Archive for April, 2013

Who Should I Appoint to Manage My Trust in Texas?

Monday, April 15th, 2013

Although many people recognize the value of a trust as part of their Texas estate plan, they may not have gotten around to creating a trust because they are uncertain what type of trust to employ and who to appoint as the trustee under a trust agreement. When determining who to appoint as your trustee, you must consider the objectives that are motivating you to create the trust in the first place. Some of the considerations that may impact the type of trust to suit your needs include:

• Whether you want to maintain ownership and control over the assets
• Long-term care planning issues
• Tax and probate consequences/costs
• Flexibility to make changes to the trust
• Importance of creditor protection for you and your beneficiaries

This is far from a comprehensive list of factors that must be weighed when deciding on the type of trust that will fit your needs and who to appoint as the trustee. It should be clear that an experienced Texas estate planning attorney can be of significant assistance in making these decisions by explaining the drawbacks and benefits of different types of trust arrangements. Below we have provided an overview of considerations about who to appoint as your trustee when creating a trust:

Appoint Yourself as Trustee: The decision to make yourself the trustee over your own trust is really a ruse that is not effective. The government recognizes that when you put your assets in a trust and maintain control over the assets as a trustee you really have done nothing more than play a shell game. This is typically a meaningless trust arrangement that will not really accomplish much. This type of trust arrangement can do significant damage if you do not have sound legal advice from a competent Texas estate planning lawyer. If you place your business in the trust, you hit the top tax bracket at $11,950 of income whereas you do not hit the top tax bracket of 39.6 percent until you make $400,000 when you file taxes as an individual.

Appointing a Family Member: While this can be a sensible option, you cannot appoint a family member who is a beneficiary under the trust. If the trustee also is a beneficiary, the trustee’s share is not protected from creditors by the trust arrangement. Because protection of assets against creditors is an important benefit of a trust, it makes little sense to set up a trust in this manner. There is another significant drawback to picking a family member to be your trustee. The available options may be limited if you have a falling out with the family member. If the family member mismanages the trust and make a poor investment, you will probably be hesitant to file a lawsuit against the trustee to hold him or her accountable? These are unfortunate options that may be faced if you use a family member as your trustee.

Financial Institution or Professional: This is a better option and includes those who are professional trustees. These individuals and institutions have insurance if they make a mistake and lose a portion of your assets. These types of trustees also have the knowledge and experience to make sound investments of trust assets. Because they are unrelated to you, there are none of the adverse family dynamics that impede holding the trustee accountable for negligence.

At our Arlington estate planning law firm, Thomas D. Reino carefully evaluates your estate to create an estate plan that is appropriate for your specific situation. If you have questions or need estate planning documents prepared, we invite you to contact us at 817.303.2133 or send us an email at tom@tomreinolaw.com so that you can set up an initial consultation.

What to Consider When Using a Texas Estate Plan to Nominate Guardians for Your Kids

Friday, April 5th, 2013

There are many important functions of a Texas estate plan which include succession and incapacity planning, asset protection and tax avoidance, but the most important function of an estate plan if you are a parent is providing for your children if something should happen to you and your spouse. An estate plan should both nominate a guardian for your children and establish financial arrangements for their care in the event of a car accident or other incapacitating event that leaves both you and your children’s other parent incapacitated.

Generally, parents may include a provision in their will to indicate who they wish to nominate as a guardian for their children. The court will typically honor this nomination unless there is some compelling reason not to do so, such as the person nominated is unwilling to accept the responsibility of being appointed guardian. While no one wishes to contemplate this extremely unlikely possibility of incapacitation of both parents, it is important that parents take steps to protect their kids if tragedy should strike. Further, the choice of who to appoint as a guardian for one’s children can be a difficult decision so it is important to carefully consider this decision in advance and prepare both the potential guardian and your kids.

Before electing someone as a guardian for your children in your estate planning documents, you should discuss your intentions with the prospective guardians to ensure that they are prepared to undertake the duties and responsibilities of raising your children according to your wishes. While you do not necessarily need to discuss your choice of guardian with your children, your kids will benefit from having someone appointed with whom they have a close relationship. The sudden change of going to live with someone besides one’s parents is difficult so the easier you can make the process the better it will be for your children. Here are some issues to consider when determining who to nominate as a guardian for your minor children:

• Philosophy and Approach to Parenting: If you pick those who have a similar parental philosophy when it comes to imposing rules and consequences as well as other parenting issues, it will make the transition easier for your children. While there will obviously be differences between the way people parent, the less radical the change the easier it will be to adapt.

• Avoiding Across the Board Changes: Sometimes there is no alternative other than to uproot kids if the best choice for a guardian does not live close. If it is a close decision between relatives that are able to move into your family home or that live close as opposed to parents that live in a distant state, however, your kids can benefit from maintaining their friends, school, activities and neighborhood.

• Provide for Financial Care: A Texas estate planning attorney can assist you in establishing the best financial arrangements for your kids if your nominated guardians need to care for your children. Sometimes it is advantageous to set up a trust that covers all of your children while in other situations there may be benefits to setting up a separate trust for each child. When you talk to your estate planning lawyer, he can advise you regarding the most efficient, safe and cost-effective alternative.

• Promote a Pre-Existing Relationship: If the best alternative to care for your children is a person who lives a good distance away, you should make efforts to ensure there is a pre-existing relationship. Whether it is arranging to visit this person or arranging for them to visit your home, the more contact your children can have with a potential guardian the more comfortable they will be if they need to live with this person.

At our Arlington estate planning law firm, Mr. Reino carefully evaluates your estate to create an estate plan that is appropriate for your specific situation. If you have questions or need estate planning documents prepared, we invite you to contact us at 817.303.2133 or send us an email at tom@tomreinolaw.com so that you can set up an initial consultation.