What is an attorney ad litem?

The term ad litem simply means “for the suit”. An attorney ad litem may be appointed or assigned in family law cases or probate cases where representation is deemed necessary by a judge. While the Texas Family Code does not specifically define the role, the Texas Probate Code provides a definition that is generally accepted in family law cases:

An attorney ad litem is an attorney who is appointed by a court to present on behalf of an incapacitated person.

In family law cases, judges will recommend the appointment of an attorney ad litem when doing so is deemed to be in the best interest of the child (or any party) with regard to the child’s interests in the case at hand.

In any probate proceeding, a judge may appoint an attorney ad litem to represent the interests of a person with a legal disability, a person who is a nonresident and cannot be present, an unborn person, or an unknown heir.

In either area of law, the role of an attorney ad litem is that of advocate for his client.

If you need a Texas Family Lawyer or a Texas Probate Lawyer, contact Peterson Law Group.

What assets do and do not pass under a will?

In Texas, assets that commonly pass under a testator’s will include:

• Real property, both surface rights and mineral interests.

• Bank and brokerage accounts, Certificates of Deposit, stocks, and bonds (depending on whether there is a beneficiary designation).

• One-half of any Individual Retirement Accounts which are considered community property owned by the testator’s spouse.

• Tangible personal property, both titled and untitled.

• Royalties generated from intellectual property.

• Money owed to the testator at the time of his/her death.

Assets that generally do not pass under a will in Texas include:

• Life insurance.

• Some employer provided retirement plans in which the testator is the participant.

• Employer provided retirement plans in which the testator’s spouse is the participant.

• Individual retirement accounts owned solely by the testator.

• Property owned in a trust of which the testator is a beneficiary.

There are instances where some of the assets described above may be passed under a will. One common example occurs when the estate or will executor is named as the beneficiary for one or more of the assets listed.

If you need a Texas Wills, Trust & Estate Planning Lawyer, contact Peterson Law Group.

If you need a will, check out our estate planning questionnaire.

If you need to start a probate, check out our probate questionnaire.

What is a “Bypass Trust” in a will?

A bypass trust is an estate planning tool employed by married couples who wish to take advantage of both of their estate tax exemptions, thereby saving hundreds of thousands of dollars in federal estate taxes. While the federal estate tax is currently non-existent, it is safe to assume that the rate of taxation will soon return to familiar percentages. Planning for this, it behooves married persons to consider establishing a will that allows them to pass on as much of their estate as possible to their loved ones.

In a simple will, all property passes to the surviving spouse when one party dies. This scenario qualifies for the marital deduction; however, once the surviving spouse passes away, they have only one estate tax exemption to apply to property passed to the couple’s children. A bypass trust, also known as a credit shelter trust or an A/B trust, allows a married couple to use both of their estate tax exemptions.

The way a bypass trust allows married couples to avoid federal estate taxes is by leaving the exemption amount available upon the first spouse’s death to a trust that provides the surviving spouse with a lifetime income. Once the surviving spouse passes away, the remaining funds in the trust will then be distributed among the couple’s children. This trust, if properly created and maintained, is not subject to the federal estate tax because the surviving spouse cannot be deemed the owner of the trust.

If you need a Texas Wills, Trust, and Estate Planning Attorney, contact Peterson Law Group.

What is the Medicaid Estate Recovery Program?

If a person (age 55 or older as of March 1, 2005) of limited income received healthcare services through the government program Medicaid, the state of Texas has the right to ask for money back from their estate once they die. The Medicaid Estate Recovery Program (MERP) facilitates that reimbursement.

The MERP applies only to some of the long-term Medicaid services, like nursing home care, extended in-home services, and prescription drugs supported by Medicaid. It is important realize that the MERP will only file a claim on a person’s estate if doing so is cost effective. The MERP will not file a claim when:

- the value of the estate is less than $10,000;

- there is a spouse who is still alive;

- there is a child under 21 years of age;

- there is a child of any age who is blind or permanently and totally disabled;

- there is an unmarried adult child who lived in the person’s home for at least one year before the Medicaid recipient died;

- the amount of recoverable Medicaid costs are $3,000 or less; or

- the cost of selling the property would be more than or equal to the value of the property.

The state of Texas will also not ask for monetary reimbursement if doing so would cause an undue hardship for the deceased person’s heirs. In order to be granted an undue hardship request, the person’s heirs must ask for it, and provide documentation that proves the hardship. Some scenarios that MERP recognizes as undue hardships occur when:

- the estate property was a family business, farm, or ranch for at least 12 months prior to the Medicaid recipient’s death, and this property is the main source of income for their heirs;

- the estate property produces at least 50% of the heir’s livelihood;

- recovery by the state would affect the property and result in heirs losing their primary source of income; or

- the estate’s beneficiaries would be eligible for public or medical assistance if a recovery claim is collected.

- Other compelling reasons may exist.

More detailed information about the Medicaid Estate Recovery Program can be found at the Texas Department of Aging and Disability Services (DADS) website.

If you need a Texas Estate Planning 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.

