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Monday, November 21, 2011 Business Attorney in Houston Says, "Your House May Not Be The Investment You Thought It Was"
By: Kim Hegwood, Business Attorney Near Houston, TX
Just because something costs a lot doesn't mean it is an investment. An investment is something that pays you money.
Therefore the house you and your family live in is not an investment. Neither is the vacation home you rent occasionally. Nor that piece of land next to your house you bought to preserve your view. It is human nature to justify a purchase by calling it an "investment," but if it does not pay you money, it should not be treated as an investment in financial planning.
Historically, equities appreciate at a rate of about 6.5% above inflation. If inflation has historically been 4.5%, equities average about 11%. Equities include stocks, stock mutual funds and stock exchange-traded funds (ETFs). Your portfolio should be invested mostly in equity investments to appreciate at a rate greater than inflation.
Fixed income is more stable, but averages interest payments of 3% over inflation. If inflation averages 4.5%, fixed-income investments average 7.5%. Fixed income includes bonds, bond mutual funds and bond ETFs.
Real estate as an investment falls somewhere between stocks and bonds. On average commercial real estate produces a real return of about 4.9% over inflation. If inflation averages 4.5%, commercial real estate averages 9.4%.
Commercial real estate as property with no income does not appreciate at the rate of inflation. It actually depreciates against inflation by about 1% a year. Fortunately, it should produce 5.9% in profit to overcome this depreciation and produce a real return of about 4.9% over inflation.
Handling commercial real estate privately requires more work. If your commercial real estate is not generating a lot more income than it costs to maintain it--including depreciation--it isn't pulling its weight. Only if it can produce significant income and grow at a real return of 4.9% over inflation will a $100,000 investment in real estate grow to $331,000 after 25 years.
Similar equations can be used for residential real estate. On average it produces slightly less income, giving a real return of 4.1% and growing to have a buying power of $273,000. Obviously all real estate is subject to the increasing desirability of the area where it is located. Some excellent school districts have experienced appreciation significantly greater than inflation. But many rural communities have barely kept up.
These historical averages provide benchmarks as a way to judge the investment worthiness of a particular piece of property. If you own a $300,000 rental home, you should expect to average at least $3,000 each year in repairs and upkeep. One year it might be lower only to have major bills the next. Your benchmark is a real return of 4.1%. After repairs and all other expenses, you should have a profit of $12,300, or 4.1% of your investment. That means you have to have a profit of at least $15,300 (5.1%) or more for your investment to pay you the appropriate amount.
Real estate that pays you appropriately can be considered an investment for the purposes of wealth management. But you need to run it like an investment and track your return after all of your expenses.
This analysis helps explain why property that you do not rent is not an investment. Every $100,000 of equity put into property that lies fallow costs you $1,000 in expenses just to keep up with inflation. And although keeping up with inflation is good, without the 4.1% income there is no way your $100,000 investment will grow to have the increased purchasing power of $273,000.
A family's home, however, does not, typically, keep up with inflation. Some couples sell a large expensive home, purchase a smaller house and invest the difference. Many believe they will, but when the time comes, their downsized house is so much nicer that little is left over to invest.
Additionally, for many couples the value in their home is used as equity toward an assisted living arrangement. The larger their home, the more expensive the retirement community they buy into. For these and other reasons, it is helpful to not assume that the equity in a family's home will be available during retirement.
To reiterate, just because something costs a lot does not mean it is an investment. Investments should appreciate at a rate that grows faster than inflation and gains purchasing power. And spending your money on non-investments can jeopardize a plan to reach your goals of financial freedom. As a rule, investments should work FOR you, paying you money that you can spend or reinvest elsewhere.
Friday, October 28, 2011 3 Gift-Giving Ideas To Curb Materialism In Children
First off, I would like to say, again, that I am not an expert in these matters -- but I have had many conversations with wise clients who have shared a thing or two over the years. I have clients, with great material means, who have children that remain "unspoiled", and don't carry an expectant spirit.
Likewise, I have clients who have shared their struggles with us about their children always wanting MORE MORE! (these are brave and wonderful clients to share such private details), and this, even, when some of these families don't have large incomes.
And then there are the holidays -- coming faster than we all think.
So how do we hold back the flood of consumerism, and teach our children the true meaning of gifts, giving and the upcoming holiday season? Well, some of my wiser clients might say ...
1) Explicitly Limit The Number Of Gifts Given
Parents often tend to go overboard buying presents for their little ones around birthdays and holidays -- after all, it often feels like an overflow of love AND children sure do love it.
But I know families who have always put a stated limit on Christmas and birthday presents -- and yet their children don't seem to act like they feel deprived. Christians can link Christmas gift-giving to the three gifts of the magi; others can find different spiritual reasons to not simply pour a truckload of gifts on their children. The key seems to be in creating a happy atmosphere around it, and remaining consistent.
2) Have Your Children Buy Their Friends Gifts
Why not let your kids experience what it feels like to sacrifice and give? After all, we would all want to give ALL of our friends a gift, but the truth of the matter is that we simply cannot buy a gift for everyone on our list. We have finite resources and have to allocate them accordingly. There is a line that we all have to draw in the sand for who will get gifts and who will get a card.
Giving your children a certain dollar amount to spend on gifts, or simply making them pay for their friends' gifts out of their own pocket, will teach them about making the hard choices of whom to give to, and how much, within their very limited resources.
And, of course, this assumes that they ARE giving gifts! If not, that is a great place to start.
3) Share Pertinent Financial Details
Children should be protected from adult concerns. But that does not mean that they should be blissfully ignorant about how money works. In fact, we owe it to our children to properly explain where the family's money comes from, how it gets into the bank account, and how expenses and budgets work. With a little explanation about how your family's budget is structured, you may be able to hold back the tide of consumerism.
Again, they don't need to feel a pinch -- but they SHOULD know that gifts and items have a monetary value, and don't just get plucked from the shelves without cost.
These are just ideas to start with. It is extremely hard to curb the allure of consumerism in our culture. But in my opinion, it's a fight that every parent should consider waging in today's society of overspending and consumer debt.
Again, every family has their own approach ... but I do hope that you have thought yours through. To your family's financial health!
Friday, September 30, 2011 Family Laywer In Houston Talks Hidden Financial Mistakes ... And How To Fix Them
By: Kim Hegwood, Family Lawyer in Houston
You pay your bills on time. You try to save as much as you can. You even follow the advice which you read in books and hear on the radio about how to keep your finances in check.
