YOU ARE A SPECIAL HOLIDAY GIFT TO SOMEONE

          It’s the holiday season.  The year is drawing to a close.  If you are reading this article, the end of the Mayan calendar came and went with no apparent disruption, at least not to your ability to get your hands on a copy of this blog.  For some people, it is a time for enjoying loved ones, traveling to be with family, or hosting travelers in your home.  For others, the holidays aren’t so pleasant.  Family relationships are not the best.  Perhaps years ago some rift happened that drove people apart.  There has been a break in the fence that no one has been able to mend.

          If you have a close, loving family, this article probably isn’t for you.  If you have stress in your family, if you and your loved ones are separated by miles or by strain, or if the holidays are a time of sadness for you, then read on.  You are not alone. 

For many years, I lived half way across the country from my loved ones.  I am from a very close family, but the challenge of tight work schedules combined with geographic distance made it difficult for us to be together on the holidays.  That was in and of itself a sad situation for me.  I remember several times walking through a big box store or a department store very early in the season, having tears in my eyes as I would hear the song, “I’ll Be Home for Christmas” playing.  I knew I wouldn’t be home that year.  So instead, I enjoyed the holidays with my friends, who became my holiday family.  My house was the house others came to who were also far away from home.  Year upon year, it became a tradition for us to be together, and it was a house full of love.

Think about all of the soldiers who are serving our country – in reality, serving you and  me– who are half way around the world this holiday season.  No mom or dad to hug them.  No wife, husband, or special someone to keep warm at night.  The kisses from their little children so far away.  The holidays for them are a lonely, distant place as well.

One particular Christmas, I remember the telephone ringing at my parents’ house on Christmas Eve.  It was my dad’s brother.  More than 10 years before, following the death of one of their parents, my dad, his brother, and several of their other siblings and spouses sat in the lawyer’s office going through details of what to do with the family farm.  Differences arose in that meeting over whether any in-laws should be involved at all, or whether it was best to leave things between the siblings.  I don’t even know what exactly happened, but that day marked the beginning of a 10-year estrangement between my dad and his brother.

So when that telephone rang, that 10-year silence was broken.  Two brothers visited on the telephone like no time at all had passed.  No mention was ever made about that day in the lawyer’s office.  The call was just about the “now” in life.  With their love as their bond, those two men marched forward in life letting bygones be bygones. 

As you approach this holiday season, if you have separation from someone, differences with a family member, or if you’re just a long way from home, make that telephone call.  Make several if you need to.  And if a simple call will not resolve your situation, don’t be alone.  Help a friend in need.  Spend time at the local shelter serving holiday meals to the less fortunate.  Call a friend, or several, who will not be with their families and form a little holiday group of your own.  In doing so, you are not only doing yourself a favor, you are also delivering love and attention to others in need.  You see, you are the special holiday gift someone else really needs this season.  By looking outside of yourself, your own needs are healed. 

Wishing you and yours a wonderful holiday season and a New Year full of every blessing.

If you have a legal question you would like for me to address, please visit my website at www.leflerlegal.com, email me at slefler@leflerlegal.com, or call me at 512-863-5658.  My office is located in Tamiro Plaza, 501 South Austin Avenue, Suite 1320, in Georgetown, Texas.

DADDY’S DYIN’– WHO’S GOT THE WILL?

         +“Daddy’s Dyin’ – Who’s Got the Will?”  This question sounds familiar to many people, but very few know where it originated.  It’s actually a masterful comedy written by +Del Shores set (where else?) in a small Texas town.  The story focuses on the reunion of a family gathered to await the imminent death of their patriarch who recently suffered a physically- and mentally- disabling stroke.  Despite the title, the story is really about the rebirth of the spirit of a family united. 

          It’s unfortunate, but sometimes it takes the illness or death of a loved one to bring a family together.   The first priority in those difficult times should be comforting one another, mending broken relationships, and honoring the deceased.  The last thing on anyone’s mind should be, “Who’s got the will?”

