Round Rock, TX Attorney Blog

Wednesday, May 27, 2015

4 Items to Bring to Your Initial Estate Planning Consultation

How can I prepare for creating an estate plan?

For most people, a trip to their attorney’s office is as about as welcome as a root canal. We get it. We know you would rather be doing almost anything else with your time. So, we’ve put together this list of four items you should bring to your first estate planning meeting in order to shorten the amount of time you will spend at our office.

1. A general idea of what you hope happens to your family and your property after you die.

Most people make an estate plan because they want to ensure that their family members are taken care of after they are gone. Beyond that, what other goals do you have? Reducing taxes? Ensuring your business is able to continue operating without you? Preserving your legacy?

We cannot write a plan to fit your needs and desires if you don’t know what it is you want. Once we know what goals you have in mind, we can begin to put a plan into place that will make your vision a reality.

2. A list of the family, friends and organizations you would like to include in your estate plan.

Most people have already started thinking about who they want to inherit particular special items. That’s great! But it is only a small part of what you should be thinking about before coming to your first estate planning meeting at our office. 

You should also be thinking about:
• Who is going to care for your children if you die unexpectedly?
• Who would you like to make medical decisions for you?
• Will that same person be in charge of your finances?
• Who is going to be in charge of following the instructions you leave?
• Who would you select as a back-up if your first choice for any role is unable or unwilling to do what you ask?
Ideally, you will have spoken to all of the people you are considering giving a role to or passing items on to in order to double check that they are on board with your plan before you come into our office. At the very least, make sure you have the full names, addresses and other contact information for each person and organization you plan to name in your estate plan.

3. A list of large assets that will need to be taken care of in the plan.

Many of our clients are surprised by how large their estate is. It is not because we are finding hidden assets or long lost inheritances, it is because they have never put together a full list of all the items that actually make up their estate.

A good indication that something belongs in your estate is that you had to fill out paperwork when you bought it or set it up. Property, cars, bank accounts, insurance policies, retirement accounts, season tickets to the Colts - all of these are examples of the types of items you should be listing.

4. An open mind and a positive attitude. 

Thinking about death is hard. Nobody wants to do it. Nobody enjoys doing it. But it is something that needs to be done. Preparing yourself to face this task emotionally is just as important as getting your paperwork in order. 

The experienced Winters Law Firm estate planning team is ready to help you with every step of planning for your family's future. We are based in Valparaiso, Indiana, and we serve clients throughout Northwest Indiana. Call us today at (219)307-4373 to arrange a consultation.

Tuesday, May 19, 2015

Using an A/B or ‘Bypass Trust’ to Avoid Double Estate Taxation

My spouse and I maintain assets approaching the federal estate tax threshold. Should we look into transferring our assets to trust? 

Currently, the federal government may impose an estate tax on transferred assets of $5.43 million per individual, or $10.86 million per couple, with a top taxation rate of 40 percent. For higher net-worth couples, a 40 percent tax rate on their hard-earned wealth is simply unthinkable – and fortunately, there are strategies available to avoid this type of tax burden for both the surviving spouse and the ultimate beneficiaries. 

An experienced estate planning attorney, such as Gerald Winters, can help you best meet your financial goals.  One option  many couples have chosen when dealing with this situation is creating a bypass trust.  These trusts, also known as A/B trusts, will address the death of each spouse individually, obviously beginning with the death of the first spouse. Assuming the trust is properly funded, the death of the first spouse will trigger a division of assets into one of two sub-trusts. Sub-trust A will be held for the benefit of the surviving spouse, and is accessible to him or her as needed for the duration of his or her life. Sub-trust B will hold assets in an amount, which does not exceed the federal or state tax threshold, and will remain in trust for the benefit of named beneficiaries, other than the surviving spouse. This way, when the surviving spouse passes away, the contents of Sub-trust B will bypass his or her gross estate for the benefit of the couple’s children or next-of-kin and escape any valuation for estate tax purposes. 

