Living Trusts in Texas: It’s all in the details!

If you have a living trust, you must remember that all of your assets should be owned by the Trust rather than by you personally. This is not a difficult process but it requires attention to the details. Are you in the habit of that? Living trusts are popular because it allows your heirs to avoid probate.

However, probate in Texas is simple and inexpensive. In Texas, there is a relatively easy procedure called an “independent administration” if your will has the proper language. An independent administration can often be completed within three months if no estate tax return needs to be filed.

If you choose to have a living trust, it’s all in the details! When you open a bank account, you must explain the trust to the bank and make sure the trust is the owner of the account. If you receive property by purchase or inheritance, you must purchase it in the name of the Trust or transfer it to the Trust immediately.

What if you miss the details? Because the benefits of a living trust (such as probate avoidance) apply only to the assets in the trust, if you miss the details your estate will have to go through probate. We have had clients whose relatives had a living trust but an asset was not in the living trust. Therefore, the will had to be probated and the living trust was all for naught.

Remember, if just one bank account is in your name alone instead of in the trust, then your estate will have to go through probate and incur all the costs of probate, on top of what you have paid to have a living trust.

What is a Lady Bird Deed?

A Lady Bird Deed is an enhanced life estate deed which is used to convey property to heirs and avoid probate.  Some interesting features of the Lady Bird Deed include:

• The grantor retains homestead, creditor and tax exemptions
• The Deed protects the grantor’s home from Medicaid claims during the grantor’s lifetime
• The property passes to the recipient outside of probate without Medicaid claims and liens upon the death of the grantor
• The grantor retains the right to sell or otherwise dispose of the property without the consent of the beneficiaries

You will not lose your Texas property tax homestead exemption; however, a home placed in a revocable or living trust (or similar type trust) loses the exclusion as a homestead and becomes a countable resource for the purposes of medicaid.  

Below are tax implications of the Lady Bird Deed:

 

**No Federal Gift Taxes 

Unlike other deeds, a Lady Bird Deed does not transfer any incidents of ownership in the property. Because the grantor does not actually transfer ownership of the property by executing a Lady Bird Deed, no federal gift tax issues arise.

 

**No Lost Step-Up in Basis for Capital Gain Taxes 

 

**No Lost Texas Property Tax Exemptions 

Lady Bird Deeds do not prevent the grantor from occupying the real property. Therefore, provided the property is the grantor’s homestead, he or she can continue to claim the homestead exemption, and over 65 or disabled homeowner exemptions permitted under Texas Tax Code $11.13

Below are potential drawbacks of the Lady Bird Deed:

**Law Could Change

Lady Bird Deeds are not without potential shortcomings. The law is subject to change. There is no guarantee that federal or state law will always permit the use of Lady Bird Deeds or that actions taken prior to such a change in law will be grandfathered. A recent example on point is HHSC’s December 2009 revised MEPD policy $F-3210 which states: “A home placed in a revocable or living trust (or similar type trust) loses the exclusion as a homestead and becomes a countable resource . . . .” 

**Title Insurability

In the vast majority of cases, when real property is purchased, sold or mortgaged title insurance is purchased to provide protection against defects in title. While there are approximately eighteen title companies authorized to sell title insurance in Texas, they each take a different approach to the risks they are willing to insure against. Because there is no uniformity in title coverage between insurers, holders of Lady Bird Deeds may run into obstacles when trying to obtain title insurance for the purpose of selling or mortgaging the property.

Do you need a pre-nuptial or marital property agreement? 5 Presumptions in Texas Marital Property Law

There are several presumptions within Texas marital property law that are effective unless the spouses alter them through the language of a property agreement. They are:

1.  In the event of a spouse’s death, the probate court must presume that all property in existence (without regard to what name is on the title for the item) is community property and each spouse owns an undivided 50% interest in it.

2.  In the event of a divorce, the divorce court must presume that all property in existence (without regard to what name may be on the title) is community property and the court has authority to divide it in a manner that the judge believes if fair.

3.  A reimbursement claim is to be paid if there has been a reduction in debt or payment for improvements from one estate (separate or community) that benefited another estate (separate or community).

4.  The income generated by a separate property asset is community property.

5.  The earnings of the parties during the marriage are community property.

The application of those rules may not always meet the objectives of the parties and, indeed, may not always be fair. Therefore, they are subject to modification through the terms of pre-nuptial or marital property agreements.

Remember Terri Schiavo: Importance of a Living Will

At 26 years old, Terri Schiavo was found unconscious on the floor.  When she arrived at the hospital, she was put on a ventilator to keep her breathing and was in a coma for more than two months.

When she emerged, she was unable to speak.  She had suffered severe brain damage because her brain was deprived of oxygen.  Multiple doctors diagnosed her as being in a persistent vegetative state.

What followed was a family battle between husband and family.  Terri’s family did not want to take her off the feeding tube and her husband who the court had appointed legal guardian contended that she did not want to be kept alive using artificial means.  Ultimately, this fight followed because no one truly knew what Terri’s wishes would have been.  On March 18, 2005, after an intense legal battle between husband and family, her feeding tube was removed.  This was more than 15 years after her husband found her unresponsive and without a pulse in their home.

