Three Tips on Inheritance Planning

My father passed away recently. This prompted friends and colleagues to share their real life inheritance experiences with me. By the end of this article, you will know how to prevent three inheritance headaches. Local estate planning attorney and CPA, Richard Talbert, explains what you need to know now.

Write Your Trust Here But Die There

Can you pick where you will die? Where you die can cause inheritance headaches if your trust does not include a small but critical clause. You need your documents to discuss the place where those documents were created, known as the situs.

Patty’s parents lived many years in a neighboring state. Months before her father passed away, her parents moved to a north Texas town. As trustee, would Patty have to hire an attorney in that remote Texas town? Or an attorney in the neighboring state? Could she hire an attorney who is conveniently located in Brazos County? As with many legal issues, the answer is “it depends.”

Talbert explains that the situs of trusts used as estate planning documents is an important consideration. What was the situs of this trust? Does the document allow it be moved? Which state’s trust laws would apply? If this trust allowed for a change of situs, what state’s laws are preferable in administering the trust, or provide tax or other advantages? An attorney contacted should be familiar with the laws of the state applicable to the trust. It might be that she could hire a Brazos Valley estate planning attorney if the situs was moved from out of state. However, for Patty, the trust did not allow a situs change. She had to hire an attorney in the neighboring state who was familiar with, and licensed to practice in that jurisdiction. Since the trust is paying for her travel costs as administrative expenses, there will be less inheritance for the heirs.

Married Again, Plan Again

Planning how to leave your estate to your heirs is particularly complex when you are in your second or third marriage. As Richard Talbert explains,

“Over the years, you both may have mixed together your separate and community property to such an extent that you can no longer identify what is separate property. There is a strong presumption in Texas of community property, unless one can identify his or her separate property estate.”

Whether this is yet another challenge depends upon your estate plan desires. Talbert further describes that

“maybe you want your spouse and stepchildren to end up with everything and leave nothing to your children. However, if this is unintentional, there will be some hard feelings, to say the least, and it could involve quite a bit more than hard feelings.”

Don’t Handcuff Your Professionals

Can you read minds? Neither can attorneys. Be open with your estate planner because you can save money and prevent headaches for your heirs.

Recently a client complained to me that her husband’s lawyer advocated for him more than her lawyer advocated for her. I pointed out that her husband talks to his attorney far more than she talks with her attorney. How could she expect her attorney to advocate for her when she didn’t share her thoughts with him? She thought she was saving money by avoiding her attorney. She was being penny wise, pound foolish.

This also applies to estate planning.

“Planning properly may require that you discuss your particular circumstances with a qualified estate planner, your CPA, certified financial planner, and/or other professional who is familiar with dealing with all kinds of family and estate planning situations. Sometimes you need the whole team working for you,”

suggests Talbert.

“And don’t be afraid to disclose to them your concerns or the issues with your family—if they don’t know about it, they cannot help you. It is a complicated world out there, and as they say, ‘ignorance of the law is no excuse.’ Spending a little time and money up front can save a bundle of both for those you leave behind.”

Be in control of what happens to your property and take advantage of tax strategies. If anything has changed in your family since your last will or trust was created, or you have moved to or from another state, have your documents reviewed by a qualified estate planner. While many states have similar laws, some laws could be very different, and in the areas of estate planning and marital property, you should make sure that the your estate planning documents carry out your desires in accordance with the laws of the state of your residency.