Posts Tagged ‘Texas Probate lawyer’

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.

Modifying a Texas Estate Plan in the Wake of Marital Dissolution

Wednesday, March 20th, 2013

Because many marriages end in divorce, it is important to understand the benefits of a marital settlement agreement as well as the impact of divorce on the terms of a will. Many people continue to view prenuptial agreements as an unromantic partial commitment to the permanence of marriage. When either party to a marriage has children from a prior relationship, however, a prenuptial agreement is essential to ensure that children from the prior relationship, one’s current spouse and children from a pending marriage are provided for according to your intentions.

The process of providing for children from a prior relationship is easier when the parties to a marriage are on good terms than during the conflict that accompanies the divorce process. Most people would never consider entering into a business partnership without a partnership agreement which delineates that assets contributed by both parties, ownership shares and provisions for winding down the partnership, a marriage is a partnership that is more extensive than a business partnership. A prenuptial agreement is an important estate planning tool that ensures there is an agreement between marital partners about how these issues will be handled upon divorce.

Another important issue to consider if you are facing a pending divorce is the impact of that marital dissolution on your will. Under Texas Probate Code §69, the spouse from a marriage that ends in divorce is treated as though the former spouse pre-deceased the person whose will is being administered. In other words, all provisions for a former spouse in a will are invalidated under Texas law upon dissolution of the marriage. This means that if a person wishes to include provisions that benefit a former spouse in terms of testamentary gifts, the will must be revised to reflect these gifts following the divorce.

When both parties have prior marriages or children from other relationships, a carefully prepared estate plan can be essential to providing for those from multiple relationships. An estate plan should never be viewed as a finished product but an ongoing plan that must be revised with significant life changes including remarriage, birth of new children and divorce. Texas estate planning attorney Thomas D. Reino keeps in contact with estate planning clients so that he can periodically review their changing needs and inform them of changes in the law that impact their estate plan.

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.

Using a Spendthrift Trust to Provide Asset Protection for Beneficiaries in Texas

Wednesday, March 6th, 2013

One of the most important components of an effective estate plan is its asset protection features. When properly constructed, an estate plan can shield assets from your creditors as well as those of your beneficiaries. While many people postpone estate planning decisions, it is important to understand that the asset protection features of an estate plan must be implemented before the specter or a creditor claim or judgment is on the horizon to avoid claims of fraud.

A trust arrangement allows you as the Settlor to transfer assets into a trust that is managed by a Trustee for the benefit of the beneficiaries of the trust. While a trust can be either revocable or irrevocable and the same person can be both the Trustee and Beneficiary of the trust, there are limitations to such arrangements if the trust is going to provide asset protection.

The trust must be both irrevocable and you cannot be the beneficiary of the trust if you want the trust to provide protection from creditor claims. This type of trust is often called a “spendthrift trust.” This type of trust can be used to provide for the financial maintenance of another person while shielding the assets in the trust from the creditors of the beneficiary. This form of trust often is used to protect beneficiaries who may have difficulty managing their own financial affairs.

By way of example, the spendthrift trust might be set up with $500,000 in the trust with a limit of $25,000 per year in annual disbursements to protect a beneficiary who has a drug problem or gambling addiction. Any terms that are used to prevent a direct transfer of the trust assets to the beneficiary may be used to establish a spendthrift trust. While creditors can seek to have distributions made from the trust paid toward their claims, they cannot obtain a right to future payments from the trust nor the principal or assets within the trust.

This prevents the beneficiary from selling the trust assets to satisfy creditor claims. Although the creditor can still seek to enforce a judgment or other financial obligation against funds already disbursed, this spendthrift restriction prevents the entire principal in the trust from being pledged or the direct encumberance of future payments as they become due to the beneficiary. The protection of the principle increases the probability that the beneficiary will continue to have an ongoing stream of income for his or her care and support.

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.

Understanding the Fundamental Differences between Living Trusts and Irrevocable Trusts

Friday, February 15th, 2013

Many people recognize the value of a trust because of its ability to prevent the delay and expense associated with the probate process, but some do not know the difference between an irrevocable trust and a living trust. The distinction between these types of trusts has critical importance in terms of ownership of assets, legal consequences and tax implications. Texas estate planning attorney Tom Reino assists clients in developing comprehensive estate plans that include appropriate types of trusts specifically tailored to the unique situation of his client. Mr. Reino has provided an overview of differences between an inter vivos trust (living trust) and an irrevocable trust.

