Patricia Annino’s Latest Book – “It’s More Than Money” Released

Front CoverIs each generation of your family aware of the “family brand” – the foundational values you want them all to share? Have you discussed the objectives – in business or philanthropy or investments or family activities – that will translate those values into a family plan?  Do you have the enabling structure (legal estate and business planning documents,  financial investments and the team of advisors) in place to carry out the plan?

Most families cannot answer “yes” to all these questions.

Directed at the “Captain of the ship” the head of the family, but written in a way that is accessible to all interested family members,  It’s More Than Money: Protect Your Legacy explains how to:

* Focus on what your values are,

* Align those values with your goals,

* Work with your team of advisors to put in place the legal documents and financial framework that will…

* Protect you, your family, your charities and your legacy.

It’s More Than Money: Protect Your Legacy is both a how-to-do- it blueprint and a handbook designed to provoke family discussion, understanding and unity.

To get your copy visit:  http://www.amazon.com/Its-More-Than-Money-Protect/dp/1494847396/ref=sr_1_1?ie=UTF8&qid=1397140464&sr=8-1&keywords=patricia+annino

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

 

 

 

 

 

 

 

Estate planning for valuable art (Part Two)

Lessons Brooke Astor could have used.

To continue our discussion from May 22.  Here are several additional options and considerations you may find appealing.

CRATs and CRUTs

The donor may determine how the income interest will be calculated with a CRT. There are two types of CRTs: the charitable remainder annuity trust (CRAT) and the charitable remainder unitrust (CRUT). The CRAT is designed so that the actual dollar amount distributed to the donor (and/or the other persons the donor designates) are fixed when the trust is created and funded. Generally the predetermined annuity amount will not change no matter how the trust assets fluctuate in value. A CRAT can be appealing to the donor who needs a specific amount of income and who is concerned about a change in income payments.

A CRUT is designed so that the amount distributed to the donor is recalculated each year based on a fixed percentage of the trust’s fair market value for that year. Unlike the CRAT, the CRUT is not a fixed annuity payment. The fixed percentage will not change; however, the amount that the donor receives can fluctuate. If the CRT performs well and the trust assets increase in value, so will the income interest payment, which is calculated as a fixed percentage of the increased trust value. However the reverse is also true, and if the trust decreases in value, the income interest will also be affected. A CRUT is appealing for the investment-minded donor who wants to benefit from increased income payments resulting from the long-term appreciation of the trust assets. There are various types of CRUTs, which should be explored in greater detail before the client makes a final decision.

A disadvantage of using a CRT for art is that because art is personal property, the income tax deduction may be limited significantly. In addition, when a charitable contribution consists of a future interest in tangible personal property, no deduction may be taken until all interests and rights to possession or enjoyment of the property have expired or are held by a person other than the donor (Sec. 170(a)(3)).

The tax benefits of transferring art to a CRT and later selling it include avoiding the capital gains tax on the sale of the asset and removing the underlying value of the asset from the donor’s taxable estate. Of course, the reason that the art is removed from the taxable estate is that it is no longer owned by the donor. For that reason, some donors couple the use of a CRT with what is known as an irrevocable life insurance trust. When used together, these tools replace the art’s value and keep that value out of the donor’s taxable estate.

Trusts

The client may also choose to make a gift (lifetime or at death) of the art to family members in trust. If the client wishes the art or collection to stay with intended beneficiaries, he or she can establish an irrevocable trust and transfer the collection to it. That will protect the assets from the creditors of the beneficiaries and preclude its value from being taxed in the client’s estate. If doing so, it is advisable to add enough funds to that trust to insure and maintain the art. Choosing a trustee must be carefully considered as the trustee or trustees will have the continuing ability to manage the trust assets, including the art.

Fractional Interests

A gift of a fractional interest in art should also be considered. However, the Pension Protection Act of 2006 (PPA) greatly limited the value of this strategy. Until passage of the PPA, a collector could donate a fractional interest in a work of art to a museum that qualifies as a charitable institution. Collectors did so for many reasons, one of which was that they could take a tax deduction for the value of the fractional interest. For example, if a collector donated a 50% interest in a painting to a museum, he or she could write off half the value as a charitable deduction. The painting would spend half the year in the donor’s possession and half the year in the museum’s. Unfortunately, this led Congress to be concerned that collectors may have been abusing the write-off by enjoying more than their rightful share of the art. For example, if a collector donated 50% of the art but kept it for more than six months a year, the public would be losing out on the painting’s availability during the excess period.

