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If you are a business owner, there is no doubt you have thought about what might happen to your business once you are gone. At McCulloch & Miller, we specialize in planning for the future, and business succession is no different.

Today’s blog covers some basics that could help you think through your business’s long-term ownership, but at the end of the day, the most important takeaway is to plan early and plan often. By ensuring you have put your company’s plan in writing, you can take care of the business that you have worked so hard to build. As always, we recommend contacting a Houston estate planning attorney to talk through the specifics of your plan and make sure it covers all of the necessary and relevant details.

Option One: Internal Sale

One popular option among those who own family business or have children and grandchildren is to hand over the business to a relative. This hand off could be in the form of a sale or a gift. In this scenario, it’s important to talk to an expert about how to minimize the possible tax consequences that you and your loved one could suffer. It’s also important to have open and frequent conversations with the family member you plan on naming as the recipient of the business. If that family member is not open to the transfer, the long-term success of your business will be threatened.

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Writing a will should not be overly complicated. With the right Houston estate planning attorney helping move things along, many clients find the process to be relatively smooth. There are, however, important things to include in your will that could be detrimental to leave out. Today, we focus on a few of the provisions you should make sure to put into your Texas will. Overall, your will should be an effective tool that allows you to achieve your financial goals and that makes things as easy as possible on your loved ones after you are gone.

Step 1: Name an Estate Executor

First and foremost, you should name an executor of your estate. This person should be someone you trust who is familiar with your will and estate planning documents. The executor will be responsible for carrying out the will once you are gone; therefore, choose your estate executor wisely. Many individuals choose an adult child, a sibling, or a trusted friend as their executor. When in doubt, speak with your estate planning attorney about who might be the right executor for your estate plan.

Step 2: Provide for Your Assets

The parts of your will that leave assets to beneficiaries should be as specific as possible. This section of the will should also be thorough; every significant asset you own should be included. Writing your will is also an appropriate time to think through any individual items you might want to give to your loved ones. For example, do you have valuable artwork or sentimental heirlooms? If so, your will might be a good way to name heirs to inherit these items.

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As a general rule, it is best to be as thorough as possible when drafting your estate plan. Your plan should include any significant assets you own, and it should be as specific as possible. There are times, however, when decedents unintentionally leave items out of their wills. Today, we cover what might happen when your loved ones discover you have left something important out of your will in the state of Texas.

The Residuary Clause

If you leave items out of your will, your assets can still be well protected if your will includes a residuary clause. The residuary clause is a “catch all” provision at the end of the will that covers any additional property or assets that your will did not specifically name. Your clause could, for example, state that any property not mentioned in the will should go to your children, to your spouse, to your parents, or to a loved one. The clause should intentionally be phrased to encompass a broad range of assets, i.e. all of the assets included in your estate, except those mentioned in the will.

Rules of Intestacy

Without this residuary clause, the remainder of your estate will be subject to intestacy laws in Texas. Intestacy laws are the rules of the state, and they provide a specific order of inheritance for your assets. The probate court is responsible for figuring out which parts of your will are “up for grabs” and are therefore subject to intestacy. Through intestacy, your assets could end up with a relative that you did not intend to benefit from inheritance.

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As many business owners know, business succession planning is a process, not a one-time ordeal. Succession planning is the activity through which organizations identify, train, and set up future leaders to take over when current management steps down. All companies should have some form of succession planning in place, but the methods and intensity of the planning can vary from company to company. Today, we cover some basics of succession planning that all business owners and leadership teams should keep in mind.

Recruitment

The first basic of business succession planning is recruiting capable, hardworking leaders. In recruiting, it’s important to think about widening your network to attract talented, diverse employees that have a desire to grow with the company. Your hiring decisions should reflect your company values, and you should work hard to retain the talent that you’ve acquired.

Training

The second facet of business succession planning is training. As an employee spends more time at a company, he or she develops institutional knowledge, and it’s key that employees pass this knowledge down to future leaders. It can also be helpful to cross-train, or to have employees learn the jobs of employees in other (sometimes seemingly unrelated) departments. As you train more leaders, it can be valuable to take a step back and observe who is taking the reins and who is implementing your business strategies at the highest level.

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Estate planning doesn’t have to be overly complicated. While it’s important to make sure your plan is thorough, accurate, and thoughtful, you should also be able to draw up your documents without too much stress. To aid in that process, today we offer five tips that you can use to help guide your estate planning journey in Texas.

Tip 1: Start Early

Some people think that estate plans are only for older adults or for those with a lot of money. In reality, it’s never too early to start your estate plan. Without a plan in place, rules of “intestacy” (i.e. the state’s order of priority for distributing your money) will apply. Even if you don’t have significant assets to your name, creating an estate plan can help you ensure that your money goes exactly where you want it to go when you pass.

Tip 2: Plan for Potential Incapacity

Life is full of the unexpected, and we recommend that you include a provision in your estate plan to cover what will happen if you become incapacitated. For example, do you name a power of attorney? Does your power of attorney cover medical decisions, financial decisions, or both? By naming a trusted person that can take over for you if needed, you can be prepared for whatever lies ahead.

