Monthly Archives: July 2014

In your last will and testament, consider your heirs

Texans who are getting ready to do some estate planning, such as having a last will and testament drawn up, may want to consider their heirs. You probably already know who your heirs will be, but by “consider your heirs,” we mean consider their personalities — their strong points and their weak points.

This way, as you plan your last will and testament, you can set your heirs to be winners and not losers. You don’t want to see the inheritance you have built through hard work squandered away, do you? Unfortunately, depending on who your heirs are, that could be just what happens.

There are some common mistakes that heirs make when they receive an inheritance. The most common is careless spending. People who have had little money for most of their life are inexperienced with how to make a windfall of money last and work for them. They buy large items, such as houses, cars or boats. However, as time moves on and the money is gone, they haven’t planned for how they were going to support those assets.

Another common mistake that heirs make is letting an inheritance — theirs or someone else’s — cause problems between them and their families. Inheritances can cause jealousy when everyone doesn’t get the same. It often harbors feelings of “they don’t deserve it.”

Finally, new heirs will probably need some advice from someone who can direct them on what to do with their inheritance. Many heirs just think it is their money now, and they can make their own decisions.

To avoid these problems, do some thorough estate planning with your attorney. When deciding who gets what, know and consider your heirs. Put safeguards in place, such a trust. It may be time-consuming, but it will make a great deal of difference for those you love.

Source: U.S. News and World Report, “5 Inheritance Mistakes for Heirs to Avoid” Susan Johnston, Jul. 15, 2014

Consumer protection rule could impact an estate plan

Many times, financial rules are implemented by banks and government agencies for the purpose of protecting consumers or businesses. Sometimes, those rules can eventually have unintended negative consequences for a subset of consumers that were not taken into consideration when the rule was being written. Some Texas residents may have experienced such consequences following a Consumer Financial Protection Bureau ruling in January.

The January rule, known as the Ability to Repay rule, required banks to consider a person’s ability to repay any loan prior to giving that person a mortgage. The rule was meant to protect consumers from being trapped in mortgage arrangements that would be impossible for them to be successful in. However, in some cases, the rule was applied to heirs who were inheriting a mortgaged property.

Under the Ability to Repay rule, banks were unable to grant some heirs mortgages. That resulted in some families losing homes due to legalities, even when estate planning documents called for heirs to take ownership of properties. It’s possible there were even cases where family members, such as children or spouses, were already living in the homes when the homes were lost.

The Consumer Financial Protection Bureau issued a new interpretation of the January rule in July. The new interpretation is aimed at giving families a better chance of creating arrangements that let them maintain property ownership in keeping with a loved one’s wishes. The new rule interpretation doesn’t mean loved ones are automatically granted a mortgage or mortgage transfer, but it does remove the strict requirement regarding ability to repay.

Planning ahead for situations such as a mortgage transfer is the best way to ensure heirs are able to follow through with transferring property. Working with heirs within legal processes ahead of time reduces the chance anyone will be hit with sudden financial crises following the death of a family member.

Source: Consumerist, “CFPB Clarifies Rule That Could Cause Heirs To Lose Their Homes” Ashlee Kieler, Jul. 08, 2014

Texans would be wise to plan for family’s future with a will

They say the only two certainties in life are death and taxes. Texas is one state replete with complications that can occur involving the tax implications of a death.

Consider the case of an elderly mother who wanted to provide for her children after death. Her estate was to be distributed in equal amounts to all her children, but questions arose among the siblings regarding the high costs of legal fees to advisers, as well as a potentially large part of her estate to be taxed.

The woman’s children had estimated her liquid assets to be about $300,000 and her home at around $90,000. Taxation guidelines can be tricky, so determining what will be taxed and how her property will be distributed are best resolved sooner than later. The proposed heirs would be wise to consult with a financial planner specializing in wills, guardianships and beneficiary issues. Frequently, estate advisors are able to provide valuable input.

Unless a person already used up a lifetime cap of exorbitant gift giving, in the state of Texas, an estate valued under $5,340,000 would fall under a gift tax exclusion for each individual in question. This mother’s asset value would not be taxed under federal law. Anyone inheriting assets under that amount would not be subject to assessment on gifts or an estate.

Another piece of good news is that Texas probate is not as expensive a process as it is in other states. The issues would be slightly more complicated if the principal held properties in various states and resided in another.

It is always a good idea to confer with a professional who is dedicated to keeping up with ever-changing estate planning laws so that a love one’s final wishes regarding guardianship, heirs, beneficiaries, distribution of assets and power of attorney can be clearly spelled out in a last will and testament. This is especially crucial if the person becomes incapacitated. Medical directives to physicians and family members may be unpleasant topics, but discussing issues now will deters family squabbles later. For this reason, the mother and children in this case should turn to a reliable source to provide unbiased information to secure the future of her beneficiaries.

Source: The Dallas Morning News, “Minimize Taxes Upon Death” Trudy Turner, Jul. 10, 2014

Elder Law Caveats for durable power of attorney

Most people these days are living longer and prosperous lives. Advances in health and technology provide more information designed to keep us healthy. Regardless, after we reach a certain age, we need to consider what will happen to our assets after we pass on.

