Probate

Why It’s Important for Houston’s Young Couples to Consider Estate Planning

Published on: May 9, 2016 | By McCulloch & Miller, PLLC

Many young couples choose to hold off on estate planning because they feel they are too young to worry about estate planning and death. Maybe it’s because they think they don’t have enough assets to begin an estate plan or they just don’t want to think about death and what may happen to their minor children. However, having minor children is reason enough to being the estate planning process. And being young and healthy is not a “get out of jail free” card when it comes to death, as Houston accidents happen all the time.

If you have minor children, you should consider initiating the estate planning process immediately. While it’s not the easiest topic to discuss, it’s one of the most important things you can do for your family. The estate planning process is not too difficult, and it helps to be prepared before you start. The process is much easier when you know what is expected of you:

Name a trusted individual to be the executor of your estate.

Estate Planning? Don’t Forget Digital Assets

Published on: December 4, 2015 | By McCulloch & Miller, PLLC

Today’s millennials understand that their digital assets, which include everything from family movies hosted in the cloud, to social media accounts, digital currencies like Bitcoin and domain names, have value that can be passed to others when they die. One young man created a will that listed all of his digital assets and used a password manager to gather all passwords in a central location. He gave the password manager to his brother, who is his estate executor. He also moved certain digital assets, particularly photos and movies, to a file sharing service so that other family members would have access to them in the event of his demise.

Many people neglect to include digital effects in their estate plans, which can be a huge mistake, as valuable assets may go unnoticed, or money and time might be spent attempting to find them.

There are some assets like digital currencies, video game characters, and Internet domain names that exist only in cyberspace. You can’t put these in a safety deposit box: they can be overlooked because they aren’t as tangible. These days, folks are acquiring more digital assets like Facebook photos or email addresses all the time. However, getting access to social media accounts can be difficult because laws governing digital assets vary by state. Online sites concerned with user privacy have drastically different terms and conditions that sometimes exclude executors.

TV Crime Boss Not Wise Guy About Estate Planning

Published on: November 25, 2015 | By McCulloch & Miller, PLLC

The irrevocable charitable lead trust is a trust that cannot be amended, revised or cancelled. We would call that bullet-proof, and it would have been a good idea for preventing James Gandolfini's estate from being "whacked" by estate taxes. The financial website thestreet.com took a closer look at this powerful estate planning tool in"How to Protect Your Estate From Getting 'Whacked' Like James Gandolfini's.

This trustprovides a stream of income for a designated number of years to the specified charity. At the end of that period, the property held in trust reverts back to the donor or to the donor's designated beneficiary.

When the donor makes the gift under a charitable lead trust, he or she immediately receives a federal income tax deduction equal to the present value of the future income stream. But the donor is taxed every year on the value of the income interest that is payable to the charity.

Take Time After Receiving an Inheritance Before Investing

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

If you inherit a portfolio or a large amount of money, proceed with caution, according to "What to Do When You Get an Inheritance," in US News & World Report. Every situation is different, but a few basics need to be kept in mind for heirs who are thinking about investing their inheritance in stocks, bonds, hedge funds or any other investment vehicles.

First, get good information and consider assistance from an expert: speak with an experienced estate planning attorney, one who worked with those giving the inheritance. Heirs should find a CERTIFIED FINANCIAL PLANNER™ practitioner who works for a registered investment advisor with a fiduciary duty to their clients. They aren't commissioned salespeople.

If the inheritance involves a larger sum, it can be administered via a trust that needs to be funded properly due to tax ramifications and expenses.

Estate Planning for Blended Families Takes Special Consideration

Published on: October 12, 2015 | By McCulloch & Miller, PLLC

Anytime a blended family includes children from prior marriages, estate planning becomes more challenging, as reported in The Meridian Star, in “Estate planning after a second marriage.” If there are young children, how can you ensure that the surviving spouse will take care of them? And what if you pass away and your surviving spouse remarries? One way to prepare for this possibility is to make a child the primary beneficiary of a life insurance policy, place certain property under joint ownership with the child or set up a trust for your children. But none of these steps are simple, and all require the hard conversation with your spouse and with an experienced estate planning attorney.

If you have a written a will, it may require an update. Be extremely specific about which heir gets what and state bequests convincingly. The more convincing your bequest, the less ambiguity and the fewer issues that will arise. Also, update your beneficiary designations for retirement plans, investment accounts, and insurance policies. However, if you’ve been divorced, you may be precluded from changing beneficiaries in certain cases. Talk to a qualified estate planning lawyer. Take a copy of your divorcee decree with you and ask if revising your beneficiary designations will violate it.

You can also take a look at irrevocable trusts, which can be used to provide for your spouse and your kids. Some people establish a separate property trust to provide for their spouse after their death and designate their real property to their children. Parents can also create irrevocable trusts to direct assets to particular children. These can be great estate planning vehicles because: (i) a trust agreement isn’t a public document; (ii) assets within irrevocable trusts are shielded from creditors and from inheritance claims of spouses of the adult children named as heirs; and (iii) an irrevocable trust represents a “finalized” estate planning decision—which guarantees that particular assets transfer to a parent’s biological children. In addition, irrevocable trusts are rarely undone.