Executing an A/B or bypass trust has additional benefits aside from estate tax savings. Probably one of the biggest benefits of an A/B trust is the ability to skip the probate process upon the death of the second spouse, which will save a significant amount of time and unnecessary expenses. In addition, managing trust assets through the use of a trustee helps to maintain family privacy – particularly upon the distribution of real estate and other titled assets. 

If you are interested in a bypass Trust, or have any other estate related questions, contact trusted Porter and Valparaiso County estate planning attorney Gerald Winters at the Winters Law Firm by calling at (219)307-4373 today. 

Monday, May 18, 2015

Legal Capacity and Estate Planning

How does a loved one’s dementia diagnosis impact estate planning?

If a loved one has been diagnosed with dementia, it makes proper estate planning more important and it also raises issues of whether the person has the ability to make his or her own planning decisions. Only people who have legal capacity to sign legal documents can do so.

Legal capacity is the level of judgment and decision-making ability needed to sign official documents. Just because someone has been diagnosed with dementia does not mean he or she necessarily lacks legal capacity. However, if legal capacity is lacking, any document signed by the person has no legal effect. In this case, a conservator may be needed to make decisions for the person’s benefit.

If the person has legal capacity, the following documents should be drafted and executed before that capacity is lost. 
• A living will can enable the person to spell out what kind of medical treatment he or she wants, or does not want, including the use of artificial life support. An agent can also be named to make decisions for this person when the capacity to make medical decisions is lost.
• A health care power of attorney can also name an agent to make medical care decisions above and beyond end of life medical treatment.
• A financial power of attorney can give another person, an agent, the ability to manage the person’s financial affairs and pay bills. This agent needs to be organized, good at handling money and trustworthy. An agent needs to act in the person’s best interests and not spend money for his or her own affairs.
• A will allows a person to decide how assets will be divided following his or her death, after all debts have been paid. Without a will, these assets will go to the next of kin by action of state law. If that is not what the person wants, a will or some kind of trust document should be created so the person’s wishes can be fulfilled.

People often consult with estate planning attorneys after a life-changing diagnosis like dementia is made. The Winters Law Firm has helped many families cope with these situations, and we understand their wants, needs and fears. We are based in Valparaiso, Indiana, and we help clients throughout Northwest Indiana. Call us today at (219)307-4373 for a consultation so we can talk about your family’s situation and how we can help you through a difficult time.

Monday, May 11, 2015

Who Owns A Business's Customer List?

Many businesses have customer lists that they consider their own private property.  It is common, however, for sales representatives and other employees to regard customer lists as theirs too, something they can take to a new employer. 

Employment agreements, confidentiality agreements, non-competes, and non-solicitation agreements can all be used to eliminate confusion over whether a customer list is transferable or not. 

In the absence of clear contractual protections, however, case law and state "trade secret" statutes may decide whether a list is the exclusive property of a business.  If the list is a "trade secret," a business owner may have an easier time protecting it and obtaining damages for its use by ex-employees and competitors.  47 states have adopted some version of the Uniform Trade Secrets Act, which provides for penalties and remedies for the misappropriation of trade secrets.

When is a list a trade secret?

Generally, a list receives "trade secret" protection if, first, it contains information not readily ascertainable from public sources.  Merely listing customers and general contact information is usually not enough to elevate the information to trade secret status.  Second, owners must usually take some measures to keep the information confidential.

What steps can a company take to ensure that a list is viewed as a trade secret?

The following are elements which, when present, can lead to a customer list being deemed a trade secret.

• The list contains unique, non-public information about each customer, such as ordering history, needs and preferences, and private phone numbers and e-mail addresses.  The more a customer list contains valuable details painstakingly compiled about each customer, the less likely a court is to say that the list could have been readily assembled from public sources. 

•  The list is marked "private" or "confidential," and employees are informed that it the property of the company. 

