In this new installment of The Estate of The Union Podcast, Brad Wiewel is joined by Ann Lumley, JD, the Director of After Life Services and Trust Administration for Texas Trust Law to discuss celebrity estate planning screw ups.
The size and scope of the mistakes made by celebrities may be enormous, but many of the mistakes are common for, well, us common people. Ann and Brad discuss the havoc created by celebrities when they died with no planning or inadequate planning. It’s a fun, fast moving discussion on What-Not-To-Do. Learning lessons from celebrity estate planning mistakes is a good way to prevent yourself from making those same errors. If you don’t have an estate plan, get it started. If you haven’t looked at your estate plan in a while, have it reviewed.
In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insight into estate planning, making an often daunting subject easier to understand.
It is Estate Planning Made Simple!
The Estate of The Union can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. Please click on the link below to listen to the new installment of The Estate of The Union podcast. We hope you enjoy it.
Texas Trust Law focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization.
With our aging population, we need more solutions to help seniors live well. That’s where universal design comes in: it’s a concept that tries to make products and structures usable by everyone, regardless of age, ability, or other factors.
Money Talks News’s article entitled “8 Essential Home Features for Aging in Place” says that aging in place requires homes that accommodate our needs as we age. The article sets out a list of eight design features buyers focused on accessibility are looking for based on survey data from the National Association of Home Builders’ 2021 “What Home Buyers Really Want” report.
Lower countertops. The kitchen is the center of most homes, and it’s an important part of universal design. Countertops that are three inches lower than the standard height of 36 inches lets seniors and those with limited mobility to fully participate in meal prep. You can round all countertop edges and corners because fewer 90-degree angles may reduce bumping and bruising and minimize injury in the event of a fall.
Lower kitchen cabinets. According to Aging in Place, upper kitchen cabinets that are three inches lower than standard height lessens the tendency to overreach and potentially lose balance. Lower cabinets that feature pull-out shelves, “lazy Susan” corner cabinets and easy-pull handles offer additional convenience for seniors and those who rely on a wheelchair or mobility scooter.
Bathroom aids. For seniors, using the bathroom safely can a challenge. Aging-in-place design recommends these features to make bathrooms more practical and convenient:
A walk-in tub or a shower with non-slip seating
An adjustable or hand-held showerhead
A comfort-height toilet
Ground-fault interrupter (GFI) outlets that reduce the risk of shock; and
Grab bars near the toilet and shower.
A Stepless entrance. To age in place safely, AgingCare recommends that a home’s main entrance not have steps and should have a threshold height of no more than a half an inch. Here are a couple of ways that an entryway without steps can make life better for seniors:
It facilitates smooth entrance/exit by wheelchair, scooters, or walker
It decreases the risk of falls, particularly in snowy or icy conditions; and
It makes it easier to get deliveries and enter the home carrying groceries.
Non slip floors. According to the CDC, more than 35 million older adults fell at least once in 2018, and 32,000 died from fall-related injuries. To help, non-slip surfaces like low-pile carpet, cork and slip-resistant vinyl can minimize the risk.
Wide hallways. Wide hallways (defined as at least four feet wide) let seniors access every space in their home with a walker, wheelchair, or scooter, or with the assistance of a home health aide.
Wide doorways. A standard doorway can be as narrow as 24 inches, which is a tight fit for seniors who rely on wheelchairs, scooters, or walkers. Seniors like wide doorways, defined as at least three feet wide. According to the ADA, doorways should have at least 32 inches of clear width. To help with an easy transition from room to room, thresholds should be as flush to the floor as possible.
Full bath on main level. Not just convenient, it’s a critical safety feature for seniors. Besides eliminating the need to go up and down stairs several times a day, main floor bathrooms also allow the elderly to (i) respond to incontinence issues more quickly; (ii) practice regular self-care; and (iii) access a private space when required.
Elder care can be a complicated. These, and many more solutions help seniors live well and comfortably. If you would like to learn more about elder care, please visit our previous posts.
Estate planning becomes more complicated for couples with big age differences. Seniors who are married to younger spouses have a special situation for estate planning, a situation that’s become more common, according to Barron’s recent article “Couples with Big Age Gaps Require Special Attention.”
