Asset Protection

Can You Talk to Your Aging Parents About Finances?

Published on: July 27, 2015 | By McCulloch & Miller, PLLC

Talking with aging parents about their finances, their wishes, and the future, is never an easy conversation. When it became clear that her mother was starting to suffer from memory loss, Gwen started to speak with her mother about finances, accounts and final wishes. While she felt uncomfortable pressing her own mother for information, in the long run obtaining this information made things easier when Gwen, the daughter, ultimately had to take over her mother’s finances. While not all parents are willing to have these discussions, they are important to prevent the difficulties that eventually arise. Gwen Morgan, the author of “What If…Workbook,” a guide that helps gather and convey this type of information, notes that “People hold tight to their bootstraps.” Communicating early and often can help.

Even if your parents are reluctant to discuss their finances, the sooner the conversation begins, the better for all concerned. In an article posted on Go Banking Rates, “How to Talk About Money With Your Aging Parents,” the author shares a deeply personal experience with her own mother. Some parents are simply not willing to have these conversations, and several different approaches may need to be tried before you find the one that they are comfortable with. Not knowing key information could lead to family members needing to go to court to obtain the ability to gain control of their parents' finances and make medical decisions on their behalf. These scenarios can cause serious emotional and financial hardship for families.

Here are several strategies from the article to get aging parents to discuss their finances. Make sure that the conversation is respectful. Also make certain that it’s understood that you’re not trying to take over your parents’ finances. Starting with an area that doesn’t feel like a loss of power, may be more successful, the article advises.

Is a TOD (Transfer on Death) Registration Right for Your Houston Planning?

Published on: July 23, 2015 | By McCulloch & Miller, PLLC

Certain assets, including life insurance, IRAs, 401(k) plans and other retirement accounts pass directly to beneficiaries outside of your will. Typically, brokerage accounts pass only through your will, and then only after probate. But there is a way to ensure that brokerage accounts transfer at death to your beneficiaries.

A recent item in Kiplinger's, "How Your Brokerage Account Can Bypass Probate" explains how to use a transfer on death (TOD) registration to have your brokerage accounts transferred directly to your beneficiaries upon your death. This is a special kind of investment account that is recognized under state law and it may solve the challenges posed by having your estate pass through probate, which can be an expensive and time-consuming process. In some states, a "TOD" can also be used to allow real estate to be transferred. An experienced estate attorney is needed to understand where this works best, and what it can and cannot accomplish.

A TOD lets you keep control over the account, and you are able to change the beneficiary designation any time you'd like.

Is Your Houston Estate Plan Current?

Published on: July 22, 2015 | By McCulloch & Miller, PLLC

Ensuring that your assets are passed on to heirs in a way that you wish is not always easy because of the many options available and the fact that the tax laws are always changing. While certain facts are relatively fixed – i.e., beneficiary designations on life insurance policies and retirement plans avoid having these particular assets subject to probate, others are subject to change. Keep up with these changes by meeting with your estate planning attorney on a timely basis.

The use of trusts to help estates avoid probate is well established in any estate planning law practice, but when laws change, estate planning must change also. An explanation comes from The (Anderson, IN) Herald Bulletin article, "Changes in laws can affect your estate planning," which explains how the revocable grantor trust works and why it was created: to help people avoid probate.

A revocable grantor trust roles include the grantor (the person making the gift), the trustee in charge of the trust (typically the grantor), the income beneficiary (also usually the grantor), and the remainder beneficiary. Taxes that are generated from investments and income are reported on a standard tax return. When assets are placed in a trust, individuals have control and the use of the assets. Ownership is structured so that there is no probate. Individuals should fund the trust with as many assets with which they are comfortable (except IRAs and retirement accounts).

Having THAT Conversation with Your Houston Heirs

Published on: July 21, 2015 | By McCulloch & Miller, PLLC

While some estate planning is better than none, most Americans don't speak with their heirs about basic issues – like where the wills can be found – and most wills are not updated. A recent study from the Center on Wealth and Philanthropy at Boston College, estimates that between 2007 and 2061, as much $59 trillion will be transferred from 93.6 million American estates. The numbers are clear, but little else is. How assets are being distributed, what plans are in place for potential beneficiaries and other critical issues are murky at best, and in most cases, completely undefined.

If you've got heirs, you may want to do something few Americans do – tell them where your will can be found, and discuss your intentions for your estate. These two conversations would put you miles above what happens to most heirs – according to "5 Biggest Estate Planning Mistakes You Can Make," seen in The Street. According to a caring.com survey of adult children more than half (56 percent) of U.S. parents have a will or living trust document in place while nearly one-third of parents (27 percent) don't have estate documents in place; and 16 percent of adult children have no idea about what's in their parents' estate plans. Looks like we are setting up for a generational scavenger hunt – even when parents have an estate plan in place, most adult children don't know where the documents are located (52 percent.) Even worse, 58 percent don't know what the estate planning documents say!

The article cautions that even when you have a will or a trust, there's no absolute guarantee that your assets will be distributed without a hitch. Wills and trusts have kept families in litigation and at odds with each other for years if the estate plan isn't administered properly. To make things easier for your family and make sure your wishes are carried out properly after you pass, try to steer clear of these monstrous errors:

Hard-to-Value Houston Estates Can Be Tax Concern

Published on: July 20, 2015 | By McCulloch & Miller, PLLC

The Internal Revenue Service has won a settlement of $388 million from the estate of Detroit Pistons owner Bill Davidson. According to the IRS, the estate owned more than $2 billion in additional taxes. To gain some perspective: in 2013, the US Treasury took in a total of $12.7 billion in estate tax revenue. Davidson, who made his fortune in glass and auto products, was best known to the public as the team owner of the Pistons, the W.N.B.A.'s Detroit Shock and the N.H.L. Tampa Bay Lightning.