To address this perceived abuse, Congress changed the law to make donations of partial interests in artwork much less attractive for donors. Generally, before the PPA, the collector would bequeath the remainder of the fractional interest to the museum so the collector’s estate would take a charitable contribution deduction for the remaining current fair market value at the time of the collector’s death. But the PPA changed the law to require that the write-off be based on the art’s value at the time the original fractional interest was donated if the art appreciated in value, rather than on its value at the time of the collector’s death. If the art’s value has appreciated in that period, as it typically does, the law will reward the collector by reducing the amount his or her estate could take as a deduction for the donation and thus increasing the estate tax liability.

Consider the example of a painting worth $1 million when the collector first donated 50% to the museum. The collector bequeaths the remaining 50% of the painting when she dies, at which time it is worth $10 million. Under the old rule, the painting would pass to the museum and the estate would take a $5 million charitable contribution deduction. Under the new law, her estate may only deduct $500,000 and the estate would have to pay taxes on $4.5 million more than it would have under the old law.

The PPA also introduced recapture rules (deductions turned back into taxable income) that further reduce the desirability of contributing a partial interest in art. If the collector fails to donate the balance of the art to the museum on or before the earlier of 10 years of the original gift or the collector’s death, the collector will be forced to recapture the deduction. In addition to paying income tax and interest on the recaptured amount, the collector must pay an additional 10% tax on it. This essentially requires the collector to donate or bequeath the remaining fractional interest or lose the tax benefit of the original gift.

Conclusion

If the client has valuable art, it is important that he or she assemble a team of advisers that understands how to deal with it. The team may include an attorney, financial adviser, tax specialist, and an art succession planner. It is wise to make sure that the team members know the extent and value of the art and how the client intends to dispose of it so that it can properly be taken into account when establishing a financial and estate plan.

The decisions and choices as to how to preserve the legacy of artwork should be thought through with care and involve a discussion with the client, the intended beneficiaries, the charitable organization, and the team of advisers.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Patricia Annino Receives “Best in Wealth Management” Award

The Euromoney Legal Media Group chose Patricia Annino, Chair of Prince Lobel’s Estate Planning and Probate Practice Group, to receive the prestigious “Best in Wealth Management” award at the second annual Americas Women in Business Law Award ceremony held May 24, 2012, in New York City.

Selected from a short-list of eight well-known, highly-qualified nominees, Patricia’s award was based on extensive peer review research conducted by Euromoney’s research team, her professional accomplishments during the past 12 months, and her advocacy and influence in the field of wealth management.

Following the success of similar award ceremonies in Europe and Asia, the Americas Women in Business Law Awards was launched by Euromoney Legal Media Group to give law firms and professional services firms the recognition they deserve for their efforts in helping women advance in the legal profession.

Patricia Annino is a nationally recognized expert on estate planning and taxation, with more than 25 years of experience serving the estate planning needs of families, individuals, and owners of closely held and family businesses. She speaks regularly on many issues of concern to family owned businesses, including succession planning, risk management, managing a business with multiple stakeholders, the risk of divorce, and more. Annino is a graduate of Smith College and Suffolk University School of Law.

Patricia is the author of two widely utilized professional texts: Estate Planning in Massachusetts, and Taxwise Planning for Aging, Ill, or Incapacitated Clients. Patricia’s recent books for consumers include, Cracking the $$ Code: What Successful Men Know and You Don’t (Yet), Women in Family Business: What Keeps You up at Night, and Women & Money, A Practical Guide to Estate Planning.

About Prince Lobel

Prince Lobel Tye LLP is a full-service law firm providing a wide range of services for Fortune 1000 companies, closely held businesses, and individuals. Prince Lobel’s attorneys are guided by the highest standards of legal excellence, professionalism, and service – whether they are addressing complex business issues or providing advice on personal legal matters. Practice areas and industries served encompass corporate law, data privacy and security, domestic relations, employment law, estate planning and probate, insurance and reinsurance, intellectual property and Internet law, litigation, media law, nanotechnology, real estate, telecommunications law, construction law, environmental law, renewable energy, health care, and education. For more information, visit Prince Lobel at PrinceLobel.com.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Gifting Ownership of the Vacation House: A Gift or a Curse?

