Estate Planning

Beneficiary Designations: Do Houston Families Update Key Documents?

Published on: August 14, 2014 | By McCulloch & Miller, PLLC

You may have made a giant estate planning mistake without even knowing it — forgetting to update the names of your beneficiaries for your employer-sponsored retirement plans, IRAs, life insurance policies, mutual funds, bank accounts, brokerage accounts, annuities and 529 college savings plans.

The recent MarketWatch article, titled “Don’t make the No. 1 estate-planning goof,” outlines several reasons for updating your beneficiary designations. Here are a few:

A change of jobs. A job change can mean that you will need to roll over your retirement plan. If this happens, beware! Moving money from your former employer’s retirement plan into your new one or into an IRA could eliminate your beneficiaries’ claims to those assets. You should make sure you have them as beneficiaries on the new account, too.

If You Can Dream It, You Can Do It in Houston…Unless the Trustee Says No

Published on: August 8, 2014 | By McCulloch & Miller, PLLC

Your plan is only as good as the people who implement it. When they aren’t competent, don’t pay attention to details, or decide to pursue their own interests, disaster can ensue. The latest case involves the Walt Disney estate.

"If you can dream it, you can do it." Walt Disney shared great inspiration with the world, and no doubt with his own family. But ever since Disney passed away in 1966, problems with his estate plan have continued to mount.

At issue is a trust he left for his grandchildren. The trust itself is fairly standard in that trust principal was to be distributed to the grandchildren in stages. For one grandchild, everything went according to plan. However, for the other two, problems have arisen.

Houston Heirs vs. Credit Card Debt: Who Gets Paid First?

Published on: August 5, 2014 | By McCulloch & Miller, PLLC

When people die, their assets (cash, real property, investments, savings, car and so on) become the property of their estates. And each estate is obliged to pay all debts, costs, taxes and other liabilities due before it distributes what's left over, according to the deceased's wishes, to the beneficiary or beneficiaries.

Credit card debt is no stranger to the American family. In fact, it's no longer surprising to find out that someone has more credit card debt than assets. But how does that impact one's estate? Unfortunately, credit card debt does not automatically disappear when the debtor passes away. It still needs to be paid by the estate if possible.

The Deseret News discusses the different possibilities in a story titled “What Happens to Credit Card Debt When Someone Dies?” Basically, any credit card debt will have to be paid out of any assets the estate has. The debt must be paid before any heirs can inherit. The good news is that in most cases no one will inherit the debt. If there are not enough assets in the estate to pay the debt, then in essence the debt ceases to exist. However, there are some exceptions. In community property states, a surviving spouse will be responsible for any unpaid credit card debt. A joint owner of the credit card account would also still be responsible for paying off any remaining debt in the account.

College Assistance from Grandpa and Grandma

Published on: July 31, 2014 | By McCulloch & Miller, PLLC

Many grandparents want to help their grandchildren pay for college, but don't know the best ways to do that. Financial advisers who can show them how to make those contributions and reap financial advantages for themselves can shine.

Many families struggle enough to meet their current needs that they just do not have enough to pay for their children's college education. And with the costs of college education increasing year after year, it is almost impossible for students to make enough to pay for it with part-time jobs. Consequently, grandparents are starting to look into ways to help pay for their grandchildren's college education. They have already earned their wealth and are in a better position than the parents to pay for school.

A recent Reuters article examined how grandparents can pay for their grandchildren's college education while getting a tax benefit for themselves. The article, titled “YOUR PRACTICE-Selling grandparents on the perks of 529 college savings plans,”suggests a 529 college savings plan. This unique account can be used to contribute more than the yearly gift tax exemption into an account that a grandchild can later use for educational expenses. The accounts are not perfect as they could make a grandchild ineligible for financial aid.

Houston College Graduates Need Estate Plans Too

Published on: July 24, 2014 | By McCulloch & Miller, PLLC

After graduating from college, and even law school, the thought of drafting your estate plan probably did not make the top twenty on your "to-do" list, and why should it? The only thing most young professionals have when they first start out is debt. However, after you land your first job, preparing your estate plan needs to move quickly to the top of that elusive "to do" list.

Regardless of your age, you might not think you have very much – but you probably have enough to want to have a say in who gets what.Young people may not view estate planning as a necessity when just starting their careers, but the reality is they should plan how their assets will be distributed in case something were to happen to them.

Estate planning is more than just deciding how your assets will be distributed. That is a large part of it, but there are other documents every good estate plan should include. A recent article in the National Law Review, titled “Five Estate Planning Documents Every Young Professional Should Have,” lists the documents that every recent college graduate will want to include as part of his or her estate plan:

Keeping Your Houston Estate Plan Up-To-Date

Published on: July 21, 2014 | By McCulloch & Miller, PLLC

"Many have not taken adequate steps to review and update these plans since the moment they were signed. Meanwhile, major life events such as marriage, the birth of a child or the launch of a business may have occurred."

