Category: Family

Marital Trusts Help Protect Blended Families

Marital Trusts help protect Blended Families

Marital trusts help protect blended families from complicated family dynamics. Understanding marital trusts is crucial for couples looking to secure their financial future and provide for the surviving spouse tax-efficiently. This article is a guide to marital trusts, how they work and their advantages and disadvantages. With the potential to safeguard assets and ensure that they reach the intended beneficiaries, marital trusts can be an effective part of a comprehensive estate plan, particularly for those in a second marriage or a blended family.

What Is a Marital Trust?

A marital trust is a type of irrevocable trust and is crafted to benefit the surviving spouse. It allows for the managed distribution of assets, potentially safeguarding against financial imprudence or external influences.

Consider that while many couples are just fine with everything going to the surviving spouse directly and outright after one spouse dies, in some cases, there may be concerns related to the surviving spouse not being able to manage the money effectively. What would happen to the money if the surviving spouse is not good with money or is vulnerable to financial predators? Perhaps giving the entire estate outright to the spouse would run the risk that all of the money would be spent irresponsibly. A marital trust allows for both tax benefits and protections for the couple’s estate to prevent these issues from happening.

How Do Marital Trusts Work?

There are three parties involved in setting up, maintaining and ultimately passing along the trust, including a grantor, who is the person who establishes the trust; the trustee, who’s the person or organization that manages the trust and its assets; and the beneficiary. That person will eventually receive the assets in the trust once the grantor dies. The surviving spouse must be the sole beneficiary of a marital trust. Once the surviving spouse dies, the assets in the trust typically pass to surviving children. A marital trust also involves the principal, which are assets initially put into the trust.

How Do Marital Trusts Assist Blended Families?

For blended families, using a marital trust is becoming more popular as a means to help protect assets to a surviving spouse, and the inheritance of children from previous marriages. If one or both spouses in a second marriage have children from a prior marriage, both spouses typically want to ensure that their kids get an inheritance at some point in the future. While most married couples prioritize their spouse as the primary beneficiary, after the surviving spouse passes away, if the couple’s estate plan gives everything directly to the surviving spouse, that arrangement would run the risk that the children from a prior marriage of the deceased spouse would be cut off from receiving an inheritance.

While couples want to assume that a surviving spouse will protect the rights of children from their spouse’s previous marriage, without legal safeguards, the estate of the surviving spouse can be changed to cut out individuals named as beneficiaries after their spouse’s death. Having a marital trust for the surviving spouse ensures that this change can’t happen.

What Are Other Situations in Which a Couple Should Consider Using a Marital Trust?

Additional situations in which a couple might consider using a marital trust include wanting to prevent undue influence of an outside person or party over the surviving spouse. This usually is a concern for older couples when the surviving spouse is in declining health or may have early onset of dementia, and there’s a concern they may be vulnerable to being taken advantage of financially. Another motivation for a marital trust includes a spouse who has an addiction that prevents them from making sound financial choices.

Did Actor Tony Curtis Disinherit His Children Due to Undue Influence?

In 2010, when Actor Tony Curtis died, his five children were left out of their father’s inheritance in a last-minute decision shortly before his death, notes MoneyWise article, “Hollywood legend Tony Curtis cut his kids out of his will and $60 million fortune when he died. Here’s how to avoid leaving behind messy inheritance disputes.” While Curtis did have a will, he decided to leave the majority of his assets to his fifth wife, Jill, and intentionally disinherit his children. The change to his estate plan came only a few months before his death, which raised suspicions within the family. Some of the Curtis children opened estate disputes in the years following his death to challenge the disinheritance, causing additional pain and separation within their family. If Curtis were subject to the undue influence of his fifth wife, Jill, as some of the Curtis children claimed, then a trust could have protected them from being disinherited.

What Are the Benefits of Having a Marital Trust?

  • Marital trusts are significant in estate planning for high-net-worth individuals, serving as a tool to minimize the estate tax burden by taking advantage of estate tax exemptions. A married couple can significantly reduce or eliminate estate taxes by utilizing a marital trust.
  • The surviving spouse can receive income and financial stability from the trust.
  • Assets are kept in the family, and the inheritance intended for children from previous marriages is protected.

Estate Tax Exemptions with a Marital Trust

One of the most significant benefits of a marital trust is its impact on estate taxes. A marital trust effectively doubles the estate tax exemption for a married couple, ensuring that a more significant portion of their wealth can be transferred tax-free. In the context of the federal estate tax, this can result in substantial tax savings and financial security for the surviving spouse and any other designated beneficiaries.