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Probate is the process through which a court determines the validity of a person’s last will and testament. Once the court determines that a decedent’s will is valid and enforceable, the court approves the process of passing the person’s assets to his or her chosen beneficiaries. Probate can take anywhere from several months to a year (or, in some cases, it can take longer). Probate can also end up costing families significant resources, chipping away at the estate that the decedent left behind.

There is, however, good news: with the right strategies in place, you and your loved ones can avoid probate altogether. Today’s blog covers a few basic probate avoidance techniques in Texas. To find out if these strategies might work for you, contact a Houston estate planning attorney you trust.

Trusts

The first, and perhaps most commonly used, probate avoidance technique is the formation of a trust. By definition, a trust is a legal arrangement where a person gives an appointed trustee the right to hold assets on his or her behalf. The creator of the trust, or the trustor, communicates to the trustee how the money should be used. Trusts can shield assets from outside influences like debtors, creditors, and probate.

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Many of our clients come to us with questions about how to effectively pass on assets from one generation to the next. When done well, giving money to children and grandchildren can have benefits not only for the beneficiaries but also for the person gifting the money. On today’s blog, we cover some fundamental strategies that can help you figure out how to gift money without suffering unnecessary tax penalties. As always, these recommendations are general tactics, and we recommend speaking with an experienced Houston estate planning attorney to find out how to apply these strategies to your individual circumstances.

Annual Exclusion Gifts

Under 2024 federal regulations, each individual is able to give a beneficiary up to $18,000 in tax-free gifts. For couples, this amount increases to $36,000. If you have three children, then, you could give each child $18,000 as an individual or you could give each child $36,000 with your spouse. If you instead choose to leave this money in your estate for when you pass, the money could be subject to a hefty estate tax, and by giving it away annually, you allow yourself to avoid the possibility of suffering these taxes.

Educational Gifts

As another gifting tool, you could pay for a child or grandchild’s education in part or in full. If you pay an educational institution directly, it both benefits your loved one and allows you to bypass any tax penalties. This strategy once again allows you to tangibly pass wealth onto the next generation without suffering a hefty estate tax later on.

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It is common to wonder when you should update your will and estate planning documents – after all, life circumstances are always changing, and these circumstances might bring important updates to your long-term plans. As a general rule, we typically advise clients to update their estate plans every three to five years, or when there is a life change that warrants an update. One such change might be having children that move out of the house. Below are some of the ways you might want to consider updating your will when this occurs.

Updating Your Estate’s Executor

The first way you might want to change your will after your children move out is by considering an update to your estate executor. As your children transition into young adulthood, they might make competent and responsible executors that could carry out the terms of your will after you pass. This is not a decision to take lightly, and it is not necessarily recommended if your children are still in their late teens or early twenties. As they age, however, they could be a smart choice for your estate executor.

Preparing for Your Child’s Marriage

If and when your child gets married, this might also warrant an update to your estate plan. For example, would you like to name your child’s spouse specifically in your estate plan? Or, conversely, would you like to set up a trust so that your child’s spouse is unable to access your assets once you pass? Making your will as specific as possible is always a good idea, and this level of specificity helps you leave nothing to chance.

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Estate planning does not have to be unnecessarily complicated, especially if you have an experienced attorney to guide you through the process. While the details of every estate plan are important, and while it is crucial that your details are thoroughly reviewed, there are a few main elements to every estate plan that comprise the fundamentals. Today, we review what we see as the three “must-haves” in estate planning, so you can think through your own estate planning journey accordingly. To find out how these fundamentals apply to your circumstances, take the next step, and reach out to a Houston estate planning attorney that can offer you additional support.

1. Distribution of Assets

The first, and perhaps most obvious, “must-have” in an estate plan is clear distribution of assets to beneficiaries. Your estate plan must be specific about which assets go to which people, and it must take into account contingencies. For example, if you pass everything to your spouse, but your spouse tragically dies at the same time you do, does your estate plan have specify who will inherit in your spouse’s place? You should not leave any major assets out of your plan, so that nothing is put to chance in the future.

2. A Plan for Potential Incapacity

Your estate plan should specify a person with the authority to make important decisions on your behalf in the unlikely event that you become incapacitated. This authority can come in the form of power of attorney or a guardianship, depending on your goals. Texas statutes define an incapacitated person as either a minor or an adult who is “substantially unable” to care for his or her own physical needs or financial affairs due to a health condition. By including a specific person in your estate plan who can take over in the event of your incapacity, you can ensure your medical and financial needs are in good hands, no matter the circumstances.

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Each state has slightly different taxes that it imposes when it comes to estate plans. In Texas, we are lucky that our state does not charge an estate tax, an inheritance tax, or a gift tax; even so, there are important things to know about each one. On today’s blog, we cover some of the basics on these three kinds of taxes, so that you can be well prepared if and when you encounter any of them in the future. As always, with additional questions, be sure to contact an experienced Houston estate planning attorney that you can trust.

The Estate Tax

The estate tax is a tax that states can impose on decedents’ estates, making them pay the state a percentage of the total assets before passing money down to their beneficiaries. Luckily, Texas is one of the 38 states that does not have an estate tax, meaning you can bypass this part of probate when thinking through your last will and testament.

The federal government, however, does impost an estate tax, but only for estates that are at least $13.61 million in value. The estate’s value that surpasses the $13.61 million is subject to the federal estate tax, meaning decedents should not have to pay taxes on the entire estate (only the amount above this threshold).

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