Having “That” talk with your Parents…About Estate Planning
“THE LEGAL CORNER”
By Sam A. Moak
The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstance.
Talking to parents can be very difficult. In fact, it can be more difficult to have a deep conversation if you’re really close to your parents, because frequent communication and closeness means that important subjects often get placed on the back burner. Personal experience has taught me that none of us knows what will happen tomorrow. Before something happens to you or your parents, make it a point to discuss their estate plans.
A few months ago the New York Times ran an article about an attorney in Seattle who had never even thought about forming an estate plan until the issue was forced upon him by life circumstances. At that point, the decision to formulate a plan involved a great deal of input from the attorney’s daughter—a woman who would certainly be influenced by the plan. The moral of the story is that it’s incredibly easy to fail to plan . . . even for attorneys who are trained and understand the importance of establishing a comprehensive plan.
How can insurance companies get away without paying the proceeds of life insurance policies? The answer is simply that many beneficiaries don’t know they are named as beneficiaries and, therefore, don’t demand payment from the insurance companies. Many, many times I have been asked to help clients locate insurance companies listed in old policies they have found in their parents’ home. This is one reason why you need to know (i) if your parents have an estate plan, and (ii) what that plan looks like. Your parents worked hard to pay premiums and create real wealth. It would be a shame for that wealth to go somewhere other than where your parents intend it.
A sad but true fact is that more than $32 billion of unclaimed property is currently held by state treasurers. The property consists largely of cash held in bank accounts, and sooner or later, it’s likely that the cash will end up belonging to the state. You don’t want that to happen to your property, nor do your parents.
Estate planning attorneys often talk about the importance of Wills and trusts. While those documents are critical, what is often overlooked, however, is a discussion of how your parents would want to be cared for in the event of a major debilitating illness. Without the properly drawn legal documents, you may not be able to assist your parents in this time of need.
There can be serious pitfalls and tax implications to adding a child’s name to a bank account or deeding them property while you are still living. A well written power of attorney can avoid these pitfalls. Additionally, all documents are not created equal and finding out the document you are relying on is difficult to use or out dated at a time when your parents need you most just adds to the stressful situation.
Your parents worked hard to acquire their assets, and they should be made aware of the consequences of failing to plan adequately. It’s not a matter of selfishness on your part to mention estate planning to them. However, you should understand it is their choice. I often tell clients, “It’s your property, if you want to take it all out back and burn it, that is your choice.” The point is it is your parents’ decision. You can not make their plans for them.
Making estate planning decisions is not something that should be done from a sick bed. You can encourage your parents to plan sooner rather than later and to let you know your role in that plan.
Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.
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KEEP IT SIMPLE, FINANCIALLY SPEAKING
“THE LEGAL CORNER”
By Sam A. Moak
Keep It Simple, Financially Speaking
The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstance.
I recently completed a review of Dave Ramsey’s Financial Peace Revisited at my church. With many churches having similar programs and everyone’s focus on our Nation’s debt, I thought I would review some simple areas of personal finance.
In theory, we are all in favor of saving time, labor, and space, not to mention avoiding the stress and anxiety that can come from leading complicated and disorganized lives. In the realm of personal finance, these are all good reasons to resolve to become more simplified and organized, but saying and doing are two different things. It may help move the process along to break the job up into some very specific things that you can do in addition to making an overall change in attitude toward your finances. Minutes spent doing this ahead of time could save hours and many dollars later.
Direct Deposit
You may be one of those people who like to have the check in their hands for their pay, pension, or Social Security benefits so that they can personally take it to that bank teller they have known and trusted for years. However, arranging for a direct deposit into a bank account is safer, easier, and more convenient, and, at least by a small margin of time, it allows you to get access to your money more quickly.
Recurring Bills
If the merchant, such as a utility or insurance company, allows the practice, you can pay recurring bills with an automatic withdrawal from your checking account or with a charge to a credit card. In the case of the former, don’t forget to record the transactions in your check register. In the same vein are online banking services that allow you to pay bills online instead of by snail mail.