The Unlimited Marital Deduction in Action

The unlimited marital deduction is a cornerstone of marital trust planning. It allows the first spouse to pass assets to the surviving spouse without incurring estate taxes at the time of the first spouse’s death. This deduction is a critical aspect of marital trusts, ensuring that the income to the surviving spouse provides the necessary financial support without an immediate tax burden.

Are There Disadvantages of Using a Marital Trust?

While a marital trust offers many benefits, it’s essential to consider any limitations or drawbacks, such as loss of flexibility once established.

  • Once established, an irrevocable trust cannot be easily altered or terminated.
  • Estate tax exemption is limited based on the federal estate tax threshold.
  • Marital trusts, like other types of trusts, require that assets be moved into the trust, a process that can be lengthy or overlooked.

Establishing a Marital Trust with an Experienced Estate Planning Attorney

Setting up a marital trust is a complicated form of estate planning that involves several steps, including choosing a trustee to manage the trust assets, determining the terms under which the trust assets will be managed and distributed and ensuring that the couple’s property is held in trust. When couples have complex family situations, including blended families or a spouse with vulnerabilities, a marital trust provides for the financial well-being of the surviving spouse. It also ensures that assets are preserved for future generations.

An experienced estate planning attorney can help a couple assess if a marital trust is the right instrument to help protect their blended family as a part of a comprehensive estate plan. If you would like to learn more about planning for blended families, please visit our previous posts. 

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Credit Card Debt must be Paid after Death

When you consider the average credit card balance in 2023 was $6,365, chances are many Americans will leave an unpaid credit card balance if they die suddenly. Credit card debt must be paid after death. A recent article from yahoo! finance asks and answers the question, “What happens to credit card debt when you die?”

Many people think death leads to debt forgiveness. However, this isn’t the case. Some forms of debt, like federal student loans, may be discharged if the borrower dies. However, this is the exception and not the rule.

Credit card debt doesn’t evaporate when the cardholder goes away. It generally must be paid by the estate, which means the amount of debt will reduce your loved one’s inheritance. In some cases, credit card debt might mean they don’t receive an inheritance at all.

Outstanding credit card debt is paid by your estate, which means your individual assets owned at the time of death, including real estate, bank accounts, or any other valuables acquired during your life.

Upon death, your will is submitted to the court for probate, the legal process of reviewing the transfer of assets. It ensures that all debts and taxes are paid before issuing the remaining assets to your designated heirs.

If you have a will, you likely have an executor—the person you named responsible for carrying out your wishes. They are responsible for settling any outstanding debts of the estate. If there’s no will, the court will appoint an administrator or a personal representative to manage the assets.

In most cases, your heirs won’t have to pay off your credit card debt with their own funds. However, you may be surprised to learn there are exceptions:

  • Married people living in community property states. In a community property state, the deceased spouse is responsible for repaying credit card debt incurred by their spouse. In 2023, those states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
  • Credit cards with joint owners. If you had a joint credit card shared with a partner or relative, the surviving joint owner is responsible for the full outstanding balance. Only joint users are responsible for repaying credit card debt. If your partner was an authorized user and not an owner, they aren’t legally responsible for the debt.

Debt collectors may try to collect from family members, even though the family members are not responsible for paying credit card debts. The debt collector may not state or imply that the family member is personally responsible for the debt, unless they are the spouse in a community property state or a joint account owner.

If a debt collector claims you personally owe money, request a debt validation letter showing your legal responsibility for the debt. Otherwise, you have no legal obligation to pay for it yourself.

When someone dies, their estate is responsible for paying debts, including credit card debt. However, debt is repaid in a certain order. In general, unsecured debt like credit card balances are the lowest priority and paid last.

Some accounts are exempt from debt payment:

  • Money in a 401(k) or IRA with a designated beneficiary goes directly to the beneficiary and is exempt from any debt repayment.
  • Life insurance death benefits go directly to the named beneficiary and go directly to the beneficiaries.

If a loved one has died and they had credit cards, stop using any of their cards, even if you are an authorized user or joint owner. Review the deceased’s credit report to learn what accounts are open in their name and the balance on each account. Notify credit card issuers and alert credit bureaus—Equifax, Experian, and TransUnion. You may need to submit a written notification, a copy of the death certificate and proof of your being an authorized person to act on behalf of the estate.

