Updated: Feb 4, 2022
This column first appeared in the San Antonio Express-News and its MySA.com website on May 5, 2015.
Dear Mr. Premack: I am in Liberty Hill, Texas. I have taken care of my mother due to Parkinson’s and Lewy Body dementia for two years. I can only work a few hours due to her dementia. I have been here for ten years due to my father’s ill health in the beginning. I promised my mother she would not have to move when he passed, and I am holding to that promise. But I am very concerned about the 40% inheritance tax below $300,000 when my mother passes. Is there a way to avoid inheritance taxes? – LLC
You seem to be a caring and dedicated son who is giving up a lot to care for his ailing mother. Your goal of keeping your mother in her own home is laudable so long as you can provide to her the necessary level of care. Her well-being must be your first goal, and so long as she is mentally competent, she is the person who decides where she will live and what type of care she will receive.
But her dementia may worsen to the point that she may lose the ability to make those decisions. It is imperative that she consult with a Certified Elder Law Attorney to be certain she has a legally valid Durable Power of Attorney appointing a trusted agent (you would seem to be the logical choice) to make her financial decisions. It is equally vital that she have a legally valid Medical Power of Attorney appointing an agent to make her medical decisions. Also, if she desires to avoid artificial life support if she is diagnosed as terminally ill then she needs a legally valid Directive to Physicians to be signed by her while legally competent.
When those documents are in place, you as her agent will have legal authority to care for her by making her legal decisions. In their absence, if she loses mental capacity, you may be required to become her court appointed guardian. As you are appropriately money conscious, you should be aware that guardianship is many times more expensive than proper pre-planning with a Certified Elder Law Attorney.
It may be that in order to keep her at home, you will need assistance. If her income and assets are low enough, she may qualify for help through the state’s Medicaid program. The Texas Health and Human Services Commission operates the Star+Plus Home and Community Based Services program. If she qualifies and is approved for services, nursing and other at-home services may be provided to help her stay at home.
With that foundation in place, we can address your inheritance tax concern. First, be aware that your involvement is controlled by your mother’s instructions in her Will, Trust or other legally binding estate plan. You may be the only child or one of eight. Her legal documents will nominate a representative to conclude her financial and tax affairs upon her death. In the Will, this person is the Executor. In a Trust, this person is the successor Trustee.
If you are the representative, you may still not be her sole heir. The representative is charged with the duty of finalizing her financial matters, paying her debts, finalizing and paying her income taxes, and paying any inheritance tax from her estate before the remaining assets are distributed to her heirs.
Fortunately, Texas has eliminated is state inheritance tax as of 2005. So, the heirs won’t lose any funds to the state. Also fortunately, the federal estate tax exemption was raised to $5.43 million for 2015. If her total estate value is about $300,000 then when she dies there will be zero federal estate tax to pay. The largest legal cost to which the heirs may be exposed is the cost of probate, and with proper advance legal planning even that cost can be reduced or eliminated. See a Certified Elder Law Attorney to be sure that all of her legal plans are properly complete.
Paul Premack is a Certified Elder Law Attorney with offices in San Antonio and Seattle, handling Wills and Trusts, Probate, and Business Entity issues. View past legal columns or submit free questions on legal issues via www.TexasEstateandProbate.com or www.Premack.com.