Monday, December 19, 2011

Two Common Houston Estate Plan Myths -- BUSTED

By: Kimberly Hegwood, Wills and Estates Lawyer in Houston, TX

As of this writing, it's a fact that almost 60% of Americans do not have a basic will, and that is a big problem.

One of the big reasons that most families don't yet have this kind of plan in place is because of some incorrect thinking about whether it is right for them, or if it is even necessary. And sure --some people just have not gotten around to creating a will or trust. Others think they don't need an estate plan because they are not "rich".  

But here is the problem--if you continue without an estate plan, you could leave a legacy of bad feelings and attorneys' fees.

So I wanted to speak to some of the more common misconceptions out there. I will start with a couple big ones this week, and when the time is right, address a few more in 2012...

MYTH #1: Only rich people prepare estate plans.

Do you own ANYTHING? Because if so, you need a will. You see, a will allows you to designate who will receive your property should anything happen. Continuing without one ensures that your assets will be distributed under the terms of your state's "intestate succession" laws. That means your money and property could end up with family members you have not spoken to in years, instead of who you would really like to see control your assets.

I won't go into all of the different components of a will, trust, medical power of attorney, directive to physicians, etc., as my purpose here is to emphasize that failing to plan is simply a decision to trust your assets to government bureaucrats who do no know you from Adam.

Even if you think your situation is pretty straightforward, you may feel more comfortable hiring a lawyer to guide you through the process.

MYTH #2: Everything goes to your spouse, if something happens.
 

Unfortunately, that is not always the case. We deal with clients from different states around the country, and state laws vary. In fact, in most states, if you continue without a will (intestate), your inheritance will be divided among your spouse and your children. In New York, for example, when someone dies intestate, the spouse gets the first $50,000 of the estate and what is left is divided 50-50 among the spouse and the children.

You can imagine how this could create all kinds of problems, particularly if your spouse was financially dependent on you or you have children from a previous marriage.

I will send a few more in the future, but I hope you can already see that things are not always as we "think". And don't miss the chance to take advantage of the time and focus you will already be applying to your preparation for tax season, by moving towards getting your estate plan done (or updated) in 2012, after you have already done the hard work of gathering all of your documents. It is actually the perfect time for it.

Monday, December 19, 2011

3 Reasons To Give Money Away, With or Without a Tax Deduction | Houston Estate Planning Law Firm

There is something that happens to your soul when you cut a big check to someone in need.

You signal to those very fears and desires which so often control your unconscious thoughts: "Money does not rule me. I have more than enough, so much more than enough that I am giving it away." Then, of course, something special often happens: more money seems to find itself in your hands.

I am not advocating a mystical pay-it-forward scheme; I am simply making the observation over years of being a student of how money "works". And, "coincidentally" it just seems to find itself in the hands of those who give it away.

Why is it that those who are benevolent seem to be well-taken care of, even rich? I know many families of significant means who were NOT wealthy when they started to give in large percentages of their income (15%+). Coincidence?

So I would say that this first dynamic is one significant reason to give: Your soul is set free from the shackles of fear and greed.

Here are two more big reasons:

2) You build a network of grateful friends and organizations. You will never know when someone to whom you have donated or given (be it time, money, connections, or other resources) comes back to you with something you need, at just the right time.

Personally, I have seen this dynamic in play enough times to not dismiss it. When you act or give generously, it is the most powerful form of networking on the planet. Obviously, there are better, less self-interested reasons to give ... but there sure are worse ones.

3) Your perspective can shift in an instant. When you don't just give money, but also time and heart, you often learn heretofore unrealized reasons for being grateful about your own present circumstances.

Sometimes giving to institutions that work with the poor can bring home appreciation of your own enormous wealth. And it can also bring home awareness of a poverty which is not solved through adding zeroes to a bank balance. But either way, if you do it right, you are changed for the better.

With these reasons, AND the monetary benefits to your tax return, I urge you Amber: stretch yourself this month. Give more than you think you should. See what happens.

I promise it will be good.


All this said, above, I firmly advocate for being careful with your planning of said giving. I don't suggest impulsivity, just some small risk-taking.

But do not risk losing out on the tax advantages to gifting appreciated stock, or other, less common, forms of gifting. I suggest consulting with your tax professional to ensure that while your soul grows, so too does the amount you can deduct on your 2011 tax return!

Monday, December 19, 2011

Houston Elder Law Attorney Tackles the Sibling Situation

Siblings often have trouble agreeing on anything, so why should it be any different when it comes to Mom and Dad’s elder care?  Unfortunately those of us in elder law see quite often how families have a very difficult time when it comes to determining what is best for aging parents. 