           This week I want to share practical guidelines with you about where you should store your will, trust, living will, durable power of attorney, and other important estate planning documents.  If you think that all of these documents should be locked away in a safe deposit box, think again.  It is important for a few of the documents to be readily within reach.  This is an article you should cut out, save, and share with your friends and family so no one has problems reaching the important documents when they are most needed.  Here are some guidelines:       

 

          Rule # 1:       Tell your family where you store you legal documents, whether at home, in the bank, or both.  Be specific.  (“The right upper side of the master bedroom room closet in the red box.”)

          Rule # 2:       If you already have a safe deposit box:  The best place to store your original trust and original will is in the safe deposit box   The reason:  Banks are generally fire-proof.   If your original documents are destroyed, your family can always ask a court to accept a copy of an original or you can redraft your trust as a “restatement”, but it’s always best to safekeep your originals in the first place.  Safe deposit boxes offer that extra protection.

          Rule # 3:       If you don’t have a safe deposit box:  It’s okay to keep legal documents at home, but understand that in doing so you are accepting the fire, tornado, or water damage risk.  If you live in a single-story home, place the documents on a high shelf, away from any area that might suffer from water infiltration.  It’s best to place the documents inside a plastic or metal, water-tight storage box.  Fireproof safes are another alternative.

          Rule # 4:       Keep All Medical Directives at Home, and Take Copies to Your Doctors / Hospitals.  Even if you have a safe deposit box, keep your directive to physicians (living will),  medical power of attorney, and HIPAA release at home where you can access them 24/7.   Many medical emergencies happen at night or on the weekends at a time when banks are closed.  What is equally as important is to take copies of these documents to all of your doctors at your next appointment, and ask them to put a copy in your chart.  Also take a copy with you to the admissions office any time you have in-patient or out-patient treatment in a hospital. 

          Rule # 5:       Send Copies to the Important Family Members Named to Handle Your Affairs.  If someone in your family is trusted enough to be named as executor in your will or trustee of your trust, then they probably should have a copy of all of your estate planning documents now.  There are exceptions, of course, so use your own judgment.

          Hopefully you and your family will find these guidelines helpful. It will certainly put your minds at ease in the event of a crisis to already know where these documents are, should you need them.

For more information on estate planning and other legal needs, or if you have a legal question you would like for me to address, please visit my website at www.leflerlegal.com, email me at slefler@leflerlegal.com, or call me at 512-863-5658.  My office is located in Tamiro Plaza, 501 South Austin Avenue, Suite 1320, in Georgetown, Texas.

SECOND SPOUSE + UNEQUAL WEALTH = TIME TO PLAN!

          +Donald Trump, what a guy!  Real estate mogul, avid golfer with a handicap in the low single digits, famous hair, tv show where he gets to scream, “You’re Fired!”.  Oh, and yes, a total of 3 wives, so far, in his lifetime.   Let’s talk about those wives.  Trump and his first wife, Ivana, had three children together.  He and his second wife, Marla, had one child.  And his 3^rd and current wife, Melania,  also gave birth to a son.  What do you want to bet that in each case Trump didn’t marry these beautiful women for their money?  Undoubtedly, Trump had more money than probably all 3 of his wives combined. 

What do other people do when they marry a second (or third) spouse, and the two lovebirds are not financial equals?  When people marry later in life, it isn’t uncommon for them to come into the marriage with differing amounts of wealth.  And it isn’t always the husband who has more money than the wife.  But if it’s a second or third marriage, all sorts of issues present themselves.  Some of the more common issues are: 

                What happens to the house if the wealthier spouse dies first and wants to leave everything to his or her children from a prior marriage?

                What if the wife doesn’t have much savings of her own, and her husband at least wants to leave something to her in case she has a financial emergency, or just provide an allowance for the rest of her life?  And does that money keep coming if she remarries?