• Electronic versions of the list are password-protected, and access is limited to certain users.

• Printed copies are kept under lock and key.

• When the list is shared with third parties, there is a confidentiality agreement.

• The owner can show that time and effort were invested in building and maintaining the list.

A recent case involving former employees of an insurance company shows how these factors can influence a court.  In that case, the customer list contained more than just customer names, birthdates and drivers' license numbers.  It also contained laboriously compiled information about the amounts and types of insurance each customer had bought, the location of insured property, the personal history of policyholders, policy termination and renewal dates, and other potentially valuable details.  The list conferred a powerful, competitive advantage and the court deemed it a "trade secret."

Meeting the criteria spelled out in that case and in the suggestions above does not guarantee that a customer list will be deemed a protected trade secret.  It could, nonetheless, increase the odds.

Tuesday, April 28, 2015

Avoid Family Feuds through Proper Estate Planning

A family feud over an inheritance is not a game and there is no prize package at the end of the show. Rather, disputes over who gets your property after your death can drag on for years and deplete your entire estate. When most people are preparing their estate plans, they execute wills and living trusts that focus on minimizing taxes or avoiding probate. However, this process should also involve laying the groundwork for your estate to be settled amicably and according to your wishes. Communication with your loved ones is key to accomplishing this goal.

Feuds can erupt when parents fail to plan, or make assumptions that prove to be untrue. Such disputes may evolve out of a long-standing sibling rivalry; however, even the most agreeable family members can turn into green-eyed monsters when it comes time to divide up the family china or decide who gets the vacation home at the lake.

Avoid assumptions. Do not presume that any of your children will look out for the interests of your other children. To ensure your property is distributed to the heirs you select, and to protect the integrity of the family unit, you must establish a clear estate plan and communicate that plan – and the rationale behind certain decisions – to your loved ones.

In formulating your estate plan, you should have a conversation with your children to discuss who will be the executor of your estate, or who wants to inherit a specific personal item. Ask them who wants to be the executor, or consider the abilities of each child in selecting who will settle your estate, rather than just defaulting to the eldest child. This discussion should also include provisions for your potential incapacity, and address who has the power of attorney.

Do not assume any of your children want to inherit specific items. Many heirs fight as much over sentimental value as they do monetary items. Cash and investments are easily divided, but how do you split up Mom’s engagement ring or the table Dad built in his woodshop? By establishing a will or trust that clearly states who is to receive such special items, you avoid the risk that your estate will be depleted through costly legal proceedings as your children fight over who is entitled to such items.

Take the following steps to ensure your wishes are carried out:

  • Discuss your estate planning with your family. Ask for their input and explain anything “unusual,” such as special gifts of property or if the heirs are not inheriting an equal amount.
  • Name guardians for your minor children.
  • Write a letter, outside of your will or trust, that shares your thoughts, values, stories, love, dreams and hopes for your loved ones.
  • Select a special, tangible gift for each heir that is meaningful to the recipient.
  • Explain to your children why you have appointed a particular person to serve as your trustee, executor, agent or guardian of your children.
  • If you are in a second marriage, make sure your children from a prior marriage and your current spouse know that you have established an estate plan that protects their interests.

Tuesday, April 21, 2015

Medicare vs. Medicaid: Similarities and Differences

With such similar sounding names, many Americans mistake Medicare and Medicaid programs for one another, or presume the programs are as similar as their names. While both are government-run programs, there are many important differences. Medicare provides senior citizens, the disabled and the blind with medical benefits. Medicaid, on the other hand, provides healthcare benefits for those with little to no income.

Overview of Medicare
Medicare is a public health insurance program for Americans who are 65 or older. The program does not cover long-term care, but can cover payments for certain rehabilitation treatments. For example, if a Medicare patient is admitted to a hospital for at least three days and is subsequently admitted to a skilled nursing facility, Medicare may cover some of those payments. However, Medicare payments for such care and treatment will cease after 100 days.