The bottom line is this: credit card debt must be paid at your death. Talk with an estate planning attorney to find out how your state’s laws treat the outstanding debt of a deceased person, as these laws vary by state. If you would like to learn more about managing debt as an executor of an estate, please visit our previous posts. 

Reference: yahoo! finance (Nov. 9, 2023) “What happens to credit card debt when you die?”

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Navigating Estate Tax Planning

Navigating Estate Tax Planning

Read our BooksNavigating the intricacies of estate tax planning can be a daunting task. Understanding the nuances of the estate tax and implementing robust estate tax planning strategies can ensure that your beneficiaries enjoy the fruits of your labor without being overburdened by tax liabilities.

What Is Estate Tax and Who Is Subject to Estate Tax?

The estate tax, often called the “death tax,” is a tax levied on the total value of a person’s estate upon their death. If the estate exceeds certain thresholds, it becomes subject to federal estate tax, potentially diminishing the wealth passed on to heirs.

Understanding who is subject to estate tax requires knowledge of current tax laws, which often change. These laws dictate specific exemption amounts and continually adjust what constitutes a taxable estate.

Why Is Estate Tax Planning Essential?

Proactive estate tax planning is crucial to preventing your heirs from facing unexpected tax burdens. Without careful planning, a significant portion of the estate you’ve worked hard to build could end up in the hands of the government, instead of your loved ones.

Tax planning involves a comprehensive look at your assets and potential tax liabilities, ensuring that your beneficiaries are safeguarded. The goal is to reduce estate tax significantly, allowing more wealth to transition to the next generation.

How Can Trusts Benefit Your Estate Plan?

Incorporating trusts into your estate plan can be a strategic move to minimize estate taxes. Trusts, particularly irrevocable ones, allow you to transfer wealth from your estate, reducing the overall value subject to estate taxes upon your death.

Trusts offer control over assets even after death, ensuring that your wishes concerning asset distribution are honored. Grantor trusts and other types of trust arrangements are advanced estate planning tools that can significantly reduce your taxable estate.

Are Gift Taxes and Estate Taxes Interconnected?

Yes, gift taxes and estate taxes are closely linked. Strategically gifting assets during your lifetime can reduce your estate’s size, subsequently decreasing estate tax liability. However, it’s essential to understand the gift tax exclusion limits in your tax planning.

Large gifts that exceed these exclusions may still be taxable. These count towards your estate and are potentially subject to estate tax if they surpass the lifetime exemption limit. It’s wise to consider the long-term implications of gifting on your overall estate.

What Changes in Tax Laws Mean for Your Estate Planning Strategies?

Estate tax laws are not static; they undergo changes and adjustments that could impact your estate. These changes in tax laws could influence exemption thresholds, tax rates and what assets are considered part of your taxable estate.

Keeping abreast of these changes is critical. Working with a tax professional who understands the latest federal estate tax laws ensures that your estate plan remains effective and compliant, safeguarding your estate from increased tax liability.

Can You Minimize Estate Taxes with Charitable Contributions?

Making charitable contributions is an effective strategy to minimize estate taxes. Donations to qualifying charitable organizations can reduce your taxable estate’s size, while allowing you to contribute to causes you care about.

This estate planning tool requires proper documentation and adherence to tax laws to ensure that your estate benefits from the tax reductions applicable to charitable contributions.

Do All States Impose Own Estate Taxes?

Navigating estate tax planning isn’t just a federal matter. Several states impose their own estate taxes, with exemption thresholds and tax rates that differ from federal guidelines. State estate taxes can complicate estate planning, especially if you own assets in multiple states.

Understanding how state tax laws affect your estate is crucial. It involves complex considerations, particularly if you’re planning for properties in states with distinct estate or inheritance taxes.

How Does the Tax Cuts and Jobs Act Affect Estate Tax Planning?

The Tax Cuts and Jobs Act significantly impacted estate tax planning by increasing the federal estate tax exemption. This change means fewer estates will be subject to the estate tax. However, it is essential to remember that many parts of the Jobs Act are temporary.

Estate plans should consider future changes, possibly with lower exemptions. Careful planning and continual review of your estate strategy are necessary to adapt to legislative shifts and protect your estate from excessive taxation.

