Estate Planning

Common Mistakes Women Make in Estate Planning!

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A large amount of women hold a substantial amount of wealth in this country, however, many do not take the correct steps to protect their assets.  It’s a simple fact that Women live longer than men!  By the time a woman is 85+ she will outnumber men by 25% and she is 9 times more likely to live past 100 than a man.  When the husband gets ill, becomes disabled or passes away, it is the WIFE who is left to deal with the couples finances.  Therefore, it is necessary for women to get more involved in the couple’s finances well before any of these life changing events occur.  What should a Woman avoid?

Putting off Estate Planning. Probating an estate without a will takes longer, cost more money, requires more court involvement and the state law determines who gets your possessions. But the biggest reasons you should have a will is to keep the family harmony! There’s no excuse for putting your family through the drama of trying to probate an estate without a will!

Trying to Do It Yourself! There are numerous ways to transfer assets upon death and a will is just one of them!  There are also numerous documents you may need depending upon your own circumstances.

  • Who gets your stuff once you pass?
  • Who gets the responsibility of being your executor and what does that mean?
  • Who makes decisions for you upon disability or incapacitation?
  • Who makes burial decisions once you pass?
  • Do you need a Special Needs Trust now or upon your death so your spouse or child doesn’t lose disability benefits?

These are all good questions to iron out with a professional!  The cost of preparing a will by using a professional should not prevent you from being prepared.  You can spend a little now or a lot later!  However, the main reason you should leave it to the professionals is because doing it your self means there is good chance that you will make a mistake!  I have had small and large estates where the person used a computer form incorrectly and it left us trying to figure out what they wanted to accomplish and cost the beneficiaries additional unnecessary expenses. I have also had clients write their own will giving away each of their assets to a specific person, but they forgot about after acquired items or potential future litigation.

Failing to Understand your financial situation. Many women find themselves lost when their husband passes away or becomes incapacitated because he was the one that handled the finances. While you may not want to be the one to deal with the bills on a daily basis you should always know what assets you have as a couple, how those assets are disposed of upon death, and what your estate plan is as a couple.

Failing to Probating Husband’s Estate.  Women are more likely than men to put off probating their spouses estate.   Many women think that they get it all so there is no need to probate, but this always causes problems down the road.  It is necessary to probate the will to transfer assets such as, bank accounts, investment accounts and real estate.  What happens when you want to sell or refinance your house and it is still in both names?  What happens when you pass away and your children try to probate your estate and there are joint accounts or property?

In Texas, a Will can only be probated within 4 years of death unless there are extenuating circumstances and then it can only be probated as a Muniment of Title.  So waiting to probate a Will seriously limits your options!   Do you really want your children to have to deal with your husband’s estate years down the road?  Do you really want the Court to tell you that you now only own one-half of your house because you failed to probate?

If your husband doesn’t have a Will, then it is important to probate now rather than later!  The main reason is because you or your children may not be able to find witnesses in 10 or 20 years.  So as you can see it is very important to consult an attorney after your spouse dies to discuss the ways you can go about making sure you preserve your rights.

Failing to Consider the Possibility of Incapacity.  Women live longer and are more likely to be the caregiver of their husbands or parents, so it is likely that a woman is going to have to deal with long-term care during her lifetime. For this reason, it is important for women to be informed, involved and understands her financial affairs.  Here are a few questions you need to discuss with your estate planning attorney are:

  • Do I need a Guardianship Designation? It lets you chose now rather than allowing a Court to decide who will have control over your person and finances if you become incapacitated or the POA’s are not enough.
  • Do I need to provide for a Special Needs Trust for disabled or incapacitated spouses or children? If your spouse or child receives financial assistance, you would not want to leave them assets that would affect this assistance.
  • Do you need a Lady Bird Deed? This tool could help preserve your home to be left to your children at your passing being used to pay your creditors.

