Grounds for Contesting

Standing

A person must have a legal interest in a case in order to contest a will. This concept is called standing. It essentially means that the person bringing the challenge has some sort of stake in the outcome of the contest. For example, a beneficiary has standing to contest a will he or she is named in. On the other hand, the beneficiary’s friend at work would not. Without the rule of standing, any person on the planet could contest any other person’s will.

Valid Reason

1. Fraud

Wills must be created without deceit. If not, then the terms are invalid. Cases of fraud and deception may affect the entire will or only certain provisions.

2. Diminished Capacity

A will may be challenged successfully if it can be shown that the deceased did not have the requisite mental capacity to make and sign a will at the time it was formalized. Diminished capacity may have a number of different causes:

• Drugs/Alcohol

• Infirmity/Illness

• Brain Trauma

3. Duress

Also known as undue influence, it occurs when the is pressured into drawing up the will in a certain fashion. The pressure being exerted must be some sort of illegal action, such as a threat.

4. Forged or Improper Documents

The paperwork may be forged or may be insufficient. Depending on which part of the will is lacking, a judge may order the entire will thrown or or simply opt to remove certain provisions or sections.

Time Limit

There is a statue of limitations that requires a person to contest a will within two years of it being entered into probate. After this time period elapses, it becomes difficult, if not impossible to challenge a will. That being said, Texas law does allow post statute of limitation challenges in a few specific instances:

Fraud or Forgery

If either are discovered, a person then has two years after the discovery to contest the will.

Incapacitation – Capacitance

In some cases, incapacitated persons may regain their capacity and faculties; in which case they may contest their wills if not in accordance with their wishes. There is also a two year time limit governing this provision. Once the the cause for challenge has been discovered, it must be brought within two years of the discovery.

While the idea of estate planning can seem daunting, there are many simple steps you can take to get started. First off, make sure the beneficiary information on all your accounts is up to date. Without naming any beneficiaries, these funds will go to your next of kin – surviving parents, siblings, or nieces and nephews. If these aren’t the people you want receiving your money in the event of your death, make sure all of your financial institutions and employee retirement plans know who you do want as the beneficiary.

Additionally, in the absence of a significant other, it’s important to be clear of your wishes should you be rendered unable to make decisions for yourself. If you end up in a coma, who should be in charge of handling your finances? Do you want to be taken off life support after a certain period of time? While it can be scary to consider these situations, it’s even scarier to think that these decisions could be left up to someone who didn’t know what your choices would be. Having a will and medical power of attorney can let everyone know what you want in the event you’re unable to tell them.

Regardless of age, a single person should take the steps necessary to make sure their estate is in order. By meeting with a lawyer and having a few simple documents drafted, you can ensure that your final wishes are carried out exactly how you want.

Regardless of the prospective advantages offered by gifts, it’s also essential to recognize their dangers. Here are some:

1. Some may result in additional taxes
2. May perhaps modify recipient’s position for current support.
3. Loss of property

Varieties of other tax ramifications could develop from utilizing gifts as a means of averting estate taxes. Analyzing the way in which gifts fit into an exemption is critical. Gifts which may have appreciated may additionally result in the person receiving the gift to pay capital gains taxes. While determining whether to use gifts, it’s vital to monitor the overall scheme of things.

Gifts also can occasionally affect the eligibility for medical assistance and economic well-being of the beneficiary. If the recipient happens to be a university student, he or she may lose federal funding. An individual of lower income may possibly lose their Medicare insurance. Sometimes a gift offered with the best of wishes ultimately ends up hurting the receiver.

The final factor which needs to be considered is how the gift may affect the giver. Sometimes financial security can be lost upon gifting away property. Furthermore, an individual may be giving up property that he or she has a emotional connection to. Even if the gift is offered to a close family member, like a spouse or child, there isn’t any assurance that the recipient will hold onto the gift permanently. The recipient may end up selling the gift or giving it away. Anyone who wants to gift away property needs to first understand that they will be relinquishing all ownership of the property.

