate to disclose the details of their wills to their heirs because they fear being pressured to change their decisions. The provisions that compose your will are entirely yours to make; no one should pressure you to change your mind. Yet, it isn’t unreasonable to listen to the responses of your heirs and consider making adjustments should they make sense to you. For example, you might have your heart set on leaving your amber jewelry to your daughter, but perhaps she doesn’t wear jewelry and would rather you left it to someone who would appreciate it more.
Selecting Your Executor
The executor of a will has many responsibilities. When it’s time to choose your executor , consider speaking with a probate lawyer in The Woodlands for guidance. Your probate lawyer may recommend choosing a professional executor if the estate is large, or if you’re concerned that your loved ones may not be suitable for this role. If you would prefer to select a known executor of your will, please watch this video for some helpful tips.
This probate professional recommends making a list of people whom you trust to carry out your final wishes and manage your legacy. Then, narrow down your choices by considering which individuals are best able to manage official paperwork and pay attention to details. Before designating your executor, ask that individual if he or she is willing to carry out these important duties.
What Happens to Stocks When the Owner Is Deceased?
It is likely that the stocks of a deceased owner will have to go through the probate process, but it’s best to consult a probate lawyer in Houston to confirm this. If stocks are jointly owned or titled “transfer on death,” then the designated survivor can simply redeem the stocks without the need for formal probate. Otherwise, the executor of the will must file the will with the court and then receive court-issued letters testamentary to validate his or her authority to transfer ownership of stock shares.
Oftentimes, the executor of the will then set up a separate estate account and re-register the stocks in the name of the estate itself, rather than the decedent. If the will specifies that the stocks are to go to one or more specific beneficiaries, the stocks can usually be transferred to those individuals unless the assets must otherwise be used to satisfy the liabilities of the estate. In some cases, the executor may need to obtain a court order to use the stocks in this manner. Otherwise, the stocks can simply be liquidated and the funds deposited into the estate account.
Do You Need an Heir for Your Facebook Account?
If you’ve already met with an estate planning attorney in The Woodlands, then consider perhaps moving on to another aspect of your final arrangements: Your social network accounts. Facebook now allows users to select a legacy contact. Your legacy contact can manage certain parts of your Facebook account after your death, but cannot delete the entire account.
Watch this video to hear more about selecting a legacy contact and what happens if you die without a legacy contact. The primary purpose of a legacy contact is to allow your Facebook page to become an enduring memorial after your death. The designated individual can post information about the memorial and funeral services, and he or she can download the photos and posts you put up during life. Another option Facebook allows is simply to delete your account entirely upon your death.
Important Things to Consider When Making a Will
A will attorney in The Woodlands can explain the factors which you should consider when creating your will. These include selecting an executor of the will and designating a guardian for your minor children. By working with a will attorney, you can rest assured that this important legal document will be drafted in a way that clearly specifies your preferences and reduces the possibility of a will contest.
Select a Will Executor
The executor of a will is the person who is responsible for managing the estate, satisfying liabilities, and distributing assets. It is most common to select a spouse as the executor, but this is not mandatory. The responsibilities of an executor can be arduous. An executor who is grieving your passing may find it difficult to pay close attention to the tasks at hand. With this in mind, some people choose a more distant relative or even a professional executor to perform such duties. You can discuss your options with your attorney should you desire further guidance on this matter.
Choosing a Guardian
If you currently have minor children, it’s essential to designate a guardian for them in the event that you and the other parent die before they turn 18. Without such a designation, a court will determine custody of the children. Choosing a guardian can be a sensitive issue. When assessing a person’s fitness as a guardian, consider that person’s overall health, current relationship with your children, parenting style, religious beliefs, and his or her financial resources. It may be wise to also consider that individual’s residency, particularly the school district in which he or she resides. The guardian’s residence might well be your children’s residence should you not be there.
Consider Charitable Giving
Many individuals choose to give back to their communities or to favorite causes by providing for charities in their wills. You may choose to designate a percentage of your estate for charitable giving. Another option is to fund a charitable giving vehicle such as a private foundation.
Updating Your Will
Creating a will is an important first step to take for your beneficiaries, but it’s also often necessary to update wills from time to time. The birth of a child or grandchild, a death in the family, the divorce of an adult child, and the estrangement of family members are all reasons to visit your will attorney to draft a new will.
Answering Common Questions About Living Wills
You may already have heard the term “living will,” especially if you are considering your estate planning needs. Or, a hospital clerk might have asked you if you have an advance healthcare directive. These terms are used interchangeably to refer to the same legally binding document. If you do not yet have a living will , consider talking to a will attorney in The Woodlands.
Do I need a living will?
Every adult should have a living will. Unlike a last will and testament, a living will does not distribute property after a death. This document specifies your choices for your healthcare in the event that you are unable to speak for yourself.
When will a living will take effect?
A living will only takes effect during a person’s lifetime, not after his or her death. Whenever possible, healthcare providers will defer to the wishes of the individual patient, but if that person is unable to speak for himself, or herself, then a living will takes over. Some examples of situations in which the directives of a living will are followed include when the individual is placed on life support, has end-stage Alzheimer’s disease, or is otherwise incapacitated. This document specifies a healthcare power of attorney, sometimes called a healthcare proxy. This is a person who is responsible for ensuring that the living will is properly executed.
