Estate Tax

Estate Tax Changes Are Favorable, But Different Worries May Arise

Published on: November 20, 2014 | By McCulloch & Miller, PLLC

State and federal estate and inheritance tax rates are what drive most people’s estate plans, but now that tax rates are falling and exemptions rising in many jurisdictions, how much people will leave their heirs isn’t what keeps them awake at night anymore. What they really worry about is how the money they leave will affect the lives of those who will inherit it.

Are you cheering for the new death tax changes on the horizon, or will you be up all night worrying about the potential downsides to your Houston estate?

So-called “death tax” rates have been the subject of much debate, reform, and repeal over the past 15 years. Some say that repeal will suppress entrepreneurship and economic growth. However, tax rates have been unreliable, so it's hard to use them when looking at a long-term estate plan. A recent Forbesarticle, titled "Estate Planning Fears That Keeps Us Up At Night,"explains what this means.

Passing on Artwork? How To Divide the “Picassos” of Your Houston Estate

Published on: October 6, 2014 | By McCulloch & Miller, PLLC

Serious art collectors might roll over in their graves—or never marry—if they knew what feuds their purchases were destined to inspire. On the other hand, lots of friction can be avoided if lovers of art and their families acquaint themselves with a few legal and tax basics.

So, who's getting the Picasso? Dividing assets of artwork can be a challenge.

A recent Wall Street Journal article, titled "Tips for Dividing Art in a Divorce or Death," warns that fighting can be avoided if art lovers and their loved ones learn a little about some legal and tax basics. The original article offers some ideas on how to decide—in a fair and civilized manner—who gets what, and the ways of disbursing an art collection to minimize taxes.

Worried About Estate Taxes? Don’t Die in These States Next Year!

Published on: September 29, 2014 | By McCulloch & Miller, PLLC

Moving to New York to avoid state death taxes? “When your bordering state is telling you, ‘Come on over!’ the pitch is compelling,” McManus says. “If New York has a more welcoming tax scheme, then people will say, ‘Let’s call me a New York resident.’” McManus says that he and his wife might make the New York move in retirement themselves; they already have a place in the West Village they rent out for now.

Would your state's death tax prompt you to move to another state? You wouldn't be the first to consider relocation.

The number of death tax jurisdictions is 19 states plus D.C. at present. However, there are several states making changes for 2015. These states are lessening the death tax liability by increasing the exemption dollar threshold, figuring in inflation, and eliminating “cliff” provisions that tax the first dollar of an estate.

Samsung Chairman’s Estate Sparks Tax Questions for Houston Families

Published on: August 7, 2014 | By McCulloch & Miller, PLLC

Lee is a legendary figure in South Korea as the man who turned Samsung Electronics into a powerful conglomerate. He is also the country's richest man with an estimated net worth of US$11.4 billion. Under Korean inheritance law, an heir will have to pay 50 percent in tax when inheriting such wealth, indicating an inheritance tax bill of some US$6 billion.

Estate problems are on the horizon for Samsung Chairman Lee Kun Hee's heirs. Lee suffered a major heart attack three months ago and has been in the hospital ever since. It does not appear he will live for much longer. Hee's estate is believed to be worth approximately $12 billion. As China Topixpoints out, in an article titled “Samsung Heirs Could Pay a Massive US $6 Billion Inheritance Tax,” under South Korean law the estate will have to give half of the estate to the government. The family could avoid some of this tax burden by placing the money in a foundation, but that would mean giving up some control of the assets.

It is unclear whether Lee could have avoided this through estate planning before his heart attack. It is possible that South Korea has laws and vehicles that could be used to more effectively keep wealth in the family as opposed to giving it to the government. In the United States, if a wealthy person does nothing, then their family might not be much better off than Lee's. The government will not necessarily take half of the wealth, but a significant portion of the estate will be lost, as much as 40% in some cases.

Humorous Take on Newsworthy Estate Planning Topics

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

Income inequality and the estate tax continue to be hot button issues in American politics and culture. Americans have a wide array of opinions about these two linked topics. Comedian John Oliver recently gave his humorous thoughts on them.

More and more Americans, especially younger Americans, want to be entertained when they are listening to the news. They often look to comedians, such as Jon Stewart and Stephen Colbert, for the lowdown on hot topics. One new television show in this category is HBO's Last Week Tonight hosted by John Oliver.

A recent Los Angeles Timesarticle titled “John Oliver Tackles Income Inequality on 'Last Week Tonight'” describes a recent Oliver show that tackled the estate tax and income inequality. Oliver suggested during the show that whether a viewer would agree with his opinions depended on whether they subscribed to HBO or watched his show by getting it illegally. The implication was that people who were wealthy enough to afford HBO would have one opinion and those who were not would have another opinion. Oliver later went on to compare the American promise to a lottery system where the already rich get multiple fantastic opportunities to win and the poor cannot even get a draw because the machine is broken.

A Qualified Personal Residence Trust: Take a Note from the Clintons!

Published on: July 30, 2014 | By McCulloch & Miller, PLLC

Even with its funny name, a QPRT can save you hundreds of thousands of dollars in estate taxes after your death for your Houston family. Let's take a closer look at what the Clintons did and whether the same strategy could help you.

While QPRTs are complicated trusts, the basics of what they do and why are easy to understand.

If you are considering this trust as part of your plan, take a note from Bill and Hillary Clinton. The Clintons used a qualified personal residence trust as part of their own estate tax planning.

Adding Your Collection to Your Houston Estate Plan – Does the Value Hold Up?

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

Over the past few years pieces have not been selling as well as expected or not selling at all. Often the amount they are appraised for, and thus the amount the IRS views them as valuing, is not close to the amount that they garner at auction.

Have you ever watched the TV show Pawn Stars? The same process plays out on the show over and over again. Someone will bring in a rare item, the pawn store owner will call in an expert to appraise the item, the appraiser will give an approximate value, and then the store owner will offer to pay half the appraised value of the item.

Obviously, a pawn shop is not going to pay full price for anything. However, the spiel that the store owner often gives contains lessons. He explains to the customer that the appraisal value is how much the item might get at auction, but that it has to be the right auction with the right buyer and that in this economy nothing is going at auction for the full appraisal value.

The Federal Estate Tax Exclusion: Get The Facts for Houston Families

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

What is the $5 million federal estate-tax exclusion, and how does it work?

Now that "tax time" is over for many Americans, the subject of taxes may not come up as often. In fact, when it comes to the estate tax you may not think about it until you sit down to plan for your estate. So what is this tax anyways?

A reader recently put these questions to the Q&A in The Wall Street Journal, which found its way to publication in “The Federal Estate-Tax Exclusion.” If you find yourself asking, “What is the $5 million federal estate-tax exclusion, and how does it work?” you’re not alone and here’s a start.

Houstonians: Should Your Gifts Be Made While You Are Still Living?

Published on: March 25, 2014 | By McCulloch & Miller, PLLC

When it comes to estate planning, one of the primary goals is to transfer as much of a person's assets to their intended beneficiaries at the lowest cost or, in other words, by paying the least amount of tax.

Giving your assets to your heirs is all about timing. When to do it and how to do it depends on your situation. Is it best to maximize your gifting strategy while you are living? Or should you plan your gifts for after death?

Formerly, the primary concern was the estate tax. The strategy was to gift during life using the annual gift tax exclusion, currently $14,000 per donee per year. After all, gifting lets you incrementally slide under that onerous estate tax ceiling.