Estate Tax Planning Remains Important Step for Some Houstonians

Published on: July 31, 2015 | By McCulloch & Miller, PLLC

Estate taxes are seen by some as instruments of public policy, an attempt to fight economic inequality by diminishing the ability of wealthy families to aggregate vast amounts of wealth. Others see estate taxes as a “death tax” that penalizes those who are financially successful. Whatever your opinion, estate tax rates are still quite high compared to other taxes. This creates an incentive to plan in advance and use sophisticated methods to reduce estates taxes.

Thirteen different brackets might make you think that estate tax planning is all about college basketball! According to a Fox Business article, “2015 Estate Tax Rates: How Much Will You Pay?” the rate structure for the estate tax has remained virtually unchanged since 2013, even with these numerous brackets. See the chart below for a birds-eye-view of the 13 different brackets:

Amount of Taxable Estate	Tax Bracket
$0-$10,000	18%
$10,001-$20,000	20%
$20,001-$40,000	22%
$40,001-$60,000	24%
$60,001-$80,000	26%
$80,001-$100,000	28%
$100,001-$150,000	30%
$150,001-$250,000	32%
$250,001-$500,000	34%
$500,001-$750,000	37%
$750,001-$1 million	39%
Over $1 million	40%

Source: IRS

Before you do any number crunching, remember that the federal government has an estate tax exemption for all estates more than $5.43 million (in 2015). The “lifetime exemption amount” is the cut-off mark for how much wealth each person can pass to their heirs without owing any estate tax.

The article explains that the exemption is different than a standard deduction. What you do is look at all your taxable estate assets and knock out the first $5.43 million. If you have more than that, the estate tax will be at the maximum rate of 40 percent on the portion of the estate that’s above the $5.43 million threshold. For instance, if your estate is $5.44 million, then your estate's tax liability would be $4,000 — which is 40 percent of the $10,000 above the $5.43 million threshold.

An estate planning attorney can help you with some ways to reduce or even eliminate your estate tax liability. This can include gifts during your lifetime to reduce your estate assets at your death. The law says that you can give an individual up to $14,000 annually without having to pay any gift tax. If you give more than that amount, you'll start using up your lifetime exemption. You don’t want that!

There are also many more-complicated methods of giving money to potential heirs during your lifetime that can reduce your eventual estate tax bill. Talk with your estate planning attorney about these more complex strategies and leave more money for your heirs and less for taxes.

For additional information on estate tax planning and elder law topics in Houston, please click here to visit my website.

Reference: Fox Business (July 16, 2015) “2015 Estate Tax Rates: How Much Will You Pay?”

Business Succession Planning: Key Element for Houston Business Owners

Published on: July 30, 2015 | By McCulloch & Miller, PLLC

Owners who are personally and emotionally involved in their businesses, including farming operations, often consider what will happen to their businesses, farms and business assets when they are no longer involved. Planning for the disposition of a business is different than estate planning. While many think they are the same process, they are really very different.

Estate planning concerns the transfer of assets, including wealth, of an individual from one individual to another or to an entity, such as a trust, and this occurs only when the person passes away. Ownership of a business and business assets, whether they are tangible or intangible, can be transferred to a legal entity, whenever the owner chooses. The Columbus (NE) Telegram’s article, “Estate planning and business transition quite different,” discusses these two different kinds of transactions.

Business transition is simply the transfer of a business asset or the entire entity from an existing owner who has decided to retire or move on. This usually occurs during the life of the existing owner. However, when a business transfer takes place after the death of the owner, it’s usually part of an existing or implied estate plan or asset transfer process.

Two Key Documents for Houston Estate Planning

Published on: July 28, 2015 | By McCulloch & Miller, PLLC

When a man who had remarried passed away, his children were less upset about his leaving everything to their stepmother as they were about her decision to liquidate the family home and furnishings. Rather than give them an opportunity to enjoy things that had special meaning to the children, she took the position that they could come to the auction and bid on the items, just like anyone else who attended the auction. The heartbreak and hard feelings that resulted could have been prevented with the use of two documents: a Letter of Instruction and a Personal Property Memorandum.

While it seems that listing out personal assets like jewelry, books, photo albums and home furnishings might be tedious and not really necessary, a recent article in Forbes, “Simple Steps To Prevent Future Family Inheritance Rifts,” points the way to using two documents that can ensure that your personal property goes where you want it to go, and also saves your heirs from losing personal items that may hold a great deal of meaning to them.

A Personal Property Memorandum is a legally binding document. It is to be referred to in the will that is to list all the personal property you want to leave to your heirs and loved ones. A personal property memorandum is recognized in 30 states and must be referred to in the will. But the document doesn’t need to be notarized or witnessed. The article suggests that you clearly describe these items so they aren’t confused with others. For example, “All of the Barry Manilow LPs in my collection are to go to Cousin Buddy.” Make sure your executor or executrix has the correct information, as well. You don’t want the wrong relative to walk off with your disco records!

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).