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Estate planning in anticipation of divorce!

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Trusts can be useful tools in a divorce proceeding especially when a spouse has a direct or indirect interest in a trust. Counsel should identify specific trust features that could make a difference and impact whether trust assets can be reached, potentially affecting alimony and property division determinations.

Within the context of a divorce, trust and estate attorneys should understand specific discovery techniques family law practitioners may use to determine whether a spouse has an interest in a trust, whether that interest is material, and what attack can be made against the trust.  The key is make sure your attorney is knowledgeable before you do any estate planning in anticipation of a divorce.

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Landmines to Avoid When Taking Money from Family and Friends

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I constantly have clients that open small businesses and they tell me they are using money from friends or family members. I try to warn them about the downside of such arrangements and how to avoid future problems. There are several big mistakes that most people just do not think about in the beginning! However once a problem arises it is usually too late!

Recently I found this great new article that sums it up quite nicely.
Four Landminds to Avoid! by NFIB.com
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I do not usually endorse specific businesses but if you are a small business owner you should seriously think about joining an organization called NFIB (“National Federation Of Independent Business”). This organization was formed to bring together small business all over the country and give them a very big voice!

SURVIVING SPOUSE’S HOMESTEAD RIGHTS

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On the death of the husband or wife, leaving a spouse surviving, the homestead shall descend and vest in like manner as other real property of the deceased.” TX PROB CODE § 283. Also, the surviving spouse is entitled to retain a constitutional survivor’s homestead right for life or for so long as the survivor elects to use the homestead. This right is not affected by the deceased spouse conveying the property to a third party through their will.

Here are a few questions which are regularly asked with regards to surviving spouse’s homestead rights:

1. Can the deceased spouse’s administrator force the sale of the house?
This constitutional right protects the homestead against forced sale and partition so long as the surviving spouse chooses to use and occupy the homestead. TX PROB. CODE § 284. The homestead right protects the survivors homestead from forced sale by creditors and from partition among the heirs and beneficiaries of the homestead claimant.

2. Does the surviving spouses rights end when move out of the property? Have they abandoned their homestead rights?

The surviving spouse’s right to occupy or use the homestead for life or for so long as the surviving spouse chooses to do so, but it only lasts as long as the spouse occupies or uses the homestead property. If you can prove the surviving spouse abandoned the house, then the beneficiaries could take possession. It is not required that the surviving spouse continuously reside in the property to be considered as using it. For example, the survivor could rent the land out to satisfy the use requirement.

3. Who is responsible for maintenance on the property?
The surviving spouse will be responsible for making repairs and generally maintaining the property, but the duty to repair does not go so far as to require that the property be maintained in the same condition that existed when the homestead right was originally established.

4. Who is responsible for the mortgage on the property?
A purchase money lien is not subject to the homestead exemption, thus the property could be foreclosed upon default. TX PROP CODE § 41.001(b)(1). If the heirs wish to retain the property, they are responsible for the mortgage.

5. Who is responsible for the insurance premiums on the property?
The surviving spouse is not responsible to insure the property against loss. Even if the surviving spouse did insure the property, the insurance proceeds upon fire or damage would be made to the surviving spouse and not to the heirs/beneficiaries. The heirs/beneficiaries (children) would be responsible to carry insurance on the property to preserve their asset.

6. Who is responsible for paying the taxes on the property? The heirs/beneficiaries are responsible for all tax payments, even if the surviving spouse resides in the house. The homestead is not exempt from forced sale to pay delinquent taxes. TX PROP CODE § 41.001(b)(2).

Disclaimer: The content of this article is provided for informational purposes only and does not constitute legal advice.

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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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.

Enforeceable contracts made by email

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With today’s electronic world, the issue of whether you can create a binding contract through email signatures often comes up in business.  In Texas, the elements that are generally required to create an enforceable contract are (1)  an offer; (2) acceptance in strict compliance with terms of the offer; (3)  a meeting of the minds with respect to both the subject matter of the agreement and all of its essential terms;  (4) a communication that each party has consented to the terms of the agreement;  (5) for a written contract, execution and delivery of the contract with an intent that it become mutual and binding on both parties; and  (6) consideration (the giving of something of value).

In Texas, a contract may be written or oral, unless the contract is required by law to be in writing.  A written contract must spell out the agreement and be signed by both parties.  An example of a contract required to be in writing is a settlement agreement in a lawsuit, which must also be signed by the parties and filed with the court to be binding.

The Texas Uniform Electronic Transaction Act allows for electronic signatures to create an agreement.  Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties’ conduct.   UETA allows for the enforceability of electronic signatures once the parties to a transaction have decided to carry on dealings by electronic means. In Texas, the Courts have consistently held that an email signature is comparable to a manual signature. Therefore, if someone makes an offer to settle a matter with you and you then accept that offer, all by email, then a contract has been created.

A party that agrees to conduct a transaction by electronic means may refuse to conduct other transactions by electronic means.  If you no longer want to transact business by electronic means, you just need to notify the other party in writing that you no longer agree to conduct business by email.

If you want to ensure you do not create a contract by email, you might consider putting a disclaimer on your emails that states:  “This email is not intended to create or form a contract between the parties”.  This may be ineffective if the substantive body of the email contradict and override this statement, so I suggest starting your email out with this language.

Understanding the Texas Medicaid Estate Recovery Program (MERP)

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The Texas Medicaid program pays almost half the cost of all nursing home and other long term care expenses.  So in March of 2005, Texas implemented the Medicaid Estate Recovery Program (MERP) to comply with federal laws.  This program allows the state to file a claim against the estate of a deceased Medicaid recipient, age 55 or older, who received payments for certain long-term care services.  Claims can include the cost of services, hospital care and prescription drugs paid for by Medicaid.  However, the state will not file claims in the following situations:

a)            where there are estates valued less than $10,000,

b)            where the costs were less than $3,000,

c)            where the cost of selling the property would be result in no value.

elderly_wf_gardenThe state will not file a claim when there is a surviving spouse, there is a surviving child under 21 years of age, there is a child who is blind or totally disabled, or where there is a an unmarried child living in the Medicaid recipient’s homestead for at least one year prior to the death.  The state also allows a hardship waiver to be filed in certain situations.

The State will not collect certain types of assets that fall outside a person’s estate.  Therefore it may be necessary to do your estate planning with consideration given to Medicaid rules.

The personal representative of an estate (executor or administrator) is required by law to give the State of Texas notice of Medicaid recipient’s death thereby allowing the state to file a claim.  Such a claim by the State of Texas is a Class 7 claim which is paid after funeral bills, administration expenses, secured claims, child support, taxes, and it is paid before all other creditors and before the beneficiaries are compensated.

The Department of Aging and Disability Services administers the MERP and they provide a wonderful guide for those with additional questions.

http://www.dads.state.tx.us/news_info/publications/brochures/DADS121_merp.html