Failing to Consider Burial Plans.  Since you will likely outlive your husband, have you considered that it will be up to you to make the funeral plans after his passing.  Many women are too upset about their loss to handle these arrangements so it is left up to the children or funeral home.  But what if you and your husband could make these plans in advance of either’s passing?  This doesn’t mean you have to purchase burial plots and pay for burial plans!  This just means you have a written plan in place and designate an agent to carry out this plan after you are gone.  It makes sense to have such a plan because it is easier on the remaining spouse who has to deal with the loss or with the spouse’s other family members.

Texas Durable Power of Attorney

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The Texas Legislature adopted a new Durable Power of Attorney form, effective as of January 1, 2014.  Click here to download the Durable Power of Attorney

NOTICE: This form is being provided for convenience only and is not intended to be construed as offering legal advise. You should always consult an attorney about giving someone your power of attorney!

Choosing your agent for a POA is serious stuff!

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Many people know they can find the Statutory Power of Attorney form online.  But what they do not usually understand is the extent of the authority they are giving to their agent and how the form needs to be filled out properly to be accepted once incapacity occurs.

Giving a person agency over your financial affairs means they step into your shoes and can do all kinds of things, such as, sell your house, cars, spend your money, make investments on your behalf, etc. Therefore you should makes sure you do not not give away too much authority!

Texas law does provide that an agent under a power of attorney owes the principal a fiduciary duty.  However, many times it is all but difficult to recover lost money or assets because the agent has already spent the money or disposed of the assets.  Power-of-attorney

Therefore, the important lesson is to choose your agent carefully and use an attorney to make sure the POA does exactly what you need it too!

 

Does a Transfer on Death deed interfere with spouse’s homestead right?

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I was recently asked a specific question as to how the Transfer on Death deed affects the spouses homestead rights.

Example: A party is married and they execute a transfer on death deed to their children on their separate property which is their homestead.

The deed would not displace the spouse at death because the homestead right is attached to the separate property and community property. Therefore, while the children might own the property upon their parent’s death, the spouse has the right to live in the house.

 

Estate Planning advise from Warren Buffett!

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Blum

Marvin Blum (pictured on the far left) generated quite a bit of media coverage this past weekend when he posed a question to Warren Buffett at the Berkshire Hathaway annual meeting, where an estimated 35,000 shareholders gather each year in Omaha. Marvin’s question and a summary of Warren Buffett’s comments are below.

“I’m an estate planning lawyer, and it’s interesting as we wrap up today to ponder that the baby boomer generation is about to pass along the greatest transfer of wealth in history. I can design plans that eliminate estate tax and pass down great amounts of wealth to the next generation, but many of my clients come to me and say they want a plan like Warren Buffett’s, leaving their kids enough so they can do anything, but not so much that they can do nothing. Now they ask me, and I am asking you, ‘How much is that, and how do you keep from ruining your kids?'”

The following is a brief summary of Mr. Buffett’s insightful response:

• I think that more of our kids are ruined by the behavior of their parents than by the amount of the inheritance.
• I rewrite my will every five or six years.
• When your children are old enough (mid-thirties or thereabouts), you should explain your estate plan to them – It’s crazy for them to read the will for the first time after you’re dead.
• If your child is named as executor, your child should understand how to carry out his or her obligations that are embodied in the will before I sign that will, and we should talk it over.
• Rather than creating a dynasty of sorts, if you’re very wealthy, the money can have far more utility to society than to create a situation where your kids don’t have to do anything in life except call a trust officer once a year and tell him how much money they want.
• If you’re going to leave each of your children different mixes of assets, you want to make sure your definition of equality is understood by the children.

Marvin’s question drew immediate attention in the news media with coverage in The Wall Street Journal, The New York Times, The Washington Post, Bloomberg Business Week, The World-Herald, and commentary from these sources was syndicated and reprinted globally by many other outlets.

Article was provided by the Blum Firm, P.C.

Why you need a directive to physican!