                What if the spouse with no real wealth dies first, and his or her children come haunting around looking for something to call their inheritance?

                Worse yet, what if both of the spouses become incapacitated, leaving their respective children to each take care of them?  Whose money will they use?

There are several different estate planning tools you can use to address these and other issues when you and your spouse have unequal wealth – here are just a few:  (1) You can use a prenuptial agreement and a property agreement to spell out your respective rights.  (2) You can purchase an annuity so that upon the wealthy person’s death the surviving spouse receives a specific sum of money each month for the rest of their life; (3) You can grant your spouse a life estate to remain in the home for the rest of his or her life;  (4) You can provide for the needy spouse through use of a will or trust; (5) You can do nothing, and hope that the least wealthy spouse dies first; (6) You can do nothing, and count on the fact that the needy spouse will probably struggle once the wealthy spouse dies. 

Planning of this type isn’t easy, but with some creative thinking and initiative, you can get through it and resolve all of these issues to the collective benefit of concerned.  I have no doubt that Mrs. Trump # 1 and Mrs. Trump # 2, though they lost their wealthy spouse to divorce rather than to death, are very happy for the plans in place for them and for their children.  

           

For more information on estate planning and other legal needs, or if you have a legal question you would like for me to address, please visit my website at www.leflerlegal.com, email me at slefler@leflerlegal.com, or call me at 512-863-5658.  My office is located in Tamiro Plaza, 501 South Austin Avenue, Suite 1320, in Georgetown, Texas.

WHO ARE THESE PEOPLE ANYWAY? Estate Planning Isn’t Just about Planning for Death, It’s Also About Planning for a Long Life

Remember that great TV show, +“What’s My Line”?  It ran for seventeen consecutive years on +CBS Television from 1950 to 1967, and it boasted several international versions, making it the longest running prime time game show in U.S. television history.  Through a series of “Yes” or “No”questions, panelists attempted to guess the “line” (i.e., occupation) of the guest.   You can all remember the big surprises and laughter that ensued when the panel just couldn’t guess the occupation, or were surprised by what the person really did.  But that was part of the great fun and it was very entertaining.  

What happens when a situation involves something more serious, and you really need to know who you’re dealing with?   For example, when you prepare an estate plan, one of the things you have to decide is who is going to oversee your financial, medical, and personal needs if you are no longer able to do so.   These questions come up in preparing a medical power of attorney, a durable power of attorney, a designation of guardian, and even in signing a HIPAA release to list what persons are entitled to receive information about your medical care from your doctors.  As you can see from this short list, I’m not talking about planning for death.   I’m talking about planning for assistance during your lifetime, and selecting the right person.

People are living much longer.  At some point, we may need someone to assist us with things like financial decisions, money management, health care decisions, or even help us care for our physical wellbeing.  The four documents listed above are part of every estate plan prepared in my law practice, together with the client’s will or trust. 

In choose your agents – i.e., those who will act on your behalf -- you’re lucky if you have a spouse, because typically that’s the first person called upon to fulfill these three important needs if you can no longer manage your own affairs.  Even under those circumstances, however, as a couple ages together they both may come to a point where they need to reach outside of their immediate household to a third person to act as a co-trustee, a guardian, grant a medical power of attorney, etc., should the need arise.

As you select an agent, realize that sometimes no one person has all of the skills, the time, or the geographic convenience to serve in all of these capacities.  Thus, you may decide to have your daughter the CPA who lives in New York oversee your financial affairs, while your son from Austin handles your day to day medical and personal needs, simply because he lives nearby.  If you don’t have children, or if your children wouldn’t know the first thing about how to handle money responsibly, maybe your household would benefit from using an outside service known as a “professional fiduciary” or have a financial institution to oversee your financial affairs if you cannot. 