Closing Thoughts: Estate Tax Planning Takeaways

To encapsulate, here are the key points to remember in your estate tax planning journey:

  • Understand the implications of the estate tax on your assets.
  • Utilize trusts and lifetime gifts strategically to reduce estate size.
  • Keep updated with changes in tax laws, including state estate taxes.
  • Consider charitable contributions as part of your estate strategy.
  • Consult with a tax professional to navigate complex estate scenarios.

Navigating the complex rules around estate tax planning is challenging. Effective estate tax planning can preserve your wealth for future generations, ensuring that your legacy endures as you envision. If you would like to learn more about estate taxes, please visit our previous posts. 

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Selling the Family Home when a Loved One needs Nursing Care

Selling the Family Home when a Loved One needs Nursing Care

When an aging relative decides the time is right to move into an assisted living or continuing care facility, families face many decisions. This is often a difficult but necessary step for older individuals with trouble living independently or planning for their future needs. Selling the family home when a loved one needs nursing care can be a challenge. A recent article from Herald—Standard, “How to handle selling a home when moving into an assisted living facility,” offers suggestions to help families navigate the process.

First, speak with an estate planning attorney to have a trusted, responsible family member be named Power of Attorney. Individuals moving into assisted living may not have any cognitive problems at the time of the move. However, selling a home for a family member who develops dementia can present complex challenges. Only a person with legal capacity may transfer their home to a new owner. Having a Power of Attorney allows a family member to step in and manage the transaction without needing to go to court and have a guardian named.

Talk about the situation and the sale with the aging family member. They will need time to process the idea of selling their home and moving. Homeowners make untold sacrifices and compromises to buy and maintain their homes, so the decision to sell a beloved home is almost always very difficult and brings out a range of emotions.

Throughout this process, an open and honest dialogue about what can be achieved by selling the home and improving their quality of life will be helpful.

Sorting through belongings is an extremely hard task. A lifetime of memories and a loss of their independence are all wrapped up in the contents of a home. It will be impossible to take the entire contents into a one or two-bedroom apartment. Take the time to sort through belongings with your family members and select certain items to give them a sense of home in a smaller space.

If possible, try to pass on some items to younger family members. Most importantly, handle this process with as much compassion as possible.

Keep all relevant people involved and current throughout the process. This is particularly important if the family members are scattered in different states. Adult children who live far away and can’t be active participants in this process shouldn’t be dismissed and left out. Open communication with other family members will minimize the chances of objections when the sale and move take place.

Finally, because this is perhaps the largest and last financial transaction, make sure the sale of their home is done with an eye to their estate plan. Selling the family home when a loved one needs nursing care may cause tax issues. There may be ways to minimize tax exposure for the individual and their estate plan. Confer with an estate planning attorney to avoid any missteps. If you would like to learn more about managing property in your estate plan, please visit our previous posts.

Reference: Herald-Standard (Oct. 27, 2023) “How to handle selling a home when moving into an assisted living facility”

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Consider using a Trust Be for Long-Term Care

Consider using a Trust Be for Long-Term Care

More than a few seniors who are retired or nearing retirement lose sleep worrying over being able to afford the expense of long-term care, including nursing home care, which can cost thousands monthly. The fallback option for many Americans is Medicaid; according to a recent article, “Long-Term-Care planning using trusts,” from the Journal of Accountancy., Medicaid is a joint federal-state program requiring spending down assets. One option is to consider using a trust for long-term care.

To be eligible for long-term care through Medicaid, a person’s “countable” assets must fall below an extremely low ceiling—in some states, no more than $2,000, with some provisions in some states protecting the “well” spouse. States vary in terms of which assets are counted, with many exempting a primary residence, for example.

For many people, planning for Medicaid for long-term care may consider the use of an irrevocable trust. The basic idea is this: by transferring assets to an irrevocable trust at least five years before applying for Medicaid for long-term care, the Medicaid agency will not count those assets in determining whether Medicaid’s asset ceiling is satisfied.

If the planning is done wrong, there is a risk of not qualifying, thereby defeating the objective of creating the irrevocable trust. In addition, any tax planning may be undone, causing liquidity and other problems.

Some people plan to qualify for Medicaid even though they have asset levels as high as $2 million or more. Much of this may be the family’s primary residence, especially in locations like New York City, with its elevated real estate market. Costs at nursing homes are equally high, with nursing homes costing private-pay patients upwards of $20,000 a month, or $250,000 per year.

