Trusts

Intrafamily Loans: An Estate Planning Tool for Houston Families

Published on: October 6, 2015 | By McCulloch & Miller, PLLC

Utilizing intrafamily loans and trusts is one way that wealthy families can maximize their estate planning strategies. A recent issue of Barron’s features, “How Family Loans and Trusts Can Create Big Wins,” and outlines the specifics on intrafamily loans as an estate planning tool. The note has a fixed value, no matter how big the underlying asset grows.

With low interest rates, families with taxable estates can benefit from structured trusts and intrafamily loans. Not that these intrafamily loans have their own rates and rules – the rates on intrafamily loans allow parents to lend their children cash at rates far lower than a comparable commercial loan. Plus, they can be part of a broader wealth-transfer strategy.

For instance, an aging millionaire can fund a trust for his children’s benefit with a $100,000 gift. He then loans it $900,000 at the allowable 1.82 percent interest rate for five years, which the trust invests. The trust makes regular payments on the loan and then repays the principal in full at the term’s end. Any investment gains over that extremely low interest rate are tax-free in the trust for the next generation – it’s all legal and great planning.

Can Incentive Trusts Guide Good Behavior?

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

A trust that rewards heirs for desired behavior is known as an “incentive trust.” These kinds of trusts are popular among those who fear that their beneficiaries will not treat their inheritances with respect and are likely to waste vast amounts of resources. If you are considering setting up an incentive trust that will succeed, it needs to be done correctly.

Some wealthy families worry that their heirs may not be capable of handling large inheritances, and are concerned that the money may be squandered. In an effort to guide their heirs, they turn to incentive trusts to reward heirs who follow in what they consider to be the correct path.

For example, if you are planning your Houston estate and creating a trust for a minor child, you might want to create a trust that rewards the child for graduating from college or getting a job.

Crummey Trusts: Viable Tool for Houston Families?

Published on: June 1, 2015 | By McCulloch & Miller, PLLC

Actually the trusts are Crummey trusts named after one D. Clifford Crummey who won a decision in the Ninth Circuit in 1968, when I was just a high school lad. Israel and Erna Mikel were just in Tax Court showing how powerful the Crummey power can be as they used it to shelter over $1.4 million in transfers to their family trust from gift taxes. An arbitration clause that called for the use of a religious court caused the IRS to challenge the validity of the exclusions, but the Tax Court ruled in the taxpayer’s favor.

Trusts can have pretty funny names. Take the Crummey trust for example – doesn’t sound very good, does it? Who wants a “crumby” trust? Let’s explore this tool further.

A recent Forbes article, titled “Religious Arbitration Clause Does Not Hurt Million Plus Gift Tax Exclusion,” reminds us that there’s an annual exclusion from gift tax. Reminder: every year you can give the annual exclusion amount ($14,000 this year) to as many people as you want without any gift taxes or disturbing the unified credit against transfer taxes. However, to qualify for the exclusion, the gift has to be of a “present interest”.

Should An IRA Trust Be Part of Your Houston Estate Plan?

Published on: April 13, 2015 | By McCulloch & Miller, PLLC

An IRA Trust can be a beneficial estate planning tool for families under certain conditions. However, many investors are unaware of the IRA Trust and the benefits that it may provide.

Trusts are only for the super wealthy, right? Wrong!

The Kokomo Perspective recently posted an article titled “Are You Trustworthy?” The article explains that due to all the recent rule and distribution changes to IRAs and other retirement accounts, the IRA Trust has become much more popular and effective. An IRA Trust is a special type of revocable living trust that’s designed to receive your IRA accounts for the benefit of your loved ones after you pass away. The IRA Trust offers both protection and control.

Should a Trust Last 360 Years? Several Mississippians Think So

Published on: March 30, 2015 | By McCulloch & Miller, PLLC

Legislation allowing Mississippians to place their assets in a trust for up to 360 years passed the state House and is now pending before Gov. Phil Bryant.

How long should a trust really last?

According to the Northeast Mississippi Daily Journal, Mississippi’s House Judiciary Chair Mark Barker said many states were passing laws allowing for the establishments of trusts for 360 years or longer. He also commented that this is actually the process already since there are loopholes in the existing state rules against perpetuities.

Estate Planning for Houston Families without the Stress

Published on: January 7, 2015 | By McCulloch & Miller, PLLC

Wouldn’t knowing someone will step in if you become incapacitated create a little peace of mind? Wouldn’t knowing that your family is taken care of create even more peace of mind? Wouldn’t knowing there is a plan in place – a plan you developed – if something happens to you take a significant weight off your shoulders?

Estate planning can do a lot of things for you, but one of the most valuable takeaways is peace of mind.

A recent Forbes article, titled “11 Fundamental Elements of a Stress-Free Estate Plan,” provides practical advice on how to design a plan that protects your assets and provides for loved ones. While everyone’s individual needs are a bit different, there are some basic components you need to examine along with deciding who gets what.

A Review of Perpetual Trusts?

Published on: December 15, 2014 | By McCulloch & Miller, PLLC

“Why do we care about these perpetual trusts?” Mr. Sitkoff said. “Because there’s a lot of money in them. Billions of dollars is pouring into these jurisdictions.”

Perpetual trusts: good or bad? The principle of this tool is up for debate.

Perpetual trusts allow trust creators to maintain some control after they pass, and help protect fortunes from taxes and creditors. However, people who set up these perpetual trusts in states where they’re legal could have some headaches as lawsuits brought in a state where the trusts are prohibited could mean the out-of-state assets could be counted in any settlement.

Only the Rich Need a Trust in Houston? Wrong!

Published on: December 9, 2014 | By McCulloch & Miller, PLLC

By keeping even modest sums of money protected, trusts can ensure that your wishes for your money will be honored into the future.

A recent article by the Motley Fool,titled "5 Things You Didn't Know — but Should! — About Trusts," sheds some light on common misperceptions of trusts.

Here are a few beneficial takeaways from the article for Houston families:

Houston Residents Should Aim Straight For a Gun Trust!

Published on: November 26, 2014 | By McCulloch & Miller, PLLC

By putting ownership in trust and designating a knowledgeable person to oversee an individual’s firearms, the chance of such issues arising is minimized. Plus, paperwork requirements for transferring guns are streamlined and the trust prevents information about a valuable collection that might be of interest to thieves from being made public during the probate process.

A recent ABA Journal article, titled “Got valuable firearms? A gun trust can be a helpful estate-planning tool,” explains the benefits of a gun trust.

The thinking behind this strategy? By putting gun ownership in trust and naming a knowledgeable person to look after your firearms, the chance of trouble and issues coming into play upon your incapacity or death is minimal.

Get The Latest on Grantor Trusts

Published on: November 17, 2014 | By McCulloch & Miller, PLLC

“Income-tax rates are going up so it becomes more expensive for a grantor to maintain the grantor trust status of a trust they’ve set up,” says Lynn Halpern Lederman, managing director and senior fiduciary counsel – Northeast Region at Bessemer Trust, a New York firm that oversees $97.5 billion.

A Wall Street Journal article, titled "Rethinking Some Grantor Trusts," says that the latest bull market created potentially substantial taxable gains for individuals—and with the top federal rate on long-term capital gains at nearly 24%, as compared to 15% in 2012—there's a concern that some people may have a harder time paying that income tax bill.

How does this affect grantor trusts?