Houston Estate Planning and Elder Law Attorney Blog

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.

The Boomer Inheritance Boomerang May Impact Houston Families

Published on: March 11, 2014 | By McCulloch & Miller, PLLC

For heirs, the emotions that come with sudden wealth can be a mix of guilt, loss, anger, regret, relief and hurt, perhaps stewed with long-simmering family rivalries and resentments.

Much of estate planning focuses on the technical aspects of leaving behind or receiving an inheritance. Commonly, these include the tax questions, the legal questions, and the nitty-gritty details. In the midst of all of the numbers and code sections, it is easy to overlook the very emotional nature of inheritance itself.

Indeed, the Boomers of today are experiencing an unprecedented period of wealth transfer. What does it mean for a Boomer to inherit these days? The New York Times approached the subject a short time ago in an article titled “When Boomers Inherit, Complications May Follow.”

A Medicaid Primer 101 for Houston Families

Published on: March 10, 2014 | By McCulloch & Miller, PLLC

If you have elderly parents, don’t wait to learn about Medicaid — sometimes referred to by a litany of other state names, like Medi-Cal and MassHealth.

What is your Medicaid IQ? Most Americans have heard of Medicaid, since it has been part of the national political debate for some time. A political discussion is one thing, but what does Medicaid mean to your elderly loved ones?

If you have elderly parents, it is high time to learn about Medicaid and how it works.

Unequal Inheritances: How Do Houston Families Slice the Pie?

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

Advisors say it doesn’t happen often, but parents who divide their assets unevenly are playing with fire. That said, there are things they can do to try to keep the fire under control, so it doesn’t become a conflagration that blows the family up.

Sometimes it is easy to split up your assets like pieces of the pie, with equal pieces for everyone. Sometimes, the assets just do not split that way or maybe you do not want to split them equally. For those who receive something less than equal, they may feel spurned or sense favoritism.

How do you split your estate unevenly and still keep the peace in the family or, at the very least, keep it out of the courts?

Houston Families Can Plan A Family Business Legacy

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

These two experiences taught me a lesson about family businesses. Making a family business a family legacy takes planning and preparation. While each family business has its own unique issues, there are some common strategies associated with succession planning.

Sometimes, passing along your assets to the next generation is simply a matter of passing them along. You just let the gift and the potential represented by that gift be your legacy (emphasis on the “sometimes”). However, when the asset is a business, it is rarely that simple.

A business is not merely a thing. No, a business is a mindset, an activity and, oftentimes, even a lifestyle. It can get complicated. If your legacy is the family business, then with great responsibility comes the need for equally careful planning, preparation and dialogue.

Estate Planning With A Life Estate in Houston

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

Probate court is no one's idea of fun, so it's something you may want to spare your heirs when they inherit your home. One simple tool for doing that: a "life estate."

Do you want to avoid probate when it comes to the transfer of your assets at death, especially when it comes to your home? Perhaps you would prefer that home to pass directly into the hands of your adult heirs. If yes, then consider using a “life estate” approach.

If the concept of a life estate is new to you, then a recent article in The Wall Street Journal ought to be on your reading list. As the article titled “An Easy Way for Heirs to Inherit Your Home” explains, a life estate for real estate operates like a “payable-on-death account” for a bank account.

When Children Are Responsible For The Nursing Home Bill

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

If your parents live in one of 29 states or Puerto Rico that has filial responsibility laws on the books, you could potentially be held legally responsible for their care under certain circumstances, such as when your parents are ailing and without sufficient financial resources to take care of themselves. Until recently, these statutes have been largely ignored. However, several recent court decisions indicate that there might be renewed interest in enforcing them.

Filial support is not just a moral virtue. In many parts of the country and branches of the legal system filial support is a legal imperative. Filial support laws exist in 29 states as well as Puerto Rico, and have quietly existed on the books for some time. Now, however, these laws are a very real and present concern for the adult children of elderly loved ones.

Fortunately, Forbes has provided a crash course regarding filial laws and their potential challenges in an article titled “Who Will Pay For Mom's Or Dad's Nursing Home Bill? Filial Support Laws And Long-Term Care.”

Houston: Family Wealth And Financial Entropy

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

The numbers also show that roughly one in three businesses pass to the next generation. Just about 10% of family businesses pass to the grandchildren’s generation. Still fewer make it to the subsequent generation. Regardless of the reasons, family money seems to move away from that which created it. Among wealth advisors, there is a saying: the first generation makes it, the second generation spends it, and the third generation blows it.

Family wealth created through a family business can be a wonderful blessing for a family. The trick is keeping it through the generations. Far too few families make proper plans to keep the family business going between generations. That is where the real work needs to be done.

Only the big family names (think “Rockefeller”) lead us to believe that family wealth is perpetual. In reality, family wealth left unchecked has a tendency to follow the laws of entropy as it devolves into chaos and greater and greater breakdown or division. This phenomenon, along with some constructive advice, is featured in a two-part Forbes article titled “How The Wealthiest Families Make And Lose Their Money.”

Long-Term Care Lapse Logistics Impact Houston Families

Published on: February 28, 2014 | By McCulloch & Miller, PLLC

In the meantime, cases like this demonstrate anew how vigilant families need to be. If your older relative has a long-term care policy, photocopy the page listing the company, policy number and claims contact information. Keep the insurance company updated on new addresses, yours (if you are the third-party designee) and your relative’s. It wouldn’t hurt, if the policyholder is becoming forgetful, to check bank statements or call the company to be sure premiums are paid.

Do your elderly loved ones have a long-term care insurance policy or something similar? If yes, then they likely are relying on it to cover the potentially catastrophic financial risk that is long-term care. If yes, then what happens if they forget to pay the premiums?

Do I have your attention now? If yes, then you will want to read a recent horror story in The New York Times – The New Old Age Blog titled “The Policy Lapsed, but No One Knew.”