Inheritance

The Changing Role of Trusts in Estate Planning

Published on: July 27, 2016 | By McCulloch & Miller, PLLC

A legislative change made the use of trusts less necessary for most Americans, but there are still many situations where this planning tool is the best option.

When the American Taxpayer Relief Act became law, the $5 million exemption and the new rules on portability of the exemption for married couples (i.e., $10 million per couple) became permanent. The tax rate on estates over that threshold, now $5.45 million per person, was bumped up to 40%. Many people who had created trusts to protect their descendents from estate taxes had cause to grumble because their trusts were no longer necessary, according to CNBC in “What's the difference between an inheritance and a trust?”

The estate tax now only affects about 0.2% of the population, translating to about 600,000 Americans. This was one of the big reasons why people set up trusts over the last 20 years…to avoid estate tax consequences. But trusts continue to have an important role in estate planning.

How One Family Preserved a Legacy and a Fortune for Six Generations

Published on: July 15, 2016 | By McCulloch & Miller, PLLC

We often hear about families who squander fortune; we hear less about families that preserve their wealth and values over generations.

Successful entrepreneurs often struggle with estate planning when it comes to their children. Will knowledge of large inheritances to come create spoiled and unmotivated adults? How can wealth be shared across generations while fostering family values that include a strong work ethic and service to others? In a recent article appearing in Forbes, “The Successful Entrepreneur's Guide to Leaving a Financial Legacy That Won't Spoil Your Kids,” one family’s solution of passing along wealth and empowering generations of children is presented.

The family is one of the richest families in history: The Rockefellers. Their fortune is still going strong today—six generations later. They maintained their fortune by creating trusts to protect the family wealth. Trusts can have specific rules for determining how and when heirs are allowed to access money. This is the key to giving your children access to funds without eliminating their potential to achieve success on their own. Many times entrepreneurs fear leaving their children a large sum of money, but a trust lets you attach some strings.

How Insurance Can Be Used to Leave an Inheritance

Published on: July 12, 2016 | By McCulloch & Miller, PLLC

Planning to leave an inheritance for your children requires a careful examination of all of your assets, and insurance could be part of that plan.

Most couples use term insurance to help protect their loved ones pay the bills after they pass. A question answered in the NJ 101.5 article “Do you need more insurance?” asks if insurance can also be used to leave an inheritance for children.

If leaving an inheritance is important to you, start this process by taking an inventory of all your assets. Look at how they may factor into your support during retirement and see what might be left as an inheritance. This exercise may result in discovering that you already have money that will make a nice inheritance for your children someday in investment or retirement accounts. In addition, your primary residence could be a source of inheritance.

Picking an Executor, a Critical Part of Your Estate Plan

Published on: July 1, 2016 | By McCulloch & Miller, PLLC

Choosing an executor is not easy, but it is very important. A person who is not capable of managing the tasks can drive even the best estate plan off the path.

Part of creating an estate plan is naming an executor who will be responsible for carrying out the wishes of the decedent, according to a recent item on InsuranceNewsNetMagazine.com, “The Wrong Executor Can Destroy Even the Best Estate Planning.” These tasks include everything from making sure that assets are distributed to tidying up outstanding debts and cleaning out houses. It’s important to select a person who can manage these tasks and—if they are stymied—who will recognize when they need help from professionals.

Executors sometimes are under the impression that it’s a quick and easy job. This might be the fault of the testator or the person who has executed the will. They select an executor and believe that he or she possesses the ability, acumen, time, and desire to carry out the duties of the position. Many don’t inquire as to whether the executor is interested in and capable of serving, or the chosen executor may be hesitant to say no.

Bishop’s Large Estate: Church vs. Family Members

Published on: February 16, 2016 | By McCulloch & Miller, PLLC

Family members are fighting to lift a shroud of secrecy following the death of a successful bishop who built a real estate empire and a megachurch. As reported in The Detroit News in "Family battles over megachurch founder's estate," the estate of a Pentecostal bishop from Detroit could be valued at up to $10 million. The bishop's heirs want their inheritance, and the church is pushing back.

Bishop William Bonner's two adult grandchildren say his survivors are being shut out of their inheritance, and they believe officials with a Harlem church are hiding money and records about property that belongs to the family.