Living Trust (i.e. Revocable Trust, Inter Vivos Trust)

A living trust is a trust that you have the power to terminate at any time. Individual terms, such as the indicated trustee of the trust, may be modified through a trust amendment. If you decide that you no longer wish the trust arrangement to exist at all, you may cancel the trust in its entirety by using a trust amendment and restatement. While living trusts offer an enormous amount of flexibility in terms of reclaiming and exercising control over property in the trust or changing the beneficiary or trustee who manages the trust, there are disadvantages to living trusts so they are not right for everyone.

Because you retain the ability to terminate the trust and exercise control and ownership over the assets in the estate, the assets remain your property for both debt enforcement by creditors and tax purposes. Because you maintain ownership and control over the assets, the assets may be subject to debt collection procedures by creditors. The property in a living trust will also all be calculated among your assets for Medicaid planning purposes if you move into a nursing home or similar eldercare residential facility. A final disadvantage of a revocable trust is that the assets will be subject to state inheritance tax as well as both federal and state estate taxes.

Irrevocable Trust

An irrevocable trust is one that cannot be changed, amended or terminated once executed or may become irrevocable once the person who makes the trust passes away. While an irrevocable trust does not allow the same exposure of the trust assets to seizure by creditors and will not be considered among your assets for Medicaid planning purposes, there are other disadvantages to an irrevocable trust. The trustmaker loses all control and ownership over the assets. If one’s wishes change with regard to who should manage the trust or who should be included among the beneficiaries, the grantor has no ability to change these terms once the trust becomes irrevocable.

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.

Distribution of an Estate in Texas without a Will: Texas Intestate Succession

Wednesday, February 6th, 2013

While an estate plan that includes a trust or will provides the most common options for ensuring your intentions are carried out regarding your estate, many people never get around to having estate planning documents prepared. In other cases, people use computer programs, typing services or paralegals who prepare estate planning documents improperly, and their estate planning documents are determined to be invalid. In either case, the Texas law of intestate succession will determine how one’s estate will be distributed. We have provided an overview of how intestate succession works in Texas if the decedent does not have a will.

If a decedent is unmarried and dies without a will, the decedent’s children or their descendants (i.e. grandchildren, great-grandchildren, etc.) will be distributed to your children. The distribution between one’s children will be an equal share to each living child or (descendent of a child). When there are no children and a decedent was unmarried, Texas intestate law will direct that assets pass to the next closest biological relative as follows:

Two Surviving Parents: If you have two surviving biological or adoptive parents, each surviving parent inherits half of the estate. Step-parents do not inherit under Texas intestacy law.

Single Parent and Siblings: When a decedent who passes away is survived by a parent and siblings or descendants of siblings, the parent inherits half the state and the other half of the estate is split equally among the siblings.

Single Surviving Parent No Siblings: If a person dies with only a single surviving parent and no surviving sibling or descendants of siblings, the surviving parent inherits the entire estate.

Siblings with No Surviving Parents: When a person dies with no surviving parents, the surviving siblings or their descendants share the estate equally.

No Surviving Parents or Siblings: When a person dies with no surviving parents or siblings or descendants of either, the estate will be divided into two equal shares. One share will be provided to any paternal relatives and the other share to any maternal relatives starting at your grandparent’s generation. The Texas probate courts will continue to search back through generations until a surviving relative is discovered.

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.

Texas Estate Planning FAQ [Part II]

Wednesday, January 23rd, 2013

This is the second in a series of FAQs that address common questions we receive regarding estate planning issues at the Texas estate planning law office of Thomas D. Reino. If you are considering creating an estate plan, updating your estate planning documents or just have general estate planning questions, the best way to obtain detailed information is to schedule a consultation. We have provided answers to basic questions, but you can obtain more detailed information during your initial meeting with a Texas estate planning attorney in our office.

Why can’t I just use legal software to prepare my own estate planning documents?

Although you can use this type of software, there is significant risk associated with using these generic programs. Texas has very specific legal requirements for a last will and testament and other estate planning documents. These programs may not take into account the specific Texas substance and form requirements for particular estate planning documents to be enforceable. If a will is not prepared properly, the will may be determined to be invalid so that state intestacy law dictates how your property passes rather than your will.