Terri did not have a living will or directive to physician.  She did not have a legal document that stipulates one’s wishes for medical care should circumstances render a person unable to provide consent.  A Texas Directive to Physicians allows you to direct your physicians as to how you want your physicians to use artificial methods to extend your life in the event you are diagnosed with a terminal or irreversible condition.  It lets your family and doctors know your wishes.

5 Estate Planning Documents Every Adult in Texas Needs

Five Estate Planning Documents Every Adult in Texas Needs

1. A Texas Last Will and Testament determines how your property is to be distributed and to whom you want to receive it.  A Will can also be used to create a Trust and name an executor and trustee.  In addition, it is used to appoint a guardian to care for your minor children.  Without a Will, your assets will be distributed according to a statutory formula, which may conflict with how you would have liked for your assets to be distributed.  If you do not appoint a guardian for your minor children, a judge who doesn’t know you or your family may have to make that decision for you.
2. Texas Durable Power of Attorney:  allows you to appoint a trusted family member or friend as an agent to manage your finances if you are no longer capable of managing them yourself due to temporarily or permanently incapacitated.
3. Texas Medical Power of Attorney:  allows you to appoint an agent to make medical decisions for you in the event you become unconscious or mentally incapable of making those decisions for yourself.
4. HIPAA Authorization: allows you to name an individual who can have access to your medical information so that doctor or health insurance company have no reservations about sharing your protected medical information with them.
5. Texas Directive to Physicians: allows you to direct your physicians as to how you want your physicians to use artificial methods to extend your life in the event you are diagnosed with a terminal or irreversible condition.

4 Important Estate Planning Questions

4 Important Estate Planning Questions.

4 Important Estate Planning Questions

Estate planning is what we all put off till tomorrow.  We all hope that we won’t die young, unexpectedly or with young children.  No one wants to think about immortality.  However, we have to think about the unspeakable and make choices regarding our property, kids, and end of life provisions.

To ensure that my client’s wishes are accomplished, the tough questions must be asked.  Having answers to the following questions will help you prepare for a meeting about planning your estate.

1. Who will raise your children if both parents die?

Many parents don’t draft Wills because this is such a difficult issue between parents.  My clients have voiced concerns about aging parents and hurting one spouse’s parents’ feelings.  I also had a client whose spouse wanted to address visitation rights of grandparents in the Will.  It is better to face this difficult decision because if you fail to name a guardian, then the court will do it for you, based on what it deems to be in the best interest of your child. Unless you have confidence that a judge who never knew you has better judgment than you do about matters involving your children, it is best not to stick your head in the sand for 18 years.

2.  Who will fill the role of executor or trustee and who will act as an agent under a financial and medical Power of Attorney?

Selection of these roles is vital and many clients worry that they will hurt someone’s feeling when they pick the executor or trustee.  I have had parents put off writing their documents because they don’t want to have to choose one child over the other child.  I had a client whose sibling passed away without a Will and the families couldn’t agree on who would administer the estate.  As a result, there was a court administered estate which was costly and cumbersome.

3.  Do you have special needs heirs?  

Special needs and disabilities matter very much and special trust provisions may be needed.  Without them, devastating consequences can occur.  A court will have to be involved and a guardian will have to be appointed to ensure that the special needs heir is protected.  You want to avoid this expensive court proceeding.

4. When do you want the plug pulled?

You should be asked to sign a health care directive concerning the withholding of nutrition and hydration.  This is a good time to address with your agent and family what you want to be done if the circumstances call for it.  Recently, my grandmother became bedridden and was unable to move without pain.  She had made it clear that she didn’t want medical intervention when her time came. We made sure she was kept comfortable.  It is helpful to share that information with your healthcare agent who has to be a part of carrying out instructions. If you don’t share that information, people may let loved ones linger on when if they had had more insight they might have ceased aggressive medical intervention sooner.

These are just a few questions that should be addressed in the meeting with the attorney.  The conversation may end with an open-ended question such as, “Is there anything else I should know?”   If there are any questions, concerns or matters that you believe are important, please speak up.  You never know when that additional little detail will make a big difference.

Estate Planning And Construction Law – Law offices Of Paul Nimmons & Cynthia Fronterhouse

Estate Planning And Construction Law – Law offices Of Paul Nimmons & Cynthia Fronterhouse.

An Introduction

Greetings!

I am writing this post to share my knowledge and expertise on Estate Planning.  I enjoy helping families and individuals to plan for the future.  It is rewarding being able to bring peace of mind to clients by drafting the necessary Estate Planning documents.

In addition to being an attorney, I am a mother and wife.  I understand how busy life can get and how we all procrastinate on the important family matters.  My husband and I finally sat down to prepare our Will when we were going on our first trip without our daughter.  Dying is something we don’t want to think will ever happen and I understand this feeling.

All individuals regardless of their financial status need a Will and I am here to educate you and to help you accomplish this goal.

As for my background, I graduated from Smith College with a B.A. in Government and received my J.D. from the University of Texas at Austin School of Law in 2001.    I practice law with my father, Paul Nimmons and together, we have over 50 years experience.  In my spare time, I volunteer with Houston Volunteer Lawyers and the Houston Bar Association Will-A-Thon that provides Wills to low income seniors and veterans.  In addition, I am President of my neighborhood civic association.