Houston Estate Planning and Elder Law Attorney Blog

Decisions About Taking Pension Pay-Out Still Challenging

Published on: March 22, 2019 | By McCulloch & Miller, PLLC

There was a time when most people had three sources of income in retirement. One was their savings, the second was Social Security and the third was their pension from work. Today, very few workers enjoy the security of a pension, and retirement income is dependent on each person’s ability to save, plus Social Security.

For those remaining workers who have pensions, at some point a decision must be made whether to take their pensions over time or to receive the accrued value as a lump sum. A pension can be a stable stream of income in retirement, or it could be a lump sum that is invested. There are pros and cons to both.

Investopedia’s recent article, “Pension Planning: Lump Sum Versus Monthly Payments,” says that the pension provider takes the risk of both sub-par market returns and the possibility that the retiree will live longer than expected. The article raises several thoughts to consider, when making the decision:

Tax Traps Can Ruin IRA Status

Published on: March 20, 2019 | By McCulloch & Miller, PLLC

You may know that there are tax traps when IRA withdrawals or rollovers are done incorrectly. However, did you know that an investment portfolio could contain a tax trap that could ruin your IRA status?

The most frequently occurring IRA tax trap comes from tax bills through the Unrelated Business Taxable Income (UBTI). Sources of business income from stocks, bonds and funds like interest income, capital gains and dividends are exempt from UBTI and a related tax, the Related Business Income Tax.

Fox Business’s recent article, “Your IRA and taxes: Don't get a surprise tax bill” explains that IRAs that operate a business, have certain types of rental income, or receive income through certain partnerships will be taxed, when the total UBTI exceeds $1,000. This is to prevent tax-exempt entities from gaining an unfair advantage on regularly taxed business entities.

How Trusts Work in Estate Planning for Regular People

Published on: March 18, 2019 | By McCulloch & Miller, PLLC

You’ve heard the expression “trust fund babies.” However, trusts are not just for the wealthy. They have a number of uses in estate planning and can be helpful at any asset level.

The reality of our own mortality keeps some of us up at night. For others, it’s a disturbing thought that is easily brushed aside. Whichever group you belong to, you need to have an estate plan in place. This is the only way that you can have any say in how your assets are distributed after you pass. Without an estate plan, your family will be subjected to much more stress and financial strain. One part of an estate plan is a trust.

Barron’s recent article, “Why a Trust Is a Great Estate-Planning Tool — Even if You’re Not Rich,” explains that there are many types of trusts, but the most frequently used for these purposes is a revocable living trust. This trust allows you—the grantor—to specify exactly how your estate will be distributed to your beneficiaries when you die, and at the same time avoiding probate and stress for your loved ones.

Wake Up and Smell the Coffee: Take Care of These 3 Financial Tasks

Published on: March 15, 2019 | By McCulloch & Miller, PLLC

These may be common mistakes, but they are too important to dismiss and delay.

Every year, local television news crews show up at local post offices to see the lines of folks waiting to get their tax returns postmarked on April 15—even when so many of us are using online tax services. We just tend to delay taking care of tasks that are not a lot of fun. However, according to Motley Fool, there are “3 Money Moves You Can't Afford to Put Off.”

An emergency fund. We're supposed to have at least three months' worth of living expenses in savings for emergencies, but 40% of Americans don't have the money to cover even a $400 unplanned expense. That means they're not even close to where they should be with their savings target. Without an emergency fund, you risk incurring costly debt if your paycheck disappears or you experience a surprise bill your regular earnings can't cover.

When Does an Estate Plan Need to Be Reviewed?

Published on: March 13, 2019 | By McCulloch & Miller, PLLC

People think of estate plans as one-off documents, but they should think of them more like cars. Estate plans need maintenance, oil changes, tune-ups and if there’s an accident, repairs.

As life progresses, you’ll go through a number of stages, from being a teen to an adult, getting married, retiring, welcoming grandchildren and more. Every time you move through a stage, your estate plan should too.