Even though this article is intended to be helpful to the reader, it is by no means a complete replacement for professional legal counsel. Any specific questions or details are best reserved for one’s attorney, as he or she will be able to give custom tailored advice to a client’s situation.

Term Life Insurance

As the name states, a term life insurance policy is valid for a fixed term of years, generally anywhere from 20 years on the low end to 30 years on the high end. This is a strong option for people who are looking for a lower monthly premium; additionally, it’s a great choice for people who are primarily insuring themselves to protect young or dependent children.

The policy will expire at the end of the term you choose, but will cover you for up to 30 years as long as you pay your monthly premiums. At the end of the 30 year term, you have the option to renew your policy for another 20 to 30 years. Buying into a term life policy at a young age can significantly reduce your monthly premium, as your monthly rate is directly related to your age. Renewing your policy 30 years later, however, can prove to be a costly choice.

If you’re only looking to cover yourself for the duration of time when your children are youngest or are your dependents, this is a solid option. As life insurance is designed to cover your after-death expenses as well as the lost income that would affect your children, it’s a great option to have during this time. Once the policy expires and your children have grown, you can spare the monthly expense entirely.

Whole Life Insurance (Fixed)

These policies aren’t subject to a term of 20 or 30 years and cover you for the entirety of your life. A unique aspect of these policies is that they actually cost more per month than the amount it would cost to insure you, because the rate will never change or go up over time. Therefore, you pay a consistent, somewhat higher amount over many years rather than dealing with escalating monthly premiums as you age. Over time, these extra monthly amounts add up and actually increase your life insurance’s value.

Whole Life Insurance (Variable)

Finally, there are variable rate whole life insurance plans. These plans will adjust your monthly premium as you age, increasing it as the “risk” associated with your death increases over time. It contains the same “investment policy” as the fixed rate plan, but you can opt to pay less each month; this will decrease the potential value of your policy when you die, but will save you on monthly premiums and is a good option for the budget-conscious.

No matter what your situation, life insurance is an extremely important part of estate planning and should be carefully considered before any kind of policy is purchased.

Startling Statistics

A recent study by the Small Business Review found that only a third of small business survive past the first generation of ownership. A mere twelve percent last through three generations, while only four percent survive until the fourth generation. This is a wake-up call for all small and family business owners who haven’t carefully considered what happens to their company upon the unfortunate event of their death. Many options exist to ensure that your business does not end up among the 96 percent of business which do not survive.

Make it a Gift

A lot of small business owners are workaholics, preferring to shun retirement in favor of leading and expanding what they consider to be their “baby.” But with careful planning, business owners can arrange to give the business to a second generation of ownership by way of a gift or a sale. This ensures that your successor in leading the business will be properly trained and have the skills and experience necessary to carry on your legacy.

Most importantly, if done correctly, a gifting or selling your business can assure you a comfortable retirement income as well as just the right level of involvement with the company as you enter a new phase in your life and career.

Reciprocal Agreements

If you’ve gone into business with a business partner, it is highly recommended to establish what is known as a “reciprocal buy/sell agreement.” This agreement stipulates that when one partner dies or chooses to retire, the other will automatically buy their share in the company. It’s a solid way of keeping the doors to your business open even after circumstances have changed between you and your business partner.

Employee Stock Ownership Plan

Under an employee stock ownership plan, your employees all have ownership of some company stock and enjoy all of the benefits of ownership; however, the original business owner retains control of the business until the event of their death or retirement. With employees so heavily invested in the success of your company, it’s a great option for continued success while you’re alive as well as a smooth transition after you have died.

A QTIP trust may fit your needs if you are concerned about any of the following;
? The surviving spouse may remarry, which would allow the new spouse to benefit from the trust.
? The surviving spouse may pass on the inheritance to someone who is not your child.
? The surviving spouse’s creditors may attach the trust property.
? The surviving spouse is vulnerable in some way, or unsophisticated in financial matters.