Ben Franklin once said that fish and houseguests smell after three days. But what if the houseguest co-owns the house? The perils of the vacation home, what to do with it, who should own it and what the rules are can be a source of family satisfaction and family conflict.

Under current law, the 2012 federal gift exemption is $5,120,000. Since many parents and grandparents are uncertain of their economic future, they may not want to gift assets that still earn income. Nor do they want to give away assets that have a low income tax basis that may be sold in the future. For these families, the vacation home is an attractive asset to consider gifting.

Gifting the vacation house to the next generation, or to a dynasty trust for the benefit of subsequent descendants, can remove that home (and any appreciation in its value) from the taxable estate. But before heading down that path, homeowners must carefully consider how that home will be owned post transfer.  We will explore three options: (i) outright ownership, (ii) an irrevocable trust (which could be a dynasty trust), and (iii) a family limited partnership or a limited liability company.

Outright Ownership

Often, the choice of making an outright gift of the vacation home is not appealing, whether the next generation owns the property as tenants in common, or as joint tenants with a right of survivorship. Many states have the right to compel a sale of that asset through a court proceeding, so the ownership of the home may be divisible in a divorce and subject to that family member’s creditors.

Also, family issues and resentments may develop with co-ownership. The child who lives out of state and never uses the home may resent sharing the expenses. Plus, with each generational transfer, the ownership becomes more fractionalized and the ownership of the asset is included in the taxable estate of each subsequent generation. There could also be conflict, such as who uses it the week of July 4th? Who pays for maintenance? Should rent be charged to cover expenses?

Irrevocable Trust (could be a dynasty trust)

A more appealing option for many families is transferring ownership of the home to an irrevocable trust. To complete the gift, the trust must be irrevocable, meaning that the donor cannot retain the ability to change, amend, or revoke its terms. The art of drafting an irrevocable trust is to remember that life is a movie not a snapshot, and that the document, while irrevocable, must also be flexible enough to contemplate the future.

The trust should address what happens to the child’s share at his or her death, whether or not the child’s spouse or stepchildren can continue to use the property in a divorce, or if the child predeceases his or her spouse. It should also address who is responsible for paying expenses, the line of succession of trustees, how the home should be furnished or updated, whether nonpaying guests may use the property, and who sets the rules for using the property.

Reasonable rules include who can use the property and when, the process for how that determination is made, whether use can be exclusive or must be open to all families all the time, payment of operating expenses, noise, cleanliness, pets, number of people, who pays for landscaping, parking, whether the property can be rented to nonfamily members, and other issues affecting the use and enjoyment of the property. The trust document can also address who has the right to determine the operating reserve and when income and/or principal may be distributed to the beneficiaries.

It may be also helpful for the donor to state intent – perhaps the use of the property is not intended to be equal, but based on relative degrees of interest in and ability to enjoy the property, and to take into account relative contributions (financial or otherwise) to its maintenance and improvement.

The document may also include a buyout provision by which one beneficiary (or beneficiary’s family) can sell his or her interest to other family members. Many families do not allow family members to cash out of their share in the home. An advantage to restricting what a family member can do to convert his or her share to liquid funds provides additional creditor protection and also helps keep that interest out of the taxable estate of subsequent descendants.

The trust should also address the mechanism by which a decision can be made to sell the home – should a decision that important be left only in the hands of the trustee? Should it include the trustees and all adults in the next generation? Should the vote be by majority or unanimous? The tension in that choice is that one family member who wants to use it more than others may block the sale for personal gain.

It is important to fund the trust with enough liquid assets to cover ongoing expenses and trustees. Future family discord might be avoided if family members who do not use the property are not expected to help cover its expenses. The funding can occur during the donor’s lifetime or at his or her death, through the donor’s estate plan. Once the property is transferred to the trust, the trustees should ensure that the property has sufficient property and casualty insurance coverage.

