It is important to discuss your employment plans with your spouse. Your job may provide you and your spouse with health insurance and income, but it can also take up a significant amount of your time.

If you or your spouse are currently working, it’s important to talk about what you both want to do in the future. If one or both of you plan to retire or stop working soon, you need to consider how it will affect your lifestyle and future plans. Additionally, if you both have different aspirations for retirement, it’s important to discuss how you can compromise and find activities that you can enjoy together.

As a married couple, it’s important to discuss your retirement plans and make sure your financial future is secure. Retirement means the loss of one type of income and many people rely on their retirement accounts to provide a significant portion of their retirement income. However, this requires advanced planning and open communication between spouses.

When discussing retirement, it’s important to consider when you plan to retire and whether you can afford to stop receiving a paycheck. If you are unsure, meeting with a financial planner can help ensure your finances are in order. Additionally, you should consider whether there will be a period of time when both of you will be retired or not working, and whether you will have enough money from other sources to support your lifestyle during this time.

Another important topic to discuss is when you plan to withdraw the required minimum distributions from your retirement accounts. A financial advisor can help you determine the best strategy given your current account balances and your desires for the future. Finally, if there is a significant age difference between you and your spouse, it’s important to discuss whether the younger spouse is anticipating using the retirement funds from the older spouse for their lifetime as well, and whether there will be enough money to support both of you.

Creating an estate plan is important because it ensures that your loved ones are taken care of when you die. Without an estate plan, Texas law will determine how your money and property will be distributed, and who will make decisions for you if you are unable to make them for yourself.  When reviewing or creating your estate plan, there are several important things to consider.

Firstly, you need to decide who will serve as your trusted decision-makers, such as your executor, successor trustee, agent under a financial power of attorney, and agent under a medical power of attorney. Because of the age difference between you and your spouse, it is advisable to name alternates to these positions in case your first choice is unable to act on your behalf. If you have children from a previous relationship, you should also consider if and in what order you want to name them to one of these important decision-making roles.

Secondly, you need to decide who you want to receive your property and money after you die. If your spouse is your beneficiary, you need to consider whether you want them to receive the inheritance outright or in trust. If you plan to leave an inheritance to your children, you need to decide whether they will receive it immediately after your death or after your surviving spouse’s death.

Lastly, if you have children from your current marriage and previous relationships, you need to consider if  you want them to be treated the same when it comes to inheritance or if you want to give preferential treatment to one group. These are some of the important issues to think about when creating your estate plan.

An estate planning attorney can help explain any estate planning documents you need, including Wills, trusts, powers of attorney and beneficiary designations, and help you create these documents for your current situation.

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“THE LEGAL CORNER”

What is Philanthropy?

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 circumstances.

As defined by the Oxford Dictionary, “philanthropy” is the desire to promote the welfare of others, expressed especially by the generous donation of money to good causes. While most of us may give to charity on a regular basis, many of us do so spur-of-the-moment or when we feel we have a little extra money to give. Philanthropy allows a person or groups of people to give to charitable organizations consistently over a long time period. Philanthropy does not mean you have to give money, there are many opportunities to give your time or expertise to a charitable endeavor.

For example, earlier this week the Item ran a story on Huntsville Independent School District seeking volunteers. I strongly urge you to do so, you will find it may change a child’s life and is rewarding. However, this week’s column is on different ways you can financially be philanthropic.

Some of the largest philanthropies have existed for decades and are large enough to provide an endowment of giving to last in perpetuity. While you can give your own money to such large philanthropies to benefit your favorite charities, it’s not necessary to do so. In fact, you can begin your own philanthropic legacy for as little as $5,000. You may say “Sam, I can’t afford that,” but please read on because you or a group may be able to do more than you believe possible as I explain different types of philanthropies.

Private Foundations
A private foundation is a legal entity established by an individual, family or group of individuals for philanthropic purposes. The Bill & Melinda Gates Foundation is the most prominent and largest example of a private foundation. Corporations can also establish private foundations as well as charitable organizations. The largest private foundations are endowed with billions of dollars in assets.

This is only an option if you have millions of dollars, however, because of the costs to manage and maintain such philanthropy. As a legal entity, a private foundation has corporate and tax filings to maintain on a regular basis and myriad administrative tasks that go with any corporate endeavor. The overhead costs alone are typically too expensive and time-consuming for most of us, as individuals or as families, to establish such a philanthropic structure. You want your giving to achieve the most bang for the buck.