Bonner died in April at age 93, after suffering from dementia and complications from a stroke. He founded Solomon's Temple in 1944, which has grown into a 2,500-seat sanctuary. His real estate empire includes as many as 30 homes and other properties in several states, his family says. His survivors want the church to open its books on his financial affairs to give them more information about the bishop's Will detailing property and cash that they claim should be part of their inheritance.

Houston Boomers. Redefining Inheritance?

Published on: February 10, 2016 | By McCulloch & Miller, PLLC

The same generation that redefined American culture is making changes to the concept of inheritance as well. A recent article in Forbes, "How Boomer Parents Feel About Leaving Inheritances," looked at two studies concerning inheritances to find that Baby Boomers are of two minds when it comes to leaving inheritances to their children. Some have no intention of leaving anything behind. They don't lack for generosity; they just have a different way to share. Others are planning on leaving assets to their offspring, but are not sure that their heirs will be able to manage an inheritance wisely.

The Hearts & Wallets report, Funding Life After Work: Impact of Parenthood & Wealth Transfer on Retirement Solutions for Baby Boomers, reveals that roughly 40% of those surveyed plan to leave inheritances. About 30% expect to spend all their money, and the other 30% aren't sure. There's one item that the majority of the parents had in common: they're afraid of running out of money. And those who plan to leave inheritances are extremely terrified of running out of money!

Interestingly, ultra-wealthy parents appear to be more apt to give their kids inheritances, according to a US Trust survey of high net worth individuals with at least $3 million in investable assets. Some 57% of the respondents think it's important to leave a financial inheritance to the next generation—which is somewhat less than the 66% of Gen X'ers and 74% of Millennials who felt this way. However, only 27% of the parents surveyed have told their children how much they are likely to inherit. One reason for this is that only 20% strongly agreed that their children will be prepared to handle the wealth they'll receive.

Can Houston Families Create Fair Estate Plans for Kids?

Published on: January 20, 2016 | By McCulloch & Miller, PLLC

Should you cut the pie in equal portions? If you are preparing an estate plan and want to make sure that every one of your children receives the exact same amount of your assets because that's fair, you may want to reconsider. A post from New Jersey 101.5, "Being fair in estate planning," discusses the differences that take place during child rearing and even early adulthood that may redefine what you think of as fair.

While there's no easy answer to the question of what is fair, treating the children equally can be fair. But so can unequal treatment.

Let's look at how a parent treats a minor or young adult child. There are times when a parent simply needs to spend more on one child. The reason may be apparent—for instance, if one child has a disability or serious illness. But it can be more muddied when one child participated in costlier school-age activities, went to a more expensive college, or planned a more expensive wedding than the other kids. Even so, provided each child was given equal opportunities, the unequal financial support may not be a problem. Nonetheless, some parents believe that it's important to keep everything as equal as possible.

Large Estate? Consider Gifting to Family

Published on: November 3, 2015 | By McCulloch & Miller, PLLC

Most people prefer to maintain possession all of their assets, letting them go to the next generation only after they have passed away. But if a family member feels that they have more than enough money and property and others in the family are in need or would benefit from having access to the assets, then the older person can make gifts during their lifetime. This can be very rewarding to the benefactors.

When it comes to giving methods, there are many ways to skin the cat. This was the subject of a recent article in the Columbus Dispatch, "Guide to Life: Pros and cons of leaving inheritances to relatives." Nevertheless, some of those giving methods are more tax savvy than others.

The article mentions three such ways:

Son’s Inheritance Funded Pursuit and Conviction of Mother’s Murderer

Published on: September 4, 2015 | By McCulloch & Miller, PLLC

It’s not exactly what most parents would want their children to use their inheritance for, but we suspect that this mother would have been very proud of her son.

John Bickman Walls told his son Pelle Walls, who was then 17, that his mother, Walls’ ex-wife, had committed suicide. Walls said that his ex-wife, Uta von Schwedler, a well-respected scientist, was found drowned in a bathtub.

Pelle was devastated, and before too long he began to suspect that his father had a hand in his mother's death. His father began acting strangely and saying things like "What if I did do it?" This behavior continued. When he reached the age of 18, Pelle moved out on his own. He eventually managed to get his siblings out of his father's control, due to the latter's erratic behavior.