Timing is a key part of planning for Medicaid. Many estate planning attorneys recommend clients consider planning in their mid-to-late 60s or early 70s to move assets into a Medicaid Asset Preservation Trust, also called a Medicaid Asset Protection Trust.

This is because of Medicaid’s five-year lookback period. Most states have a five-year look-back period for both nursing home and home health care. If any transfer of countable assets has been made within the preceding five years of applying for long-term-care Medicaid, there will be a penalty period when the person or their family must pay for the care. The penalty is typically measured by the length of time the transferred assets could have paid for care, based on the average costs of the state or the region.

While there is no way to know when a person will need long-term care, statistically speaking, a person in their mid-to-late 60s or early 70s can expect to be healthy enough to satisfy the five-year lookback.

Why not simply make gifts to children during this time to become eligible for Medicaid? For one reason, there’s no way to prevent a child from spending money given to them for safekeeping. A trust will protect assets from a child’s creditors, and if the child should undergo a divorce, the assets won’t end up in the ex-spouse’s bank accounts.

Using a trust for Medicaid planning could be combined with gifts made to children or assets placed in trust for children, depending on the individual’s financial and familial circumstances.

The creation of a Medicaid Asset Preservation Trust is critical. The estate planning attorney must seek to accomplish two things: one, to say to Medicaid that the settlor, or creator of the trust, no longer owns the assets. At the same time, the IRS must see that the settlor still owns these assets and, therefore, receives a basis step-up at death.

If you are considering a trust for long-term care, an experienced estate planning attorney will be needed to advise you and create a Medicaid Asset Preservation Trust to meet the Medicaid and IRS requirements. If you would like to learn more about long-term care planning, please visit our previous posts. 

Reference: Journal of Accountancy (Oc. 9, 2023) “Long-Term-Care planning using trusts”

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Houses make horrible Wealth Transfer Vehicles

Houses make horrible Wealth Transfer Vehicles

Houses make for horrible wealth transfer vehicles. Bequeathing a house can mean passing along financial burdens, red tape, home maintenance responsibilities, potential family conflict and housing market volatility, says Kiplinger’s recent article, “Your Home Would Be a Terrible Inheritance for Your Kids.”

Communication about plans is critical. A study from Money & Family found that 68% of homeowners plan to leave a home or property to heirs. However, 56% haven’t told them about their plans. That will surprise the recipients who may or may not want or be able to service an inherited home.

Suppose you bequeath a house to an heir or heirs. In that case, they’ll have to make an immediate plan for home maintenance, mortgage payments (if necessary), utilities, property taxes, repairs and homeowners’ insurance. Zillow says this can amount to as much as $9,400 annually, not including mortgage payments.

The psychology of the home. Owners often have deep emotional attachments to their homes. Therefore, when people gift their homes to children and heirs, they’re not just giving an asset — they’re endowing them with all the good memories that were made on that property. Emotional connections to the home can be nearly as powerful as a strong attachment to a living being.

Beneficiaries may struggle to make practical choices about the inherited property because of the home’s sentimental value. This emotional aspect can cloud judgment and hinder the effective management and allocation of assets.

The financial burdens and family conflicts for beneficiaries. Inheriting a home entails a range of financial responsibilities that can quickly add up.

Property taxes, insurance premiums, ongoing maintenance costs and unexpected repairs can strain beneficiaries’ financial resources dramatically. If beneficiaries already have their own homes, inheriting an additional property can exacerbate financial burdens and potentially hinder their own financial goals, retirement plans and aspirations. The passing of a family member can also sometimes lead to conflicts among heirs, potentially exacerbating existing fractures in relationships among siblings and other family members. These are just a few reasons why houses make for horrible wealth transfer vehicles.

According to a 2018 study, nearly half (44%) of respondents saw family strife during an estate settlement. Disagreements can cause tension, strain relationships and even result in lengthy legal battles. If you would like to learn more about managing real property in your estate planning, please visit our previous posts. 

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RLT can Help with Planning for Incapacity

RLT can Help with Planning for Incapacity

Planning for potential disability and mental incapacity is part of a comprehensive estate plan. Women, in particular, are at a higher risk of becoming disabled, with 44% of women 65 and older having a disability. Most people understand the value of an estate plan. Nevertheless, few know how to that a Revocable Living Trust, or RLT, can help with planning for incapacity, as explained in the article “Incapacity Planning: The Hidden Power Of A Revocable Trust” from Financial Advisor.