What are the components of a living will?
You can use your living will to specify the types of medical treatments that you do and do not wish to receive. When creating this document, consider the conditions that might make living no longer desirable. Would you want to remain on life support even if there is no hope of recovery? How important is independence and self-sufficiency to you? Would you want to receive all available medical treatments, regardless of cost? Such treatments may include cardiopulmonary resuscitation (CPR), mechanical ventilation (a breathing machine), feeding tubes, and dialysis (waste removal). Your living will can also specify your preferences with regard to organ donation and palliative care.
What Are Your Options If A Loved One Dies Without a Will?
It’s always preferable for individuals to work with an estate planning attorney, rather than risk dying without a will. Even when a person is in good health, and not of advanced age, there is simply no way to predict what the future may hold. The unfortunate truth is that many people die intestate, or without a will. When this happens, the surviving spouse and children must sort through the matters involving the estate with the help of a probate lawyer in The Woodlands . The lawyer can advise the living heirs about the intricacies of probate law and the alternatives to probate.
Submitting Affidavits of Heirship
Some estate cases are relatively straightforward and may be settled by submitting an Affidavit of Heirship. This transfers certain property, such as a home, into the ownership of the heirs, without going through the judicial probate process. This approach may only be used when the property is not being used as collateral in a secured debt. The Affidavit of Heirship must be witnessed by two individuals who are not involved with the estate, but are familiar with the decedent. The witnesses must know the family members and heirs, the date of death, and the existence of outstanding debts.
Going Through Probate
Where it is not possible to use an Affidavit of Heirship, a probate lawyer can guide the surviving family members through the formal probate process. Since, in such cases, there is no designated executor, the court may choose an executor. If all heirs agree on an executor, then usually the Court will confirm that person as executor. Executors are usually the surviving spouse, adult children, or other closely-related family members. Potential executors should become fully informed of their responsibilities before accepting this job. Once an executor is appointed, he or she must identify all relevant liabilities of the decedent and other claims against the estate. The probate lawyer can assist the executor with the process of satisfying those claims and creating a complete inventory of the assets in the estate. Next, the heirs will be identified in accordance with the state’s rules of intestate succession. For example, in Texas, if a decedent leaves behind a spouse, with no children, parents, or siblings, then the spouse inherits the entire estate. The probate lawyer can ensure that the heirs are properly identified and the estate is legally distributed.
Making The Decision To Challenge A Will
It isn’t always easy to make the decision to challenge a will . If you believe that a deceased relative’s will is invalid, then you should contact a probate attorney near Houston right away. Your probate attorney will determine if there are sufficient grounds to contest a will. One possible situation is when the decedent may have been coerced or deceived when the will was drafted. Or, perhaps you have reason to believe that the will was completely fabricated in its creation, or otherwise altered after it was completed.
Wills are often drafted when the testator is in his or her senior years or after there has been a diagnosis of a terminal illness. If this is the case, then perhaps your will attorney can contest the document on the grounds that the testator was not mentally competent at the time that the will was drafted. Another possibility is that the will was not created under legally binding circumstances. For example, the document may not have been properly signed, witnessed, or notarized.
Probate Bonds 101
Many people involved with an estate go through the probate process without the need to secure a probate bond . If a family in The Woodlands does need a probate bond, then the probate lawyer can provide legal guidance in this area. A probate bond, also referred to as a fiduciary bond, and is simply a way to protect the estate from fraudulent or incompetent acts.
Understanding Probate Bonds
When a probate bond is required, the executor of the estate must post the bond. The executor is the person responsible for identifying the beneficiaries, satisfying any claims against the estate, and distributing the estate in accordance with the decedent’s will. Unfortunately, it is not unheard of for executors to engage in fraudulent acts for their own gain or simply to manager or administer the estate in an incompetent fashion. Probate bonds therefore provide an added measure of protection for the estate and the beneficiaries.
Recognizing When Probate Bonds Are Needed
Probate bonds are not always necessary, but executors may be required to post them when the estate is affected by unsecured debts. By posting a fiduciary bond, the executor is ensuring that these unsecured debts will be satisfied from the assets of the estate. If the will has not designated a specific executor, then a probate bond may be required in order to protect the beneficiaries. In some cases, the will may specify that the executor is required to post a bond. In other cases, the court may require that the executor post a bond. This may occur in cases when the estate involves substantial assets. Lastly, a probate bond may be required if one or more of the heirs named in the will refuse to provide consent to waive the bond requirement.
Identifying the Executor’s Fiduciary Duties
The fiduciary duty of the executor is to the beneficiaries. Subject to the probate court’s supervision, the executor is responsible for keeping the assets of the estate completely separate from his or her own assets. The executor must keep careful, accurate records of all matters pertaining to the assets of the estate. Those records must be made available to the beneficiaries upon request. If the executor carries out his or her fiduciary duties competently and does not engage in fraudulent acts, then the amount of the probate bond will be returned to him or her when the estate is settled.
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