In some cases, one sibling may be expected to take on an unreasonable portion of the elder care with other siblings not recognizing (or possibly not caring) that it is a hardship. Other times, siblings simply can’t agree on the best course of medical intervention or the choice of an assisted living facility.

A Houston elder law attorney can actually help to avoid or work through some of these issues.

The best approach is to start early.  Most siblings can likely agree that having your parents make their wishes known in advance is a good thing.  The attorney can help them draw up some very important documents before they are even needed. 

• Medical Power of Attorney – This names the person responsible for making medical decisions when the parent is unable to do it for himself or herself.
• Financial Power of Attorney – This is used to determine who will have control of the parents’ finances in order to keep the household going, pay medical bills, etc. during an illness or crisis.
• Living Will – A living will helps to outline the parents’ wishes when it comes to medical interventions and end-of-life care.  Having this in place takes some of the burden off of the adult children who would otherwise be making these choices.

If possible, it’s best to have all of the siblings aware of and in agreement about these documents, as it can cut down on the amount of frustration later. 

When things do become more intense and these documents come into play, it is still likely that siblings will have disagreements about what is best.  The one who has the largest responsibility for day-to-day elder care may become resentful, while another may also harbor resentments that someone else was chosen to take care of the parents’ finances.  Throw in the emotions that surface when facing your parents’ mortality, and there is potential for a major explosion.

In order to diffuse the situation, an elder law attorney can direct you to other forms of outside help.  For example, some families choose to hire a “geriatric care manager.”  This person is able to manage many aspects of the parent’s care, and because he or she isn’t a family member, much of the associated drama is mitigated.  When a situation has become too out of hand, the siblings may need to agree to use a mediator.  This impartial listener can help to determine the best course of action for getting the parents the care they need while meeting the needs of the siblings as appropriately as possible.

In order to salvage an uncomfortable family situation, it may be advisable for members to seek family counseling.  This is most likely to work when all of the members are invested in a positive outcome.  Your elder law attorney can help direct you to many resources for counselors and mediators here in Houston.

Friday, December 09, 2011

Trust attorney in Houston Asks, “Do You Need a Gun Trust?”

When it comes to wills and trust administration, it seems like we see it all here in Houston.  From pet trusts to special needs trusts, there are a variety of unique circumstances that need to be addressed in many people’s estate planning.  One such concern is that of a gun trust. 

Wills in Texas are created specifically to stipulate how one’s assets are to be distributed, and trusts do the same, while sometimes affording extra protection and benefits.  Those who collect guns for various reasons often have reason to add this type of protection to their estate plan.

One of the first reasons to consider a gun trust is because many firearms are particularly valuable.  Putting them into a trust can ensure that they are passed as heirlooms or investments for future generations.  The collector is able to set the trust up so that these valuable items are distributed according to his or her wishes.

Another concern is that there are restrictions that apply to certain guns.  Creating a gun trust can help to ensure that all applicable laws and regulations are followed regarding the administration of the trust and the firearms it contains.  Some legal questions need to be answered in regards to the suitability of passing certain types of weapons on to others, especially those that are more heavily regulated.

A gun trust is fairly flexible, as it is revocable.  While it can certainly be used as a tool during estate planning, many Houston residents use it for a whole different reason.  Because certain types of guns are so heavily regulated, they cannot be transported or used without the owner present.  A gun trust allows for the owner to name trustees who are then permitted to engage in these activities legally.

Gun trusts have become fairly common, with gun dealers even providing them to customers.  In reality, though, it is one area where having a qualified wills and trusts lawyer involved is especially helpful.  Because of the regulations surrounding firearms and the fact that most of the trusts created with the provided forms are not specific to guns, many owners don’t even realize that they’re breaking laws, erroneously believing they have covered themselves adequately.

If you deal with guns on a regular basis, it is a good idea to consider creating a gun trust with your Houston estate planning attorney.  The outcome is better protection for you and your firearms both now and after you are deceased.

To learn more about creating a gun trust here in Houston, simply call our office at (281)218-0880 and ask to schedule a Lifetime Legacy Planning Session. These sessions are normally $750, but you can come in free with the mention of this article.  However, these sessions are limited to 10 per month, so call today! 

Friday, December 09, 2011

Going Beyond the Will | Estate Planning Law Firm in Houston

Parenting is more than reading to your children or getting them to eat their vegetables. It's also about securing their financial future. One way to do that is by drafting a trust and naming a trustee.