What is the status of the estate tax currently?

As of January 1, 2010, the Federal estate tax has been repealed -- but only for one year. As part of the 2001 tax act, Congress increased the amount persons could give away tax-free at death (the "Exemption Amount"),. This amount increased each year over a 10 year period. The Exemption Amount reached $3,500,000 in 2009 and ultimately became unlimited this year. In other words, the Exemption Amount in 2010 is equal to the value of your entire estate.

However, tax law changes were limited to a 10 year duration. Thus, in 2011, the estate tax will be reinstated with an Exemption Amount of only $1,000,000 and a rate of tax equal to 55%, the same exemption and tax rate as in 2000. Larger estates will also have an extra 5% tax that was repealed 2001, but be reinstated in 2011.

If you have questions about how the estate tax affects you specifically or if you need a Texas estate planning lawyer, contact Peterson Law Group.

How do I appoint a future guardian for my children?

In Texas, appointing a guardian for one's children is normally done in one of two ways:

1. in a person's Will
2. or in a separate Appointment of Guardian document.

While I typically include that information in a will, I prefer to also appoint guardians using a separate instrument. The reason that I prefer this approach is that a will does not become authoritative until the time of your death. On the other hand, the Appointment of Guardian is active upon death or incapacity/disability (if you are longer able to care for your child). Most people with minor children are more likely to become disabled or incapacitated than to die, so I think the second approach is the better one.

If you need a Texas Wills, Trust & Estate Planning lawyer, contact Peterson Law Group.

What is a codicil?

A codicil is a legal document that amends your existing Will without revoking the Will in its entirety. Codicils can be used to an existing will provision, a new will provision, or delete an existing will provision. Usually, if the changes someone wants to make to their will are relatively minor (for example, changing executors), a codicil is a quick, inexpensive way to amend the Will without re-drafting the entire document.

If you need a Texas Wills, Trust & Estate Planning attorney, contact Peterson Law Group.

What is a medical directive?

A Medical Directive (or Directive to Physicians) allows you to state whether you want or do not want life-sustaining treatment to be utilized to keep you alive if faced with a terminal or irreversible medical condition. It is much better for you to make your end of life decisions made in advance so that your loved ones, your doctors, and your medical power of attorney knows your desires. Typically, we include a medical directive in our standard will packages.

If you need a Texas Wills & Trust lawyer, contact Peterson Law Group.

What is a HIPAA release?

HIPAA (the Health Insurance Portability and Accountability Act of 1996) requires health care providers to be very careful how they release health care information. All health care providers are required to make reasonable efforts to limit the release of protected health information to the minimum necessary to accomplish the intended purpose of the particular disclosure or request for disclosure. A HIPAA release allows you to name one or more persons who will be able to have access to all of your information. This is especially important to have in your estate planning so that your medical power of attorney can have access to complete medical information in the event that they needed to make a medical decision on your behalf. We typically include such a release in our standard will packages.

If you need a Texas wills & trusts lawyer, contact Peterson Law Group.

What is a pourover will?

When someone has created a revocable trust, we usually create a pourover will. This will protects the individual or couple in case there is property that does not get contributed to the revocable trust. For example, someone with a revocable trust may forget to title a new car in the name of the revocable trust. In that instance, the will, when probated, would serve to place the ownership of that car into the name of the revocable trust, i.e. "pours it over into the trust".

If you need a revocable trust, pourover will, or other estate planning advice, contact the Peterson Law Group.

Key Elder Law Numbers for 2010

ElderLaw Answers released a short summary of the key elder law numbers for different federal tax and benefit programs for 2010. The summary is much better than sifting through the various governmental portals for this information.

The highlights include:

• Gift tax exclusion stays at $13,000
• There was no cost of living adjustment to Social Security and SSI since the consumer price index did not increase
• Medicare premiums, deductibles and copayments increased slightly
• The amount you could deduct from your taxes for buying long term care insurance increased slightly
• Medicaid's community spouse resource allowance, monthly mainteance and income cap remained the same as in 2009.

If you need a Texas Estate Planner, contact Peterson Law Group.

Estate Tax under Obama's Budget

Folks have been worried for some time about the changes to the current estate tax system with the change in President. President Obama's current budget does make a coupld of significant changes to the current estate tax system.

First, the estate tax exemption for 2010 is replaced in toto. Previously, there was an unlimited exemption in 2010, which meant that no estates would be subject to estate tax. Now, that has changed, and the unlimited exemption has been removed for 2010.

Second, the estate tax exemption amount for 2010 and the following years has been changed to $3.5 million per individual. Thus, with proper estate tax planning, a married couple can shield $7 million from the estate tax.

While it would have been nice to have the unlimited exemption in 2010, the 2011 exemption is a significant increase from the $1 million exemption amount that was scheduled for those years. Thus, although there is some disappointment in this news, there is also a significant silver lining that will probably be a bigger benefit to more Americans.

To Will or Not to Will

The Texas Bar Journal has a new client page that contains very basic information about why everyone should have a will. Click here for the link. If you need a will, please contact Peterson Law Group at BrazosLawyers.com or 979-703-7014.