Online Banking
Aside from bill paying, consider doing virtually all of your banking online, making it effectively paperless. You can go online to handle such tasks as reviewing deposits and withdrawals, tracking balances in your accounts, transferring funds between accounts, and receiving statements.
Automatic Savings
It is simply common sense that if you set up a system in which something happens automatically rather than only when you think about it and take action, the “something” is going to occur with greater consistency. So it is with saving for the future. Arrange with your employer or bank to put a predetermined amount of money into an account or an investment vehicle on a regular schedule. Another bonus for this approach as an investment strategy is that over the long run, it might provide a better return than jumping in and out of the markets.
Consolidation
You might want to streamline your finances by consolidating what could be an unwieldy number of accounts and credit cards. By doing so, you can better monitor everything, lighten the load of paperwork you receive, avoid some fees, and perhaps even obtain better deals. If you are combining deposits at one banking institution, though, be careful not to exceed FDIC deposit insurance limits ($250,000 for each ownership category in a single institution).
Up-to-Date and Available
Even if you have been diligent about making a Will, review it periodically to make sure it still conforms to your wishes, especially if there have been any intervening major events that might prompt a change. The same goes for any number of important financial documents, such as life insurance policies and retirement accounts identifying beneficiaries and providing directives about what happens to bank accounts and other assets if you become incapacitated.
All of the above may not matter much if nobody can find the documents, so keep them in a secure place, ideally in a central filing system. Make sure to let your family members know where they can find your important documents.
If a Disaster Strikes
It is not a pleasant scenario to contemplate, but what if in an emergency you had to evacuate your home in moments and all of your carefully gathered and organized financial materials were left behind? One way to prepare for this possibility is to keep copies of the important documents, or at least lists of account numbers and similar identifying information, on a secure website that you could access from any location.
Implementing even a few of these processes can give you more peace of mind and organization in your personal finances.
Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.
Read MoreTAX CREDITS FOR HISTORIC PRESERVATION
“THE LEGAL CORNER”
By Sam A. Moak
TAX CREDITS FOR HISTORIC PRESERVATION
The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstance.
For over 30 years, the federal government has been using tax incentives to help preserve historic buildings. Originally, federal law allowed accelerated depreciation on rehabilitated buildings, but subsequent changes have made preservation and revitalization efforts even more attractive to taxpayers.
Today, there is a general business credit equal to 20% of qualified rehabilitation expenses for a certified historic structure, or a 10% tax credit for the qualified rehabilitation of nonhistoric, nonresidential buildings first placed into service before 1936. Eligibility for the tax incentives is determined by the National Park Service. Tax credits are often more beneficial to taxpayers than deductions are, since every dollar of a tax credit reduces the amount of income tax owed by one dollar.
The 20% credit for the rehabilitation of a certified historic structure applies to commercial, industrial, agricultural, rental, or residential properties, but not to properties used exclusively as the owner’s private residence. A certified historic structure must be a building as opposed to another type of structure. To have the required historic status, the building must be either listed individually in the National Register of Historic Places or located in a registered historic district and certified as being of historic significance to the district.
Eligibility for the 20% credit also depends on meeting some additional requirements. For example, the building must be depreciable, that is, used in a trade or business or held to produce income. The rehabilitation must be substantial, generally defined as entailing expenditures exceeding the adjusted basis of the building and its structural components. Generally, this requirement must be met within two years or within five years for a project completed in multiple phases.
Qualified rehabilitation expenses include such items as architectural and engineering fees, site survey and development fees, legal expenses, and other construction-related costs, so long as they are added to the basis of the property, are reasonable, and are related to services performed.
The owner of the rehabilitated building must hold it for five years after completion of the rehabilitation or else pay back all or part of the 20% credit. A sale in the first year means that the entire credit is recaptured. The recapture amount is reduced by 20% per year for properties held between one and five years.