This kind of family requires planning for the older spouse’s retirement needs and healthcare costs, while determining how much of the older spouse’s wealth should go to the children from any previous marriages while balancing the needs of a future child with a younger spouse. Beneficiaries for all financial accounts, last wills and all estate documents need to be updated to include the new spouse and child. The same goes for medical directives and power of attorney forms.
Social Security and retirement account considerations differ as well. The younger spouse may begin receiving their own Social Security at age 62, or a portion of the older spouse’s Social Security, whichever is greater. If the older spouse can wait to file for Social Security benefits at age 70, the younger spouse will receive more spousal benefits than if the older spouse claims earlier. Social Security pays the survivor’s benefit, typically based upon the older spouse’s earnings.
Pension plans need to be reviewed for a younger spouse. If the pension plan allows a survivor benefit, the surviving spouse will receive benefits in the future. IRAs have different beneficiary distribution rules for couples with significant age differences. Instead of relying on the standard Uniform Lifetime Tables, the IRS lets individuals use the Joint Life and Last Survivor Expectancy Table, if the sole beneficiary is a spouse who is more than ten years younger. This allows for smaller than normally Required Minimum Distributions from the IRA, allowing the account a longer lifetime.
Families that include children with special needs also benefit from trusts, as assets in the trust are not included in eligibility for government benefits. Many families with such family members are advised to use an ABLE Savings Account, which lets the assets grow tax free, also without impacting benefit eligibility. There are limits on the accounts, so funds exceeding the ABLE account limits may be added to special needs trusts, or SNTs.
A trustee, who may be a family member or a professional, uses the SNT assets to pay for the care of the individual with special needs after the donor parents have passed. The child is able to maintain their eligibility.
For same sex couples, revocable or irrevocable trusts may be used, if the couple is not married. Nontraditional families of any kind with children require individual estate plans to protect them, which usually involves trusts.
Trusts are also useful when there are children from different marriages. They can protect the children from the first marriage and subsequent marriages. Estate planning is more complicated for couples with big age differences. A wisely constructed estate plan can do more than prevent legal battles among children—they can preserve family harmony in the non-traditional family after parents have passed.
If you would like to learn more about estate planning for older couples, or those in second marriages, please visit our previous posts.
We know why estate planning for your assets, family and legacy falls through the cracks. It’s not the thing a new parent wants to think about while cuddling a newborn, or a grandparent wants to think about as they prepare for a family get-together. However, this is an important thing to take care of, advises a recent article from Kiplinger titled “2021 Estate Planning Checkup: Is Your Estate Plan Up to Date? Consider maintaining an estate planning checklist to keep your planning current.
Every four years, or every time a trigger event occurs—birth, death, marriage, divorce, relocation—the estate plan needs to be reviewed. Reviewing an estate plan is a relatively straightforward matter and neglecting it could lead to undoing strategic tax plans and unnecessary costs.
Moving to a new state? Estate laws are different from state to state, so what works in one state may not be considered valid in another. You’ll also want to update your address, and make sure that family and advisors know where your last will can be found in your new home.
Changes in the law. The last five years have seen an inordinate number of changes to laws that impact retirement accounts and taxes. One big example is the SECURE Act, which eliminated the Stretch IRA, requiring heirs to empty inherited IRA accounts in ten years, instead of over their lifetimes. A strategy that worked great a few years ago no longer works. However, there are other means of protecting your heirs and retirement accounts.
Do you have a Power of Attorney? A POA gives a person you authorize the ability to manage your financial, business, personal and legal affairs, if you become incapacitated. If the POA is old, a bank or investment company may balk at allowing your representative to act on your behalf. If you have one, make sure it’s up to date and the person you named is still the person you want. If you need to make a change, it’s very important that you put it in writing and notify the proper parties.
Health Care Power of Attorney needs to be updated as well. Marriage does not automatically authorize your spouse to speak with doctors, obtain medical records or make medical decisions on your behalf. If you have strong opinions about what procedures you do and do not want, the Health Care POA can document your wishes.
Last Will and Testament is Essential. Your last will needs regular review throughout your lifetime. Has the person you named as an executor four years ago remained in your life, or moved to another state? A last will also names an executor for your property and a guardian for minor children. It also needs to have trust provisions to pay for your children’s upbringing and to protect their inheritance.
Speaking of Trusts. If your estate plan includes trusts, review trustee and successor appointments to be sure they are still appropriate. You should also check on estate and inheritance taxes to ensure that the estate will be able to cover these costs. If you have an irrevocable trust, confirm that the trustee is still ready and able to carry out the duties, including administration, management and tax returns.
