Estate Planning

Who makes the funeral decisions?

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In Texas, if the Decedent did not leave any written instructions, then the Texas Health & Safety Code authorizes the following persons, in the priority listed, to control disposition, including cremation. They also bear liability to pay the reasonable cost of burial, from their own funds if the estate does not have adequate funds. They are:

1) The surviving spouse;

2) Any one of the surviving adult children;

3) Either one of the decedent’s surviving parents;

 4) Any one of the decedent’s surviving adult siblings; or

5) Any other adult who would inherit under the intestacy laws.

However, if the Decedent left instructions, they get top priority!  Legally, a person may provide funeral directions in the following:

1)       a Will;

2)       a pre-arranged funeral; or

3)       a written instrument signed and acknowledged by that person.

If the directions are in the Will, then for the limited purpose of handling the funeral there is no need that the Will first be probated. The person authorized to control the disposition must promptly carry out the directions to the extent that they are affordable to the estate or the Agent. If that alleged Will is later denied probate or is declared invalid, the funeral directions remain valid to the extent they were acted on in good faith. Again, probate of the Will is not required – just the appearance of a document that purports to be the Will and is acted on in good faith.

The directions might also be in a legal document called an “Appointment of Agent to Control Disposition of Remains.” It is essentially a power of attorney, but it takes effect at the moment of death, contrary to typical powers of attorney that cease at the moment of death.  That Appointment document may include very explicit and legally binding instructions, including the requirement of cremation or a traditional funeral. It must be signed by the principal (and acknowledged before a notary) and it must be signed by the agent. When the agent signs it, the agent is also agreeing to pay for the funeral if the estate’s funds prove inadequate.

Keep in mind that the funeral home can legally refuse to accept the Decedent’s remains or to conduct the funeral or cremation until it receives a court order or other suitable confirmation that the dispute has been resolved. So don’t put your family through the fuss of deciding what your burial plan will be, prepare ahead of time!

Do you need a Lady Bird Deed?

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A “Lady Bird Deed” is a nickname given to an Enhanced Life Estate Deed, which is used to convey property to your heirs outside of probate. This deed is commonly used in Texas because it allows the grantor to transfer property to beneficiaries while retaining a life estate in the property coupled with the power to sell, convey, or mortgage the property without the beneficiaries’ consent. The beneficiary of the deed does not get any rights to the property while the current owner is alive.  However, these deeds are outdated!

In Texas you do not need a Lady Bird Deed because the Texas Legislature created a Transfer on Death deed with a new law.  This new law allows property to transfer at death to someone else, so no probate is needed.  A Transfer on Death deed conveys property outside of probate. Avoiding probate allows for you to avoid court costs and administrative costs to deed the property to your beneficiary. Under current Texas law, it also excludes the real property from Medicaid estate recovery.

The Transfer on Death deed can only transfer real property (ie home, commercial property, etc) and the deed must be formal in all ways and filed with the local real property records office.  Anyone can sign a Transfer on Death deed but they must have the capacity to understand what they are doing or the deed could be found to be invalid.  You should consider retaining an attorney to prepare this deed as the cost would not be large.

When should you amend your trust?

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Many times people create trust during their lifetime and they face situations that may require amendments to the trust.  If changes are required to your trust, a trust amendment is the proper way to make the changes. Handwritten marks and notes on the trust document are not considered legal changes. An amendment specifically states what paragraphs of your trust is being changed, and sets forth the new trust language. The amendment may be short, or it may be so drastic that it actually changes the entire trust, from the first word to the last.

What are some reasons why you may need to amend your trust?  Some trusts are completely out-of-date, or irrelevant due to changes in the statutes, case law, or just poorly written. Some trusts may have provisions that are illegal, or contrary to the client’s wishes. Some people need their trusts revised or updated because of changes in their wealth or family circumstances.

Lengthy or complicated trust amendments may be difficult, costly, time consuming and hard to follow for future trustees. Therefore, a good estate planning attorneys will recommend a trust restatement. A trust restatement is a document which completely restates the entire trust agreement, and a new trust is created through the amendment and restatement.