Here are a few questions to ask yourself to determine if a trust is right for your family:

How much money will you be leaving to your children?
A trust may not be worth the effort if you think you will only be leaving a child (or children) $100,000 or less. On the other hand, if you are leaving life insurance money to cover four years of school and you own a home, there is a good chance a trust would make sense for you.

Are you wanting to provide boundaries to how the money is spent?
A trust allows you to restrict spending to basic support, including food, clothing, education and health care. This is something that can't be done with a custodial account. If the custodian is a soft touch, he could end up lavishing your child with designer jeans and a fancy car, leaving very little left for the college years. Even worse, if the custodian is also the guardian, he could start writing himself large "support" checks to help cover his other expenses.

Would you want to give your children some breathing room before the money hits-- to fail well, or to find their own path?
If you think giving a high-school senior a large sum of cash is a recipe for disaster, then you should consider a trust. Kids in their 20's are in such a transitional time that we do not necessarily want them to have significant financial decisions to make, when they could be pursuing their passions.

Is your bequest to be used only for education?
If you specifically bought life insurance so that there would be enough money to help fund college in the event of your death, then you will definitely want to delay the age at which your kids inherit your money. Otherwise, your child could think a red Ferrari is a better investment than a crimson Harvard diploma.

Do you want to set up a way for your children to hold mismanagement of funds accountable?
One more benefit of a trust that you don't get with a custodial account is that a trust is a legal contract; the trustee has an obligation to follow your directions and act in a reasonable and prudent manner. If the beneficiary feels the trustee spent the money frivolously, he can demand an accounting, and can sue for reimbursement if the trustee acted improperly with the funds. It may be pretty tough to prove illegal or improper actions with a trust, but just the threat of a possible lawsuit can keep someone in line.

Don't forget -- we are only a phone call or email away, and our consistent question for you is this: "What more could we do for you, to help?"

Wednesday, November 30, 2011

How You Can Work With A Houston Elder Law Attorney to Shield Your Assets From Nursing Home Costs

Many Houston seniors are making strides toward estate planning by working with their elder law attorneys to set up what they believe are the appropriate wills and trusts.  The goals with this type of planning are most commonly to:

• avoid probate,
•  make decisions regarding trust administration,
• and—most importantly—to protect your assets for your heirs. 

Unfortunately, this final criteria isn’t always met in traditional wills and trusts.

The problem stems from long-term care.  When you set up your initial estate planning documents, such as a revocable living trust, you probably fully intend to outline your wishes for how your estate will be dispersed upon your death.  Unfortunately, this document does not protect your assets from creditors, lawsuits or the incredible costs associated with nursing home care.

In order to pay for that care, your entire estate can be at risk.  Your assets will be used to pay for your medical and other needs, potentially leaving little or nothing to be administered in your trust.  This means that even if you have a legal document directing how your assets should be distributed, it will be referring to assets that were already sold off to cover expenses.  As nursing home costs continue to rise, we see more and more of this in Houston.

To avoid this situation, it’s often necessary to work with an attorney who focuses on elder and long-term care planning, in addition to traditional estate planning.  If it appears your estate is at risk of being wiped out due to unexpected illness, incapacity or long-term care costs, your attorney can work with you to create the right kind of trust that will adequately shield your assets during your lifetime, and after death.

To learn more about how seniors around the country are engaging in long-term care planning to shield their assets from the skyrocketing costs of nursing home care, consider discussing this option with your Houston elder care or estate planning lawyer.

Wednesday, November 30, 2011

Family Lawyer in Houston Says, "Make These Tax Moves Now Before 2012"

As promised, I have compiled some information on expiring tax breaks for 2011, as well as some suggested moves to make before December sees its ball-dropping end.

Filed under: Increased-Deduction Strategy

With one caveat: increasing deductions could cost you if you end up owing under the Alternative Minimum Tax (AMT).

1. Pre-Pay and Accelerate
Mortgage bills, college tuition, property taxes -- all of these can add deductions to your bottom line, so cherry-pick some 2012 bills if cashflow allows, and you will get to mark them against this year's taxes (only January's mortgage payment counts for this, I should hasten to say).

And you can "accelerate" certain expenses like optional medical procedures (dentistry is always a ripe source for procedures to implement, unfortunately ?), again, doing so if cashflow allows.

2. Donate
It is not just because 'tis the season, but often (if we are all honest) because the year-end is so close. So, obviously, when it comes to taxes, giving to a nonprofit can be like a money-saving gift to yourself. If you itemize your deductions, you can claim your charitable donations, both of cash or goods.

