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, 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
+++++++++ Tuesday, December 28, 2010 Houston Asset Protection Lawyer Discusses Generation-Skipping Gifts Opportunity
By: Kimberly Hegwood, Houston Asset Protection Lawyer
The practice of giving (tax-free) gifts to your children, in advance of estate transfers, has been around for a while. But any gift of over $13,000 has always been subject to the "Generation-Skipping Transfer Tax". This tax was set up in the eighties to prevent asset transfer for the purpose of avoiding said estate tax. It is typically the same rate as the estate tax. So, any gift over $13K would be taxed at those rates.
But not right now, it's not.
You heard me right.
With the (recently-signed) tax agreement, the tax rate is ZERO for any "generation-skipping" transfer made by 12/31/10.
Now, this won't apply to everyone, of course, but this is a welcome opportunity for the right situation. And you will need to act quickly, because beginning January 1, 2011, the tax rate for these transfers will be 35% (the same as the new estate tax rate). Further, that rate is set to go back to 55% in two years, unless Congress changes it again.
The best part? Even if you don't yet have grandkids, you can take advantage of this "loophole" by setting up the right vehicles now.
But you will have to act quickly. These sort of moves are what we routinely "pull off" on behalf of our Houston Asset Protection clients, and if you contact us quickly (281-218-0880 or by sending me an email), we can put the papers together to make it happen for you.
Again, this won't apply to everyone ... but if you think a friend might be interested, feel free to send them this article and have them contact us.
And, on the early note -- let me wish you a premature Happy New Year, 2011!
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! Tuesday, October 19, 2010 Houston Estate Tax Attorney Reveals Do-It-Now Tax Moves, And More
By Kim Hegwood: Houston Estate Tax Attorney
Since so many tax issues are up in the air right now, as a Houston estate tax attorney, I believe you should organize your tax moves into three categories: those you should do now, those you can decide last-minute in December, and Roth conversions.
If you have "income flexibility" in any way, your list should include:
"Do-it-Now" Moves from a Houston Estate Tax Attorney
* Make a maximum contribution to your 401(k), which is $16,500, or $22,000 if you are 50 or older this year.
* Sell taxable bonds now and pay the capital gains tax at 15% rather than a much higher rate in 2011.
* Make gifts of the annual exclusion amount.
"Do It Soon" Moves from a Houston Estate Tax Attorney
* Prepare to give away large sums of money late in December. This year the gift tax is only 35% and there is no "Generation-Skipping" inheritance tax. However, you don't want to make taxable gifts now just in case Congress reinstates the GST tax retroactively.
* Identify possible charitable contributions for deductions purposes. If taxes go up next year, you will want to defer these deductions.
* Accelerate your income if possible. If it looks like taxes rates will rise, you will want to take in as much as possible in 2010 rather than 2011.
The Roth Do-Undo
This year, taxpayers can convert regular IRAs into Roth IRAs. There are many considerations in this decision, so do give us a call about it, if you are considering it (281-218-0880).
Good news: If you convert now, you have until October of 2011 to undo the conversion or decide whether to pay taxes in 2010 or 2011 and 2012.
After all, with Congress putting so many key tax decisions off, this kind 20-20 hindsight could come in handy.
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