Gifting in the Estate Plan. Laws concerning charitable giving also change, so be sure your gifting strategies are still appropriate for your estate. An estate plan review is also a good time to review the organizations you wish to support.
It is a wise and prudent choice to consider maintaining an estate planning checklist to ensure that your planning is up to date with your life. If you would like to learn more about crafting an estate plan, please visit our previous posts.
For most families, estate planning is a relatively straightforward task, protecting loved ones and preparing to distribute assets. But when parent-child relationships have frayed or fractured, estate planning becomes more complicated and emotional, according to the article from The News-Enterprise titled “Estate planning must account for estranged children.” This poses the question of how to address an estranged child in your planning.
The relationship may be broken for any number of reasons. The child may have married an untrustworthy person, have addiction issues, or have made a series of hurtful decisions. In some families, the parents don’t even know why a break has occurred, only that they are shut out of lives of their children and grandchildren.
The reason for the estrangement impacts how the parents address their estate plan regarding the child. If there is an addiction problem, the parents may want to limit the child’s access to funds, and that can be accomplished with a trust and a trustee. However, if the situation is really bad, the parents may wish to completely disinherit the child. Both require considerable legal experience, especially if the child might contest the will.
There are three basic options for dealing with this situation.
One is to leave an outright gift of some kind, with no restrictions. The estranged child may receive a smaller inheritance, but not so small as to open the door to litigation.
Second, the parent may create a testamentary trust in their last wills. Testamentary trusts become effective at death, with funds going into the trust and controlled by a trustee. The heir will have no control over the assets, which are also protected from creditors, divorces, or scammers.
Third is the option to completely disinherit the child. That way the child will not be entitled to any portion of the estate. The language in the last will must be watertight and follow the laws of the state exactly so there is no room for the disinheritance to be challenged.
There needs to be language that clarifies whether the child’s descendants (grandchildren) are also being disinherited. If the child is disinherited but their children are not, the descendants will inherit the child’s share as if the child had predeceased his or her parents.
Some estate planning attorneys recommend writing a letter to the child to explain the reasoning behind their disinheritance. The letter could be seen as reinforcing the parent’s intent, but it may also open old wounds and have unexpected consequences.
Your estate planning attorney will be able to clarify the steps to be taken to address an estranged child in your planning. This is a situation where it will be helpful to discuss the full details of the relationship so the correct plan can be put into place. If you would like to learn more about managing family dynamics, please visit our previous posts.
Rising prices for investments and real estate is making owners of these assets concerned about paying exorbitant taxes amid discussions of possible changes in the near future. According to a recent article from The Street titled “Retirement Saving and Charitable Remainder Trusts,” having a strategy on hand to prepare for or even avoid these taxes is a wise move. People who are charitably inclined may want to take a closer look at how Charitable Remainder Trusts, or CRTs, can reduce taxes and provide a generous gift to worthy charities.
There are two basic types of CRTs: the Charitable Remainder UniTrust, or CRUT, and the Charitable Remainder Annuity Trust, or CRAT. In both types of trusts, the charity receives the “remainder” of the principal once the income interest ends. Income from the trust is given to a non-charity beneficiary for a certain period of time, or as in many cases, for the entire life of the beneficiary until it’s time for the remainder principal to be donated.
The key difference between the CRAT and the CRUT are how the income payment is calculated. In a CRUT with a 5% payout, the 5% is based on the value of the CRUT each and every year. Obviously that payment amount fluctuates according to the performance of the assets held by the CRUT. In a CRAT, payments are fixed based on in the initial contribution made to set up the account. Your estate planning attorney will be able to recommend the right vehicle for you and your family.
A CRT may be funded with highly appreciated assets because selling within the CRT results in no capital gains to the donor. Any proceeds may be reinvested to generate the needed income, while at the same time potentially growing the remainder asset for charity.
An administrator is hired to evaluate the trust to ensure its compliance, and the administrator’s role is to advise the trustee on the amount of the distribution annually to the beneficiary.
Since the charity is the remainder beneficiary, the grantor is not able to deduct the entire amount of the contribution to the CRT. The deduction is determined by the income payments selected and the terms of the CRT. There are software programs used to calculate the approximate deduction based on the input. The higher the income payment, the lower the deduction.