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Many of you know I am very adamant that all my clients have a Physician’s Directive (Living Will), so I never charge for the document.  Why is it so important you ask?  Well, there are various reasons and scenarios that come into play that many people just do not think about.  Here is a wonderful article by attorney Harvey Cox that does a great job of illistrating why end of life decisions are so important, regardless of your age!

directive-to-physicians

The Difficulty of Life
or Death Decisions
By: Harvey Cox

Understanding the Oil & Gas world – Part II

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PART II OF OIL & GAS OUTLINE

DEFINITIONS

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Here is Part II of the Oil & Gas Outline provided by the author Derek Fletcher a Managing Director and Wealth Strategist at U.S. Trust, Bank of America Private Wealth Management. I have not altered the context of Mr. Fletcher’s work, however, I have reduced it down to include only the basic information and broken the outline into two separate blogs.

As is the case with many industries, the oil and gas business has adopted a specialized, unique and, in some instances, humorous vocabulary. Below are some of common terms utilized in the oil and gas business:

1. The Players.

a. Landman. A person in the oil and gas industry whose responsibilities include acquiring oil and gas leases, examining and curing titles and managing an oil company’s leases. This term applies to both men and women and it is not advisable to use the terms ‘Landwoman” or “Landperson” !

b. Lessee. The person entitled under a lease to drill and operate oil and gas wells. The lessee will pay the lessor a royalty and retain the balance of the production. The lessee is commonly referred to as the “operator” or “working interest owner.”

c. Mineral interest Owner. The owner of the minerals under a tract of land. The mineral interest owner has the right to extract the minerals or lease that right to another party. The mineral interest owner has a right to bonus payments, delay rentals and royalties.

d. Operator. The working interest owner who is responsible for the daily operations after production has commenced.

e. Purchaser. The company that remits payment to the various interest owners, including the royalty owners and working interest owners.

f. Surface Owner. The owner of the surface estate. While a party can own both the surface and the minerals, the term “surface owner” generally means a person who owns only the surface and none of the minerals.

2. The Economics.

a. Bonus. The consideration paid by the lessee for the execution of an oil and gas lease by a landowner. If the bonus is to be paid out in installments over a number of years, it is referred to as a “deferred bonus.”

b. Carried interest. A fractional interest in oil and gas (usually in the form of a lease) where the owner of such interest has no obligation for the operating costs. Instead, the owners of the remaining fractional interest in the property bear the costs and reimburse themselves out of the production proceeds, if any.

c. Carved Out Interest. An interest created out of a greater interest (e.g., the creation of an overriding royalty interest out of a working interest).

d. Delay Rental. Consideration paid by the lessee to the lessor for the right to delay drilling operations or production during the primary term of the lease.

e. Depletion. The exhaustion of a reservoir (or the reduction in value of the reservoir) caused by the extraction of minerals.

f. Nonparticipating Royalty Interest. A royalty interest which does not “participate” in (i) bonus or rental payments, (ii) the right to execute leases or (iii) the exploration and development. Instead, it entitles the owner to an expense-free interest in any oil and gas if and when produced.

g. Overriding Royalty Interest. This is an interest that is similar to a royalty interest but which is carved out of the working interest of an existing lease. It is commonly expressed as a fraction of production from the lease but is free of exploration and development costs.

h. Production Payment. A production payment is a right to minerals in place that entitles its owner to a specified fraction of production for a limited period of time, or until a specified sum of money or a specific number of units of mineral has been received.

i. Royalty Interest. The interest in production reserved by a mineral interest owner upon entering an oil and gas lease. The royalty is commonly referred to as a fraction of the total production of oil and gas (or the proceeds) and is free of exploration and development costs. Historically, a standard oil and gas royalty was 1/8 – although it now has a range of 1/8 to 1/4.

j. Shut-in Royalty. A payment made when a well that is capable of producing in paying quantities is shut-in due to the lack of an available market. The payments are generally expressed as a particular amount per acre. These payments enable the lessee to keep the lease alive without actual production for a reasonable period of time.

k. Working Interest. Interest under a lease which gives the lessee the exclusive right to explore and develop the property. In exchange for this exclusive right, the lessee must bear all costs associated with such exploration and development.