Although a restatement is basically a new trust in the form of a trust amendment, the name of the old trust and the date that it was established remain the same.  Therefore, there is no need to obtain a new tax identification number, move funds to new accounts, change deeds, etc.

With the many tax law changes in recent years, concerns about future ill health and incapacity, or with changes in your family situation, it is recommended to have your trust reviewed by an attorney. A simple amendment may be all that is required or it may be necessary and more efficient for the attorney to restate the entire trust.

Dying without a Will in Texas.

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If a person dies in the State of Texas without a will, there several options for the person who decides to handle the estate. Choosing the correct option depends upon the assets involved and if the heirs are in agreement on certain matters.

If no formal administration of the estate is necessary, there are two options: 1. Small Estate Affidavit (estates of $50,000 or less); or 2. Proceeding to Determine Heirship. These are both pretty simple process that can be done relatively cheaply with the help of an attorney.

If a formal administration is necessary, then there are still two choices: 1. Independent Administration (if all heirs agree on the appointment of an IA); or 2. Dependent Administration (when all the heirs do not agree on the appointment of the administrator; more expensive route).

If either of these latter two options is chosen, then along with the administration filing/proceeding, the administrator will also need to file an Application to Determine the Heirs (and the appointment of an ad litem attorney to assist the Court in determining the heirs of the estate).

To determine which step is necessary, you should consult an estate planning attorney.

Inheritance Rights of Adopted Children

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ImageThe inheritance rights of adopted children are protected when a parent dies without a will. Under the Texas Probate Code, a child adopted by the decedent is treated the same as a natural-born child. Therefore, the adopted child can inherit from his or her adopted parents and vice versa.

If the decedent allowed their child to be adopted, the child can still inherit from his or her natural parents.  However, the natural parents cannot inherit from the child if the child dies without a will. This is an important consideration today when so many children are adopted.

Furthermore, under Section 162.507 of the Family Code, a person who is adopted as an adult, inherits from their adoptive parents but not their biological parents and vice versa.

Texas Business Franchise Tax

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Small business owners in the State of Texas are being inundated with costs which could put them out of business. One of those new costs, is the ever changing Texas’ Franchise Tax. The Texas franchise tax is a privilege tax imposed on each taxable entity formed or organized in Texas or doing business in Texas.

The revised franchise tax applies to partnerships (general, limited and limited liability), corporations, LLCs, business trusts, professional associations, business associations, joint ventures, incorporated political committees and other legal entities.

Who has to pay the Franchise Tax? Most business who make more than the $1,030,000 (the no-tax-due threshold) for January 2012 through January 2014 tax years. On January 1, 2014, the no-tax-due threshold is scheduled to be $600,000. Keep in mind that the no-tax-due threshold is calculated taking the lowest of three calculations:

  • total revenue minus cost of goods sold;
  • total revenue minus compensation; or
  • total revenue times 70 percent.

On January 12, 2012, the Texas Supreme Court dismissed the Nestle case, In Re Nestle USA, Inc., Switchplace, LLC, and NSBMA, LP, challenging the revised franchise tax, the so-called “Margin Tax,” on constitutional grounds. On February 10, 2012, the Texas Supreme Court rejected a second challenge by Nestle Case to the Texas franchise tax http://www.supreme.courts.state.tx.us/historical/2012/feb/021012.htm.

So for now, small business owners will just have to suffer through trying to calculate and pay this complicated business tax.

10 things to do if you won the powerball

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Last night’s Powerball jackpot was over $325 million. If you won the jackpot or any other lottery jackpot, you might be thinking that you won’t ever have to worry about money again–right?

Wrong!

With good money management you–and your heirs–could live handsomely for many, many years. But from the moment that you claim that prize, you will be descended upon by vultures who want a hefty helping of those winnings. And if you didn’t have smart money habits up until now, you could easily turn out to be your own worst enemy by quickly squandering the fortune.

Forbes has written a wonderful article about the 10 things you should think about if you win!  http://www.forbes.com/sites/deborahljacobs/2012/02/11/10-things-to-do-when-you-win-the-powerball/