The 10% credit for nonhistoric buildings constructed before 1936 shares some of the requirements with the 20% credit, such as that the rehabilitation be substantial and the property be depreciable. However, only buildings rehabilitated for nonresidential uses qualify for the 10% credit. In addition, so that the identity of the original building is not lost in the process, projects undertaken for the 10% credit must meet specific tests based on retention of minimum percentages of the building’s walls and internal structural framework.
If you have a historic or old building in need of rehabilitation, it would be worth your time to look into these tax credits further to see if your project qualifies.
Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.
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MEDICAID ESTATE RECOVERY IN TEXAS
“THE LEGAL CORNER”
By Sam A. Moak
MEDICAID ESTATE RECOVERY IN TEXAS
The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstance.
As Texans, we are staunch defenders of our property rights. Anyone who disagrees should look back on the public reaction to the Texas Trans-Corridor project. However, Texans have a fairly new threat that affects their property rights, Medicaid estate recovery. Federal law (the Omnibus Budget Reconciliation Act of 1993 or OBRA 1993 – Public Law 103-66) requires states to recover from the assets of deceased Medicaid recipients the costs of certain services paid by Medicaid on their behalf.
The Texas Legislature attempted to pass an estate recovery law in 1987. The law was repealed in 1989 and the legislator who authored the law lost his seat in the Texas Legislature. Because of this, Texas declined to implement OBRA 1993. Texas ran the risk of losing the federal Medicaid funding. We were not alone. Georgia and Michigan also elected not to implement an estate recovery process. But on June 2, 2003, the 78th Texas Legislature enacted House Bill 2292, which directs the Texas Health and Human Services Commission (HHSC) to implement estate recovery as required by the federal statute. This became law on September 1, 2003.
Some states use another federal law, the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982 or Public Law 92-248, to place a pre-death lien against the Medicaid recipient’s home. Texas has not used TEFRA liens to date and it is not referenced in House Bill 2292. However, Texas has recently implemented post-death liens placed against the homes of deceased Medicaid recipients.
The family of the deceased Medicaid recipient, or sometimes the nursing home, receives a notice of intent to recover the costs of certain services paid by Medicaid. Certain waivers or exemptions do exist; however, the notice must be responded to in a timely manner or the family may not be granted a waiver or exemption.
The federal guidelines place certain restrictions on when a state may pursue recovery or impose liens. I cannot stress enough the importance of responsible, long-range planning, to ensure most of your assets pass to your heirs according to your wishes. Planning must start early, well before you are in need of medical care or Medicaid. Therefore, do not hesitate to begin planning.
If you have a question regarding Elder Law, Estate Planning, Living Trusts or Probate in the Huntsville area, please contact us at 936-295-6394 or visit our website. We look forward to hearing from you and assisting you with any and all elder law and estate planning needs.
Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.www.moakandmoak.com
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MAKE SURE YOU TALK TO YOUR DOCTOR
“The Legal Corner”
By Sam A. Moak
MAKE SURE YOU TALK TO YOUR DOCTOR
The information in this column is not intended as legal advice but to provide a general understanding of the law. Any readers with a legal problem, including those whose questions are addressed here, should consult an attorney for advice on their particular circumstance.
As hot as it is this summer, and its only June, this maybe a good time to reorganize the closets, clean out those old files in the cabinet, and get rid of all those boxes in the garage. Call it “Extended Spring Cleaning” if you will. Anytime someone “Spring Cleans” seems to be a good time to take stock and start fresh…at least in the home. But what about with your health?
I am not talking about the diet you vowed to follow in your New Year’s Resolution, or trying to look good in that new bathing suit this summer. What I am talking about is your annual checkup—taking stock of your health with your primary care physician and making sure you are both on the same page with your instructions for health care and your advanced healthcare directive or living will.
When clients come into our office for an estate plan, we ensure that their healthcare instructions are completed as well. But the job doesn’t end when the document is signed. We tell our clients their health care providers need to be aware of their wishes as well. The best way to ensure that they know and understand your wishes is to take a copy of your advanced healthcare directive or living will with you to your next check up and talk to your physician about it, then ask them to keep the copy on file.
