Houston Estate Planning and Elder Law Attorney Blog

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.

Inheritance “Bugs” at the Smithsonian

Published on: July 3, 2014 | By McCulloch & Miller, PLLC

Carl J Drake spent his life studying bugs, everything from aphids to water striders. When he died in 1965, the entomologist left his life savings and his vast insect collection to the Smithsonian. But now Drake's will has become something of a pest.

The case of the Smithsonian Museum and the entomologist Carl J Drake, as relayed in a recent article in the Guardian titled “Smithsonian Museum is bugging out over insect inheritance,” provides an example of how a gift of charity can actually be a gift of a burden to your institution of choice without the proper plans in place.

Most museums across the globe, including many Houston museums, really only start out and build their vast collections through the largesse of charitable donors. The Smithsonian is no stranger to gifts of the strangest collections with the most peculiar needs and various limiting conditions. That said, Drake’s bug collection is beginning to bug them. The Museum is actually petitioning the courts in an attempt to modify the gift.

Houstonians Can Plan Short-Term and Long-Term for Business Succession

Published on: July 2, 2014 | By McCulloch & Miller, PLLC

Succession planning where company ownership is concerned can be fairly complicated, but at a simple level every plan is based on two basic issues. You’ve probably thought a lot about who will take over for you; that’s one. But, just as importantly, how can you make sure what you want to happen will happen? Without the right short- and long-term plans in place, it won’t.

Business succession planning focuses on two main concerns. On the one hand, what will happen way down the line when you're ready to give up the business? And, on the other hand, what will happen to the family business if you pass away tonight?

What is needed is a tiered approach as explored in a recent Forbes article titled “Don't Let Your Family Business Die With You.” This may require both short-term plans and long-term plans.

How Do You Value a Priceless Yet Worthless Object?

Published on: July 1, 2014 | By McCulloch & Miller, PLLC

New rules and enforcement guidelines may render certain artwork not only illegal to export or import, but also unsalable within the United States. Houston is a very international city and residents have traveled the world, returning with valuable artwork.

Valuing artwork is never an easy task. It gets all the more tricky with antiques composed of protected materials which cannot be legally sold, particularly ivory. How do you value a priceless yet worthless object?

The problem of valuation is not a new one, but it has taken some serious turns as of late. There is a helpful guide to the whole ordeal in a recent WealthManagement article titled “Zero Fair Market Value for Antiques?”

Art Valuation Vexation – The Taxman’s Test

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

The tax law makes clear that the taxpayer has the burden of substantiating the value of the property. To this end, a taxpayer must not only comply with the procedural requirements for valuation, but must also persuade the trier of fact that his claimed valuation is correct.

How do you place a value on art? There is the subjective eye of the beholder that gauges the beauty of the art, and then there is the no less subjective eye of the market, the appraiser and/or the taxman. Be sure to properly plan for your artworks and ensure that they are appropriately (if usefully) valued, as seen through the eyes of the taxman.

The issue of valuation is always the issue at stake when it comes to taxes – be it with regard to real property, stocks, or something as mercurial as an easement – but with art there is both a special importance and a special irony. After all, art is only truly valuable when it is priceless, in one sense, but there is nothing that is priceless on the market.

Don’t Let an Inheritance Come Between Your Houston Family

Published on: June 27, 2014 | By McCulloch & Miller, PLLC

Everyone knows someone who hardly speaks to his brother or sister or aunt simply because of a misunderstanding over an inheritance.

Inheritance planning can be a direct mode of expression, whether of appreciation for a person or an extolling of virtues. But can these expressions be taken the wrong way depending upon who gets what? As a family-loving person, you can express yourself far more subtly by ensuring that your heirs and the entire family can come together even after your passing and that no fight is to break out with regard to the inheritances you leave.

Estate planning for the entire family is a difficult balancing act. It can take a good deal of thought, but is well worth the effort. Forbes recently offered a bit of wisdom on the topic and a goal too: “How To Make Sure Your Children Keep Speaking To Each Other After You Die.”

Houstonians Can Protect Intellectual Property

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

If you have identified all your potential intellectual property and never operated without professionally prepared documents, you will likely be confident about the value of what you worked so hard to create. And if not, now is the time to turn to your intellectual property. Here are a few things that you, as a startup founder, should do to protect your intellectual property and get started on the right track.

Have you planned to structure the sale of both your business and your intellectual property? To what degree are the products of your company products of an intellectual property? Who owns the property, you or the company? Just as likely, is it possible that a previous employer has claim to your intellectual property?

Heed some advice given in a recent Forbes article titled “Start With The End In Mind: Four Must-Dos For Intellectual Property.”

Preserving Genetic Material for Offspring – How Does this Affect Your Houston Estate Plan?

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

As growing numbers of people use reproductive technology to have children later in life or overcome infertility issues, many affluent Americans are leaving behind “genetic material” that could conceivably add a new heir to the family.

Estate planning is all about tying together the loose ends of your life. Easier said than done, right? It seems with every passing generation our lives get even more complicated. Medicine, especially fertility medicine, continues to baffle the legal system. The perfect example of that is posthumous progeny (how is that even a phrase?) through cryogenics, in vitro fertilization, and entirely understandable timing. It’s been in the news before, but MarketWatch recently took up the topic in an article titled “Your frozen sperm could inherit your estate.”

Inheritance, unless you plan otherwise, legally flows from generation to generation or simply the closest kin in lieu of that next generation. It’s an age-old concept and logically follows the nature of human reproduction. On the other hand, that can get pretty complicated when we stop reproducing as they always have (as in only the ways they could) in ages past.

Inherited Stock and Taxes – What You Need to Know

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

If you sell stock you inherited, the tax bill is keyed to its value at the time of the original owner’s death.

If you’ve just inherited stock or if you’re set to leave behind stock to your heirs, then it is well worth your time to get an idea of the tax treatment you will get and what it can mean in the context of your overall estate plan.

There a volumes to read on the topic of inherited stock, but thankfully Kiplinger posted a handy little note and Q&A on the topic last month with “The Tax Hit on Inherited Stock.” Essentially, stock is a partial ownership of something greater (a company) and the value of the stock is based on the company which is based on market which is based on when you buy and sell or how long you own the stock and/or who held the stock at each juncture. In other words, there are more than a few variables, as you well know, and these variables are what can make for a tax headache.

Nevada Asset Protection Trusts: “Seasoned” DAPTs

Published on: June 23, 2014 | By McCulloch & Miller, PLLC

A domestic asset protection trust (often called DAPTs, or just APTs) allows the settlor (the trust creator or grantor) to be a discretionary beneficiary of the trust, while at the same time assuring protection of trust assets from claims of the creditors.

Trusts are powerful legal machines and the Domestic Asset Protection Trust (DAPT) is a particularly intriguing machine, indeed. A recent article in Forbes sheds light on the concept and some of the finer points. The article, titled “How To Use a Nevada Asset Protection Trust To Safeguard Your Assets,” notes that in the same way all trusts are built they are not same, not all states treat them the same. It just so happens that a Nevada DAPT is a particularly well-crafted and well-situated machine for its purpose.

DAPTs in any state are a specific subset of trusts that protect assets by placing them within the safe confines on an irrevocable trust, but allow the owner to retain a level of control over the assets. In other words, it’s a way of having your cake and eating it too. It just so happens that trusts like these are also well-suited to multiple purposes and blend well into your overall plan for your assets during life and as part of your estate. In fact, a DAPT is never going to be your sole vehicle, because putting all of your assets into a protection trust is neither practical nor entirely defensible (it might not pass the sniff test for fraud). On the other hand, a DAPT may be your most precious holding.