Houston Estate Planning and Elder Law Attorney Blog

Houston Business Owners May Combat Values During Sale

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

The buyers and the sellers couldn’t agree on how much the company was worth.

A business is essentially an asset, but assigning a value to this type of asset tends to be very complex. If your retirement plan (and maybe your estate plan for your heirs) relies upon the business, do you know what your business is truly worth?

For a sobering problem many business owners end up facing when it comes to valuing their business, be sure to read a recent article in Forbes titled “Is Your Business Worth As Much As You Think? Many Aren't.”

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.

Is An Inheritance Helpful Or Hurtful For Houston Families?

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

One of the most common themes among my affluent clients is a desire to see their children make it on their own. Over 90% of these clients are first-generation wealth builders, meaning they didn’t inherit their money but accumulated it from saving, investing or building a business. They value hard work and frugality and feel leaving a large inheritance to a child is more hurtful than helpful.

When it comes to planning for one's estate, most children assume their parents will leave it all to them. Is that really in the cards?

A recent Forbes article takes a different tack and asks “Why Bother Leaving an Inheritance for the Kids?”

Houston Families Should Note Estate Planning Under Fire With Obama Budget Proposal

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

Under the President’s plan, in 2018 the tax would revert to the rates that were in effect in 2009.

Budget buzz is spreading across Capitol Hill. For example, did you know that President Obama's proposed budget is seeking a reduction of the estate tax exemption back to $3.5 million?

Just when taxpayers and estate planning attorneys thought the estate tax exemption level had become settled law (except for inflation increases), President Obama would like to throw a monkey wrench into estate plans past, present and future. In addition, he would like to double down on some traditional estate planning techniques, too.

Business Succession Through Employees

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

The 1974 ESOP law and later amendments were designed to encourage employee ownership. Company founders who initially sell just part of their stake and stay on as CEO say the best news comes after the deal: employees start to act more like owners. Ideas formerly kept quiet start to bubble up. Costs, once resistant to reduction, come under control more easily.

Once you have decided to sell your business, the million-dollar question becomes: "to whom should you sell it?" If you have no successor in mind, have you considered your employees? As many have discovered over the years, there is much to be said for selling the business to the employees themselves in the form of an ESOP or “Employee Stock Ownership Plan.”

Much has been written on the topics of employee ownership and the ESOP transition before, but a recent Forbes article titled “The Better Exit Strategy: ESOPs Satisfy Business Owners And Preserve Their Legacy” is worth your read.

A Family Loan Vs. A Family Gift For Houston Families

Published on: March 19, 2014 | By McCulloch & Miller, PLLC

Be prepared to demonstrate that the loan is legitimate, and that repayments are being made regularly. This documentation can also help sort matters out if the lender should die before the full value of the loan has been repaid.

If you are compelled to help out a family member by way of an intra-family loan, make sure you are aware of all the ins and outs before you extend the offer. The benefits of incorporating family loans into your estate plan were pointed out a short time ago in an article titled “Estate planning benefits of intra-family loans” on LifeHealthPro.com.

The benefits of making a loan are not immediately obvious because that means, by definition, the loaned assets are to be returned to the estate of the one granting the loan, plus interest. Yes, if you make a loan to a family member you still have to expect it back and charge interest at the federally mandated interest rate, the Applicable Federal Rate (or AFR) for the relevant time-frame of the loan. Otherwise, it is not a “loan,” but a “gift” and is subject to an entirely different set of rules.

Multi-Generational Living: Who Owns The Houston Home?

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

… Multi-generational living arrangements present legal and financial challenges around home ownership.

The family home is that special place where the family lives and comes together. In fact, some families take it one step further and actually all live under the same roof. Some 17% of the population have multi-generational living arrangements.

All that said, there are significant issues at play when it comes to actual home ownership and occupancy. How can a family keep everything straight and keep the family home?

Wills And Trusts: Do Houston Families Need One Or Both?

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

The question that many Americans want answered is: is a will or trust best for retirees?

There are simple solutions to simple problems, and complex solutions to complex problems. That being said, when it comes to estate planning many Americans ponder the following: "will or trust?"

If you have found yourself between these horns of dilemma, the simple will and the (sometimes) complex trust arrangement, then you will want to consider a recent Forbes article titled “Wills vs. Trusts: What's Best For Retirees?”

Missed IRA Rollover Deadline? How to Get Relief From Being Taxed on “Distribution”

Published on: March 13, 2014 | By McCulloch & Miller, PLLC

Dad missed the 60-day IRA rollover period and is now being taxed on 100 percent of his life’s savings. Can anything be done?

Applicable IRS rules and regulations provide that if someone receives a distribution from an IRA, the distribution is then taxed at an individual’s ordinary income rate. A distribution can occur inadvertently in cases where a person wishes to rollover the IRA funds from one investment account into another and the rollover is done incorrectly. This can have disastrous tax results. Again IRS rules and regulations do provide that if there is “reasonable cause,” e.g. mistakes or incorrect actions, missed deadlines can be undone. There are strict timelines again for these procedures, and if all other timelines have passed, the taxpayer can seek relief by means of an IRS Private Letter Ruling (“PLR”). These PLRs are technical and complex to obtain and have significant filing fees and transaction costs but, if someone’s life savings are at issue, it can be worthwhile.

In a recent IRS Private Letter Ruling (PLR)⁽¹⁾, attorney-CPA Tom McCulloch and attorney-CPA Chris Kolenda successfully assisted a taxpayer who had missed a rollover deadline because the institution receiving the funds from the old IRA completed the paperwork incorrectly. Also, that the taxpayer suffered dementia from Alzheimer’s Disease. The process included obtaining sufficient medical evidence about the taxpayers’ medical/cognitive condition from several years past and presenting it cogently to the IRS along with substantiation of the institution’s mistakes. The IRS Private Letter Ruling allowed the taxpayer to successfully roll over the IRA funds from the old account into a new IRA account and avoid being taxed on a significant part of his/her life’s savings.

Houton Families: Going Back To Basis

Published on: March 12, 2014 | By McCulloch & Miller, PLLC

Recent tax law changes are turning traditional estate planning on its head. Indeed, moves long considered savvy–for example, aggressively shifting wealth to younger generations while senior family members are still alive or leaving assets to a “bypass” trust–may no longer be necessary to save estate tax and could now leave many families paying income tax they wouldn’t otherwise owe.

The beast – the estate tax – is not dead. Nevertheless, that multi-headed monster is far tamer these days. On the other hand, there is another less obvious tax monster that you cannot afford to ignore.

The capital gains tax.