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The Nightmare of DIY Estate Planning
  • By: Harvey L. Cox, Esq.
  • Published: July 28, 2021

I participate in several online lawyer discussion groups. A few weeks ago, a fellow lawyer posted a story illustrating the dangers of do-it-yourself estate planning. The attorney telling the story said she received a call from a woman whose boyfriend recently died. The boyfriend had considerable wealth. He had consulted with an attorney about an estate plan. But, he chose not to hire the lawyer. Instead, he used DIY software to prepare his own Will. In the Will, he named his girlfriend the executor and sole beneficiary of his multimillion-dollar estate. Before his death, he did inform his girlfriend of the Will he created. He also told her that he wanted her to use the funds to benefit his minor…Read More

You Have to Understand How Your Assets Pass at Your Death
  • By: Harvey L. Cox, Esq.
  • Published: July 22, 2021

Contrary to popular opinion, your will doesn't necessarily control how your assets pass at your death. You may hold most of your wealth in assets that pass outside of your will. For example, if you have a retirement plan, life insurance, or IRAs, those assets aren't usually subject to probate. Your will does not affect how those assets are distributed at your death because they aren't subject to the probate process. If you have a retirement plan, IRA, or life insurance, they pass to the beneficiaries you name on a beneficiary designation form with the issuer of those particular assets. Example: Ben is single. He names his brother Larry as the sole beneficiary in his will. He also names Larry…Read More

Do NOT Add Your Children to Your Bank Accounts
  • By: Harvey L. Cox, Esq.
  • Published: July 13, 2021

Adding your children to your bank accounts makes them co-owners of those accounts. If your children have creditors who have obtained a judgment against them, your funds are now subject to a bank garnishment to collect the judgment. In other words, adding your children to your bank accounts makes your accounts subject to the claims of your children's creditors. Likewise, if your children owe the IRS, your funds could be subject to an IRS lien or levy. Nationwide, parents have lost millions of dollars by making this catastrophic mistake. If you need your children to help you manage your bank accounts, you should appoint them as your agent using a Durable Power of Attorney. The Durable Power of Attorney will…Read More

Do NOT Rely on Co-Ownership of Property to Avoid Probate
  • By: Harvey L. Cox, Esq.
  • Published: July 7, 2021

In Texas, co-owners of property can have a right of survivorship to the property they co-own. Co-ownership with the right of survivorship means that when one co-owner dies, the surviving co-owner becomes the sole owner of the property without the necessity of opening a probate estate. But, using this method of estate planning can cause unexpected tax and legal problems. Example: You decide to make your son a co-owner of your property so that it will pass to him at your death without him having to hire a lawyer and file to probate your will. While the property will go to your son outside of probate, you have created some tax and legal issues that you didn't intend to happen.…Read More

Think About the Tax Consequences of Distributing Your Assets
  • By: Harvey L. Cox, Esq.
  • Published: July 1, 2021

Example: Mary's estate consists of two significant assets, a life insurance policy and a traditional IRA. Both assets are equal in value. To simplify and equally distribute her assets, Mary names her son as the beneficiary of her life insurance and her daughter as the beneficiary of her IRA. What is the problem with Mary's plan? The problem is how the plan ultimately distributes the assets to Mary's children. The proceeds of life insurance are income tax-free. Mary's son gets the full value of her life insurance. The proceeds of Mary's IRA, however, are subject to income tax. Mary's daughter will lose about one-third of the value of the IRA to income taxes. Mary's attempt to divide her primary assets…Read More

Don't Make the Mistake of Thinking All Estate Plans are the Same
  • By: Harvey L. Cox, Esq.
  • Published: June 23, 2021

I have seen a lot of poorly drafted estate plans. Inexperienced attorneys wrote some of those plans. Financial planners and CPAs even wrote some of them. With the proliferation of wrong information on the internet, I have seen more than a few poorly written do-it-yourself estate plans from forms found on the web. It isn't a good idea to find forms on the internet and then complete them by just typing your name in blank spaces. And, just because you pay for a form on the web doesn't mean you're getting something that fits your needs. I recently reviewed a Revocable Living Trust created from a form purchased online. One of the most significant advantages of a Revocable Living Trust…Read More

Do NOT Add Your Children to the Deed of Your Home
  • By: Harvey L. Cox, Esq.
  • Published: June 22, 2021

When you put your children on the deed to your home or any other asset, you become a co-owner of the property with them. The legal effect of co-ownership can bring unintended results. The first unexpected result is creating an IRS tax liability issue for yourself. Putting your home in joint tenancy with your children is a taxable gift under IRS regulations. You will have to file a gift tax return for the year in which you added your children's names to your deed if the value of the interest transferred to each child is more than $15,000 (2021). The second unintended result is that you may inadvertently transfer the house to your child's ex-spouse or your child's creditors. If…Read More

If You Don't Have an Estate Plan, the State of Texas Has One for You
  • By: Harvey L. Cox, Esq.
  • Published: June 17, 2021

If you don't have an estate plan, Texas law has one for you. The state's plan determines who gets your property based on their relationship to you and the type of property you own. Example: Bill and Julia have been married for twenty years. Together they have a son and a daughter. Bill also has two children from a prior relationship. Bill and Julia have approximately one million dollars in community assets. They each want their community property to go to the other upon the death of the first. They believe Texas law automatically gives the community property share of each of them to the other at death without them having to do anything. Because of this belief, Bill and…Read More

Naming Children as Beneficiaries of Life Insurance
  • By: Harvey L. Cox, Esq.
  • Published: June 15, 2021

Many parents with minor children have not acquired substantial assets, so they use life insurance to provide financial security for the children in case one or both parents die. If you name your minor children as beneficiaries and they are minors when you die, the insurance company cannot legally pay the life insurance proceeds directly to them. In this scenario, it will be necessary to ask a court to appoint an adult to manage the money for the children until they reach adulthood. You can avoid this situation by establishing a trust for the children and naming the trust as the beneficiary of your life insurance. Join me on my next Estate Planning Webinar to learn how to avoid other…Read More

You Should Not Plan Your Estate Around Specific Assets
  • By: Harvey L. Cox, Esq.
  • Published: June 11, 2021

I discourage clients from planning their estates around specific assets. There may be a compelling reason to do it in rare instances, but in most cases, it can result in unintended consequences. Example: John is a widower with three grown children. He wants to treat his children equally. In his will, John divides his assets equally to his children. Several years before he died, John made some changes that dramatically affected his estate. The first change he made was to transfer one-half of his home to his oldest son. Next, John added his daughter as the beneficiary of his savings account. Finally, he named his youngest son as the sole beneficiary on his life insurance policy. These changes in his home,…Read More

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