San Antonio, TX Estate Planning

Avoid These Common Estate Planning Mistakes

Failing to take action or making the wrong moves can be costly for you and your heirs. Here are six blunders experts told us they see most often, and what to do instead.

Estate planning experts have noticed some trends over the years when it comes to making mistakes in one’s estate plan. Some mistakes are fairly minor, but others can be very costly to sort out when the estate is being administered.

Recently, Consumer Reports published a list of some of the latter mistakes in an article titled "6 costly estate-planning minefields and how to avoid them." 

Their list includes:

Thinking you are too young to need a will - Since you cannot accurately predict when you will pass away, you can never be too young to get a will.

Putting everything into joint ownerships - When you put property into joint ownership, you give the other owner and his or her creditors equal rights to the property.

Forgetting a will doesn't do everything - Many things such as life insurance and retirement plans are not covered by wills.

Allowing your legacy to be squandered - Many inheritances are spent quickly if proper safeguards are not in place.

Igniting sibling rivalry - Your estate plan should not cause your children to feud.

Making things too complicated - You might not need a complex estate plan. You should speak to an attorney about getting the appropriate estate plan for your needs, not necessarily the latest, complex estate plan.

That last bit of advice is likely the most important. Work with an experienced attorney who has seen it all and can help you avoid estate planning pitfalls.

Reference: Consumer Reports (April 14, 2015) "6 costly estate-planning minefields and how to avoid them."

House of Representatives Passes Bills Concerning Gift and Estate Taxes

The U.S. House of Representatives this week passed a bill to provide gift tax certainty to individuals who make gifts to 501(c)(4) social welfare organizations, 501(c)(5) labor unions, and 501(c)(6) trade associations. In a related move, the House also passed a bill to repeal the federal estate tax (H.R. 1105, the “Death Tax Repeal Act”).

Recently, the House of Representatives passed, with broad bipartisan support, the Fair Treatment for All Gifts Act and the Death Tax Repeal Act as reported by The National Law Review in an article titled "Gift Tax Certainty at Last? re: H.R. 1104."

Lawmakers have grown increasingly wary about how the gift and estate taxes operate to cause strain on estates of farmers, small business owners and others. This is especially a concern given President Obama's new proposals for an increased capital gains tax and for eliminating the step-up basis for capital gains on death. 

The gift tax act would exempt from the gift tax any gifts to social welfare organizations, trade associations and labor unions. This is an extension of the IRS policy that already exempts gifts to social welfare organizations. 

The Death Tax Repeal Act will do just what it says.

Of course, neither act is currently law. They both must still pass the Senate and avoid a Presidential veto. However, this is the first step to making these acts law.

Reference: The National Law Review (April 17, 2015) "Gift Tax Certainty at Last? re: H.R. 1104."

Inheritance Scam with a Twist

A Brooklyn woman scammed $300,000 from her friends by telling them she had inherited a boatload of cash but needed their dough to pay off the estate’s taxes and liens, prosecutors said Tuesday.

Have you heard of the standard inheritance scam? A scammer pretends to be an attorney or estate agent. They tell a potential victim that the victim has inherited a large fortune from an estranged or long lost relative. However, before the victim can get the inheritance, the scammer claims that the victim must cough up large sums of money to pay off taxes or other debts that the estate holds. 

Plot twist! A woman in Brooklyn is alleged to have turned this standard inheritance scam around. 

She forged bank documents to make it look like she had received an inheritance for $13 million in cash. She then went to her friends and convinced some of them that to get the cash she needed money to pay the estate's taxes and debts. 

She is alleged to have conned $300,000 from up to ten people. 

The New York Post has more on the story in a recent article titled "Woman busted in $300K inheritance scam: DA."

Avoiding inheritance scams is easy. 

If someone you do not know asks for money concerning an inheritance, especially if it seems too good to be true, consult with an estate attorney before spending any money. 

If the person objects to you receiving the advice of an attorney, run away! 

No legitimate estate administrator would object to an attorney being consulted. 

In this particular case, the attorney would have told the victims that any taxes or other debts could have been paid out of the cash in the estate, if in fact the inheritance were real.

Reference: New York Post (April 14, 2015) "Woman busted in $300K inheritance scam: DA."

Will Your Beneficiary Do the Right Thing … or Squander Your Money Instead?

The United Jewish Appeal claims it was supposed to get the remainder of a trust set up by building mogul Bill Gottlieb, who died in 1999, according to a filing in Manhattan Surrogate’s Court. Gottlieb’s late sister’s husband, Irving Bender, eventually became the beneficiary of the trust, and ­allegedly blew $3.5 million meant for the charity.

In a lawsuit, United Jewish Appeal alleges that Irving Bender wasted $3.5 million of trust assets on fancy hotels and other luxuries that were well beyond his normal standard of living. It is also alleges that these expenditures were allowed by the third-party trustee so that it could get business in the future from one of Bender's relatives. 

Under the terms of the trust, Bender was supposed to use trust assets during his lifetime but retain his normal and usual standard of living. The remainder of the trust was to go to United Jewish Appeal. 

The New York Post has more on this story in an article titled "Real-estate heir blows $3.5M meant for charity on cars, hotels: suit."

Of course, Bender disputes the allegations and it is too early to tell which of the parties is correct.

These types of suits are not unusual, however. 

Trusts often have conflicts between present and future beneficiaries. The keys to creating a trust that does not have those types of conflicts is to set specific limits in the trust and to choose a trustee that does not have a business interest in taking one side of the conflict over the other.

An experienced estate planning attorney can help parties steer clear of these conflicts.

Reference: New York Post (April 7, 2015) "Real-estate heir blows $3.5M meant for charity on cars, hotels: suit."

10 Strikes against the Estate Tax

With the fate of the bill against the estate tax yet to be determined by the Senate and President, let’s reflect on the top ten reasons the death tax deserves to die.

Many people wonder why the estate tax would be repealed and why there is so much controversy surrounding the matter. 

With the U.S. House of Representatives recently voting to repeal the estate tax, the issue now will go before the Senate for approval. If it passes there, then President Obama will need to decide whether to veto the legislation or not. 

Forbes recently published a list of reasons why the estate tax should be repealed in an article aptly titled "Top Ten Reasons The U.S. House Will Kill the Death Tax." 

The Forbes list includes:

The estate tax is unfair to people who have paid taxes on the assets as income.

The estate tax is not popular with Americans.

The tax generates relatively little income for the government.

The revenue from the tax is decreasing.

The estate tax effects family businesses, not just the extremely wealthy.

Most states do not have an estate tax.

The U.S. has one of the highest estate tax rates in the world.

The tax harms the job market.

The tax decreases economic growth.

The estate tax harms the environment by forcing landowners to subdivide tracts.

Keep a close eye on these developments and stay in touch with your estate planning attorney whichever direction the political winds may blow.

Reference: Forbes (April 14, 2015) "Top Ten Reasons The U.S. House Will Kill the Death Tax."