In summary:

  • Medicare provides health insurance for those aged 65 and older
  • Medicare is regulated under federal law, and is applied uniformly throughout the United States
  • Medicare pays for up to 100 days of care in a skilled nursing facility
  • Medicare pays for hospital care and medically necessary treatments and services
  • Medicare does not pay for long-term care
  • To be eligible for Medicare, you generally must have paid into the system

Overview of Medicaid
Medicaid is a state-run program, funded by both the federal and state governments. Because Medicaid is administered by the state, the requirements and procedures vary across state lines and you must look to the law in your area for specific eligibility rules. The federal government issues Medicaid guidelines, but each state gets to determine how the guidelines will be implemented.

In summary:

  • Medicaid is a health care program based on financial need
  • Medicaid is regulated under state law, which varies from state to state
  • Medicaid will cover long-term care

Wednesday, April 15, 2015

Estate Planning Don’ts

Preparing for the future is an uncertain business, but there are steps you can take during your lifetime to simplify matters for your loved ones after you pass, and to ensure your final wishes are carried out. Planning for what happens to your property, or who cares for your family members, upon your death can be a complicated process. To simplify things, we’ve created the following list to help you avoid some of the pitfalls you may encounter before, or even long after, you create your estate plan.

Don’t assume you can plan your estate by yourself. Get help from an estate planning attorney whose training and experience can ensure that you minimize tax implications and simplify the process of settling your estate.

Don’t put off your estate planning needs because of finances. To be sure, there are upfront costs for establishing the estate plan; however establishing your estate plan is an investment in the future well-being of your family, and one which will result in a far greater cash savings over the long term.

Don’t make changes to your estate plan without consulting your attorney. Changes in one area of your estate plan could impact other provisions you have made, triggering legal or tax implications you never intended.

Don’t assume your children will intuitively know your wishes, and handle the situation appropriately upon your death. Money and sentimental items can cause a rift between even the most agreeable siblings, and they will be especially vulnerable as they deal with the emotional impact of your passing.

Don’t assume that once you’ve prepared your estate plan it’s set in stone. Estate planning documents regularly need to be revised, often due to a change in marital status, birth or death of a family member, or a significant change in the value of your estate. Beneficiary designations should be periodically reviewed to ensure they are up to date.

Don’t forget to notify your family members, friends or other beneficiaries of your estate plan. Make sure your executor and successor trustee have access to your end-of-life documents.

Don’t assume your spouse will handle everything if something happens to you. It’s possible your spouse may be incapacitated at the same time, for example if you both are injured in the same accident. A proper estate plan appoints alternate representatives to handle your affairs if both you and your spouse are unable to do so.

Don’t use the same person as your agent under both the financial and healthcare powers of attorney. Using the same individual gives that person an incredible amount of influence over your future and it may be a good idea to split up the decision-making authority.

Don’t forget to name alternate agents, executors or successor trustees. You may name a family member to fill one of these roles, and forget to revise the document if that person dies or becomes incapacitated. By adding alternates, you ensure there is no question regarding who has the authority to act on your or the estate’s behalf.

Monday, March 23, 2015

Coordinating Property Ownership and Your Estate Plan

When planning your estate, you must consider how you hold title to your real and personal property. The title and your designated beneficiaries will control how your real estate, bank accounts, retirement accounts, vehicles and investments are distributed upon your death, regardless of whether there is a will or trust in place and potentially with a result that you never intended.

One of the most important steps in establishing your estate plan is transferring title to your assets. If you have created a living trust, it is absolutely useless if you fail to transfer the title on your accounts, real estate or other property into the trust. Unless the assets are formally transferred into your living trust, they will not be subject to the terms of the trust and will be subject to probate.