But you are still not getting ahead.
Well, sometimes, it's the unchallenged assumptions about how we are handling our money which rise up and bite us in the keister.
So, in the course of working with clients, I have identified some mistakes I see (as well as ones I have made myself!), which can be fixed. All it takes is thinking a little differently...
Hidden Mistake #1: Inappropriate Mental Accounting
Definition: Tendency for families to divide money into separate accounts based on subjective criteria.
Typical Example: Treating $100 you received as a gift from Grandma, differently than a $100 bill earned.
Typical Example #2: Having money languishing in a savings account earning 0.25%, while carrying high-interest debt to pay off at 12%.
Cure: Funnel income, no matter the source, into one savings account.
Any "found money", such as a tax refund or gift from Grandma, quickly decide where that money is best utilized.
As for expenses, occasionally change how you pay. If you always pay with a credit card, try cash. This will get you remembering that all of it, for the purposes of your mental "books", should be lumped into one, monthly bucket.
Hidden Mistake #2: Manipulative Price Anchoring
Definition: Our tendency to relate the value of a purchase to a price point which, rationally, should have no bearing on the amount spent.
Typical Example: The "rule of thumb" to spend two months' salary on an engagement ring.
Typical Example #2: A realtor will tell you that "in 2007 this house was going for $500,000 and is now listed at only $350,000!" ... causing you to think this house is undervalued.
Cure: For big ticket purchases like a house, car, or engagement ring, ask a friend whose financial values you respect for their input.
For everyday purchases, avoid looking at the MSRP or sticker price.
Ask yourself:
Can I afford this today?
What do I really want to spend?
What is this really worth to me?
Marketers are experts at this sort of price-anchoring, and we really should know better ... but yet we still fall prey to it. Try not to let outside sources set up the comparison by which you should be considering such large purchases.
I think I have a couple more up my sleeve, but I will save those for next week. But let me know: is this helpful to you? And what more could we do for you, to help?
Until next week then... Friday, September 16, 2011 Family Lawyer In Houston Offers Tips For The College Student In Your Life
By: Kim Hegwood, Family Lawyer in Houston
Financial independence training is a short-term pain, for a long term gain. Because "untrained" college students are sitting ducks for unscrupulous financial service companies and their own lack of financial sense.
So, with that in mind, here are some off-the-cuff guardrails to consider for your son or daughter entering, or continuing on through college...
1. Make a definite plan to leave college with no consumer debt. And I am talking a real PLAN. Credit cards, car loans -- college kids are ripe for the plucking. Consumer debt is a real killer, simply because it depreciates so much. In a short matter of time, these items lose their value, but the payments and interest continue to inexorably pile up. So set up a clear budget for travel, late-night snacks, and other miscellaneous lifestyle expenses (heck, going through the process might even prompt some lifestyle evaluation!). Tell your child: "You should have an exact answer if I ask about your weekly spending limit." And have them try to earn enough over the summer that they can afford to skip the part-time job during the spring and fall semester.
2. ATM bank fees are killer. Moving to a new city often means the local debit card will likely be charged from $1.50 to $3.00 for every withdrawal from a foreign ATM. Consider an online bank account like Charles Schwab Bank that reimburses all ATM fees or a local bank with easy ATM access.
3. Overdraft fees are as common as hangovers for the college kid -- avoid both. A recent Pew Foundation study found that the median overdraft penalty fee is $35; an additional $25 accrues if this overdraft is not repaid in seven business days. The average bank allows up to four of these overdrafts to occur in one day for a total fee of $140 or more per day. However, if you open a savings account in addition to your checking account, you can apply for overdraft transfer protection. You might even set up a situation where the college student controls the checking account -- but you control the savings.
4. One cell phone bill gone awry can swamp you. New routines in college will likely mean that calling and texting habits will change. Or just one call to that high school sweetie who is spending the semester abroad might necessitate a different plan. If your child doesn't have an unlimited plan, have them make it a habit to review the account online in the middle of each billing cycle. By the way, this is a very good expense to NOT pay for as a parent.
5. Avoid gimmicky credit card offers. Often the first credit card is awarded at a football game where so-called "free" T-shirts are being handed out. Again, college kids are ripe targets. Shop online for the best rates and terms and purchase a dozen dress shirts with the money saved by finding a card with less onerous terms for interest rates and late fees. Focusing on the so-called "rewards" which credit card companies give you is a distraction in your financial life. Like a casino, credit card companies win most of the time -- which is why they stay in business.
And, of course, having children enter into adulthood changes your estate considerations. Let us know if this applies to you -- we are here to help! Thursday, April 21, 2011 Family Lawyer In Houston Discusses Choosing An Advisor For Retirement
By: Kim Hegwood, Family Lawyer in Houston
The way you have been investing in your retirement account for the last 30 years worked perfectly. Now you have all this cash and the rest of your life ahead of you, but who do you choose to help manage those funds for the next 30 years? A great question, and it may require making a switch.
While your investments were geared for making you money over the long haul, you now need to switch that strategy to help make money in the short term. As they always say: "While past returns are no indication of future performance", many people try to base their decisions on what kinds of returns were done in the past. For instance, if you had an investor who just went with his gut instinct and you made 30% on your investment -- and you had another investor who knew and understood the markets, guaranteed and produced a 15% return on your investment, which one would you choose?
Well, I would say that it is more important to base your decision on investment managers who really understand what they are trying to accomplish instead of winging it using past performances.
I did some digging, and I turned up the three qualities many of the Ivy League Endowment Fund investors look for in their managers. And if the big boys look for these qualities, it doesn't hurt for individuals to do the same when it comes to picking out a retirement investment manager:
Risk-adjusted returns
These returns must be exceptional. Risk-adjusted returns basically compare the amount of risk used in order to generate the return, which helps investors to compare investments as apples to apples. It is basically like the difference in total score and degree of difficulty in a gymnast's or ice skater's routine.
Investment rationale
Taking a look at not only how a company is doing financially, but what a company is all about, is a big factor in making investment decisions. Investment rationale is the ability to look past the "hype" and figure out if a company will be around and doing strong for a good number of years.
Stickiness
This is where Ivy League investors look at how well investment managers take note of what their clients want and stick to the plan as well as possible. Customer satisfaction is based largely in how well a company sticks to a stated investment style and preference.