Revocable Living Trusts are highly effective tools to protect assets against failing capacity. Although everyone should have both, they can be more powerful and efficient than a financial Power of Attorney. An RLT offers the freedom and flexibility to manage your assets while you can and provides a safety net if you lose capacity by naming a co-trustee who can immediately and easily step in and manage the assets.

Cognitive decline manifests in various ways. Incapacity is not always readily determined, so the trust must include a strong provision detailing when the co-trustee is empowered to take over. It’s common to require a medical professional to determine incapacity. However, what happens if a person suffering cognitive decline resists seeing a doctor, especially if they feel their autonomy is at risk?

Do you need an RLT if you already have a financial Power of Attorney? Yes, for several reasons.

You can express your intentions regarding the management and use of trust assets through the trust. A POA typically authorizes the agent to act on your behalf without specific direction or guidance. A POA authorizes someone to act on your behalf with financial transactions, such as selling a home, representing you and signing documents. The co-trustee is the only one with access to assets owned by the trust, while the POA can manage assets outside of the trust. Having both the POA and RLT is the best option.

Trustees are often viewed as more credible than a POA because RLTs are created with attorney involvement. POAs are often involved in lawsuits for fraud and elder abuse.

Suppose there is an instance of fraud or identity theft. In that case, RLTs provide another layer of protection, since the trust has its own taxpayer ID independent of your taxpayer ID and Social Security number.

Your co-trustee can be the same person as your POA.

Adding a trusted family member as a joint owner to accounts and property provides some protection without the expense of creating a trust. However, it does not create a fiduciary obligation, enforceable by law, for the joint owner to act in the original owner’s best interest. Only POAs or trustees are bound by this requirement.

Once a POA is in place, it is wise to share it with all institutions holding accounts. Most of them require a review and approval process before accepting a POA. Don’t wait until it’s needed, when it will be too late because of incapacity, to have a new one created.

If you know that planning for incapacity is in your family’s future, consider how an RLT can help. Talk with your estate planning attorney about planning to create an RLT and POA to ensure that your assets will be protected in case of incapacity. If you would like to learn more about incapacity planning, please visit our previous posts. 

Reference: Financial Advisor (Oct. 18, 2023) “Incapacity Planning: The Hidden Power Of A Revocable Trust”

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The Estate of The Union Season 3|Episode 3

The Estate of The Union Season 2|Episode 11 is out now!

The Estate of The Union Season 2|Episode 11 is out now!

Sylvia Holmes makes a fabulous guest! She is a Travis County Justice of the Peace and she does much, much more than marry people. In this edition of The Estate of the Union, she describes what happens in the “Peoples Court” in an entertaining and insightful way. It’s everything from evictions to speeding tickets to truancy.

If you’ve ever wondered about where Judge Judy gets her cases for her TV show, Judge Sylvia shares that secret too!

We’ve got more than 30 other episodes posted and more to come. We hope you will enjoy them enough to share it with others. If you would like to learn more about Judge Holmes and JP Court, Precinct 3, please visit their website: www.traviscountytx.gov/justices-of-peace/jp3. The Travis County, Precinct 3 live stream can be found here: justiceofthepeacetraviscou8356

 

 

In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insights into the confusing world of estate planning, making an often daunting subject easier to understand. It is Estate Planning Made Simple! The Estate of The Union Season 2|Episode 11 is out now! The episode can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. If you would prefer to watch the video version, please visit our YouTube page. Please click on the links to listen to or watch the new installment of The Estate of The Union podcast. We hope you enjoy it.

The Estate of The Union Season 2|Episode 4 – How To Give Yourself a Charitable Gift is out now!

 

Texas Trust Law focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization. We provide estate planning services, asset protection planning, business planning, and retirement exit strategies.

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Beware of Social Security Scams using AI

Beware of Social Security Scams using AI

Beware of Social Security scams using AI. Seniors now need to be extra careful about Social Security scams since fraudsters have embraced AI (Artificial Intelligence) to manipulate people into revealing secure information, says a recent article from U.S. News & World Report, “AI and the Risks of Social Security Fraud.” The schemes are sophisticated and appear entirely legitimate, making them harder to discern from real messages from the Social Security Administration.

The Office of the Inspector General recently launched a task force to investigate the use of AI and deter AI-related Social Security scams. The OIG recognizes the risk of criminals using AI to make their schemes easier and faster to execute and the deceptions more credible and realistic.