3. Miscellaneous Terms.

a. Barrel of Oil. 42 U.S. gallons of oil at 60 degrees Fahrenheit weighing approximately 306 pounds. A barrel is the most common unit used for measuring crude oil.

b. Casing. Round steel tubes of varying sizes, weights and grades that can be interconnected into a string. Casing is run into an open borehole and cemented into place. It is the outermost tube in a wellbore and prevents the borehole from caving in.

c. Casinghead Gas. Is basically the gas produced from an oil well. It is a gaseous hydrocarbon which is found in liquid form prior to production but which converts to a gaseous form upon production.

d. Condensate. Liquid hydrocarbon which is found in gaseous form in the formation prior to production but which converts to liquid form upon production. Generally speaking, this is the oil produced from a gas well.

e. Crude Oil. Hydrocarbons found in liquid form in the formation prior to production and remaining in liquid form upon production.

f. Directional Drilling. The drilling of a well that materially departs from vertical drilling (e.g., horizontal drilling).

g. Division Order. A contractual agreement between the party distributing production proceeds and the various interest owners setting out the proportions of production that each owner is entitled to receive. The division order generally requires the payee to stipulate as to the size of the interest involved, warrant title to the same, agree to prove title to the payor’s satisfaction if a dispute arises, indemnify the payor for payments made in accordance with the terms of the division order and other related matters.

h. Dry Hole. A well determined to be incapable of producing in paying quantities.

i. Farmout. An agreement between operators whereby the owner of a lease transfers the development rights (or some portion of it) to another operator in exchange for consideration (often a payment per acre, an overriding royalty interest or a reversionary working interest).

j. Executive Right. The power to make executive decisions regarding the mineral estate, including the power to lease. The executive right can be severed from other incidents of mineral ownership.

k. MCF. Abbreviation for 1,000 cubic feet of gas. MCF is the most common unit used for measuring natural gas.

l. Mud. Drilling fluid which is pumped down the drill pipe through the drill bit and circulated back to the surface. The purpose of this process includes maintaining hydrostatic pressure, lubricating the drill bit, carrying rock cuttings to the surface and preventing the pipe from getting stuck in the borehole.

m. Natural Gas. Hydrocarbon found in gaseous form in the formation prior to production and remaining in gaseous form upon production.

n. Permeability. A measure of the ease (or difficulty) with which a fluid can move through a porous formation (such as shale, sandstone or limestone).

o. Pooling. The joinder of several small tracts for purposes of securing a drilling permit.

p. Porosity. The ratio between the volume of pores within a formation to its total volume. In general terms this is the space in a formation where oil can be held.

q. Primary Term. The period of time during which a lease can be kept alive even though there is no production in paying quantities.

r. Secondary Recovery. Application of various liquids, gasses, heat, etc. at a time in which a reservoir has reached the exhaustion of the natural energy needed to extract the oil.

s. Secondary Term. The period of time during which a lease can be kept alive by virtue of production in paying quantities.

t. Section. An area of one square mile – which equals 640 acres. Sections are divided into quarters – each representing 160 acres.

u. Tertiary Recovery. Use of chemicals or energy to enhance recovery methods for the production of oil or natural gas.

v. Transfer Order. If an interest subject to a division order is transferred, the party distributing production proceeds will require a transfer order to be executed by the transferor and transferee. The transfer order will describe the interest being transferred, the date of the transfer as well as making the transfer subject to the original division order.

w. Tubing. Like casing, tubing is round steel tubes of varying sizes, weights and grades that can be interconnected into a string. Tubing runs inside the casing and is the path through which oil and gas is brought to the surface.

x. Unitization. The joint operation of all or a portion of a producing reservoir often to make secondary recovery operations more economically feasible.

y. Wildcat. An exploratory well that is drilled in an unproven area.