In fact, if you are *close* to being able to itemize deductions, making some nice gifts this month can push you over the top into some major tax-savings. And, of course, there is the added benefit of what happens to YOUR mindset when you give.  If you need any help on recommendations to worthwhile non profits, please let us know!

Filed under: Buying stuff you already need -- and saving on taxes

3. Energy-Savings and Big Cars
The accountants have been pounding this drum for a while, for the simple fact that (because of the last "stimulus" package) replacing windows, doors, and HVAC  systems-- as well as installing new insulation--could net you a $500 tax credit on your 2011 tax bill! Credits always beat deductions. A solar energy system gets a 30% credit with no upper limit.

How about that fancy new vehicle you have been eyeing? Or that energy-sucking flatscreen? Buy it before the end of the year, and you are eligible for a deduction on the state and local sales taxes.

But you can't deduct both state income taxes and general sales taxes, so the deduction is usually most beneficial to our clients who actually live in the no-income-tax states. By the way, this sales tax deduction is scheduled to expire on Dec. 31.

Filed under: Common sense

4. Please stop loaning extra funds to Uncle Sam

Do you intentionally get a big refund each filing season? Quit that! You are providing Uncle Sam an interest-free loan of your money.

Submit a new W-4 now so that your payroll withholding is more closely in line with your future IRS bill. It could even give you a few extra dollars at the end of the year to spend on holiday gifts!

Oh, and just so you know, it is growing very likely that whatever Congress decides on tax law changes, payroll calculators may not have time to update by January 1st. This means that even if you request the changes, your withholding may not reflect things until 2012 ... but making the change will still impact your taxes -- it just might not be obvious until next year.

5. Make your family happy  (our specialty)

The clock is ticking on the very generous estate and gift tax exclusions that allow you to give up to $13,000 this year to any number of recipients -- and a total of $5 million over your lifetime -- without owing any federal gift tax. The $5 million lifetime exclusion expires at the end of 2012, and Congress may decide to reset it at a lower level.

While you are at it, you can always do it again on January 1st!

I hope these are easy, and that they give you some good ideas. Remember-- I am in your corner, and not just about generational wealth issues.

Monday, November 21, 2011

Business Attorney in Houston Says, "Your House May Not Be The Investment You Thought It Was"

By: Kim Hegwood, Business Attorney Near Houston, TX

Just because something costs a lot doesn't mean it is an investment. An investment is something that pays you money.

Therefore the house you and your family live in is not an investment. Neither is the vacation home you rent occasionally. Nor that piece of land next to your house you bought to preserve your view. It is human nature to justify a purchase by calling it an "investment," but if it does not pay you money, it should not be treated as an investment in financial planning.

Historically, equities appreciate at a rate of about 6.5% above inflation. If inflation has historically been 4.5%, equities average about 11%. Equities include stocks, stock mutual funds and stock exchange-traded funds (ETFs). Your portfolio should be invested mostly in equity investments to appreciate at a rate greater than inflation.

Fixed income is more stable, but averages interest payments of 3% over inflation. If inflation averages 4.5%, fixed-income investments average 7.5%. Fixed income includes bonds, bond mutual funds and bond ETFs.

Real estate as an investment falls somewhere between stocks and bonds. On average commercial real estate produces a real return of about 4.9% over inflation. If inflation averages 4.5%, commercial real estate averages 9.4%.

Commercial real estate as property with no income does not appreciate at the rate of inflation. It actually depreciates against inflation by about 1% a year. Fortunately, it should produce 5.9% in profit to overcome this depreciation and produce a real return of about 4.9% over inflation.

Handling commercial real estate privately requires more work. If your commercial real estate is not generating a lot more income than it costs to maintain it--including depreciation--it isn't pulling its weight. Only if it can produce significant income and grow at a real return of 4.9% over inflation will a $100,000 investment in real estate grow to $331,000 after 25 years.

Similar equations can be used for residential real estate. On average it produces slightly less income, giving a real return of 4.1% and growing to have a buying power of $273,000. Obviously all real estate is subject to the increasing desirability of the area where it is located. Some excellent school districts have experienced appreciation significantly greater than inflation. But many rural communities have barely kept up.

These historical averages provide benchmarks as a way to judge the investment worthiness of a particular piece of property. If you own a $300,000 rental home, you should expect to average at least $3,000 each year in repairs and upkeep. One year it might be lower only to have major bills the next. Your benchmark is a real return of 4.1%. After repairs and all other expenses, you should have a profit of $12,300, or 4.1% of your investment. That means you have to have a profit of at least $15,300 (5.1%) or more for your investment to pay you the appropriate amount.