Keeping these qualities in mind will help individuals looking to find the perfect retirement investment manager. Your retirement is extremely important, so it is imperative that you find someone who knows what they are doing, are able to explain every step of the way, balance risk and return, look beyond the stats, and keep you in their best interest when making decisions.
Pick several top choices for your investment manager and sit down with them. Ask them each about their past experiences, but more importantly, ask them how they came to those decisions, because the process matters more than the outcomes.
And I may have a specific idea or two, as well -- so feel free to shoot me an email.
Lastly, email this blog post to a few friends who may be on the lookout for something like this -->
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+++++++++++++++++ Thursday, March 31, 2011 Family Lawyer in Houston Talks Money Lessons For Young Children
Perhaps I am biased as a family lawyer in Houston, but I believe that it really is never too early to start teaching your children about good money habits. Obviously, by doing so, you are preparing them for the uncertain future. You are also establishing a family culture, wherein money is handled with maturity and openness.
But the best news is that helping them to develop these habits can be fairly simple! I have put together some basic steps -- many of these may not seem like rocket science, but my job is to be a coach and a goad for you to do the things which you already may "know" to do!
1) Give them an allowance--with strings. Do not just give them an allowance for doing nothing -- this actually defeats the purpose! You can buy your young children whatever they ask for, so they do not need "spending money". Instead, see an allowance as a training tool: your children should learn that money is earned by working. Believe it or not, this isn't an obvious connection for a young child! Because a kindergartner truly is able to help with small chores around the house, you can put them to work and let them earn their allowance this way. Rather than seeing it as a "bribe", or some sort of indentured servitude, this is a critical knowledge base for a young child.
2) The old lemonade stand. Encourage this! And do it with adult supervision. Your child will learn how to make a product, market it and sell it. While the idea is to teach good money habits, they are also learning valuable life lessons -- nothing sells itself, after all. (Though with cute kids, that is sometimes the case!)
3) Saving and investing. Rather than showering your young child with gift after gift, encourage them to go through the process of working towards a savings goal. You can always "supplement" this process, but having your child save up for an item will teach them that nothing comes for free. In return, children also learn that the items you buy them have real value and should be treated as such.
This might, even, cut down on those "negotiations" so familiar to parents who bring their children into stores!
4) Cold, hard cash. A lot of children nowadays are so used to seeing parents pay with debit and credit cards that they may not know what actual money looks like! This is a new-generational issue, and it is important that your children learn that money is more than a mouse click, or a card swipe. Show your kids the different types of money - coins, bills, etc. and tell them the monetary amount for each.
When you go shopping, let your child have a try at paying for certain items. This will help them feel quite grown up, and again -- they see that transactions don't just "happen", they cost.
What about you? How have you gone about introducing your children to money? I would be interested to hear some other tactics, and may share them with the list next week.
But until then, I remain your kindly Houston family lawyer-- out to save the world from improper planning, unnecessary taxes ... and from young adults still living on Mommy/Daddy credit! Thursday, March 24, 2011 Automatic Investing As The Basis For Real Wealth | Houston Family Lawyer
By: Kim Hegwood: Houston Family Lawyer
Yes, it may be a cliche, but the greatest engine to generate real wealth is saving and investing. And the best way to ensure that your default is saving & investing is to automate the process. Pay yourself first, and your savings will grow exponentially.
Effective money management is based on the idea that very small changes can yield enormous gains in your family's finances. This process, both easy and simple, is worth millions. Unfortunately, only a tiny percentage of American families take advantage of the tools available to implement this automated technique.
So here is how you pull this off: Have all income flow into a joint taxable investment account. Make saving and investing your default. Putting all of your money in this account helps ensure that you move only the money intended for some other purpose into a different account.
For working families, this means an automatic deposit of paychecks into their joint account. Banks will try to entice you into setting up automatic payroll deposit into their checking account. They will offer you additional interest if you do so. Resist. The additional interest is not worth the failure to not only save but to save and invest. Your taxable investment account should be the default.
For retired families, this means an automatic deposit of Social Security checks. It also means their required minimum distributions (RMDs) from their individual retirement accounts (IRAs) should be deposited first into this account.
From this account you can then withdraw what you need for daily expenses. Do this by setting up a regular transfer of funds from your joint investment account to your checking account. Make sure the transfer matches the amount you have allocated in your budget, ideally 65% or less of what you need to support your lifestyle. The other 35% should remain in your joint taxable account, much of it to be invested.
Part of what remains is the 10% you have designated for "unknown unknowns". In the ideal world, this money will not be needed, but few families can anticipate every possible expense. Each stage of life presents new challenges. Having the financial margin to absorb some of life's shocks is simple wisdom and offers financial peace of mind.
Because the time horizon for this emergency money is unknown, invest it in a balanced portfolio. If unused, your emergency money will double in 7 to 10 years and provide a greater safety net for your family. If you have to dip into this fund, keep track of the amount. If it approaches the full 10% every year, you are using your emergency money to extend your budget, not simply for unanticipated expenses.
The less you use this account, the more quickly you will reach financial independence. These funds are mixed with your other taxable investment savings and continue to grow your net worth. If you are meeting all of your expenses without any major surprises, these funds can be used to purchase a home, start a business or for additional charitable giving.
Another portion of what remains in your taxable investment account will be the 5% you are specifically designating as taxable savings. Because this 5% gets mixed in with charitable giving that is being invested and your unknown expenses, the entire portfolio should be balanced. If an emergency arises, any portion of the portfolio could be sold to furnish the needed funds. Similarly, when you want to gift appreciated stock, any portion of the portfolio could be gifted.
The last portion might be the 10% for funding your retirement accounts each year. Many people put this money directly into a retirement account as part of the payroll process through a pretax deduction. If that is the situation, you don't need to flow anything through your taxable investment account. But you may want or need to fund your retirement outside of a payroll deduction. One example is funding your Roth IRA each year. In this case you may want to collect the money in your taxable investment account and then transfer it to a Roth account.
If you want to fund a Roth IRA account for the maximum $5,000 (in TY2011), you could transfer the entire amount once during the year or set up a monthly transfer of $416.66. The money from your paycheck would provide the cash, either letting it build up throughout the year or supply the funds for each month's transfer.
Busy people forget to make the necessary transfers each year. That is why a monthly transfer is preferable. Saving and investing should be automated so it occurs regularly without any additional effort. Whatever is in your checking account you are likely to spend. Whatever is in your investments you are less likely to spend.