Is it true that probate should be avoided at all costs?

While probate can be time consuming, slow and costly in many jurisdictions, Texas has a process called “independent administration” that avoids these pitfalls. While in some states the drawbacks of probate make it essential to have a living trust to avoid probate, this is not necessarily the case in Texas. This expedited process can take as little as three months depending on the circumstances and may be no more expensive than use of a living trust. The tax implications of a will and living trust are also similar so probate is not necessarily a process to avoid at all costs like it might be in some other states.

Do I need a durable power of attorney?

If you become incapacitated because of a coma or mental incapacity, a durable power of attorney for financial decisions permits you to designate someone as your “attorney in fact” to manage your financial affairs. The power of attorney can provide broad powers to dispose of property, manage assets, execute contracts and manage all your financial affairs with broad discretion, or the authorization can be narrowly tailored to a single task like executing a specific contract.

Will my heirs have to pay estate tax?

The federal estate tax is levied against the “taxable estate” transferred to one’s heirs. The value of one’s taxable estate is based on the fair market value of assets in the estate less liabilities and funeral costs. The majority of parties pay no estate tax because $5 million (adjusted for inflation) can be transferred without any estate tax liability.

What does intestacy mean?

If you do not have a will or trust, state law will determine how a decedant’s assets are distributed upon death without regard to a decedent’s wishes or intentions.

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. While this blog post provides answers to some common estate planning questions, the best way to get more detailed information is 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.

Texas Estate Planning FAQ [Part I]

Wednesday, January 9th, 2013

There are many questions we receive from those throughout Texas about estate planning and probate issues. The most effective way to obtain detailed legal advice on issues related to protecting your estate as well as disposition of your assets is to schedule a free consultation with a Texas estate planning attorney. However, we understand that sometimes it is helpful to have basic general information when considering whether to put together an estate plan or meet with a probate attorney. We have provided answers to frequently asked questions (FAQs) regarding a range of estate planning issues below.

Why do I need an estate plan?

An estate plan ensures that your wishes are observed in terms of disposition of your property at death and that your family is provided for because of your financial planning. Your estate plan also should include tools so that you can designate the type of extraordinary medical care you wish to receive and designate someone to make decisions regarding your medical and financial matters if you become incapacitated. Parents even use estate plans to designate a guardian for their children in the event they die.

Do I really need an estate plan if I already have a will?

While a will is a valuable estate planning tool, it does not cover all estate planning issues. Although your will may indicate how you want your assets distributed among your family and/or friends, it does not take effect unless you have passed away. This means that it does not address who will manage your financial affairs or make medical decisions for you if you become incapacitated. There are a range of documents that must be executed to have a complete estate plan, which typically should include at least the following: durable power of attorney, directive to physician (also called a living will), medical power of attorney, last will and testament and HIPAA authorization. Although there are other estate planning documents that may make sense given your individual situation, these are a good foundation if you are building an estate plan in Texas.

What kinds of medical issues can an estate plan cover?

There are a range of health care issues that may be covered by your estate plan including the following:

HIPAA Authorization: The Health Insurance Portability and Accountability Act is a federal statute that restricts who may have access to your medical records and information and prescribes penalties for violating your privacy. If you prepare a HIPAA authorization, it permits you to designate who may have access to this information so that your medical provider and insurance company will share information with the individual that you designate.

Medical Power of Attorney: A medical power of attorney permits you to designate someone to make medical decisions on your behalf if you become mentally incapable of making decisions or unconscious. This document will authorize someone to act in your interest in making health care decisions if you are incapacitated by severe injury like a car accident or suffer incapacity because of age.

Directive to Physicians: If you suffer a terminal condition, a directive to physicians (also known as a living will) permits you to decline extraordinary medical measures or designate those measures that you find acceptable.

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. While this blog post provides answers to some common estate planning questions, the best way to get more detailed information is 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 Every Party Involved in Contesting a Will in Texas Should Know

Saturday, December 22nd, 2012

One important consideration that must guide the drafting of a will in Texas and other states is the exercise of extra care where there are motivations for a party to challenge the will. While contested will proceedings are relatively uncommon, there are situations where the wishes of the decedent make it more probable that a will may be contested. These situations require that the party drafting the will anticipate the potential motivations to challenge a will and carefully draft with such motivations in mind. Generally, a will contest is more likely when an heir will receive less through the will than under Texas intestate law.