Even if you don’t have a living trust, how you hold title to your property can still help your heirs avoid probate altogether. This ensures that your assets can be quickly transferred to the beneficiaries, and saves them the time and expense of a probate proceeding. Listed below are three of the most common ways to hold title to property; each has its advantages and drawbacks, depending on your personal situation.

Tenants in Common: When two or more individuals each own an undivided share of the property, it is known as a tenancy in common. Each co-tenant can transfer or sell his or her interest in the property without the consent of the co-tenants. In a tenancy in common, a deceased owner’s interest in the property continues after death and is distributed to the decedent’s heirs. Property titled in this manner is subject to probate, unless it is held in a living trust, but it enables you to leave your interest in the property to your own heirs rather than the property’s co-owners.

Joint Tenants:  In joint tenancy, two or more owners share a whole, undivided interest with right of survivorship. Upon the death of a joint tenant, the surviving joint tenants immediately become the owners of the entire property. The decedent’s interest in the property does not pass to his or her beneficiaries, regardless of any provisions in a living trust or will. A major advantage of joint tenancy is that a deceased joint tenant’s interest in the property passes to the surviving joint tenants without the asset going through probate. Joint tenancy has its disadvantages, too. Property owned in this manner can be attached by the creditors of any joint tenant, which could result in significant losses to the other joint tenants. Additionally, a joint tenant’s interest in the property cannot be sold or transferred without the consent of the other joint tenants.

Community Property with Right of Survivorship: Some states allow married couples to take title in this manner. When property is held this way, a surviving spouse automatically inherits the decedent’s interest in the property, without probate.

Make sure your estate planning attorney has a list of all of your property and exactly how you hold title to each asset, as this will directly affect how your property is distributed after you pass on. Automatic rules governing survivorship will control how property is distributed, regardless of what is stated in your will or living trust.

Friday, March 20, 2015

How Does the Affordable Care Act (ACA) Impact My Taxes?

Will I be penalized this year if I do not have health insurance?

Tax season can always be stressful, and now the effects of the Affordable Care Act (ACA) add another element to be considered. This year's tax season is the first time filers will be asked to provide basic information about their health care coverage.

The ACA, or Obamacare as it is sometimes referred to, uses tax laws to encourage signing up for medical coverage through health care insurance marketplaces. The ACA contains tax credits for those who purchased medical insurance through a marketplace and a penalty for those without coverage. Some taxpayers might qualify for an exemption from the requirement to have coverage.

The Obama Administration created a special enrollment period for this year only. It allows those subject to the penalty for 2014 ($95 per adult or up to 1 percent of their income, whichever is greater) to purchase coverage on an exchange before April 30. This will prevent having to pay the penalty (also known as a shared responsibility payment) again next year. The fee for 2015 is expected to be $325 per adult or 2 percent of income.

The penalty is supposed to encourage people to enroll, but there are timing issues. If open enrollment ends in February (like this year) or in January (which is a White House proposal for next year), the penalty's incentives diminish. For example, if you file your taxes in March and discover you need to pay a penalty because you are uninsured, you also learn you will most likely owe another higher penalty for 2015. For most people, this cannot be avoided unless they find a job with medical benefits or qualify for Medicaid.

The Winters Law Firm handles tax planning as well as all aspects of estate administration. We help individuals, families and businesses plan for the future and preserve assets. We are based in Valparaiso, Indiana, and serve clients throughout Northwest Indiana. Call today at (219)307-4373 for a consultation.

Monday, March 16, 2015

Senior Citizens Comprise Growing Demographic of Bankruptcy Filers

It’s called your “golden years” but for many seniors and baby boomers, there is no gold and retirement savings are too often insufficient to maintain even basic living standards of retirees. In fact, a recent study by the University of Michigan found that baby boomers are the fastest growing age group filing for bankruptcy. And even for those who have not yet filed for bankruptcy, a lack of retirement savings greatly troubles many who face their final years with fear and uncertainty.