Automating the process of saving and investing is like damming a river to form a reservoir. The alternative is the manual process of hauling buckets of water from your stream to a water tower. You will never grow rich by hauling buckets, and it is much harder work.
No matter what income you have, you probably already have enough to grow rich! Saving and investing just $10 a day builds a million dollars over your working career at average market returns. You build wealth by what you save and invest, not by what you spend. Automating the process of saving and investing grows your wealth while you sleep. Wednesday, March 09, 2011 Houston Asset Protection Attorney On How To Prepare Your Finances For Emergencies
By: Kim Hegwood, Houston Asset Protection Attorney
It is my firm belief as a Houston Asset Protection Attorney that how you choose to think about your circumstances has a subtle, yet profound, impact on how you handle storms. I have written often on this subject, so I won't belabor it here.
Instead, this week, I thought I would give you a short run-down on specific, financial steps to put in place so you can be ready for whatever kind of situation you might find yourself in.
1) Put $1,000 aside. It doesn't amount to a real emergency fund, but it will do until you get your finances in order. You can accumulate the $1,000 by allocating $10 a day for just over three months. Most people go into debt because they live hand to mouth, spending 100% of their take-home pay. Then life happens. Having a mini-emergency fund can help you get out of debt and stay out of debt.
2) Remove yourself from credit card debt--forever. I suggest paying off your credit card by starting with the smallest balance in order to achieve small successes and then working to snowball your payments as you tackle the larger balances. These first two steps, having $1,000 and paying off debt, simply prevent you from facing a financial emergency by starting out wounded and bleeding.
3) Improve your ability to handle fluctuating monthly expenses. If you can, set up a monthly budget so your day-to-day expenses are less than 65% of your take-home pay. The difference between those growing rich and those remaining poor is not the salary they make. It is the salary they keep. Relative to their income, the rich are frugal. They save and invest. They spend less than 65% of their take-home pay on day-to-day expenses. They save at least 10% in their retirement accounts and another 5% in taxable savings. They direct another 10% toward unknown big purchases. And they even live frugally enough to give another generous 10% to charities.
4) Automate your cash flow to promote saving and investing. Every month, have 10% transferred into your retirement account before you receive your paycheck. Then automate the transfer of 25% of your take-home pay into an investment account a day or two after your paycheck is deposited. Automating your savings makes savings a high priority and ensures that you pay yourself first. This investment account will grow over time, and you can use it to pay for big emergencies and charitable gifts.
5) Set up an asset allocation for your investments that is diversified for safety while being invested for growth. If you make it to this step, you are well ahead of the game...but the game ain't over yet! Diversification works, and it is never more obvious than in times of market turmoil. Without diversification, portfolios can have a zero return over a decade. After being well diversified, the likelihood of no return over a decade drops significantly.
6) (If necessary) Mobilizing during an actual emergency. Having the discipline to budget for small financial emergencies will help you be prepared when you encounter larger financial crises. When some unknown spending need strikes, take the money to cover the expense from your growing emergency fund. Then, determine if you have been budgeting for this level of unknown expenses adequately.
Usually emergencies don't happen. So the money you have socked away makes more money. Keep an emergency fund for several years and it should double in value, giving you an additional emergency fund. Whether you need it or not, being prepared for a financial emergency means peace of mind, knowing that your lifestyle is frugal, so you won't be in trouble. Thursday, February 10, 2011 Houston Attorney Kimberly Hegwood's Tax-Time Checklist
By: Kimberly Hegwood, Houston Attorney
This list is mostly complete--but I'm always looking to add to it! Let me know if you think I missed anything.
Personal Data
Social Security Numbers (including spouse and children)
Child care provider tax I.D. or Social Security Number
Employment & Income Data
W-2 forms for this year
Tax refunds and unemployment compensation: Form 1099-G
Miscellaneous income including rent: Form 1099-MISC
Partnership and trust income
Pensions and annuities
Alimony received
Jury duty pay
Gambling and lottery winnings
Prizes and awards
Scholarships and fellowships
State and local income tax refunds
Unemployment compensation
Homeowner/Renter Data
Residential address(es) for this year
Mortgage interest: Form 1098
Sale of your home or other real estate: Form 1099-S
Second mortgage interest paid
Real estate taxes paid
Rent paid during tax year
Moving expenses
Financial Assets
Interest income statements: Form 1099-INT & 1099-OID
Dividend income statements: Form 1099-DIV
Proceeds from broker transactions: Form 1099-B
Retirement plan distribution: Form 1099-R
Capital gains or losses
Financial Liabilities
Auto loans and leases (account numbers and car value) if vehicle used for business
Student loan interest paid
Early withdrawal penalties on CDs and other fixed time deposits
Automobiles
Personal property tax information
Department of Motor Vehicles fees
Expenses
Gifts to charity (receipts for any single donations of $250 or more)
Unreimbursed expenses related to volunteer work
Unreimbursed expenses related to your job (travel expenses, entertainment, uniforms, union dues, subscriptions)
Investment expenses
Job-hunting expenses
Education expenses (tuition and fees)
Child care expenses
Medical Savings Accounts
Adoption expenses
Alimony paid
Tax return preparation expenses and fees
Self-Employment Data
Estimated tax vouchers for the current year
Self-employment tax
Self-employment SEP plans
Self-employed health insurance
K-1s on all partnerships
Receipts or documentation for business-related expenses
Farm income
Deduction Documents
State and local income taxes
IRA, Keogh and other retirement plan contributions
Medical expenses
Casualty or theft losses
Other miscellaneous deductions
+++++++++ Wednesday, February 02, 2011 Family Laywer in Houston Discusses How To Gradually Grow Your Children's Financial Smarts
By: Kim Hegwood, Family Lawyer in Houston
I will spare you the stories, but needless to say: As a family lawyer in houston, I have seen so many otherwise-loving and wise parents somehow forget to ready their children for the financial realities of adult life. Instead, they simply hand them credit cards, pack up their cars and head to school.
I will go out on a limb here, but I believe that it is this deficiency in financial education which has led, in part, to an adult population that spends beyond its means, engages in unsafe borrowing practices, and accumulates record amounts of debt.
Still, if we decide to instruct our kids how to responsibly manage their money -- much as we teach them how to read, tie their shoes, and ride bikes -- then perhaps they might avoid a Great Recession-like event in their own adult lives.
Sure, that all sounds good in theory, but how do you go about instilling proper financial values into your children?