The trust document should also address the duration of the trust. It could end at a certain date, when the underlying asset is sold, when the trustees decide to end it, when the trustees and all adult beneficiaries agree to end it, when the Rule Against Perpetuities Period ends it, or if it is governed by a state that does not have any Rule Against Perpetuities, then it may never end.

Family Limited Partnership or Limited Liability Company.

A third choice is transferring the home to a family limited partnership or limited liability company, where the terms of the operating agreement control how the property is used. These entities are more businesslike than a trust, as they are members or partners. They offer the same benefits of the irrevocable trust, but may be more flexible. The operating agreement can provide a mechanism that allows it to be amended. If the entity is underfunded, the manager or general partner can make a capital call on the owners to contribute additional funds to the entity. As with the trust, the agreement will appoint a manager or management committee. The ownership structure can have two classes- voting and nonvoting. The transfer of ownership through sale or gift can be restricted.

Another benefit to gifting in this manner is that the valuation of the gift may have additional leverage and qualify for minority discounts or lack of marketability discounts. If the gift is not made all at once – but rather over several years – then all gifts are made off the record of the respective Registries of Deeds. In other words, the transfer to the entity is recorded initially, but ensuing gifts are transfers of the units or shares in the entity and are done within the entity itself, not in the Registry. This can save annual recording fees.  Additional benefits include income tax consequences in that each owner may have the benefit of the income and deductions flow through to his or her individual income tax returns.

Summary. Gifting the vacation house this year while the federal exemption is so high may be a very wise move. It is important for clients to think through their choice of entity and the considerations mentioned above before making this irrevocable decision.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com

Donor Education – Why Effective Donor Education Programs Are Important

One of the most effective ways to educate donors and help them achieve financial literacy is through sustained and focused donor education programs. The process of understanding the power of philanthropy and how it works best for a donor’s goals and objectives takes time. When donors learn together, share their ideas and understand what other donors have done and are doing, they become more comfortable with the process.

Donor education programs which focus on philanthropy and related topics, such as financial issues for women, can teach both men and women how to achieve the joy of giving while living. Your institution can incorporate into the donor education event faculty and student presentations which integrate messages into the mission of your institution. These programs can help differentiate/distinguish your institution and create deeper relationships with donors, alumnae, and alumni spouse (Women’s Philanthropy Institute 2009, 15). (8)

Effective donor education, combined with financial literacy, can also provide networking opportunities. Associating with women of similar financial standing increases their willingness to use their money to leave a legacy. This is especially relevant for women who are learning to be comfortable with their wealth. Many baby boomer women in this country will inherit twice—once from their parents and once from their spouse.  Nevertheless, donors will not give until they know that they can take care of themselves first. As an estate planning attorney, the most common question I hear from a new widow is, “Do I have enough money to live on?” (Of course that question should be asked many years before that moment in time.) Taking the time to systematically educate your women donors, to help them achieve financial literacy, to teach them that by gifting they can reap both current and future rewards will help empower them to act when they receive their “double inheritance.”

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Donor Education and Financial Literacy – The Series

Educated donors who are financially literate understand why they are giving. Education leads to empowerment. Empowerment leads to action. Integrating an effective financial literacy and donor education program into your institution’s goals and objectives is a mandatory component of an overall philanthropic plan.

 

Why Financial Literacy Is Important

Financial literacy adds significant value to donor education because it helps donors make the most of their wealth through giving.  Financial literacy has been defined by The Organization for Economic Co-operation and Development (OECD) as  “the process by which financial consumers/investors improve their understanding of financial products, concepts and risks; and, through information, instruction and/or objective advice, develop the skills and confidence to become more aware of financial risks and opportunities, to make informed choices, to know where to go for help, and to take other effective actions to improve their financial well-being” (http://www.oecd.org/dataoecd/0/41/42271820.pdf).

Research suggests, however, that most Americans have extremely low levels of financial literacy, and that their lack of financial literacy has an impact on philanthropic giving.

Analyses show that, regardless of the actual financial resources held by donors, the size of their donations is negatively affected by feelings of retention (a careful approach to money) and inadequacy (worry about their financial situation).