Bankrate’s recent article, “Estate planning triggers: When to re-evaluate your estate planning strategy,” says the risk of not having a current estate plan and will that state your wishes is significant. When people fail to put any plan into place, it leads to confusion, chaos, and unintended consequences. Use this list of important life events as triggers to remind you to discuss your current situation with a trusted attorney.

How Will I Know When I Can Afford to Retire?

Published on: March 11, 2019 | By McCulloch & Miller, PLLC

The period before retirement is a time when people dream about what the future might hold. They also worry, because who hasn’t heard the stories about retirees who return to work because they retired too early?

It’s no surprise then that little more than half of Americans surveyed by the Transamerica Center for Retirement Studies say their biggest concern about retirement is outliving their money. The nature of retirement, when we start taking money out of those retirement accounts, after a lifetime of putting money into the accounts, seems a little scary.

Here are the key indicators that you’re probably ready to retire, according to this recent article from Investopedia’s, “6 Signs That You Are OK to Retire.”

Financial Elder Abuse in the Spotlight in Virginia

Published on: March 8, 2019 | By McCulloch & Miller, PLLC

Virginia is taking steps to protect seniors and other vulnerable individuals against financial exploitation, by giving financial institutions more resources to prevent this growing crime.

With bipartisan support, the state House and Senate of Virginia have passed versions of State Bill 1490, which encourages financial institutions to have more leeway in making decisions to protect the elderly, when it suspects exploitation is occurring. However, for now, the State and the Senate have yet to reconcile the two bills to make it into the state’s laws.

“This bill addresses the issue of financial exploitation of older Virginians, which has been on the rise in recent years,” said the sponsor, Senator Mark Obenshain, R-Rockingham.

Second Marriage Pre-Nuptial Agreements

Published on: March 5, 2019 | By McCulloch & Miller, PLLC

Early adult life is simple. You may or may not have children, a car, a lease on an apartment. However, by the time you reach your 50s and 60s, you likely have some decent assets, like retirement accounts, investments, real estate and maybe even a few collectible cars. You’ll want a prenup, before you walk down the aisle again.

A prenup the first time you get married may seem overly protective, unless there’s a big economic difference between the couple. However, after a lifetime of work, building a business or a retirement portfolio, you want to be sure that a second marriage doesn’t create a financial calamity if it fails. A prenuptial agreement lets you go about enjoying your second marriage, says this recent article, “All About Prenups For Second Marriages,” from Forbes.

Here are some of the issue to consider in second (or third) marriages:

What’s “Hot” In Estate Planning? The ING Trust

Published on: March 4, 2019 | By McCulloch & Miller, PLLC

The ING trust is used to generate tax savings in a number of ways. For the right person, they are a trend worth looking into. Are they right for you?

The expanded transfer tax exemptions created by the 2017 tax reform legislation will end in 2026. However, in the meantime, the increased exemptions have led many high-net worth individuals and couples to review their existing estate plans. The ING trust has now become a valuable tool and could easily become the biggest trend in 2019 estate planning.

Think Advisor’s recent article, “ING Trusts: The Hot Trend in HNW Estate Planning,” explains that because of the changes from the tax reform, ING trusts have taken on new significance. ING trusts can generate significant savings, both in income taxes and in overall transfer (gift, GST and estate) taxes. This means that it can be a good idea to look into an ING trust.

How Life Insurance Works Best in an Estate Plan

Published on: February 15, 2019 | By McCulloch & Miller, PLLC

Life insurance can help heirs avoid having to incur expenses like estate taxes, funeral costs and similar expenses. However, it also gives heirs breathing room, so they can make the best use of other assets.

Here is an example of how life insurance should work. A father, Howie, dies and leaves a large estate to daughter Eva. The estate is large enough that it triggers a huge estate tax. However, the bulk of his assets are tied up in an IRA and real estate properties, some of which could be put on the market quickly, but not quickly enough for tax deadlines.

With that scenario, Eva might not want to immediately force a sale of the real estate. However, if she accesses the inherited IRA to raise money, she’ll have to pay income tax on the withdrawal and lose a terrific opportunity for extended tax deferral.