1) Tackle the task as if you are once again teaching your kids to ride bikes. You first need to let them get comfortable on training wheels, and prepaid cards are the training wheels of personal finance. So co-sign for prepaid cards, load a certain amount of money biweekly and allow your children to spend freely. This will force them to learn how to budget and, since most prepaid cards allow online account management, you will be able to review their purchases with them.
By the way, I did some online searching, and these are some good choices for pre-paid cards for teenagers, etc.
Visa UPside: http://www.upsidevisa.com
MasterCard Facecard: http://www.facecard.com
American Express Pass: http://bit.ly/heWJRS (shortened link)
Visa Buxx: http://usa.visa.com/personal/cards/prepaid/visa_buxx.html
2) Once you are confident that your kids have exhibited responsible prepaid card use for at least a year, you can graduate to monthly cash allowances. This progression, which is tantamount to taking one training wheel off their bikes, will provide them with greater financial independence (given that you cannot monitor their spending with cash). It will also more thoroughly test their responsibility because the odds of losing money or exhausting too quickly are heightened with a monthly cash allowance.
3) If your kids demonstrate the requisite discipline after a year of cash allowances, you can take the other training wheel off. Do so by co-signing for and opening checking accounts in their names and depositing slightly higher monthly amounts while requiring them to pay for more of their own expenses.
With checking accounts, children will garner much needed experience writing checks and purchasing with debit cards. They will learn how to avoid overdrawing their accounts and bouncing checks -- and if they can't learn these lessons quickly enough, you can screw that training wheel back on and regress to cash spending. After all, when you took that last training wheel off, you didn't let go of the bike completely! You still had a grip on the handlebars and were providing assistance as needed.
4) If your kids' financial balance seems solid after 6-9 months, you can release the handlebars and either co-sign for student credit cards or give them small lines of credit as authorized users on your credit card accounts. Doing so will help teach them the principles of responsible credit use, such as spending within one's means and paying bills in full each month. Remember though that you are simply taking your hands off to see if your kids can ride. If they wobble, catch them.
This financial education progression will instill within your children various skill sets that will surely serve them well when they leave the nest. It's important to employ such a practical approach because it lets kids learn and inevitably falter while the stakes are low. Additionally, you can ensure that your children know how to handle their money before becoming independent, providing yourself with the kind of peace of mind that is valuable to any parent.
So before sending your kids out into the world, make sure they are ready for the financial implications of that independence!
Thursday, January 06, 2011 Estates Lawyer in Houston Discusses How To Set Those Pesky Financial Goals
By Kim Hegwood, Estates Lawyer in Houston
Not to make you feel guilty, but for every seven years you delay saving and investing for the future, you cut in half the income you would enjoy at the end of your life. So, as an estates lawyer in Houston, I want to encourage you to make 2011 the year you get on the right financial course!
Here are some suggestions to get started...
1) Set Realistic Goals First, ask the right questions and stay the course until you have found the answers. Goals that are shared are ten times more likely to be acted on. Don't wait until you have everything set up to seek out accountability.
2) Make those goals concrete and then document them. Set your savings goals as a specific annual percentage of your adjusted gross income (AGI). It is a great idea to save at least 10% of your AGI in tax-free retirement accounts and another 5% toward retirement in taxable investments. If you are behind on your savings, you may want to save even more in order to catch up.
Third, craft the best strategy to implement your goals, including prioritizing the appropriate retirement vehicles. Start by investing just enough to get the entire match from a company's 401(k) plan (if you have one) and then fund your Roth IRA accounts next. After these two, make certain you have enough nonretirement savings.
Fourth--and this is a BIG deal-- automate your plan. Automating putting money in an employer-defined contribution plan is easy. Automating a taxable savings plan is just as painless. Most banks or brokers offer an automatic money link between an investment account and a checking account. They should also offer a monthly automatic transfer between the two accounts.
Going into further detail would actually entail sitting down and creating a true, full financial plan--which is impossible over email!
But I will say one last thing: the most critical component of wealth management in the new year will be tax minimization. With the potential for tax rates to fluctuate even more than the stock market in 2011, it is never been more important to monitor what "Uncle Sam" is seeking to take from your wallet!
Thursday, December 16, 2010 Why To Give, No Matter The Benefit
I know as an estates lawyer in Houston, when we set up GRAT's (a Grantor Retained Annuity Trust), or other mechanisms for clients to deliver their philanthropy, there is much discussion about the benefits of the gift.
But what about for the giver?
This does not quite work, when the giver is an estate--but since I am not writing to a bunch of estates (I am writing to real people!), I will proceed with some strong words about WHY you should be giving, no matter how effectively your money is spent by the charity!
1. Tax Rate Leapfrogging.
You can bump yourself into a whole different (lower) tax rate, at times, by reducing your taxable income. This is something to consult with your CPA about, if you wonder if you are on the fence. (If you need a recommendation for a qualified local tax pro, just let me know in the comment section below.)
2. Your heart changes.
Studies show (http://www.livescience.com/health/080320-happiness-money.html) that when individuals spend money on gifts for friends or charitable organizations, their happiness increases -- while those who spend on themselves get no such boost. Even Scrooge can agree that everyone wins.
3. You can double your money without doing any work.
Instead of simply sending off your money, why not find out if anyone is offering to match? Sites like www.DonationDoubler.org have lists of companies that will match your charitable contribution. Find one you like and suddenly you contribution goes twice as far!
4. You're just going to blow it on something dumb anyway.
As pious as you are, there is still extra money in your budget somewhere. Create a budget for charity donations, then take some of your extra money (each month or each year) and donate it to charity. Use your spending money to make a difference instead of spending it on Brookstone junk you'll use once. And if you think you do not have enough, take that extra 2% you'll be earning next year and put that toward a charity fund. For someone making $30,000, that is about $500!
5. Face it: If you don't help now, you never will.
Don't pretend that instead of giving money, you are going to donate time. When was the last time you volunteered at a soup kitchen? Don't let your mind fall for this trick. Send the money now or you will end up giving nothing.
6. Be a leader, not a follower.
This is the biggie, in my opinion. There is just something that happens in your psyche when you cut a big (or relatively big) check to someone in need, or to a charity organization. You feel more powerful--more dynamic. You signal to your own unconscious: "Money does not rule me. I have more than enough, so much more than enough that I am giving it away." Then, of course, something special often happens: more money seems to find itself in your hands.
