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Frequently Asked Questions
Who Needs Estate Planning?
If you care about what happens to yourself, your property, and your family, you need an estate plan. Essentially, all adults should have some sort of planning.
Estate planning for yourself includes financial and medical powers of attorney. These essential documents come into play when you are incapacitated and cannot make decisions for yourself. An often overlooked situation is when you send your son or daughter off to college and they get into an accident. They are now adults and as their parents, if you do not have a medical power of attorney you cannot help make their medical decisions or sometimes even speak with their medical providers about their care.
Often people don't think they have enough assets to warrant an estate plan. However, odds are that you own a car or have other personal property. All those things need to go somewhere when you pass away. Some of the personal items may not have much financial value, however, they may have sentimental value to a family member. If you do not properly plan for the disposition of property, such as family heirlooms, they can cause family disharmony after you pass away.
Your family is important to you. If you have children, it is especially important that you name legal guardians in the event you and your spouse are incapacitated or pass away. If you do not, the court will decide who the legal guardian(s) will be, and that person may not be one you want. However, If you properly nominate legal guardians, you can avoid having the wrong person named or your children being placed in foster care.
What is Probate?
Probate is the court process of the transfer of property upon death. The court will appoint an executor who will oversee the transfer of property. If you die with a will, you can name your executor in the document ahead of time.
Texas has made probate a fairly easy process compared to most other states. However, when a loved one passes away it can cause a lot of stress and hardship within a family. Having the proper documents, such as a valid will and proper beneficiary designations, as well as, an attorney that is knowledgeable about the process can make probate a smoother transition for those involved.
What happens if I die without a will?
Probate as described above involves a valid will. If you have a will, but it is invalid or if you don't have a will, the state has a plan for you. It is called intestacy. The court will decide how to divide up your assets according to the state statutes. And you may not like the state's plan.
The court will also appoint a second attorney (in addition to the one you have hired) to represent the "unknown heirs". Formal notice must be given, as well as, additional time to find anyone that may be a valid heir of the estate.
A third attorney may also be required to represent any minors that are possible heirs.
Intestacy is the most expensive option that a person can have upon death. The process is much more formal than probate of a will. There is at least 1 additional attorney and the entire process takes much longer. If you can help it, you should avoid dying without a will.
Dead Celebrity Lessons
There have been several celebrities that have died without a will and the consequences have been disastrous. Recently and most notably have been Prince and Aretha Franklin.
In the news
Supreme Court Case Update
It isn't very often that the Supreme Court hears a case that affects probate or trusts but this summer they ruled on a case regarding beneficiary designations. In Sveen v. Melin, the Court upheld Minnesota state law that states divorce revokes all beneficiary designations to the ex-spouse. Mr. Sveen passed away and had not updated his beneficiary designation, his ex-wife was still the primary beneficiary. The court said that divorce revoked this designation even though he had not changed it himself. Therefore, the proceeds of the contested life insurance policy went to the contingent beneficiaries, his two children from a prior marriage, and not the ex-wife.
Similarly, in Texas, if a person divorces and the ex-spouse is a named beneficiary in a will, that person will not receive anything. The assets will go to whomever is named next in the will. However, you may have not named a contingent beneficiary or you may have gotten remarried and want your assets to go to your new spouse. As this case illustrates, as life changes, so should your estate plan.
Current Estate Tax and Gift Limits
In the 2017 Tax Cuts and Jobs Act, Congress upped the estate tax exemption to $11.18 Million for an individual and $22.36 Million for a married couple. This is set to "expire" in 2025 and reset back to $5.59 Million in January 2026.
Currently, an individual can gift $15,000 per year per person. The $15,000 limit is how much an individual can gift to another person before they have to file a tax return declaring the gift. An individual may gift $15,000 to as many people as they want and a couple can double that number to $30,000. For example, that means grandparents can gift $30,000 to each of their five grandchildren, for a total of $150,000 per year, without filing a tax return.
Business Income Tax Deduction
Congress introduced a brand new tax deduction for business owners that goes into effect for 2018 tax returns. Basically, any business owner (besides a C-Corporation) will receive 20% off of their business income on their individual tax returns. This discount is subject to a few restrictions, such as income limits and types of businesses, you should contact a tax attorney or CPA for more details. But, in general if you are a small business owner you should receive a smaller tax bill in 2018.