It can be concluded that an understanding of money perceptions is an additional important factor in the understanding of charitable behavior. Since most people do not know how much they can afford to give based on their income, financial literacy can result in higher giving—once donors know the amount that they can afford to give based on their income, they can increase their giving. Given these findings, fundraising professionals should not only select potential donors based on their absolute financial capacities, but also take the potential donor’s own financial perceptions into account when asking for donations. (Wieping and Breeze, 2011, 1)

Next week: Why Effective Donor Education Programs Are Important!


Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

New Risks to Wealth Management: To Gift or Not to Gift

Traditional risks related to the family’s wealth (including financial, intellectual and social assets) include the illness or death of the key family stakeholder, economic downturn and changes in the regulatory or legal environment. New risks are triggered by the dissipation of wealth due to generational mathematics—with each ensuing generation, the wealth is splintered—and the lack of creation of new wealth; this very turbulent economic time; the increased complexity of legal and tax matters; and the increased complexity of wealth management choices. These risks can be mitigated when the family coordinates its advisors and monitors the integration of all professional services.

The risks are further mitigated when the family embraces and encourages financial education and financial literacy across the generations. Mentoring, shadowing, exposure to the concepts and resources along the generation continuums reduces the chances for unintended consequences.

New Risk: The Bracket Game:  To Gift or Not to Gift…That Is The Question…..

On December 17, 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the Act). The Act significantly changes the federal estate tax, which impacts estate planning for many and presents significant estate planning opportunities. The biggest surprise in the new law is the ability to give $5,000,000 of assets away now and remove those assets and any appreciation in their value from the donor’s taxable estate. In a marriage, this doubles the amount to $10,000,000. This law is in effect until December 31, 2012, and it is unclear what the state of the law will be from 2013 on.

This significant increase in the gift exemption adds to the donor’s ability to gift the annual exclusion of $13,000 each year and the donor’s ability to pay anyone’s tuition and medical expenses as long as payment is made to the provider.

The Act has prompted spirited discussions, “Well, now that I can really give that much, should I? What are the non tax risks to making those gifts?”

     Factors to consider when deciding whether to gift or not to gift:

1.     How much is enough?

This question is always worth discussing. Warren Buffet’s answer is, “Leave your children enough money so they can do anything, but not enough that they don’t have to do anything (although Buffet did not leave his children the bulk of his fortune, he did leave each of them a foundation of $1billion dollars to give to the charities of their choosing).  In my experience, the answer depends upon the individual, often changes over the lifetime of the donor and has to do with his/her children and the economic times.

2.     What strings do I want on the gift?

Whatever the amount, you must decide how much control there    is over the gift. Is it to be given outright? In trust? Who is the trustee? How long should the trust extend? What are the terms of distribution? Who are the permissible beneficiaries?

3.     Should I leverage the gift?

In addition to the strings that you want to impose on the gift, you should also address leverage. If you make a gift that is eligible for a minority or marketability discount, that increases the value of the gift by at least 20%. If you fund an irrevocable trust and anticipates that the trustee will use the funds to make annual life insurance premium payments, then significantly more may be added to the trust through leverage than if the gift were to be invested along more traditional methods.

4.     Am I willing to assume the risk that the gift, once given, is gone?

What if the donee becomes divorced or has creditor issues during the donor’s lifetime, and the gift is jeopardized? Can you live with that consequence? The cascading effects from a gift can have far reaching consequences. For example, if the donor parent gifts 20% of the stock in his closely held business to his children; and one of the children becomes divorced, it is not just that the child’s interest in the business may be vulnerable. Even if it is not vulnerable, the divorce court also has the right to order the valuation of the child’s interest in that business. To do that means valuing the business in its entirety;  and having that asset valued in a hostile environment—where the ex-in-law’s lawyer will try to value that as high as possible—will in all likelihood be in direct opposition to the donor parent’s valuation and appraisals for estate planning and transfer tax purposes. In addition, if the donee child is ordered to pay alimony or child support, then the income from the gifted asset will be taken into account when the court establishes the dollar amount. If the income is phantom income, which the child donee does not actually receive, that can present additional complications and litigation.

5.     Am I willing to give up the “fruit as well as the tree”?

In most cases, the fruit and the tree—meaning the income and the principal—go hand in hand. For example, are you ready to give away 20% of the underlying asset, knowing that the corresponding 20% of the income which is attributable to that asset will also no longer be available to you?