I am not advocating a mystical pay-it-forward scheme; I am simply making the observation over years of being a student of how money "works". And, it just seems to find itself in the hands of those who give it away.
So--was any of this convincing? Did it help you see things in a new light? Let me know...
As your estates lawyer in Houston, I hope this was simple and straight--as usual. Wednesday, December 08, 2010 Will Lawyer in Houston Encourages You to Take One Day And Save
It's true: as a will lawyer in Houston, I know inactivity is costly.
You see, if you are like most people, I bet that when you get your house insurance renewal notice, you quickly glance at the price -- and renew it. You renew it simply because you do not have the time to search around for better prices.
In my experience as a will lawyer in Houston, working with family finances for YEARS, I have learned that most people have a good sense of what needs to be done to improve their finances but they simply cannot find the time.
So here is my proposed solution for you: Take a day off work.
In fact, many financial tasks simply cannot be completed in the evening or on the weekend. By taking a day off work, you can contact people who may only be available at regular business hours.
On top of the true bottom-line impact a day like this could create, there is, of course, the "mental health" aspect of it all. HR professionals often recommend taking a mental health day, from time to time--well, call this your "Fiscal Health" Day!
Possible tasks to consider accomplishing on your day off:
1. Dump your savings account with a puny interest rate and open a high yield savings account.
2. Get quotes for cheaper insurance: health, life, auto, house, and any other insurance. And you can even do a little calculating to determine how much you could save by changing your deductible.
3. Complete the most important (but not obviously-pressing) financial tasks like making a will. Best done with a professional, by the way! (Yes, I am biased--but I have also seen a lot of probate, and a lot of poorly-constructed wills!)
4. If you're carrying credit card debt, call the companies and ask them to reduce your credit card interest rates. Believe it or not--they will often say yes! Take time to develop and formulate a good plan to get out of credit card debt. Find or prepare a debt reduction plan.
5. Apply for a cash back debit card. Here's a good one: http://www.perkstreet.com/default.aspx?PerkStreetCode=3721477
6. Get more organized with your finances by shopping around for and using a good personal finance software program.
7. Review your budget, get caught up on your budget, or learn how to budget.
8. Shop around for the best online broker. Be sure you are getting the best price for your stock trades.
9. Make energy efficient changes to your home and lifestyle.
10. Find a good second hand store to shop at instead of the local department store.
11. Set up automatic payments for your bills to be sure you avoid late payments.
12. Google It. Use the phrase "how to save money", and then fill in the blank "on groceries", "on gasoline", "on kitchen expenses", "on babies" ...
13. Sell stuff on Ebay. Look for junk lying around the house and list it on Ebay.
Undoubtedly, there are more things which can go on this list, if you are industrious about it. But simply put, I am hoping to give you "permission" to see your financial health in a similar light as you see your mental health.
I hope this was simple and straight--as usual.
Thursday, December 02, 2010 Estate Planning Lawyer in Houston Reveals Best Holiday Tax Moves
As an estate planning lawyer in Houston, I obviously pay close attention to the estate tax situation. Still waiting for Congress on that one!
But whatever they do, I am all for my clients keeping their tax bill low, and I pay close attention to the tax code for all of our estate planning decisions.
But the problem for many families is that many tax advisors make things so complicated! (Of course, many situations are, indeed, complicated...but come on--plain English sometimes would help.)
So, I thought I would chime in, and translate some of the CPA gobbledy-gook into simple steps which will keep your tax bill from biting you in the rump come tax time...
1. Sell certain (appreciated) assets
Right now (until Dec. 31 at least), the long-term capital gains tax rates are at historic lows. Come January 1, there is a very good chance they could be slightly--or significantly--higher. So you will pay less taxes if, by Dec. 31, you sell stock and other assets that have appreciated and which you have owned for more than a year.
If you are in the 25 percent tax rate bracket or higher, your long-term capital gains rate is just 15 percent. If you are in the 15 percent income tax bracket or lower, you will not owe any capital gains taxes.
2. Donate
It is not just because 'tis the season, but often (if we are all honest) because the year-end is so close. So, obviously, when it comes to taxes, giving to a nonprofit can be like a money-saving gift to yourself. If you itemize your deductions, you can claim your charitable donations, both of cash or goods.
In fact, if you are *close* to being able to itemize deductions, making some nice gifts this month can push you over the top into some major tax-savings. And, of course, there is the added benefit of what happens to YOUR mindset when you give.
What is even better, in 2010--and this year only (at least for now)--there is no itemized deduction limit for anyone. So everyone who itemizes deductions, regardless of how much they make, gets to claim all of their itemized deductions.
But one caveat: increasing deductions could cost you if you end up owing under the alternative minimum tax.
3. Make the switch to Roth
Changing a traditional IRA to a Roth is even better this year because the $100,000 income threshold is gone. (However, taxes still will be due on any converted money that was not previously taxed.)
Even better: if you make the traditional-to-Roth IRA switch by Dec. 31, you can defer payment of the associated taxes until you file your 2011 and 2012 tax returns.
The same thing applies to certain 401(k) accounts too ... you can defer tax payment over the next two years.
4. Put Those New Windows In!
Many "tax people" have been pounding this drum for a while, for the simple fact that (because of the last "stimulus" package) replacing windows, doors, and HVAC systems-- as well as installing new insulation--could net you a $1,500 tax credit on your 2010 tax bill! Credits always beat deductions. Note, however, that if you claimed the full credit on your 2009 return, you don't get it again this tax year.
5. Adjust your withholding
Do you intentionally get a big refund each filing season? Quit that! You are providing Uncle Sam an interest-free loan of your money.
Submit a new W-4 now so that your payroll withholding is more closely in line with your future IRS bill. It could even give you a few extra dollars at the end of the year to spend on holiday gifts!
Oh, and just so you know, it is growing very likely that whatever Congress decides on the tax cuts, payroll calculators may not have time to update by January 1st. So, keep that in mind as well, if you are on a payroll.
I hope this was simple and straight--as usual.
Thursday, November 18, 2010 Houston Estate Tax Lawyer Offers Gift Suggestion for Your Grandchildren
By Kimberly Hegwood, Houston estate tax lawyer
As your Houston estate tax lawyer, I’d like to ask how your holiday shopping is going? If you are like me you are trying your best to fit that in with all of the other holiday planning and day-to-day obligations. What if I told you to skip the malls when looking for a holiday gift idea for your grandkids? What if you give them a family limited partnership instead?