Because the QTIP provides such an extensive amount of control, it also requires a well-informed executor who is prepared to make the trust election and the proper time, mindful of all the estate-planning and tax implications that prevail when the death occurs. A missed deadline or some other error could cause the estate to lose the marital deduction, and cost thousands of dollars as well.

Choosing a QTIP trust

This kind of trust is often chosen to meet the needs of a “blended family,” resulting from a second or third marriage, that includes “his,” “her,” and “our” children. The guidelines that apply in such a case are complicated, and you will want to consult an estate planner who has the expertise to explain them to you.

You should definitely consider a QTIP if estate taxes might be levied. (In 2009, this applied to married couples whose assets exceeded $7,000,000.) If such taxes are not a concern in your situation but you are still interested in controlling your estate, you can customize the wording of your trust to ensure that it will make payments to the surviving spouse. Then, when your surviving spouse is deceased, payments will be made to those you designate in the trust. You also have the option of leaving your current spouse a home that you owned prior to your marriage and shared together after your married, and when your spouse is deceased, your children will inherit it.

What is an Irrevocable Life Insurance Trust?

A trust is an arrangement by which assets and property are placed into a trust, administered by a trustee. The concept behind a trust is that assets are protected during certain circumstances, most notably upon the principal’s death. There are several types of trusts. These are grouped largely by whether they are revocable or irrevocable.

The principal, or creator, of a revocable trust can modify or cancel the trust at any time. With an irrevocable trust, however, the principal forfeits all control of the trust’s assets. The advantages of an irrevocable trust is that its assets are protected from the estate tax upon the principal’s death.

Despite this notable tax advantage, irrevocable trusts are a tough sell. Most principal’s do not want to give up control of their assets, especially those assets that produce income. Once an income-producing asset is placed within an irrevocable trust, the principal may not benefit from its income.

With an ILIT, an existing life insurance policy is transferred to an irrevocable trust, or, preferably, a new policy is created with the trustee as owner.

How can an ILIT benefit an estate plan?

Once created, an ILIT represents funds that will be estate-tax free upon the principal’s death. If the principal has a large estate that is subject to estate taxes, then the proceeds of the life insurance policy can pay the estate tax without incurring a further tax burden and without necessitating the need for beneficiaries to liquidate any non-liquid assets.

The principal does not lose control or ownership of important assets during his lifetime, and the beneficiaries are not subjected to a massive estate tax bill. In addition to these important benefits, a properly drafted life insurance trust can include a spendthrift clause that protects beneficiaries from their own future creditors. An ILIT can even be drafted to encourage responsible behavior when the trustee is given discretion over the distribution of assets.

An ILIT can provide important benefits to people who have amassed enough wealth to be subjected to the estate tax, while protecting their control over their hard-earned assets. However, the wording of the trust document is binding. Therefore, an attorney competent in estate and probate law can best draft an ILIT that can suit your needs.

The donor receives tax benefits when a charitable remainder trust is established because a non-profit organization is designated as a beneficiary of the trust. Once property of the donor’s choosing is transferred to the trust, the donor can take a charitable tax deduction for the property. The amount of the deduction is based on the value of the property and rules established by the IRS.

The main way the donor saves money on taxes is by transferring ownership of a piece of property to the trust that has greatly appreciated in value over the original purchase price. Once the property belongs to the trust, it can be sold by the trust. The profits from the sale are not taxed because a charity benefits from the trust’s assets. The amount of money saved on capital gains tax by the donor can be substantial.

Similarly, properties that have greatly increased in value may have limited income producing potential, and the donor may need to generate additional income after retirement. These properties can be donated to the trust and sold without tax implications for the donor. The proceeds can then be reinvested within the trust to provide supplemental retirement income to the donor and his/her spouse. The IRS requires that at least five percent of the value of the trust’s assets is distributed as income. The income can be distributed over a fixed number of years or over the donor’s lifetime, depending on the terms of the trust agreement.

For estate planning, donors with a high net worth may want to transfer property into a charitable remainder trust. The property is considered a gift by the IRS, and would no longer be included in the donor’s estate. Any potential estate taxes would be reduced.