Long Term Care Insurance

Why buy long term care insurance?
1. It will help you keep your independence and dignity and allow you to make choices. When the time comes for paying for your long term care needs, you may end up spending your savings and then relying on Medicaid for assistance. Medicaid typically pays for a semi-private room in a nursing home, but not all nursing homes take Medicaid. In many states it is not easy to get Medicaid to cover home care or pay for assisted living. Many people want to stay at home, but with Medicaid may not be able to. Insurance allows you to have a choice of where you want to live.

2. If you are married and you have a need for long term care, your spouse may be forced to pay for an outside caregiver. The cost is likely to come from your combined income and assets. This may leave your spouse with minimal funds in the future. Insurance solves this problem and allows the healthy spouse to keep the assets.

3. Many healthy caregiving spouses won't spend their money and choose to "tough it out" on their own without help. If care of a disabled spouse drags on too long, this can have a devastating effect on the physical and emotion health of the caregiver. Insurance will pay for professional care for the disabled spouse and allow the caregiver spouse needed rest.

4. If your children promise to take care of you when the time comes that you need care, insurance will help them do that. Probably neither you nor your children have thought of the prospects of moving you from place to place, changing your dirty diapers, cleaning up after "accidents" in the bathroom or helping you with bathing and dressing. Insurance will pay for aides to help your children with these tasks.

5. If you are single and a need for long term care arises, insurance can pay for and coordinate that care. With insurance you won't have to feel you would be a burden for family or friends.
6. If you have the desire to leave assets behind when you die, insurance will help preserve those assets from the cost of long term care.

Buy Long Term Care Insurance When You Are Younger

There is a bonus to buying long term care insurance at a younger age. The yearly premium is lower and the total premium over the life of the policy is also less. For example, a person in good health, currently age 45, buying a typical policy with inflation protection, could spend $42,075 in total premiums to age 78. The yearly premium for this policy is $1,275.
Suppose this same person chooses to wait to buy the equivalent coverage-- adjusted for inflation -- at age 65. If that same policy were available in the future, he could pay $44,759 in total premiums over his 13 remaining years to age 78. His premium is also considerably higher and in this case is $3,443 a year. By waiting, he saves no money in total cost, he will have a much higher yearly cost and in addition will definitely incur the following risks:
The same policies only stick around about three years and historically, new policies invariably have higher rates for the same ages as older ones. This means, all else being equal, he could pay two or three times more in total cost for an equivalent policy in the future.
The policy at age 45 is based on the best health rating and someone age 65 is very unlikely to get that same rating which means a much more expensive total cost in the future.
By waiting, his health may deteriorate to a point where he can't even qualify for a policy. Unfortunately, we have seen this happen time and time again to people who wait and all of a sudden desperately want coverage because of a change in health and can't get it.
He may need long term care before he turns 65. The chances of incurring a disability prior to age 65 are quite high.
We recommend you work with a long term care insurance specialist who understands the policy provisions and the coverage needed and can help you determine the best policy for what you want.
You can read more about long term care insurance and locate a specialist in your area at www.longtermcarelink.net.

How to buy long term care insurance

There are dozens of long term care insurance companies selling hundreds of different types of policies. It can become very confusing. There are various benefit options for home care and nursing home care, waiting periods, qualifying periods, inflation riders, and the list goes on. Here is a checklist of some of the things you need to know before you purchase a policy.

LONG TERM CARE INSURANCE BUYING CHECKLIST

the more "yes" answers you get the better off you are.
1) Is the insurance company rated by A. M. Best (the rating company) with a rating of at least A, A+ or A++?
2) Is it a large diversified company with deep pockets and selling more than just long term care insurance?
3) Is the insurance representative an expert in long term care insurance? (Because of its complexity, almost all LTCi experts only sell LTCi; they seldom sell anything else.)
4) Does the representative have a degree and/or industry financial designations?
5) Does the representative own a personal long term care insurance policy for himself or herself?
6) Is the policy you like tax qualified, and if not, do you understand the ramifications?
7) Are there at least 6 ADL’s (Activities of Daily Living) allowed for in the benefit certification?
8) Does it allow "standby assistance"?
9) Is it a "pool of money" as opposed to a "stated period"?
10) Is it "integrated" as opposed to "2-pool"? (2-pool is not allowed in some states and very few companies sell these policies anymore but you must be aware of this.)
11) Do you understand how the elimination period works? (This is extremely important.)
12) Does it have prohibitive cost containment provisions?
13) Is there any "capping" of automatic benefit increase riders?
14) Do you understand how the waiver of premium works?
15) Does the assisted living facility benefit pay the same as for nursing home?
16) Are you buying adequate home care coverage?
17) Does the company have a history of premium rate stability without large periodic increases?
18) Does the policy pay for homemaker services and other nonmedical home care services?
19) Does the policy offer an alternative plan of care for services that don’t exist today?

Article reprinted by permission from the National Care Planning Council.