Huh?
Let me explain…
While the estate tax lapse seems to be hogging the spotlight this year, there is also a lesser-known gap that is offering many people a tax-free way to pass on some of their wealth to their grandchildren.
The generation-skipping transfer tax, or GST, has also been repealed for 2010. This means that you can leave outright gifts to your grandchildren as long as those gifts meet certain conditions. The definition of a “gift” is fairly broad, but one way to take advantage of this is to set up a partnership and then give away units to your grandchildren. This will mean that you can put funds into a family limited partnership and transfer them tax-free but also transfer it in a way to keep the kids from getting control of the assets all at once and possibly squandering them.
The GST is different than income, estate and gift taxes. The purpose of this tax is to keep people from transferring property many generations down without paying any tax. So, the GST is imposed if the transfer avoids gift or estate tax.
So, say a man dies with a large estate and leaves his property in a trust with the income payable to his children. At his death, his trust assets go to his children. The man’s estate would then owe estate tax. But when his children die, the trust property would not be taxable in their name so the family will have avoided paying for a generation of estate tax. In this instance, the GST would apply.
It is important to point out that the GST applies to anyone, not just family, so this would apply to unrelated beneficiaries as long as they were at least 37 and one-half years younger than the deceased.
There are limits to what you can exempt in generation skipping gifts and you are only allowed to use them in certain circumstances. So, it is important to talk to an experienced Houston estate tax attorney when considering this.
So, as you are pondering your holiday list you might want to consider this for your grandchildren. This will be a gift they will remember (and thank you for!) for the rest of their lives! Wednesday, November 03, 2010 Houston Estate Planning Lawyer Discusses Your Mid-Life Financial Checkup
Generally speaking, many wise adults see a doctor when they hit 50. And the great thing about (most) doctors, is that they are not financially-incentivized to advise you towards a specific course of action.
Would that were true about financial advisers.
So, I thought I would take the time this week to give you an objective, "incentive-free" look at what your finances should look like when you hit the half-century mark. If you are close to that mark, I thought it might be useful for me to lay out the "perfect" scenario.
And look--if you are not perfect, at least let it be a benchmark...
We should have been saving and investing 15% of our income regularly. Even if we don't want to retire until age 70, by 50 we should be well on our way toward securing our retirement. We have managed to save about eight times our annual lifestyle spending. With a $100,000 per year lifestyle, that means we should have saved about $800,000 toward our retirement.
We are probably at the point where our children are in college or have recently graduated. When college funding is complete, it is time to reevaluate and perhaps drop term life insurance coverage depending on our individual circumstances. We purchased the insurance to make sure our children would have enough money to complete their education. When term premiums rise and college accounts are fully funded, we should probably drop our coverage.
[In this point, I am, perhaps, speaking non-objectively. But this is simply an objective truth.] Our estate plan should be in place and fully implemented. And, of course, various assets are handled differently. This is the time to make a complete review of how our plan is put together, to ensure that EVERY asset (not just the tangible ones) are still handled properly.
And, for you "imperfect" savers, we have one last chance after children and before retirement to catch up. Age 50 is the first year we are allowed to take advantage of increased savings and catch-up provisions. Maximum savings in a 401(k) or 403(b) account increases from $16,500 to $22,000 at age 50. Roth contributions also increase from $5,000 a year to $6,000. If we don't have eight times our lifestyle spending saved, now is the time to press these limits.
Of course, saving well is half the battle; investing well is the other half.
That is a subject about which I will have to point you in different directions. If you would like a good recommendation for a competent financial planner, let me know!
Of course life is too short to ignore meaning at any age. But for many people 50 is a milestone that reminds us to stop and reevaluate. There is still time for a whole new life of significance.
Financial independence can open exciting possibilities that were otherwise out of the question. If we don't need the money, we are free to do anything with our lives. People of purpose usually don't choose 28 years of recreation. Not when we finally have the time and the wisdom to make a difference in the world.
And counting retirement as a new career is a perspective I would encourage as a Houston estate planning lawyer. When you reach the point in your life where you can celebrate the freedom to work instead of the freedom from work, that is success. If just a fraction of people in the second half of life turn their experience, time and talent to our nation's most pressing challenges, imagine the progress we could make.
Although you can have that attitude at any age, it is especially powerful when redefining the second half of your life!
Here's to meaningful evenings. Wednesday, July 28, 2010 Houston Special Needs Planning Lawyer Reveals How to Plan Your Family's Wealth Around a Child With Disabilities
From the desk of Kim Hegwood: Houston Special Needs Planning Lawyer
Here is the standard thinking, in regards to setting up your affairs with children who have special needs:
Families realize that they have to support these children for the rest of their lives. So, they typically write wills and take out significant term life insurance policies. They are careful to name a trust as the beneficiary, because if their child has more than $1,000 in assets upon reaching age 18, he/she will no longer be eligible for some government benefits.
However, while these families are indeed on the right track, parents with special needs children also need to:
1. Set up a second trust. The purpose of this additional trust would be so that friends and family members can contribute to the child's care while the family is still alive--without causing the child to lose eligibility for federal disability benefits.
2. Increase savings. These families need a much larger emergency fund than most, and they also need to create a "reserve fund". They should concentrate on savings--rather than paying off debt--especially if interest rates on loans are low.
3. Plan for three retirements. These families not only have to plan for their retirements, but also for the child's long-term care. They should maximize their savings and take an aggressive approach with their portfolio to maximize returns over the long run.
While I am not a financial planner, per se, I thought that these tips were so important that if you find yourself in this situation, you should raise them with your professional advisor.
And, of course, there's this:
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+++++++++++++++++++++++++++++++++ Tuesday, July 06, 2010 How To Achieve Financial Independence
Because this economy has thrown so many family financial plans into chaos, we can focus so much of our energies onsurviving this storm--and forget that what we are really seeking to accomplish in wealth-building requires us to keep our head on straight, and to avoid all of the negativity which surrounds us.
After all, what is it we are trying to accomplish by earning wealth? For me - and for many others - the answer is Financial Independence.
Here is what I mean by that: "having an income sufficient for your basic needs and comforts from sources other than paid employment". Financial independence implies freedom. It is the condition of having saved enough money that you can do whatever you choose. Whether you elect to keep working doesn't matter - you have enough saved and invested to follow your dreams.