Estate plans are not a one-shot deal. They are like a snapshot of your life at a particular point in time. An old estate plan shows how your property and life circumstances looked at the time it was made. But things change over time, and so should your estate plan.

If you never change your estate plan, it might stop doing what you want. As Forbes points out, in an article titled “Why You Should Update Your Estate Plan,” if you do not update your estate plan when your life circumstances change, then you might be risking costly legal battles for your heirs. Significant property acquisitions that are not accounted for in your estate plan can lead to problems. Having additional children or getting divorced can cause problems, if you do not change your estate plan. Tax law changes could make your old estate plan ineffectual.

The Digital Afterlife for Houston Estate Planning

Published on: July 18, 2014 | By McCulloch & Miller, PLLC

Planning for control of your personal information after you die used to be as simple as telling someone about the desk drawer or the fireproof box or the safe deposit box at the local bank. But in the era of smartphones and cloud computing services, that same stuff may be stored in digital formats on servers scattered across the globe.

What happens to your digital life after you have passed? Does it just automatically go away? Most people today have numerous online accounts. They have email accounts for work and personal use, accounts on sites like Facebook and Twitter, and some people also have blogs or even their own websites. If you check the privacy policies on the sites where you have accounts, you will notice that most sites will not give out any information about your accounts without your prior permission and some will not give out information without a court order. Your digital life may or may not go on without you, so you must plan ahead of time.

As a recent New York Times article, “How to Digitally Avoid Taking It to the Grave,” points out, if you do not plan ahead regarding how someone else can access your accounts after you pass away, then you risk the loss of those accounts. In other cases, accounts you would want to carry on might disappear. It depends on the policies of the sites where you have accounts. Some states have passed laws granting executors access to digital accounts after the owners pass away, and there is an effort underway to pass a uniform law in every state.

Disinheritance is a Sticky Situation

Published on: July 11, 2014 | By McCulloch & Miller, PLLC

Lawyers for Mr. Cohen say that he was entrusted with his father’s business, and that the two men enjoyed a close and caring relationship. But lawyers for Ms. Perelman claimed that it was that closeness that allowed Mr. Cohen, who eventually took over operations of Hudson Media, to manipulate the ailing man into changing his will.

Even when there are good reasons for leaving everything to one child, disinherited children will often choose to fight in court. Most people attempt to leave all of their children an equal proportion of their assets. That is not always easy to do. If the majority of assets are tied up in a business, for example, then it may be prudent to leave the business to the child who is active in the business. Just be ready for a fight if this decision is done late in life.

A recent article in The New York Times, titled “In Inheritance Battle, Judge Sides Against Perelmans,” reported on a legal dispute over the estate of billionaire Robert Cohen.

Financial Tips from a State Treasurer

Published on: July 10, 2014 | By McCulloch & Miller, PLLC

From checking Unclaimed Property to setting up automatic bill payments, here are some simple tips each of us can use to keep our finances organized this year.

Although you may not live in Missouri and it may not be "spring cleaning" season, Missouri State Treasurer Clint Zweifel offered sound financial advice in a column from The South County Mail entitled"Spring cleaning? Don’t forget your finances." Mr. Zweifel has some "simple tips" on estate planning and taking care of money that you can do any time of the year.

For Texans, Susan Combs serves as the Texas Comptroller of Public Accounts. The Comptroller's office features a robust website that outlines the state's financial state and offers resources for residents, along with "Unclaimed Property" listings.

Estate Tax Liabilities and Life Insurance for Houston Families

Published on: July 4, 2014 | By McCulloch & Miller, PLLC

“While there are a number of ways to address estate tax liabilities and retirement savings distinctly, developments in the life insurance arena are providing new and potentially better options. These strategies are highly versatile to meet the evolving needs of the individual many years into the future.”

As those in business well know, there are really only two ways to deal with a potential business liability: proper planning and execution on the one hand, and proper use of insurance on the other. Many find both approaches can also work in tandem to effectively achieve their estate planning and retirement goals.

The use of insurance to deal with an estate tax liability inevitably brings us to the topic of life insurance. In fact, an interesting approach was advocated recently in a Forbes article titled “Life Insurance For Estate Taxes And Retirement.” Why life insurance? Well, while the fundamental risk life insurance is meant to resolve is the loss of income upon the death of a breadwinner, it can cure the problem of illiquidity when estate taxes are due. That is especially helpful if real estate or other illiquid assets are what is driving your estate to taxation in the first place.