Note that if you are giving highly appreciated long-term capital gains assets, only 30% of the adjusted gross income can be given. The rest may be carried forward for five years. This should be considered when determining how much to contribute to the CRT.
The choice of CRTs lets you design a desired income stream from the trust. The taxability of the CRT is based on the types of assets used. There are four tiers, as defined by the IRS: ordinary income (which includes current year and accumulated income) and qualified dividends; capital gains; other tax-exempt income; and return of principal.
To solve the problem of choosing a charity, many prefer to use a Donor Advised Fund as a beneficiary. The DAF can be treated like a charity for tax purposes. The DAF lets you control how the account is funded and the timing of distribution of assets. The charities do not need to be named when the CRT is first created.
The Charitable Remainder Trust can reduce taxes for people who would be making gifts to support meaningful causes. Your estate planning attorney will be able to help you set up a CRT to work in tandem with the rest of your estate plan.
If you would like to learn more about Charitable Remainder Trusts and how they can benefit your planning, please visit our previous posts.
Being a fiduciary requires putting the interest of the beneficiary over your own interests, no matter what. The person in charge of managing a trust, the trustee, has a fiduciary duty to the beneficiary, which is described by the terms of the trust. Understanding the responsibilities of the trustee requires a review of the trust documents, which can be long and complicated. This is explained in a recent article titled “Estate Planning: Executors, executrix and personal representatives” from nwitimes.com.
An estate planning attorney will be able to review documents and explain the directions if the trust is a particularly complex one.
If the trust is a basic revocable living trust used to avoid having assets in the estate go through probate, duties are likely to be similar to those of a personal representative, also known as the executor. This is the person in charge of carrying out the directions in a last will.
A simple explanation of executor responsibilities is gathering the assets, filing tax returns, and paying creditors. The executor files for an EIN number, which functions like a Social Security number for the estate. The executor opens an estate bank account to hold assets that are not transferred directly to named beneficiaries. And the executor files the last tax returns for the decedent for the last year in which he or she was living, and an estate tax return. There’s more to it, but those are the basic tasks.
A person tasked with administering a trust for the benefit of another person must give great attention to detail. The instructions and terms of the trust must be followed to the letter, with no room for interpretation. Thinking you know what someone else wanted, despite what was written in the trust, is asking for trouble.
If there are investment duties involved, which is common when a trust contains significant assets managed in an investment portfolio, it will be best to work with a professional advisor. Investment duties may be subject to the Prudent Investor Act, or they may include the name of a specific advisor who was managing the accounts before the person died.
If there is room for any discretion whatsoever in the trust, be careful to document every decision. If the trust says you can distribute principal based on the needs of the beneficiary, document why you did or did not make the distribution. Don’t just hand over funds because the beneficiary asked for them. Make decisions based on sound reasoning and document your reasons.
Being asked to serve as a trustee reflects trust. Understanding the responsibilities of the trustee is a serious responsibility, and one to be performed with great care.
The pandemic has taught us how swiftly our lives can change, and interest in having a power of attorney (POA) has increased as a result. But you need to know how this powerful document is and what it’s limits are. It is important to understand what a power of attorney should include. A recent article from Forbes titled “4 Power of Attorney Clauses You Need To Focus On” explains it all.
The agent acting under the authority of your POA only controls assets in your name. Assets in a trust are not owned by you, so your agent can’t access them. The trustee (you or a successor trustee, if you are incapacitated) appointed in your trust document would have control of the trust and its assets.
There are several different types of POAs. The Durable Power of Attorney goes into effect the moment it is signed and continues to be valid if you become incapacitated. The Springing Power of Attorney becomes valid only when you become incapacitated.
Most estate planning attorneys will advise you to use the Durable Power of Attorney, as the Springing Power of Attorney requires extra steps (perhaps even a court) to determine your capacity.
All authority under a Power of Attorney ceases to be effective when you die.
There are challenges to the POA. Deciding who will be your agent is not always easy. The agent has complete control over your financial life outside of assets held in trust. If you chose to appoint two different people to share the responsibility and they don’t get along, time-sensitive decisions could become tangled and delayed.
Determine gifting parameters. Will your agent be authorized to make gifts? Depending upon your estate, you may want your agent to be able to make gifts, which is useful if you want to reduce estate taxes or if you’ll need to apply for government benefits in the near future. You can also give directions as to who gets gifts and how much. Most people limit the size of gifts to the annual exclusion amount of $15,000.
