Houston Estate Planning and Elder Law Attorney Blog

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.

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.