In an article that appeared in Forbes, "IRS Grabs $388 Million From Billionaire Davidson Estate," the case against Davidson's estate is explained in detail. Two years ago, Davidson's estate filed a matter with the U.S. tax court that challenged the agency's assessment of additional taxes. They claimed that the estate owed $187 million in gift taxes, $152 million in estate taxes, and $49 million in generation-skipping taxes, plus a $133,000 gift tax penalty bill.

Two problems factored into to these deficiencies. The IRS claims that the Davidson estate undervalued some corporate stock and improperly valued the self-cancelling installment notes (SCINs). The IRS said that the estate also underestimated the value of privately held stock held in trust for Davidson's children and grandchildren.

YOU Can Define Your Houston Legacy

Published on: July 15, 2015 | By McCulloch & Miller, PLLC

Unlike previous generations, the baby boomers are more concerned with having enough money to last through their retirement years than with leaving substantial assets to their heirs and to charities. But they are still concerned with leaving a legacy for their children and grandchildren. A new definition of a legacy is not based on dollars, but on family memories and shared values.

Money isn’t the only definition of legacy, according to the US News article titled “How Boomers Are Redefining 'Legacy.’” Baby boomers realize that their top priority is to have enough assets to support themselves, but are starting to redefine “legacy” in the process. For some individuals, it means giving away some money now. For others, it’s restructuring some assets to leave a financial inheritance. For most, the process of aligning their assets with their priorities means the opportunity to create non-financial legacies.

Rethink how you label the financial help you're giving now to your next generation. Are you helping them out with college tuition? Helping with the living expenses of a slow-to-launch millennial by having them stay at home or by covering some bills is not uncommon. About 62% of Americans 50 and older are providing financial support to family members, according to a recent study. The study found that the subsidies averaged $15,000 over five years, but also increased with the givers’ resources. You’re allowed to give away $14,000 per recipient, per year, without triggering any tax penalties or disclosures … more than that and the person who gives has to complete a gift tax return. Also, the gift tax is deducted from your lifetime cap on tax-free gifting.

Reverse Mortgages: Know Potential Pitfalls

Published on: July 10, 2015 | By McCulloch & Miller, PLLC

Caution is urged when considering a reverse mortgage as a solution to financial problems during retirement years. Television commercials targeting seniors leave out most of the unpleasant parts of a reverse mortgage. Rates and fees are extremely high and the homeowner is still responsible to pay property taxes, insurance and upkeep. It’s important to understand the positive and negatives before signing on the dotted line.

The Better Business Bureau receives a lot of complaints about reverse mortgages. As these complaints show, there are problems and issues with reverse mortgages, and they also illustrate that more than a few consumers are confused when they sign up.

A recent article in The (Appleton WI) Post Crescent, titled “Be cautious before taking on reverse mortgage,” says that some consumers don't know that a reverse mortgage is a loan that leverages their home’s equity. It's actually one of the most expensive forms of credit a person can get, with its origination fees, interest charges, and insurance premiums topping those of most other types of loans. Typically, a reverse mortgage origination fee can be up to $6,000 and the initial premium for federal insurance is set at 2% of the home’s value.

Life Estates May Help Protect Houston Homes

Published on: July 3, 2015 | By McCulloch & Miller, PLLC

Let's take a closer look at what a life estate is and how using one could help you save your family home.

Home is where the heart is. The thought of losing your home can be devastating. What options do you have to prevent this from happening?

Motley Fool’s recent article, titled “What a Life Estate Is And How It Could Save Your Home,” tells us about life estates.

Estate Reduction Options for High-Wealth Individuals

Published on: July 2, 2015 | By McCulloch & Miller, PLLC

Some high-net worth families still face the challenge of reducing their estate to minimize or eliminate estate taxes, although the federal estate tax exclusion is currently larger than it has ever been. The portability of unused exclusion amounts are at $5.43 million for individuals and $10.86 million for couples. But a 40 percent top estate tax rate on amounts above the exemption concerns those with large estates.

High-net worth individuals managing their estates are better off working with an experienced estate planning attorney, The Marietta Daily Journal confirms in a recent article, titled “Estate reduction ensuring wealth transfer to heirs.” With the changes in estate and gift tax laws, have an expert on your side to ensure your documentation is drafted properly and work with your financial advisor to plan asset transfers to heirs.

An easy move for wealthy families is gifting. Individuals can gift up to $14,000 per year, per individual without incurring a gift tax. The amount doubles for spouses. There’s an informational gift tax return to be filed, but there’s no tax due if the gift is under the annual exclusion limit.

Tell Your Houston Family Your Estate Planning Goals

Published on: July 1, 2015 | By McCulloch & Miller, PLLC

What can you do to push past the emotional aspects of estate planning to make sure your surviving family members can successfully deal with issues that may arise after you pass away?

Start early. Patrick Severo is the senior vice president and financial advisor at RBC Wealth Management. He also has three kids and knew he needed a plan to take care of them after he is gone. Severo recently told Forbes in the article titled, “Don't Let Emotion Sabotage Your Estate Plan,”that, although the discussion about what happens after you pass away feels uncomfortable, the earlier you can begin, the better off you’ll be because these things take time – maybe even years!

To help the people you care about handle the financial, administrative and familial consequences of your eventual passing, be as transparent as possible about what they can expect from your estate. Mismatched expectations can often cause trouble that could’ve easily been avoided if the news wasn’t coming as such a surprise.