But is financial independence just a pipe dream? Is it something only for the lucky and the strong?
No, it is a goal that anyone can fulfill as long as they are armed with some basic knowledge; as long as you make the smart choices.
As I see it, there are four keys to accumulating wealth:
1. Start investing as early as possible. It takes significantly less money to accomplish what you want, and you have more time working for you.
2. Be determined to save on a regular basis. It is an easy way to accumulate wealth.
3. Begin investing with the largest possible sum you can. You will have more money working for you over a longer period of time.
4. Reach for the highest rate of return you believe you can safely receive on your money over time. Each additional percent is important. The higher the rate, the less money it takes to accomplish what you want.
Financial independence is built upon these four guidelines. Now, of course this is all more easily said than done! So, let's examine what keeps us from doing this!
Confronting your financial challenges
In order to save money, you must obviously fight to keep from spending it too much! I encourage you to set goals, to actively prioritize wants--and not just make willy-nilly decisions about what you are spending.
To do this, it may be helpful to place a value on each of your wants. So...here is an exercise for the week: Pull out a piece of paper and list your wants.
Depending on your income and net worth, these can range from a new house to a hot tub to a trip to London to a new blender for the kitchen. Next to each item, write why you want it. (You might want a hot tub, for example, because it would allow you to relax with family and friends.)
When you have finished, take another piece of paper and re-order the list based on how important each want is to you. If a trip to London tops the list, are you still willing to delay it by spending $100/month for that gym membership you rarely use?That's how you can use this list of prioritized desires.
Confront this issue first (keeping in mind those four keys mentioned above), and I will be back with more thoughts for you next week. Wednesday, April 28, 2010 Houston Probate Attorney Reveals How Long You Should REALLY Keep Personal Records—and WHY
From the Desk of Kim Hegwood, Houston Probate Attorney
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Have you ever seen those television specials about "hoarders"? These are the people who amass incredible amounts of stuff in their homes--often because they have experienced some kind of trauma or pain which drives them to become emotionally-attached to every scrap of their material possessions (or even trash).
I watched one of these stories recently...and they can break your heart. These folks seem to need much more help than the typically-prescribed professional "organizer". The roots just run so deep. But, it did help my daughter clean her room!
Well, as a Houston probate attorney, I wanted to let you know that family financial records should also go through a "cleanse" from time to time, and after tax day is a good time to take it up.
(By the way, i'd be remiss as a Houston probate attorney if I did not say that this is something for every generation, even--and perhaps, especially--loved ones who have passed on. There is a rising tide of identity theft among the deceased, and financial records are a big reason why.)
So, I have put together a good primer for you on the subject, as well as some quick advice about what to do if you find something that can affect you NOW, as occasionally happens. So let’s dive right into:
What To Do With Your Records (& Why)
Now is the best time to get rid of unnecessary paperwork, as well as to ensure that you and your accountant caught everything for your '09 tax return.
But before I get to what to do if you find something pertinent to your recently-filed tax return, here is a guide for how long to keep your records...
Taxes: Seven years
Reasons Why:
There are three, actually:
1) The IRS has three years from your filing date to audit your return if it suspects good-faith errors.
2) The three-year deadline also applies if you would like to make some sort of amendment because you discover a mistake in your return and can claim a refund.
3) The IRS has six years to challenge your return if it thinks you underreported your gross income.
All this adds up to keeping that info for seven years. Beyond that, there is no reason--except for posterity.
IRA contribution records: Permanently
Reasons Why: You will need to be able to prove that you already paid tax on this money when the time comes to withdraw.
Bank records: Usually just one year
Reasons Why:
Those related to your taxes, business expenses, home improvements and mortgage payments will obviously need to be included for next year's taxes. But unless there is some sort of emotional or posterity reason, get rid of everything after one year.
Brokerage statements: Until you sell
Reasons Why:
To prove whether or not you have a capital gain or loss for tax purposes; after this point, shred it.
Household Bills: From one year to permanently
Reasons Why:
When the canceled check from a paid bill has been returned, you can shred the bill with a clear conscience. However, bills for big purchases -- such as jewelry, rugs, appliances, antiques, cars, collectibles, furniture, computers, etc. -- should be kept in an insurance file for proof of their value in the event of loss or damage.
Credit card receipts and statements: 45 days/Seven years
Reasons Why:
Some families do not even bother to match up their statements, but if you do so, shred the receipts once you have verified everything. There is no reason to keep everyday receipts beyond this point. For tax-related purchases, you need only keep the statements for seven years--after that, shred it, baby!
Paycheck stubs: One year
Reasons Why:
This is to verify that when you receive your annual W-2 form from your employer, the information from your stubs match. If so, shred all of the stubs...if not, request a corrected form, known as a W-2c. After that has been handled--shred.
House/condominium records: Six years/permanently
Reasons Why:
You will want to keep all records documenting the purchase price and the cost of permanent improvements -- such as remodeling, additions and installations as well as records of expenses incurred in selling and buying the property, such as legal fees and your real estate agent's commission, for six years after you sell your home.
Holding on to these records is important because any improvements you make on your house, as well as expenses in selling it, are added to the original purchase price or cost basis. Therefore, you lower your capital gains tax when you sell your house.
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Now, in this cleansing process, sometimes, you will find a receipt or a documentation which really would have changed your prior year tax return. That is when you might have your preparer file an "Amended Return". However, this decision should be balanced against the cost of doing so, as well as the expected benefit--often these items can be dealt with the following year.
But here are some other, common reasons to amend...
* You neglected to report some income earned.
* You claimed deductions or credits you should not have claimed.
* You did not claim deductions or credits you could have claimed.
* You filed under one filing status, but you should have filed under another.
* You bought a residence and did not claim the First Time Homebuyers Credit (or other credits available).
These are items to take up with your accountant.
I, as a Houston estate planning attorney, am simply providing you here with common-sense advice about what to keep, and what to shred. Let it be a cleansing process for you, and sleep easy knowing you have handled this stuff properly!
Oh, and make sure you use a good shredder! | |
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Hegwood & Associates assist clients with Estate Planning, Wills, Trusts, Pet Trusts, Special Needs Planning, Asset Protection, Elder Law, Veterans Benefits and Probate/Estate Administration in Houston, Texas as well as Webster, League City, Seabrook, Kemah, Pasadena, Friendswood, Dickinson, Bacliff, La Porte and Deer Park in Harris County and Galveston County.
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