Real estate that pays you appropriately can be considered an investment for the purposes of wealth management. But you need to run it like an investment and track your return after all of your expenses.

This analysis helps explain why property that you do not rent is not an investment. Every $100,000 of equity put into property that lies fallow costs you $1,000 in expenses just to keep up with inflation. And although keeping up with inflation is good, without the 4.1% income there is no way your $100,000 investment will grow to have the increased purchasing power of $273,000.

A family's home, however, does not, typically, keep up with inflation. Some couples sell a large expensive home, purchase a smaller house and invest the difference. Many believe they will, but when the time comes, their downsized house is so much nicer that little is left over to invest.

Additionally, for many couples the value in their home is used as equity toward an assisted living arrangement. The larger their home, the more expensive the retirement community they buy into. For these and other reasons, it is helpful to not assume that the equity in a family's home will be available during retirement.

To reiterate, just because something costs a lot does not mean it is an investment. Investments should appreciate at a rate that grows faster than inflation and gains purchasing power. And spending your money on non-investments can jeopardize a plan to reach your goals of financial freedom.  As a rule, investments should work FOR you, paying you money that you can spend or reinvest elsewhere.

Monday, November 21, 2011

Wills and Estates Lawyer in Houston Says, “Don’t Sign Up For That Pre-Paid Funeral Until You Ask These Questions!”

Many people like the idea of choosing a funeral home and making their own arraignments to ensure their loved ones are never burdened with the task. Pre-paid funeral plans allow you to make all the decisions ahead of time and pay for it in installments. Not having your loved ones put in the position of planning and paying for your funeral is a wonderful idea, but, before signing on the dotted line on any agreement, be sure to ask the following questions:

1. Can you get your money back if you change your mind?
2. Does the money you invest earn interest? If so, who gets it?
3. What happens if the funeral home goes out of business?
4. Can the plan be moved if you move to a different state?
5. If money is left over after expenses, what happens to it?

Another key consideration is to find out what happens if the prices increase by the time the services are needed. Make sure that you are being guaranteed the services you selected at the contracted price. Some pre-paid plans sneak in additional payments for “final expense funding” which allows the funeral home to charge the difference in price.

There are a number of alternatives to pre-paid funeral plans. For example, you can buy life insurance to cover funeral costs. Another is to set up a bank account solely for the purpose of paying your funeral expenses. Both of these options allow you more flexibility to change your plans if you so choose.

However, if either of these options is chosen, it is important to make sure your loved ones know your wishes. Additionally, clearly lay out these plans in your estate planning documents. Then there will be no doubt about what you want, which will go a long way in reducing the stress that your loved ones may experience upon your passing.

Before you make any decisions, be sure to consult with an experienced Houston wills and estates attorney. Estate planning attorneys know which questions to ask and can help you better understand all of your options. Then, you really can feel secure that you’ve taken the burden of making end-of-life decisions off of the shoulders of your family.

Thursday, November 10, 2011

Time For an Estate Plan Tune-Up | Houston Wills and Trusts Law Firm

Most people are smart enough to keep their cars in good working order--it requires tune-ups, an annual physical check-up, etc. But I am always surprised by the common misconception about how often they should have their estate plan reviewed. 

You see, most people see estate planning as something you "do once" and never have to think about again. That is just flat incorrect. Just like your health can take a dramatic turn (for the better or worse) in a year, your estate planning decisions can change dramatically in a short period. Sometimes, something as simple happens as the people you have identified to serve as the guardians for your minor children move out of state. That is just one of many good reasons to revisit your estate planning decisions.
 
Your estate plan is a "living and breathing" plan (at least when done right) and therefore has to be maintained to reflect your life as it is today.  That is why I have a special offer for my clients and friends in this week's Strategy Note (see below).
 
If you have already prepared your estate plan--congratulations!  But now is the time to make sure that what you have put together will suit your needs NOW. 
 
So, if you don't have your estate plan in place, make today the day you take this important step for yourself and your loved ones.  And, if you have already taken this important step...let's (together) make sure it lasts.

+++++++++++++++
SPECIAL OFFER
NO CHARGE Estate Plan Review
Learn how you can protect your assets, and have control over the way they are passed on to your loved ones--at no charge!
Limited to first SEVEN Respondents Only
Email me or Call: 281-218-0880 to set up this special session
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