You really have a broad range of choices.  The key is coming up with the right solution that suits your needs.  My suggestion is to take care of this while you are well, before you no longer have a choice.  If you wait until illness strikes, it’s can be too late and you may end up having someone you’d never select involved in your most personal affairs.  As with the panelists on “What’s My Line”, take the time to ask yourself “Yes” / “No” questions about each person to decide who in your life is best suited to serve you.  Better that you go through that process now, whether on your own or with the help of an experienced attorney.  This will help you figure out what qualifications your representatives will need to oversee your unique situation, and who you can really trust.   Remember, it’s your “line” they are helping you perform, and you deserve to have the best help at your side if ever you need an extra hand. 

For more information on estate planning and other legal needs, or if you have a legal question you would like for me to address, please visit my website at www.leflerlegal.com, email me at slefler@leflerlegal.com, or call me at 512-863-5658.  My office is located in Tamiro Plaza, 501 South Austin Avenue, Suite 1320, in Georgetown, Texas.

Turning the Grim Reaper into a Paper Tiger

          As I write this, tax season is just closing and it was time to write that nice check to Uncle Sam.  At the same time, Halloween decorations are starting to pop up all over town including little cardboard statues of ghosts and grim reapers.   It’s kind of an odd illustration, but the whole thing sort of reminds me of the old adage, “There are only two things certain in life:  Death and Taxes.”   Interestingly, both death and taxes involve estate planning. 

          This week I want to alert you of a change in the law taking effect on January 1, 2013, which could significantly increase your estate tax obligation if you are married and your assets total $1 million or more.  This law will result in many couples leaving far less to their children, with more money instead going to the government to pay estate taxes.  Here’s a description of the problem. 

          The federal government allows every person to give away a certain amount of money, either during their lifetime or upon their death, without being taxed on those sums.  The amount of money changes every year.   Under the law of 2012, you can leave $5,120,000 without being taxed – it’s an estate tax exemption.  But on January 1, 2013 the estate tax exemption falls to a mere $1,000,000, and the maximum tax rate over that amount is as high as 55%.  This means that if you and your spouse die with more than $1 million in assets, your estate could very well be paying some hefty estate taxes.  These are rates we haven’t seen since 2001 and 2002.  Since this is an election year with taxes being a major issue in dispute, it is anyone’s guess whether Congress will rally to change the laws prior to January 1^st.  Therefore, when addressing estate planning needs, we have to draft estate plans as though the 2013 law remains in place, and do our best to stretch that $1 million estate tax exemption as far as we can.  How do we do that?  By using an A/B Trust.  Here’s how it works:

Upon the death of one spouse, the trust has a provision that splits the assets into two separate bundles, although they still remain in trust.  Under the 2013 law, into the first bundle (Part B), $1 million is placed.  The remaining assets go into Part A.  Part A passes fully tax free to the spouse.   The other $1 million in Part B is tax exempt, because of the $1 million estate tax exemption.  This Part B bundle generally identifies the spouses’ children as the heirs, but it also has one very neat provision:  The spouse also gets to tap into the assets in Part B and use them if he or she needs to.  Then when the second spouse dies, Part B goes to the children tax-free, and whatever remains in Part A passes on to the children, with the first $1 million in Part A also being exempt from estate tax.  So you’ve protected $2 million from estate tax.  Had you not used an A/B Trust and instead left everything to your spouse, who in turn left it to your children, you would have missed the chance to protect $1 million from taxes. 

             So that’s a summary of A/B Trusts in a nutshell.  If it sounds confusing, it really isn’t, but it is very difficult to explain in a brief overview such as this.  A/B Trusts have been around for a long time so you can trust them. 

             Have a Happy Halloween everyone, and may every grim reaper you see be nothing more than a paper tiger.

For more information on estate planning and other legal needs, or if you have a legal question you would like for me to address, please visit my website at www.leflerlegal.com, email me at slefler@leflerlegal.com, or call me at 512-863-5658.  My office is located in Tamiro Plaza, 501 South Austin Avenue, Suite 1320, in Georgetown, Texas.