It is important to anticipate the possibility of a will being contested in the following situations:

• Children are not treated equally
• The devisor is advanced in age or mentally disabled
• Dramatic changes in their indicated disposition of assets
• Unpredictable atypical behavior by the devisor
• Favoring of a distant relative or non-relative over a close relative
• Unreasonable extensive limitations imposed on the bequests

While these do not represent all possible situations where there is a higher probability of a will contest, these are common scenarios that provide motives to challenge a will. Arlington probate attorney Thomas D. Reino understands that contested probate proceedings are complicated by the fact that the parties in dispute may be close relatives. Sometimes we are able to resolve such disputes through skilled negotiation to avoid the lingering animosity and damage to family relationships that can result from acrimonious litigation.

There are certain issues that must be considered before any potential will contest including the following:

Who May Challenge a Will in Probate: Texas law permits any “interested party” to contest a will in probate proceedings including spouses, heirs, devisees and any other party that may have a legitimate claim against the estate or a property right in the estate.

Potential Adverse Impact of a Will Contest: Some wills contain “no contest” provisions that can impose severe penalties on those who unsuccessfully challenge the terms of a will. These clauses must be identified and the consequences of contesting the will evaluated if a will contains such a provision. A party who does not prevail when contesting a will that contains such a provision may face harsh consequences like forfeiting any form of inheritance.

If you are considering contesting a will in Texas, you should seek legal representation from an experienced Texas probate attorney. Once the process of probating a will has been initiated by filing an application for probate, you must file a will contest stating a basis for challenging the will, which may include but is not limited to the following:

• Mistake
• Lack of capacity
• Undue influence
• Fraud
• Revocation through a subsequent instrument (e.g. later will) or physical act (e.g. burning the will)

At our Arlington probate law firm, Thomas D. Reino represents clients on both sides of contested will probate proceedings. If you are involved in contested probate proceeding in Texas, we invite you to get more detailed information by contacting us at 817.303.2133 or sending us an email at tom@tomreinolaw.com so that you can set up an initial consultation.

Using a Spendthrift Trust to Protect Heirs from Creditors and Divorce Judgments

Friday, December 7th, 2012

Many parents have a son or daughter who struggles with personal demons like drug addiction, alcoholism or gambling addiction.  If you are engaged in estate planning, an heir that has been through rehab programs with limited success can lead to concerns about how to protect this heir from making bad decisions.  While you may feel conflicted because you do not want to exclude your loved one from inheriting part of your estate, you also may feel that the decision to leave a lump sum of cash or assets to your troubled heir will only make matters worse.  The funds inherited may be used to finance the vices of a troubled heir and be quickly squandered away.  Texas estate planning attorney Thomas D. Reino frequently helps clients address these conflicting concerns by crafting a “spendthrift trust.”

Texas estate planning laws like those in other states permit a Grantor to insert provisions to provide for a family member while protecting the inherited funds or resources from mistakes arising out of the irresponsibility or immaturity of the beneficiary of the trust.  A spendthrift provision in a trust essentially provides that the beneficiary cannot be required to use the assets in the trust to pay the beneficiary’s creditors.

The protection provided from the beneficiary’s creditors only remains effective if the trustee adheres to an “ascertainable standard’ when making distributions from the trust.  In other words, distributions cannot be made for just any frivolous purpose so most spendthrift trusts permit disbursements to be made for education, health, support or maintenance.  When the trust specifies this type of specific legitimate grounds for making a disbursement to the beneficiary, the trust arrangement meets ascertainable standards so the safe harbor from creditors is maintained.

The assets in a spendthrift trust are protected from the spouse of the beneficiary in case of divorce and creditors seeking to enforce a debt or recover damages from a court judgment.  When you are engaged in estate planning, these valuable protections of the assets left to a beneficiary make a spendthrift trust a laudable provision even where you are not concerned about the decision making ability of the beneficiary.  The alternative to a spendthrift trust is leaving all of the assets directly to the beneficiary, which may make them available to involuntary transfer by a creditor or a spouse in a divorce proceeding.

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.  While this article provides a brief overview of the benefits and requirements for a spendthrift trust in Texas, the best way to get more detailed information is 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.