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Houston Estate Planning Law Blog

To be or not to be a retirement fund: The Supreme Court rules p3

We are talking about retirement funds and how the Bankruptcy Code treats them. The U.S. Supreme Court recently decided one issue that federal appellate courts had disagreed on. The decision is about inherited retirement funds, and it could change the way Texans approach their estate plans.

Bankruptcy is not usually the first thing a person thinks about during the estate planning process. When deciding what will happen with your assets after your death, you generally consider whether a grandchild needs money for college or a child has special needs. You will think about what your family could need and what would mean something to them or make a difference in their lives. You also consider the tax consequences of each bequest.

To be or not to be a retirement fund: The Supreme Court rules p2

We are talking about a recent U.S. Supreme Court decision regarding retirement funds and bankruptcy. The case is not from Texas, but any court in Texas will have to follow the decision. The decision is important to us because it could have an impact on estate planning and how we all handle our retirement funds.

The plaintiff is a couple who were facing bankruptcy. Chapter 7 bankruptcy is generally referred to as "liquidation," a term that may be misleading. It may sound as if every asset owned by a debtor would be turned into cash to pay off creditors, but that is not quite the case. Under federal law and state law (including Texas), there are exemptions, assets that the bankruptcy trustee cannot touch, assets that do not become part of the bankruptcy estate.

To be or not to be a retirement fund: The Supreme Court rules

The U.S. Supreme Court has thrown a monkey wrench into the disposition of a useful estate planning tool. The circumstances are a little out of the ordinary, but the decision clarifies a piece of the tax code that a few federal circuit courts interpreted differently.

There are many ways to approach estate planning, and there are many ways to approach retirement planning. Individuals and couples may also choose the "your chocolate got in my peanut butter" approach: looking at retirement and estate planning as complementary. In both cases, we are evaluating our assets and liabilities; it is at that point that determining what we need to do to make ends meet until our death meets what we want to leave behind for our families, friends or charities.

Tax bills for selling basketball team could be astronomical

For many people, estate planning comes down to one thing: making sure that as much of the assets are passed down to the heirs who are supposed to inherit them. In many cases, this means developing strategies to minimize the impact of estate taxes.

Depending on the size of someone's estate, this could be a substantial burden. One extreme example involves the disgraced owner of the NBA's Los Angeles Clippers, Donald Sterling. A deal was announced recently that would sell the team to Steve Ballmer, a former head of Microsoft. Sterling purchased the team in the early 1980s when it was still based in San Diego for $12.5 million; he moved it to the more lucrative Los Angeles market shortly thereafter.

Rules are rules, and insurance companies are all about rules p2

Our discussion is about a decision from a federal appeals court that highlights some important facts about life insurance. As we said in our last post, the case is not out of Texas, but the principles the court based the decision on are commonly applied in insurance disputes.

As you may recall, the insured was a man who had been diagnosed with terminal cancer. According to court documents, after learning that he had a very short time to live, he completed a change of beneficiary form. He changed the beneficiary from his son to his wife and signed the form. He also executed a will, discussed in our last post, that stipulated that his wife be the sole beneficiary of any life insurance policies. He died just a few days later.

Rules are rules, and insurance companies are all about rules

A life insurance policy can be an important piece of an estate plan. The funds are distributed soon after the insured's death (or soon after the insurance company learns of the insured's death) and are not subject to the probate process or estate tax. And, the beneficiary need not be a person: It can be a trust or a charitable organization, for example.

Because it is a non-probate asset and for other reasons, a life insurance policy cannot be altered in a will. The 8th U.S. Circuit Court of Appeals made that clear in a recent ruling. Texas is not part of the 8th Circuit, but, since the decision does not turn on any particular state law, we thought it worth a discussion.

Mickey Rooney back in the spotlight as wife contests his will

Mickey Rooney's passing apparently did not end the dispute between the actor and his wife and stepson. We discussed the situation at length in our April 15 and 24 posts. A few years ago, Rooney accused his wife, her son and her son's wife of financial and verbal abuse. He even spoke to Congress about his ordeal.

He did not divorce his wife Jan, but the two signed an agreement that effectively kept her away from him for the last year of his life. As for Jan's son Christopher and his wife, Rooney's conservator negotiated a settlement that called for the pair to make restitution to Rooney of $2.8 million.

Estate planning may also include planned giving

The way that individuals approach the topic of inheritances may be different among generational groups, according to a recent article. Specifically, the approach to estate planning may be different among baby boomers, same-sex and younger couples. Such groups may have smaller families or even no children. For them, creating a legacy through planned gifts might be one of their primary estate planning considerations.

When planning a will or trust, individuals considering a philanthropic donation may start by thinking of the bigger picture. That process may involve listing certain values that an individual believes are important, and then identifying organizations that best reflect those values. 

Balancing the growth of assets while trying to reduce taxation

While there are many strategies to prevent an estate from being depleted due to taxes, too many individuals fail to understand the consequences that taxes can have. One financial planner called taxes "the biggest drag on returns."

Tax shelter strategies can be complex, however. Each investment is taxed differently and will require different handling - whether it's a taxable brokerage account, a tax-free Roth IRA or tax-deferred IRA.

Joseph Yule dies, leaves $18k estate and lessons re: elder abuse p2

Mickey Rooney was still married when he died in early April. He had been separated from his wife for some time, though, and she admitted to the press that she had not seen him for a year. The Hollywood Reporter said that the separation was the result of an agreement the couple signed after he accused her of physical abuse. (Rooney also had a restraining order against her son and daughter-in-law, whom the actor had sued for financial abuse.)

Because Rooney and his wife were still married, though, she had a little leverage when it came to Rooney's last resting place. She immediately clashed with the executor of the actor's estate.

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