After the donor’s death, the charity that was designated as the beneficiary receives the remaining assets under the trust’s management. The trust may then be dissolved.

Once you have agreed to supply a minor with alcohol, even if only one time, you can definitely expect that younger person to approach you for this favor repeatedly in the future. Many adults believe that they can provide certain, more mature minors with alcohol and make it completely clear that this will only occur this one time. However, these suppliers have found that they can be dealing with much more than what they originally bargained for. These situations have a tendency to get out of control quite quickly. There have been incidences reported where minors have resorted to threats of violence when demanding alcohol supplies from a previously cooperating adult who is now refusing. Unfortunately, there are even examples where the minor has gone through on the violent threat with an uncooperative adult. In every instance, the adult openly reports that they regret their initial involvement in this seemingly harmless activity.

There are serious legal consequences involved if you do choose to supply a minor with alcohol. Many, if not nearly all employers will require a background check before you are hired by a company. With a legal charge for supplying alcohol to a minor, you can expect to be excluded from applying to many valuable employment positions with well known and respected companies. Simply having a criminal record period can instantly remove quite a few employment opportunities that you may eventually want to take part in.

Not only does supplying a minor with alcohol pose a significant threat to the adult, but the minor is being placed at risk too. Laws have a tendency to be instated for a reason and majority of minors are not mature enough to handle the change in functioning that accompanies drinking alcoholic beverages. Therefore, it is more likely that a minor, who is less familiar with the intoxicating influence of alcohol, will be willing to attempt to drive home from a party after drinking. Alcohol has also be credited with influencing minors to take part in violent behavior towards others. Alcohol tends to dull the senses and minors are not yet aware of how this chemical will influence them in all that they do.

A Grantor Retained Annuity Trust (GRAT) is an estate planning tool used to transfer wealth to children, maintaining an income stream and minimizing estate tax liability.

In a GRAT, an individual transfers property to a trust. The individual will receive an annuity for a term of years, at a fixed term. The trust must be irrevocable, meaning the grantor cannot change or revoke the trust once created. At the end of the term, the remainder beneficiaries receive the amount left in the trust, and no estate or gift tax liability is owed. If the grantor dies during the term of the trust, the remaining assets of the trust will become a part of the grantor’s estate for tax purposes.

Taxation of a GRAT

When a GRAT is first created, it is considered a gift to the beneficiary. Because it is a gift of a future interest, it is not subject to the gift tax exclusion. On the other hand, the value of the gift is deeply discounted based on the actuarial value of the trust. This value is determined the terms of the GRAT and an interest rate set by the IRS under IRC section 7520 (currently 2.4%).

The grantor is paid an annual income based on the terms of the GRAT, whether fixed dollar amount or a fixed percentage of the income. If income derived from the GRAT is insufficient to pay the grantor, invasion of the trust principal is made to insure the fixed amount. When the GRAT expires by its terms, the remaining assets are transferred to the beneficiaries of the trust, without being subjected to estate or gift taxation. The value of the gift is the fair market value of the trust minus the actuarial value of the payments on the annuity. The actuarial value of the payments is based on the IRS interest rate, the term length, and the payout rate.

Example

Businessman A owns $5 million in stock in a company. Businessman A transfers the stock to a GRAT for a term of 20 years, with an income return of 2.4% per year, paying the grantor $310, 267.34. However, if the trust earns an annual return of 5%, there will be $2,671,787.95 at the end of the GRAT term. This amount would transfer to the remainder beneficiaries tax free. The gift tax value is the actuarial value is based on the initial sum, the 20 year term, and the percentage of payments in relation to the annuity amount.

In July the House of Representatives passed H.R. 5486, the Small Business Jobs Tax Relief Act of 2010. A provision in the bill requires a GRAT to have a term of more than 10 years to be effective, and prohibits zeroed-out GRATS. The president has indicated support for the bill. If interested in creating a GRAT, keep a close eye on this legislation.