6.     Have I considered gift splitting?

Gift splitting—where one spouse makes the gift, and the other gives consents to that gift—is a very effective estate planning technique for the second marriage couple. Frequently, in that case, one spouse is wealthier than the other. If the less wealthy spouse does not have $5,000,000 of assets in his/her own right, then using the less wealthy spouse’s $5,000,000 exemption in full or gift splitting, with the wealthier spouse giving his/her assets to his/her own children can be a very creative technique. In effect, it doubles the amount that can be gifted. When considering this technique, especially if there is a prenuptial agreement or postnuptial agreement in place, care should be taken to protect the estate of the less wealthy spouse who consented to this gift or allowed the use of his/her $5,000,000 exemption.  The possibility that the exemption could decrease later, resulting in additional estate taxes in his/her estate to his/her beneficiaries, should be thought through and discussed.

7.     Should I gift more than the $5,000,000/$10,000,000 exemption and incur the 35% gift  tax?

For many very wealthy individuals, this is a question to consider seriously. The gift/estate tax rate has not been this low in eight decades. The difference between a tax exclusive gift and a tax inclusive bequest is significant at the higher dollar levels, and exploring this (especially if the underlying assets have significant growth potential or discount opportunities) should be an option.

 Solution: Creation of a Family Risk Management Policy Statement:

A solid family risk management policy contains the purpose, principle and procedure for implementation. The purpose of a family risk management policy may be to reduce the risk for family members, both individually and as a whole. Adherence to the policy would go far to protect the family’s human and financial assets and minimize potential liability. The principle of the policy may be to make clear that the responsibility is to identify the areas of high risk and to do whatever possible to mitigate that risk. The procedure of the policy may make it clear that each family member is expected to:

  • Achieve financial literacy with regard to his or her own wealth as well as the wealth of the family enterprise.
  • Draft and have both parties sign a pre-nuptial agreement.
  • Contact their insurance providers annually to review their insurance coverage to ensure that they are current and adequate.
  • Have in place basic estate planning documents: will, revocable trust, health care proxy, power of attorney for financial assets.
  • Participate in the development of an investment policy that is aligned with the family’s shared values.
  • Protect the family’s reputation by learning how each individual’s behavior, both positive and negative, can impact the family’s reputation.

A family risk management policy statement is dynamic. It should be reviewed and adjusted as the risks that families face evolve and change.

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Patricia Annino Needs Your Help With Her Next Estate Planning Book!

I am writing a new book on the traditional and new risks that the family and the family owned business face.

Traditional risks have included the unexpected death or disability of key stakeholders; incomplete or out of date estate planning documents; incomplete or out of date corporate documents;  the lack of liquidity; the lack of a disaster plan; the lack of effective communication among key stakeholders; major changes in the competitive environment; the divorce or remarriage of a key stakeholder; out of date business valuations; the absence of an effective family governance policy; and the lack of an awareness of the boundaries between family and business.

In addition to these traditional risks, families and family owned businesses now face new risks, including the lack of privacy in the Google world; cyber attacks; the social media risk to family reputation; global dispersion of family members and its impact on effective communication; new attacks on  business valuation; pre-nuptial agreements and post-nuptial agreements; complex alimony calculations for the family business owner (taking phantom income into account); the baby boomer transfer of wealth; the speed of innovation; the impact of the increased working lifespan of the senior generation on succeeding generations; and the very turbulent economic times.

Over the next several months I will be asking you to provide me with questions, your stories, or areas of concern that would be most important to you through a polling system on this blog.  I would appreciate hearing any comments or thoughts you may have on these risks as I develop my book, so that I am able to provide the most up-to-date and beneficial areas of risk that would be helpful to you with your current or anticipated estate planning documents.

If you would like to share some of those questions or concerns now, please so do below.

Thank you Patricia Annino

 

Four Estate Planning Myths: Forget About Estate Taxes

Why Estate Planning is Important for All Clients

Many of our clients rely on the common myth that “estate planning is only for people who are richer than we are” to prevent them from taking that first step towards planning. That is not true. Putting an estate plan in place is important no matter what your client’s net worth is.

