Adoption: What is required to adopt a child in Texas?

Adoption is defined as a procedure that establishes a parent-child relationship between a child and adopting parents. In Texas, any adult, single or married, can petition to adopt a child who may be adopted.

So, who may be adopted? Here, any child who is living in Texas when a petition is filed, and who meets one of the following stipulations is considered eligible for adoption.

1. The child’s parents are no longer living and/or the parent-child relationship between the child and each living parent has been terminated;

2. a stepparent is petitioning to adopt their spouse’s child/children and the parent-child relationship between the child’s other parent has been terminated;

3. the former stepparent of a child who is at least two years old has been caring for the child for six months, the parent/child relationship has been terminated with respect to one parent, and the other parent consents to the adoption; or

4. the person seeking the adoption of a child who is at least two years old is the child’s former stepparent, the parent/child relationship has been terminated with respect to one parent, and the former stepparent has been caring for the child for at least one year preceding the adoption.

In general, a child who is to be adopted must have been living with the person who is petitioning for at least six months before the adoption is legally granted. While this six month “trial” period is technically required, Texas courts have been known to waive or shorten the period if doing so is deemed to be in the best interest of the child.

In all honesty, adopting a child can be a difficult process. Unfortunately, many potential adoptive parents are frightened or intimidated by the amount of time and attention to detail that is necessary to adopt a child.

If you need a Texas adoption lawyer, contact Peterson Law Group.

What is a specal needs trust in a will?

A third party special needs trust ("SNT"), generally included in a person's will, is a supplemental needs trust established by a person for the benefit of someone who is disabled. In a will, property that would otherwise have been distributed to the disabled beneficiary outright will instead be held in a SNT for his or her benefit. The SNT is designed so that the trust property will not be counted as an available resource when determining whether the disabled beneficiary is eligible for public benefits. As long they do not have the legal ability to revoke the trust or direct that the trust assets be distributed for their benefit, the assets in the SNT will not be counted as the disabled beneficiary's assets when determining his or her eligibility for Medicaid. A third party SNT has no payback provision to the State of Texas. Also, the trust can be written so that the property of the trust which remains upon the disabled beneficiary's death can be distributed to other family members or beneficiaries of your choosing. These are the major benefits of a third party SNT.

If you need a Texas estate planning lawyer, contact Peterson Law Group.

What changes have been made in dealing with estates?

Under the now-repealed estate tax laws, property passing from a decedent used to receive a step-up in cost basis equal to the property's fair market value as of the decedent's date of death. That tax benefit has been eliminated for persons who die in 2010, and instead, the basis of property acquired from a decedent will be the lesser of the decedent's adjusted basis or the property's fair market value on the decedent's date of death. Under this rule, it is possible that the cost basis of property will be stepped down.

These new carryover basis rules will not only cause the imposition of capital gains taxes that previously were avoided following a person's death, but the beneficiaries who inherit your estate now need to know what your cost basis was in the properties they receive. In this regard, you should endeavor to organize your records so that the beneficiaries of your estate will be able to calculate your cost basis in the properties you own. For many people who inherit property in 2010, records will not exist or will be incomplete, thus making it difficult or impossible for them to determine a particular property's cost basis.

There are two important exceptions to the carryover basis rules. A decedent's Executor is allowed to allocate up to $1,300,000 to various assets owned by a decedent, thereby increasing the cost basis of those assets. Also, an additional $3,000,000 of basis increase can be allocated to properties passing to a spouse or to a special "qualified terminable interest property" trust for the spouse (often called a "QTIP" trust or a "marital" trust). Under the tax laws in 2010, just like the laws which existed prior to estate tax repeal, any person may give an unlimited amount of property to his or her spouse or to a QTIP trust (the "Marital Deduction") without generating any gift or estate taxes.

For estate planning help, contact Peterson Law Group.

What changes have been made to the Federal generation skipping transfer tax?

Like the estate tax, the skipping transfer tax has been repealed the 2010 tax year. Under the old law, each person could give away during lifetime or at death up to $3,500,000 (the "GST exemption") without owing the generation skipping transfer tax. Any gifts to grandchildren or great-grandchildren (and to certain other persons two or more generations younger than the person making the gift) in excess of the GST exemption would have been subject to the GST tax which was equal to the highest marginal estate tax bracket (45% in 2009). Although the GST tax has been eliminated for 2010, it will be reinstated in 2011, and the available GST exemption will be reduced to its former level of only $1,000,000 (although this amount will be indexed for inflation) and with a 55% rate of tax.

If you need a Texas estate planning attorney, contact Peterson Law Group.

What changes have been made to the federal gift tax?

Contrary to what many think, the Federal gift tax has not been repealed. However, the gift tax rate has been lowered to 35%, down from the 45% rate in 2009. Under the current gift tax law, each person may give away (during his or her lifetime) as much as $1, million in cash or other property without paying any gift taxes. Any gifts which exceed this amount will be taxed at 35%. However, the gift tax will not apply to most of the gifts people make because each person can give $13,000 per year to any person without reducing the $1 million exemption. This $13,000 per year exclusion from the gift tax is known as the "Annual Exclusion." The Annual Exclusion, combined with other estate planning techniques, can help to reduce your estate for estate tax purposes and transfer wealth to your children and grandchildren.

If you need estate planning help, contact Peterson Law Group.

Do I need to file gift tax returns?

Gifting property to children can be a great way to reduce your estate tax burden, but when you make gifts that exceed a certain threshold amount, you will want to file a gift tax return.

It is important that you file gift tax returns (IRS Form 709) each year to report gifts you make which exceed the annual exclusion from the gift tax (currently $13,000 per donor per donee each year). Gift tax returns may also need to be filed for generation skipping transfer ("GST") tax purposes if you have a GST trust where distributions are made during the term of such trust or upon the termination of such trust to any of your grandchildren or great-grandchildren (or to other persons who are "skip persons" for GST purposes). Imposition of the GST tax can be avoided if you allocate (or are deemed to have allocated) a portion of each of your $3,500,000 GST exemptions as you make gifts in trust each year.

If you gift tax returns, they will be due at the same time as your Federal income tax return, normally April 15th of the year following the gift, unless extended.

If you need a Texas estate planning lawyer, contact Peterson Law Group.

What is an ILIT?

An Irrevocable Life Insurance Trust, or ILIT, is a way to avoid estate taxes by removing life insurance proceeds from your estate. By giving an existing life insurance policy to this Trust or by giving cash to the Trust which is ultimately used to purchase a life insurance policy, you should effectively remove the proceeds of the insurance from your estate according to the IRS.

If you transfer an existing life insurance policy to the Trust, you must outlive the transfer by three years in order for the proceeds to be excluded from your estate. Any new insurance which is purchased by the Trust is not subject to this three year rule.

Once the Trust owns a life insurance policy, the Trust becomes obligated to pay all premiums which come due on the policy. Since the Trust will need funds to pay for the insurance policy, you would make gifts to the Trust each year in the amount of the insurance premiums.

It is important to remember that gifts to the Trust will be irrevocable once made, and you cannot take back a gift once it is made. In addition, all income which accrues to the gifted property will benefit the Trust, not you.

For many, an irrevocable life insurance trust has numerous estate tax benefits and is a great method to transfer wealth to their children.

If you need an Irrevocable Life Insurance Trust lawyer, contact Peterson Law Group.