by Elizabeth Sabol | Sep 14, 2021 | Uncategorized
Any well-crafted estate plan must include planning for 401ks and IRAs, and with good reason: in 2017, the U.S. Census Bureau estimated that nearly one-third of family wealth is held in retirement accounts. Understanding how those assets are transferred after your death is a vital part of planning for your family’s future.
First, it’s important to realize that your will or revocable trust may not control how those assets are transferred. Most retirement accounts are considered non-probate assets, meaning the account owner will be asked to name the beneficiary who receives these after your death. Your will or estate plan has no bearing on how these assets pass, so it’s crucial that you discuss your assets with your attorney to make sure all pieces of your estate work together to accomplish your goals. It’s very common for owners to name these beneficiary designations when the account is established but forget to update these as circumstances change. If you haven’t looked at these in a while – and it’s even more critical if you’ve been married, divorced, or had children in the intervening years – it’s a good idea to contact your account custodian to revisit the designations today.
Second, beneficiaries should be aware of the tax consequences of inheriting pre-tax accounts. Generally, for tax-deferred accounts like traditional IRAs or 401ks, beneficiaries will need to report income in the year the accounts are paid out. The SECURE Act altered many of the rules around how quickly the balance of the account must be paid to any given beneficiary. An experienced estate planning attorney can walk you through this complicated set of rules and identify opportunities to minimize taxes to your heirs.
Lastly, account owners should realize that simply updating the named beneficiaries on the account is not the end of the story. Certain workplace-sponsored plans are governed by ERISA, which requires that a surviving spouse be named as a beneficiary. In community property states, like in my home state of Texas, spouses have a community property claim even when the account is titled only in one spouse’s name. Naming someone other than your spouse can trigger litigation and fighting among your heirs. Further, naming minor or disabled children may present challenges if the beneficiary is not legally permitted to own property or qualifies for government assistance. The wisest course of action is to work with your estate planning attorney and financial advisor to develop a comprehensive estate plan that makes a plan for all of your assets.
by Elizabeth Sabol | Aug 27, 2021 | Uncategorized
Speaking from experience, the cost of pet ownership can be tremendous. There was the few years where I treated my cat for lymphoma, requiring regular chemotherapy and blood tests; my beloved first dog, Penny, underwent bilateral knee surgery; and nearly every pet I’ve owned has needed teeth cleaning or removal at some point in their lives. Once you add in the cost of regular wellness visits or flea & heartworm prevention, my pets have easily cost thousands of dollars in vet bills alone. I was happy to pay it – I’m an animal lover and had set money aside for that purpose. But what if something happens to me? Is it fair to expect my family to pay the equivalent in a mortgage payment to take care of my animals after I’m gone? Enter the pet trust.
A pet trust is a part of an animal lover’s estate plan, where the owner sets aside funds for their pets’ care and names a person to take custody of the animals owned at death. The caretaker has access to the funds to pay for vet bills and regular expenses. The owner can specify the kind of care their pet should receive, what happens if the caretaker can no longer take care of the animal, and what happens to the money after your pet dies. Your estate planning attorney can help you decide how much should be set aside, considering the overall value of your estate, your pets’ life expectancy, and what kind of care you want your pet to receive.
Beyond writing a pet trust into your will or revocable trust, you should also consider what happens to your pets if you’re unavailable after an accident or illness. The ASPCA recommends pet owners carry a Pet Card alerting first responders that you have a pet at home, with emergency contacts who can step in during an emergency. You should also consider drafting a summary document that names your pet’s medicines, care instructions, and veterinarian contact info to guide your caretakers through your incapacity. You should leave this document in a secure location where it’s likely to be found (it’s a good idea to keep this near your estate planning documents). Your power of attorney should also explicitly grant your agent the authority to spend funds on the pet’s care or place with a long-term caregiver.
by Elizabeth Sabol | Aug 27, 2021 | Uncategorized
Most people know the state provides default rules on how property gets divided after death; it’s easy to assume that a will isn’t necessary and families can sort it out after death. Wrong! A will makes the process much, much easier on your family. Here are five main reasons you should leave an estate plan for your loved ones:
1. Increased costs and delays in probate. When a person dies without a will but leaves an estate that must be handled through probate, Texas courts will almost always require additional procedures to determine who the decedent’s heirs are. Referred to as a Declaration of Heirship, this usually entails appointing a court-appointed attorney to investigate the decedent’s family relationships. Two people will have to give testimony as to the status of the decedent’s heirs; these people should have no claim on the decedent’s estate, so tracking down disinterested witnesses who knew the decedent well enough to testify can be difficult for a grieving family. The court-appointed estate representative may be required to post a bond to ensure they carry out their duties. The additional procedures and requirements add to the cost of probate that can easily exceed the expense of putting an effective estate plan in place while the decedent was still living.
2. Undesired Results of Property Division. As in most states, Texas residents are free to leave their property to nearly any individual or charity of their choosing. If there is family estrangement, estate beneficiaries requiring more financial assistance, or a legacy bequest left to a favored charity or church, a validly-executed will is the only way to alter the default rules. Moreover, many families may be surprised to discover how the law divides property between the decedent’s surviving spouse and children, particularly in blended families. Texas community property laws and rights of surviving spouses in estates can be incredibly complex, making it absolutely crucial to consult with an estate attorney.
3. More Court Oversight During Probate Administration. Unless all the heirs agree (and may not be possible with minor heirs), the court will require the decedent’s estate to be administered under Texas’s dependent administration rules. This requires judge approval for nearly every action in the estate, including selling property, paying debts, or distributing assets to the heirs. Dependent administration procedures are far more burdensome than the provisions for independent administration found in most wills drafted by a knowledgeable Texas attorney. This translates to more time and more expense for the estate beneficiaries (see #1, above).