. . . AND TO MY SON JOHNNY, I LEAVE ABSOLUTELY NOTHING: Disinheritance & No-Contest Clauses

           In 1968, +Henry Fonda and +Lucille Ball starred in a brilliant movie, +“Yours, Mine & Ours” produced by +Desilu Productions.  The film was based upon the true story of Frank and +Helen Beardsley, a widower with 10 children and a widow with 8, and their life challenges as they met, married, and blended their families together.  Plus, they had 2 more children together following their marriage!  Since reality television didn’t exist in the 1960’s to follow this family around and hover over their every move as the years passed, we never learned much about the later years of the Beardsley family.  We do know that Helen passed away in 2000, and that Frank remarried again.  Chances are that with the film success, a 2005 remake of the film, and Mrs. Beardsley’s autobiography, +“Who Gets the Drumstick?”, there may very well have been an estate to distribute when Helen passed away. 

Fast forward to today.  Many of my clients have blended families comprised of their current husband or wife and also children from a prior marriage for one or both of them.  In many instances, for one reason or another, these parents have decided that not all of the children will inherit property from them.  And some of those disinherited children may not be too pleased about that.  What makes it worse is that many of those “children” aren’t doing so well financially in their own lives, so they would jump at the chance of receiving money – even from a deceased parent they hadn’t spoken to in over 30 years.  The biggest concern for the surviving spouse or the other children who are inheriting the estate is what in the world are they going to do when the disinherited ones show up on the doorstep demanding what they believe is “rightfully theirs” when, in fact, it was their parent’s decision that they were not to receive anything.

At the core of this situation is the concept of “disinheriting” someone.  Texas law imposes a few very important and mandatory requirements that must be followed in order to disinherit a spouse, a child, or other descendant.  If you don’t follow those requirements, the relative will be allowed to inherit anyway, which altogether defeats your desire to disinherit them.   First, you must prepare a will or place your property in trust.  If you don’t, under State law if you die without a will, your spouse is still alive, and you have children from a prior marriage, your children essentially take 2/3 of everything except Community Property, where they take your ½ share.  Here’s how State law divides the estate: 

Real Property (real estate) that is your Separate Property (not Community Property):

-          1/3 to your spouse for the rest of his/her life (a “life estate”), then that 1/3 passes on to your children in full ownership; and,

-          The remaining 2/3 ownership to your children, outright. 

Personal Property that is your Separate Property (like bank accounts, investment accounts, collections, jewelry, etc.):

-              1/3 to surviving spouse;  and,

-              2/3 to children and their descendants

Community Property:

-          ½ to the Spouse – that’s just the one-half that belonged to the spouse already!

-          Remaining ½ to the children.

So if you want to disinherit any children, you must create a will or trust in order to do so.  You must also specifically list by name the persons you are disinheriting, and specifically stating that you intend to disinherit them and leave them nothing.  Otherwise, the law calls them a “pretermitted” heir and they get to take a share of your estate anyway, as though you just accidentally forgot them!   I do suggest that if the only reason you are not leaving assets to a child or descendent is because they have already accumulated significant wealth from another source and simply don’t need the money, you may want to consider saying something like, “while I leave them all of my love and affection, they are financially sound and therefore I elect to leave no property to them.“  At least you have explained yourself and they don’t wonder why they were excluded.

                I also recommend one additional provision to try to dissuade the disinherited ones from waging war upon the survivors:  A no-contest clause.  This provision essentially says that anyone who tries to challenge the will or trust is disinherited.  Even so, be aware that there’s no guarantee that a disinherited child won’t come knocking anyway, either at your doorstep or at the courthouse steps, trying to get the will thrown out, saying that you were “incompetent” or “forced” to sign that document.  But that writing is at least one more indication of your personal intent, and the burden is on the disinherited one to prove otherwise. 