Charitable Trusts
Charitable trusts are often established by wealthy donors that provide a philanthropic legacy while providing income and/or estate tax advantages to the donor. Typically, a person has an attorney draft a trust document, established for charitable purposes. An asset or assets are funded into the trust and the donor continues to enjoy the use of the asset for a period of years or until the donor dies. After death, charities become the beneficiaries of the trust assets.

The administrative burden with charitable trusts is not as onerous as with private foundations. However, meticulous financial records must be kept as well as the trust filing an annual tax return.

Public Foundations
Public Foundations are legal non-profit entities established to provide grants to a charity or charities from donations elicited from the general public. Public foundations can benefit (or be) a single institution, such as a university (like Texas A&M’s Foundation). However, there are public foundations that benefit a wide variety of interests in a single community. Donations to public foundations usually involve a larger tax break to individual donors than donations to private foundations because the donor does not have ultimate “control” over who will receive the donation or grant.

Public foundations are more beneficial to donors who want to establish an initially modest philanthropic legacy. Initial thresholds to establish a philanthropic fund vary from $5,000 – $50,000. Oftentimes these thresholds can be met over a 2 or 3-year period.

Donor-Advised Funds
However, an often overlooked method of philanthropy is the use of Donor-Advised Funds (DAF). A DAF can be established privately and provide the best combination of private and public philanthropy. With the assistance of your financial advisor and through wealth managers who specialize in managing philanthropic investments, you set up a fund with cash or an asset. Once established, you can make annual or more frequent periodic donations to the charities of your choice.

What is unique about this option is that you can give to your favorite charities anonymously, if you desire, and you can start your philanthropic giving for as little as $5,000. Once the fund is established, you can add assets and cash to it at any time; you can have friends and family add contributions to it, and you can name successor advisors in case you pass away. Establishing such a fund, even in a modest amount, can be a great vehicle for starting a legacy of multi-generational giving in your family.

If you or your family feel philanthropic, then contact an attorney and your financial advisor about how to do so. If you can’t do so financially, contact Huntsville Independent School District or New Waverly Independent School District and make a difference in a child’s life by donating your time.

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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By Sam A. Moak

Do I have to Probate this Will?

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 circumstances.
A common question I am asked is what is probate and do I need to probate this Will?  Estate administration is the management and settlement of a deceased person’s estate by a personal representative approved by the court.   Estate administration does not require a Will.  Probate is the formal process of administering a person’s estate when they had a Will. Probate may not be necessary when the decedent’s estate is so small that no action is necessary to distribute the property to the beneficiaries or heirs.

However, probate is required in most other circumstances.  In fact in a recent case the court ruled a Will not admitted to probate is not effective for the purpose of proving title to real estate.  Ratcliff vs. Polk County Title, Inc., No. 09-04-124-CV, 2004 WL 1925447 (Tex. App.-Beaumont. Aug.31,2004, pet.denied).   In this case a title company was sued for defamation after the title company issued a title report (i.e., Commitment) that included a statement that Mrs. Ratcliff, a deceased owner of real property, died intestate.  Mr. Elijah Ratcliff, Mrs. Ratcliff’s son and named executor in Mrs. Ratcliff’s Will, sued the title company on the grounds that Mrs. Ratcliff did, in fact, have a Will and, therefore, the title report was defamatory.  The District Court rejected Mr. Ratcliff’s theory.  The Appellate Court affirmed the District Court’s ruling and  pointed out that although Mr. Ratcliff had previously filed an application to probate Mrs. Ratcliff’s Will, the Will was never presented for action in the Court.  Citing Texas Probate Code Section 94, the Appellate Court ruled that until a Will has been admitted to probate, it is not effective for the purpose of proving title to real property; thus, in that context, the title report was not defamatory.

In Texas, there are several different methods of administering an estate, some of the more common are Independent Administration, Probating the Will as a Muniment of Title, filing a Small Estate Affidavit, and filing an Informal Family Settlement.

If the decedent owned real property at their death, then something must be done to properly transfer the property.  Usually this is not discovered until the family of the decedent decides to use, sell, or partition the property. It could also arise if there is a dispute as to payment of expenses or taxes on the property.  Without a Will this process can be complicated, involve contacting many heirs, and take a great deal of time.

Please note there are limitations as to which form of probate may be used depending on the situation. Therefore, check with your attorney to decide which method of estate administration is right in your particular circumstance.  It could save you time and money.

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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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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