You’ll want to know about AI risks if you receive Social Security benefits. Here are some guidelines to keep both your identity and finances safe.

Criminals commonly use robocalls or chatbots. The messages sound as if they come from legitimate government representatives and trick seniors into disclosing personal information or even making fraudulent payments using voice synthesis and natural language processing. This can also happen on a website, with an AI-generated video of the U.S. president or an official with the Social Security Administration announcing a new Social Security benefit and encouraging retirees to sign up by following a link on the video. The link takes the user to a fraudulent website, where they are asked to provide essential information, including their Social Security number and other details. Once the information is provided, thieves can re-route the monthly benefit to an unauthorized account.

Be wary if you receive an email from a source you don’t recognize. Don’t respond to text messages from people or organizations you don’t know. If you receive a suspicious phone call, hang up. If someone claims to be calling from Social Security, hang up, call the local Social Security office yourself, and explain what happened.

If you haven’t already, set up a my Social Security account online at ssa.gov. That’s where you’ll indicate the bank account to receive your benefit, and you can tell SSA not to change it unless you appear in person at the local SSA office.

The SSA doesn’t initiate contact with recipients by email, text, or phone. Anyone saying they are from the SSA using these methods is a scammer. Even if your phone displays the call is coming from the SSA, know that it’s very easy for criminals to manipulate caller ID to make the call appear to come from whomever and whatever number they want.

Thieves now use digital technology to trick seniors into revealing personal information. As technology changes, so do the means of stealing. Beware of Social Security scams using AI. Stay current on common scams and protect your retirement benefits and finances from AI-driven fraud. If you would like to learn more about social security benefits, please visit our previous posts.

Reference: U.S. News & World Report (Sep. 29, 2023) “AI and the Risks of Social Security Fraud”

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Tax Strategies combined with Estate Planning can Safeguard Assets

Tax Strategies combined with Estate Planning can Safeguard Assets

Business owners who want long-term financial success must navigate an intricate web of taxes, estate planning and asset protection. Pre-and post-transactional tax strategies, combined with estate planning, can safeguard assets, optimize tax positions and help strategically pass wealth along to future generations or charitable organizations, as reported in a recent article from Forbes, “Strategic Tax and Estate Planning For Business Owners.”

Pre-transactional tax planning includes reviewing the business entity structure to align it with tax objectives. For example, converting to a Limited Liability Company (LLC) may be a better structure if it is currently a solo proprietorship.

Implementing qualified retirement plans, like 401(k)s and defined benefit plans, gives tax advantages for owners and is attractive to employees. Contributions are typically tax-deductible, offering immediate tax savings.

There are federal, state, and local tax credits and incentives to reduce tax liability, all requiring careful research to be sure they are legitimate tax planning strategies. Overly aggressive practices can lead to audits, penalties, and reputational damage.

After a transaction, shielding assets becomes even more critical. Establishing a limited liability entity, like a Family Limited Partnership (FLP), may be helpful to protect assets.

Remember to keep personal and business assets separate to avoid putting asset protection efforts at risk. Review and update asset protection strategies when there are changes in your personal or business life or new laws that may provide new opportunities.

Developing a succession plan is critical to ensure that the transition of a family business from one to the next. Be honest about family dynamics and individual capabilities. Start early and work with an experienced estate planning attorney to align the succession and tax plan with your overall estate plan.

Philanthropy positively impacts, establishes, or builds on an existing legacy and creates tax advantages. Donating appreciated assets, using charitable trusts, or creating a private foundation can all achieve personal goals while attaining tax benefits.

Estate taxes can erode the value of wealth when transferring it to the next generation. Gifting, trusts, or life insurance are all means of minimizing estate taxes and preserving wealth. Your estate planning attorney will know about estate tax exemption limits and changes coming soon. They will advise you about gifting assets during your lifetime, using annual gift exclusions, and determine if lifetime gifts should be used to generate estate tax benefits. Smart tax strategies combined with estate planning can safeguard assets for generations. If you would like to read more about tax and estate planning, please visit our previous posts. 

Reference: Forbes (Sep. 28, 2023) “Strategic Tax and Estate Planning For Business Owners”

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Information in our blogs is very general in nature and should not be acted upon without first consulting with an attorney. Please feel free to contact Texas Trust Law to schedule a complimentary consultation.
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