A rule of thumb with healthcare wishes is to give a copy of your Medical Power of Attorney and your Directive to Physicians and Family to each of your primary care physicians, give copies to each of the healthcare agents you’ve nominated, AND keep a copy or two on file to take with you if you ever need to go to the hospital. Of course, keep the signed original in a safe place with the rest of your estate planning documents.
If you have a question regarding Elder Law, Estate Planning, Living Trusts or Probate in the Huntsville area, please contact us at 936-295-6394 or visit our website. Call today and we will connect you with an experienced Elder Law and Probate Attorney. We can schedule you a face to face appointment to discuss your circumstances. If you have questions or are considering any aspect of your estate plan, probate, or your health care directives, etc. we can help! We look forward to hearing from you and assisting you with any and all elder law and estate planning needs.
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NEW GIFT TAX BREAK
Having a net worth of $1 million, or maybe even $2 million, does not give you entry into such a small exceptional group as used to be the case. By some estimates, between 5 and 6 million American households have a net worth of at least $2 million. This means that currently there are considerably more people who should consider how best to shield their money from the IRS and pass it on to their heirs, assuming that is their wish. One such strategy that just became more attractive, due to new federal legislation, is the making of gifts during one’s lifetime.
Among the significant pieces of the new federal tax law that was passed in December 2010 were very substantial, albeit temporary, increases in the lifetime gift tax exemptions for individuals and couples. For 2011 and 2012, these exemptions have increased five-fold, from $1 million to $5 million for individuals, and from $2 million to $10 million for couples. There will be no gift tax imposed on gifts that do not exceed those totals. The same law reduces the tax rate for gifts above the exemptions to 35% from a scheduled rate of 55%, thus benefitting individuals wealthy enough to make gifts that exceed the exemption levels.
Last year, Congress also raised the exemption for federal estate taxes to $5 million, and lowered the estate tax rate to 35%, also for a two-year period, so that, taken together, the new federal estate and gift tax rates are more favorable for taxpayers than they have been for approximately 80 years.
This is an area of the law for which sophisticated professional help is especially appropriate, but there are some general considerations to bear in mind when devising a plan for gift-giving. For example, making a gift now, tax-free, makes good sense, especially for assets that are appreciating rapidly, so that future appreciation can be shielded from taxes. It is conceivable that Congress in the future could “claw back” gifts that are greater than the exemption at the time the donor dies, but, even in that event, any income or appreciation occurring after the gift date should be tax-exempt.
Other considerations for giving are more emotional than legal. Financial considerations aside, it may be a high priority for you to make sure that assets with sentimental value are preserved for future descendants, such as by putting them into a trust. Or gift-giving decisions may entail weighing some remorse over parting with assets that took so long to acquire against the desire to improve the lot of those receiving the gifts. Of course, a contrarian view might see large gifts as mainly abdicating control and risking having everything squandered. In any case, if these considerations are all reconciled in favor of making major gifts, now may well be the time to take the plunge.
I hope this review of the new federal tax law passed in 2010 has made it clear that everyone should do some planning. If you have a Will and have not reviewed it in awhile, then now is the time because the tax laws have changed and all Wills are not created equal. Your old Will may be outdated. You should consult an attorney to review your estate and draft the best document for you. Spending a little now can save a great deal of expense and aggravation for you family later.
If you have a question regarding Elder Law, Estate Planning, Living Trusts or Probate in the Huntsville area, please contact us at 936-295-6394 or visit our website. Call today and we will connect you with an experienced Elder Law and Probate Attorney. We can schedule you a face to face appointment to discuss your circumstances. If you have questions or are considering any aspect of your estate plan, probate, your health care directives, etc. we can help! Call us now at 936-295-6394 . We look forward to hearing from you and assisting you with any and all elder law and estate planning needs.
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