4. Disagreement Among Heirs. For intestate estates, the court will appoint an estate representative to act as executor. Who gets appointed depends on their relationship to the decedent, with the decedent’s surviving spouse given first priority. This may lead to conflict among other family members, particularly in situations where adult children may not be close with their step-parent. Similar fights over whether property gets sold or distributed, how heirlooms are divided between children, or disagreements over property valuation can quickly follow. A well-crafted estate plan drafted to avoid family conflict can go a long way to minimize fighting between your heirs.
5. Limited Options for Minor Beneficiaries. If you have minor children, it is absolutely vital that you draft an estate plan as soon as possible. Besides identifying your child’s caretaker, your will can also leave your assets to your children in trust, where it can be wisely invested until your child is old enough to manage their inheritance. Without a plan, your child’s inheritance will likely be held in cash in a court registry or in a Uniform Transfer for Minors account, possibly losing out on years of investment returns. Furthermore, your child will likely have unrestricted access to funds in early adulthood, with no guarantee the funds would be used toward continuing education or buying a home.
by Elizabeth Sabol | Aug 5, 2021 | Probate, Wills
When a loved one passes away, there are many issues families need to navigate while dealing with their grief. With all the details to take care of, it may be hard to know where to start. Within the first days and weeks of your loved one’s death, make sure to take the following steps:
- Make funeral arrangements. Your relative may have purchased a prepaid burial plan or discussed their plans for a funeral with you before their passing. If this was not discussed, search your relative’s important papers. He or she may have left a letter of instruction or designated an agent to make funeral plans. Otherwise, your relative’s next of kin will be tasked with burial arrangements. Consider involving other family members to get input on what the funeral might look like and what you’re prepared to spend.
- Order multiple copies of death certificate. Order a few more than you think you’ll need; I advise clients to ask for at least 10 copies. The funeral home can assist you with ordering death certificates. If you are an immediate family member, you can also request additional copies online through the Texas Vital Statistics website.
- Look for a will. If your relative died with an estate plan in place, you should locate and safeguard the will as soon as possible. That document will name an executor and describe how property should be divided after their death.
- Forward mail to executor’s address. Reviewing your relative’s mail can provide clues as to estate assets, debts, and recurring charges.
- Freeze credit card accounts and cancel unneeded services. Call the customer service phone number located on the back of the card or account statement to notify the credit card company of your relative’s death. Note that only your relative’s estate, not you personally, will be liable for unpaid amount. You should also review the account statements for any autopay or recurring debits to cancel those services, including Netflix or cellphone bill If any charges were made after the date of your family member’s death, contact the vendor to reverse those charges.
- Notify banks and brokerage companies. Contact all banks and brokerages where you relative had an account and be prepared to provide a copy of the death certificate if requested. Be sure to retain account statements to make a record as of the day of death. Tracking down all assets can be a tricky process. Look through your family member’s tax records and mail for hints to where he or she might have had open accounts.
- Contact insurance companies. If your relative had a life insurance policy, contact customer service to begin the claims process. You should also cancel health and auto insurance policies and request a refund of any unused premium.
- Notify social security and Medicare. The funeral director typically informs the Social Security Administration of your loved one’s death. If social security payments are being deposited into your relative’s account, you may be liable to return those payments made after death. If your relative had a plan under Medicare Advantage, Medicare Part D coverage, or a Medigap policy, be sure to also contact the customer service number on membership documents as well.
- Notify the landlord or secure the residence. If your relative rented his home, contact his or her landlord to get access. You might need to hire a moving company and rent a storage unit if you want to avoid monthly rent before you’re ready to sort through their belongings. If your loved one owned his home, be sure to lock and secure the premises. Send a copy of the death certificate to the mortgage company, if any, and retain a copy of the most recent mortgage statement.
- Consult a trusts and estates attorney. An experienced estates attorney can walk you through your family’s options, which depend on if your relative had a will, the size and nature of his or her estate, and who the estate beneficiaries are. Not all estates are administered through the probate court.
by Elizabeth Sabol | Jul 28, 2021 | Probate, Real Estate
It’s a common occurrence: a family member passes away, but Mom named a beneficiary on her bank account and all the heirs agree who should now get the house. It seems simple enough to resolve without involving a lawyer and going to probate court, right?
Maybe not! A report in the Philadelphia Inquirer illuminates the problems families encounter when an estate is never opened and the legal ownership of the family home still lists long-deceased owners. Heirs who may have been paying property taxes and upkeep for years may find themselves unable to obtain a mortgage or sell the property. This could leave heirs in rapidly-gentrifying areas in a bind, unable to sell or keep up with escalating taxes. Addressing the title transfer of real property is an important step in wrapping up your loved one’s affairs. When homes are sold, one of the roles a title company is to make sure the seller has legal authority to transfer the property. When deed records show property is in the name of a deceased relative, sellers may have to scramble to locate decades-old documents or file additional affidavits and paperwork with the court. Clearing title to inherited property is crucial to preserving wealth.
Many of the issues surrounding unclear chain of title can be alleviated with careful planning while the homeowner is still living. For many families, the home is the primary source of wealth, and those concerned about providing for younger generations need to carefully consider drafting a will or using other estate planning techniques. Careful planning will go a long way in making sure the family home cleanly passes to your descendants.
In Texas, there are several ways to clear title to property, including distribution or sale through the probate process, recording the will as a muniment of title, or filing an affidavit of heirship in the real property records. Before death, executing a deed with a contingent beneficiary or utilizing a revocable management trust can make the transfer to the next generation automatic. Consult with a qualified estate planning and probate attorney today to preserve your family’s legacy.