Can the POA agent change beneficiary designations? Chances are a lot of your assets will pass to loved ones through a beneficiary designation: life insurance, investment, retirement accounts, etc. Do you want your POA agent to have the ability to change these? Most people do not, and the POA must specifically state this. Your estate planning attorney will be able to custom design your POA to protect your beneficiary designations.
Can the POA amend a trust? Depending upon your circumstances, you may or may not want your POA to have the ability to make changes to trusts. This would allow the POA to change beneficiaries and change the terms of the trust. Most folks have planned their trusts to work with their estate plan, and do not wish a POA agent to have the power to make changes.
The POA and the guardian. A POA may be used to name a guardian, who would be appointed by the court. This person is often the same person as the POA, with the idea that the same person you trust enough to be your POA would also be trusted to be your guardian.
The POA is a more powerful document than people think. You need to know what a power of attorney should include to make it work the way you want. Downloading a POA and hoping for the best can undo a lifetime of financial and estate planning. It’s best to have a POA created that is uniquely drafted for your family and your situation.
We are estate planning and probate attorneys and we experience death weekly. The saddest aspect of our work is knowing that most, if not all, of the great stories of our clients’ lives have died with them. This can be heartbreaking for future generations. The solution to this dilemma is to capture those memories NOW. In episode 7 of The Estate of the Union podcast, Brad interviews Michael O’Krent with Life Stories Alive.
Mike’s company videotapes life stories so that generations of family members can grasp the essence of the individual loved one, not just the inheritance. Brad and Mike discuss what to expect when recording your life story and how the process works with Life Stories Alive. Brad talks about his personal experience recording his story for his loved ones, and Mike shares some touching stories of how impactful these video presentations can be for both the storyteller and the viewer.
Take the time to record these special stories while you can. The Money will be spent, but the memories can endure forever.
In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insight into estate planning, making an often daunting subject easier to understand.
It is Estate Planning Made Simple!
The Estate of The Union can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. Please click on the link below to listen. We hope you enjoy it.
If you would like to learn more about Michael O’Krent and Life Stories Alive, please visit their website www.lifestoriesalive.com
Texas Trust Law focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization.
If you are the parent or guardian of an adult who depends upon you financially, estate planning is critical. There are things you need to know when creating a trust for a dependent adult. When you can’t care for your child, an estate plan which includes funding and guidance protects your dependent and ensures that they will receive the care they need, reports Parents in the article “Wills and Trusts for Adult Dependents.”
First, you need a will. This fundamental estate planning document lets you be very specific about what you want to happen after your death. It also nominates guardians for minor and adult children and pets. Wills can be used to manage decisions that apply to everyone. If there is no will, the laws of your state and a court make all of the decisions, not you.
If you have dependents, the will lets you choose who you want to serve as a guardian for your children. If you are already the legal guardian of a dependent adult, the will can be used to name the person to take over for you. Choose guardians who are up to the responsibilities that come with caring for a dependent adult.
The will is used to manage assets after your death. However, in the case of a dependent adult, you may also need a Special Needs Trust. If you pass assets directly to a dependent adult and they are receiving certain government benefits, the inheritance may make them ineligible for benefits and services.
A Special Needs Trust allows you to earmark a certain amount of money for their care. An estate planning elder lawyer will be familiar with this type of trust and help you create it.
If your dependent adult does not receive any means-tested benefits but is not able to manage an inheritance, then a trust can be used to hold assets to be controlled by a trustee, who might also be a guardian or caretaker.
A will and trusts are central to a well-prepared estate plan. Working with an estate planning attorney will give you the opportunity to consider how you want to distribute assets while you are living and after you have died. It also gives you the opportunity to name a personal representative, or executor, who will manage your estate after your death and be in charge of making sure that your wishes, as expressed in your will, are followed.
Creating a trust for a dependent adult can be more complex than wills and allow for a greater degree of control over assets. The trust is a legal entity to benefit others, and a trustee is the person named to be in charge of the trust.
Bear in mind that anything passed through a will has to go through a court process known as probate. The will has to be validated and the executor has to be approved by the court. Any assets in the trust are already outside of your estate and do not go through probate.
Information in our blogs is very general in nature and should not be acted upon without first consulting with an attorney. Please feel free to contact Texas Trust Law to schedule a complimentary consultation.