Another study, conducted by Financial Engines revealed that nearly half of all baby boomers fear they will be in the poor house after retirement. Adding insult to injury, this anxiety also discourages many from taking the necessary steps to establish and implement a clear, workable financial plan. So instead, they find themselves with mounting credit card debt, and a shortfall when it comes time to pay the bills.

In fact, one in every four baby boomers have depleted their savings during the recession and nearly half face the prospect of running out of money after they retire. With the depletion of their savings, many seniors are resorting to the use of credit cards to maintain their standard of living.  This is further exacerbated by skyrocketing medical costs, and the desire to lend a helping hand to adult children, many of whom are also under financial distress.  These circumstances have led to a dramatic increase in the number of senior citizens finding themselves in financial trouble and turning to the bankruptcy courts for relief.

In 2010, seven percent of all bankruptcy filers were over the age of 65. That’s up from just two percent a decade ago. For the 55-and-up age bracket, that number balloons to 22 percent of all bankruptcy filings nationwide.

Whether filing for bankruptcy relief under a Chapter 7 liquidation, or a Chapter 13 reorganization, senior citizens face their own hurdles. Unlike many younger filers, senior citizens tend to have more equity in their homes, and less opportunity to increase their incomes. The lack of well-paying job prospects severely limits older Americans’ ability to re-establish themselves financially following a bankruptcy, especially since their income sources are typically fixed while their expenses continue to increase.

Monday, March 9, 2015

Which Business Structure is Right for You?

Which entity is best for your business depends on many factors, and the decision can have a significant impact on both profitability and asset protection afforded to its owners. Below is an overview of the most common business structures.

Sole Proprietorship
The sole proprietorship is the simplest and least regulated of all business structures. For legal and tax purposes, the sole proprietorship’s owner and the business are one and the same. The liabilities of the business are personal to the owner, and the business terminates when the owner dies. On the other hand, all of the profits are also personal to the owner and the sole owner has full control of the business.

General Partnership
A partnership consists of two or more persons who agree to share profits and losses. It is simple to establish and maintain; no formal, written document is required in order to create a partnership. If no formal agreement is signed, the partnership will be subject to state laws governing partnerships. However, to clarify the rights and responsibilities of each partner, and to be certain of the tax status of the partnership, it is important to have a written partnership agreement.

Each partner’s personal assets are at risk. Any partner may obligate the partnership, and each individual partner is liable for all of the debts of the partnership. General partners also face potential personal legal liability for the negligence of another partner.

Limited Partnership
A limited partnership is similar to a general partnership, but has two types of partners: general partners and limited partners. General partners have broad powers to obligate the partnership (as in a general partnership), and are personally liable for the debts of the partnership. If there is more than one general partner, each of them is liable for the acts of the remaining general partners. Limited partners, however, are “limited” to their contribution of capital to the business, and must not become actively involved in running the company. As with a general partnership, limited partnerships are flow-through tax entities.

Limited Liability Company (LLC)
The LLC is a hybrid type of business structure. An LLC consists of one or more owners (“members”) who actively manage the company’s business affairs. The LLC contains elements of both a traditional partnership and a corporation, offering the liability protection of a corporation, with the tax structure of a sole proprietorship (if it has only one member), or a partnership (if the LLC has two or more members). Its important to note that in certain states, single-member LLCs are not afforded limited liability protection.

Corporations are more complex than either a sole proprietorship or partnership and are subject to more state regulations regarding their formation and operation. There are two basic types of corporations:  C-corporations and S-corporations. There are significant differences in the tax treatment of these two types of corporations, however, they are both generally organized and operated in a similar manner.

Technical formalities must be strictly observed in order to reap the benefits of corporate existence. For this reason, there is an additional burden of detailed recordkeeping. Corporate decisions must be documented in writing. Corporate meetings, both at the shareholder and director levels, must be formally documented.

Corporations limit the owners’ personal liability for company debts. Depending on your situation, there may be significant tax advantages to incorporating.

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