                So that’s an overview of a not so pleasant subject.  Hopefully the Beardsley family worked out all of these details without too much trouble. 

For more information on estate planning and other legal needs, or if you have a legal question you would like for me to address, please visit my website at www.leflerlegal.com, email me at slefler@leflerlegal.com, or call me at 512-863-5658.  My office is located in Tamiro Plaza, 501 South Austin Avenue, Suite 1320, in Georgetown, Texas.

MODERN LOVE II: They Still Call It “Shacking Up”

            In preparation for this article, I had a little fun Googling the phrase, “shacking up” just to see whether it’s still in use, or whether that was just an old fashioned term that has fallen by the wayside.  Well, guess what?  The phrase is just as common today as ever.  And apparently so is shacking up!  In my last article, I mentioned that sometimes couples live together without getting married for a myriad of reason.  Some call it a test drive, while others have a more financially-based reason for their living arrangements.

Shacking up definitely has estate planning connotations.  Specifically, in states like Texas where common law marriage is recognized, at what point does your partner have a potential claim to your estate?  Texas recognizes common law marriage, so you could be at risk of having your partner claim a spouse’s interest in your estate in the event of death.  Other legal claims based in contract and reliance can arise as well.  Basically, in the absence of a clear understanding and written agreement between the parties, you leave yourself wide open to all kinds of claims just because cohabitation creates a blurry, undefined circumstance.  

For example, your roommate could always make a claim against your estate, saying something along these lines:  “Bob promised me that if I moved in with him, took care of him, played house with him, had sex with him, and enjoyed life with him, then he would leave me everything.”  Or, your roommate could claim that he or she spent all of their money on your household expenses (or even claim an ownership interest in some portion of the house) “as a loan” and that he or she is are entitled to repayment.  The list of potential claims is as endless as your roommate’s imagination. 

If you want to avoid any confusion and protect your estate from any claims of infiltration by your “it-may-work-out, it-may-not” roommate, consider a cohabitation agreement.  It’s similar to a prenuptial agreement, which is a document signed by couples prior to their marriage spelling out their intentions with regard to their property after their marriage.  Just as with the prenup, a cohabitation agreement spells out the parties’ agreement vis’-a-vis’ the property they each own or co-own together, with the only difference being that they aren’t actually married.  The typical cohabitation agreement provides at least for the following, although additional issues are included in a comprehensive agreement:

1.       The reasons for entering into the agreement;

2.       The date the parties began living together and brief history of their relationship. 

3.       A list of all property owned by both parties.  Without this detail, the agreement could later be set aside (i.e., declared invalid) on the grounds that one party did not make full disclosure to the other;

4.       How are living expenses to be paid; whether a joint bank account will be established; who owns newly-acquired items; who pays for repairs; will payments for maintenance and improvements to one partner’s property create an ownership interest or be treated as a loan or gift? 

5.       If one partner is supporting the other, what is that partner receiving in return?  And how long is the support to continue?

6.       How do the parties revise the agreement if circumstances change?

7.       Termination of the relationship;

8.       Upon death, does the surviving partner receive anything?  Who is responsible for the deceased partners’ debts?  Are there other beneficiaries?

9.       How are disputes resolved?

10.   Does the agreement continue if they later marry?

Coupled with a trust agreement, which establishes a “holding tank” for the separate property of one of the partners, a cohabitation agreement warrants serious consideration.  It may seem awkward to plan for death or separation often in the early stages of a relationship, but if you are willing to address these issues up front, many of the problems arising from the death of one of the partners can be avoided. 

For more information on estate planning and other legal needs, or if you have a legal question you would like for me to address, please visit my website at www.leflerlegal.com, email me at slefler@leflerlegal.com, or call me at 512-863-5658.  My office is located in Tamiro Plaza, 501 South Austin Avenue, Suite 1320, in Georgetown, Texas.