One case involved an older gentleman who had followed all the necessary steps to probate his wife’s will upon her death. The question arose about where to keep this valuable document for safekeeping. When the man designated his son as the executor of his will, he was advised to assign his son durable power of attorney. Legal documents vary and require different processes.

Most financial institutions will ask for an original durable power of attorney when the designee seeks to carry out a task. It is critical that the institution see the original, or the act will be rejected. A photocopy is not acceptable, and the final wishes of the deceased cannot be carried out.

For a while, this was not the case in Texas. From 1989 to 1992, durable power of attorney had to be filed with the county clerk. This was later changed for real estate transactions and to coincide for increased lifespans. Upon filing, the maker needs to be proactive in keeping track of his documents, also informing his agent as to their whereabouts and status. Of equal importance is the protection of the last will and testament. The original needs to be kept under lock and key for safekeeping in case it needs to be present in court. A will should not be filed with the county clerk, as it lends itself to an invasion of privacy. Experts also recommend an individual assign a medical power of attorney and directive to physicians. Photocopies are acceptable for this, but originals should be kept in a safe place.

If you have an elderly member of your family who is considering how to carry out his or her final wishes, it is advisable to investigate how the state of Texas views probate, last wills, and durable power of attorney. If your loved one becomes too ill or disabled to care for him or herself, his final wishes may never be carried out. Duties of ownership and assets should be reviewed by a trusted person who can help your loved one be laid to rest in peace, providing for heirs and beneficiaries as desired.

Source: Source: “File your Durable Power of Attorney with the County Clerk,” Paul Premack, July 7, 2014

Heirs may feel effect of property tax cut in Texas

If you are an heir or beneficiary of a property owner in Texas, you may not be happy about the possible news of tax relief in the upcoming year.

Political pundits and lawmakers have been tossing around the idea for a while now, having been exacerbated by primary elections and runoffs. One candidate for governor promised to cut Texas property taxes and emphasized the cuts would be particularly beneficial for older voters. The litany has continued on his social media site.

The liberals and independents in the Lone Star State might be happy to hear the potential cuts. While the state property taxes are levied by the local governments, lawmakers have little power to change the rates doled out to unhappy homeowners. The news is not all bad, however, given that the state can prevail over allowing provisions for citizens over 65 as well as for farms.

While the law says some older homeowners are eligible for a freeze in taxes, they can also reduce or eliminate them in favor of liens payable after their deaths. This is not appealing for heirs and beneficiaries but helps older voters to continue to survive financially and keep their homes.

Implicit in state control is the financial repercussions trickling down to school districts and city municipalities that would have to scramble to get funding in other areas. If legal provisions allow for freezing appraisals and tax bills, exemptions could be extended to younger homeowners, who might find the new guidelines unfair and prejudiced according to age.

In Texas, as in other states, it is all about revenue. To keep funds flowing, local governments would have to penalize those not eligible for exemptions. Beneficiaries and heirs to property owners will be affected by this situation. To protect yourself and your financial future, you should contact a legal professional who can assist you in understanding your rights as a beneficiary or heir, and what tax implications might be upon the death of a loved one who has designated you in his or her will.

Source: ;The Texas Tribune, “Analysis: Finding Property Tax Cuts That Taxpayers Feel“, June 27, 2014

Residents fight back on foreclosure

Individuals who are faced with foreclosure or adverse lender action can be overwhelmed. Not only might some Texas homeowners already be in financial duress, but facing large mortgage lenders who can afford to litigate cases can be frightening. One couple in another state fought back against a foreclosure on their home and won both the case and a bid for attorney fees.

The homeowners received a mortgage in 1998. According to reports, one company originated the loan, but it was serviced by Washington Mutual. According to allegations from the couple, Washington Mutual wrongfully foreclosed on their property. The foreclosure allegedly occurred in 2008.

In the same year, Washington Mutual was purchased by Chase. The couple sued Washington Mutual in 2009 over the wrongful foreclosure, and in 2010 a motion was granted to Chase, allowing it to intervene in the suit because it held interests in the loan.

According to reports, the case was ultimately decided against Chase. The court ruled that the couple owned the property in question. It also ruled that Chase had created false documents regarding ownership of the mortgage. The court ruling voided the Chase documents and the foreclosure.

The couple, who had spent around a quarter million dollars on legal fees for the battle, then filed a motion to have Chase reimburse the attorney fees. The court allowed the motion and required Chase to reimburse the couple $255,135. Chase originally appealed the ruling, stating in part that the couple was excessively billed due to too many attorneys being involved. The couple’s law firm pointed out that Chase itself had four attorneys involved.

The appeals court sided with the couple again, forcing Chase to reimburse them for legal fees. In the end, it was a very positive outcome. Not all foreclosure proceedings have such outcomes, but homeowners who understand their rights and are willing to stand up for them have a better chance at a positive outcome than those who do not.

Source: HousingWire, “Chase’s fraudulent foreclosure: Court finds for plaintiffs“, July 2, 2014