Why is that so many of us and our clients work our entire lives to make sure that we are secure and that our families are well provided for, and yet put so little thought into what would happen if we become disabled or die? Even Houdini could not escape death. It is normal to want to avoid dealing with the prospect of disability or death, but at the same time it is vital that we push forward and take the necessary steps to safeguard what we have accomplished during our lives.

Four Reasons Why Your Clients Should Act Now

Here are four reasons to encourage your clients (no matter how rich or how poor) to put their affairs in order now:

Reason 1: Estate Planning Is Not Just to Protect Your Client’s Family When They Die; It Is to Protect Your Clients While They Are Alive.

Estate planning today is far more than a Will. It addresses what happens if your clients become disabled or incapacitated. By showing your client how to put appropriate legal documents, such as a durable power of attorney and a living trust, in place with necessary safeguards, the estate planning process enables them to select who should be in charge of their assets if they are alive but lose the ability to handle their own financial affairs.

Most couples’ homes are their biggest asset, for example. Unfortunately, that asset will be frozen if one of them becomes disabled or incapacitated. If a husband and wife own their home jointly with a right of survivorship at the death of the first spouse the ownership of that home will pass to the surviving spouse. If instead, one of them becomes disabled or incapacitated and is unable to handle his or her financial affairs, then the house is frozen, since both signatures are required to transfer, sell, mortgage or deed the home. At death, a retirement planning asset is paid to the named beneficiary — normally the spouse. If instead, the plan-holder becomes disabled or incapacitated, that retirement plan is frozen, as only the plan-holder has the ability, during his or her lifetime, to make decisions concerning investments, hardship withdrawals and emergency loans.

The same thing is true for a single person. If your client becomes incapacitated and all of their assets are in their name alone, they will be frozen. If, however the couple had executed durable powers of attorney by which they gave each other the authority to handle those transactions then should one spouse become disabled or incapacitated the other spouse would have the legal authority to handle the transaction.

Reason 2: Estate Planning Should Begin When Your Clients Are Young.

Once your clients reach the age of majority, even if they do not have any assets, they should execute a healthcare proxy or healthcare durable power of attorney. In that document your clients may designate one person (and successors) to make their medical care decisions if they are unable to do so. They can change the document any time during their lifetime.

No doubt Terry Schiavo had no idea that at her young age she would experience serious medical issues. Because she had not expressed her intent in writing, Florida state law named her husband as her agent. Perhaps her parents would have had some comfort if they knew that she had selected him to make those decisions herself.

Designating a healthcare agent is equally critical in a second-marriage situation. Otherwise, if, for example the wife gets sick, both the adult child and the new spouse might end up vying for the right to make healthcare decisions for her. It is not fair to put them in that position, i.e., forced to negotiate in the middle of a crisis. The person who should make that decision is your client, and they should make it now.

If your clients are in a relationship with someone but they are not married, that person has no legal standing to make your client’s medical care decisions for you, or, in some states, even to visit you in the hospital. Executing a healthcare proxy or healthcare durable power of attorney can grant the person the legal authority to visit your client and to make those decisions.

It is important that your client write down the phone number of the healthcare agent in the document. After all, if they are in an accident, and it is a life-threatening situation, the healthcare professionals will want to call and discuss the situation immediately with the named agent.

It is also important to tell their healthcare agent that they have named him or her as their proxy. Make sure your client gives a copy of the document to their primary care physician and keeps a copy of it with their passport when traveling.

Reason 3: Nominating a Guardian to Protect Your Client’s Children.

If your clients have minor children, no matter what their net worth, they need an estate plan so they can choose the person who will make decisions concerning their children’s care, upbringing and education when they are not around to do so themselves. If your clients do not take the time to designate who should serve as their children’s guardian, they could be leaving that important decision to a stranger, probably a judge.

This is a decision your client not only wants to make themselves, but one they want to think through carefully. Raising someone else’s children is a tremendous responsibility and the choice of who should serve in that capacity takes time.  Your clients need a guardian who shares their value system, religious beliefs and attitude towards education. Ideally the guardian should also share your client’s money value system — what it is ok to spend money, and what it is not.

Making parental decisions is very subjective. We all have our own ideas on whether or not it is appropriate to send a child to private school, summer camp, vacations, purchase an automobile for him or her, put a down payment on a child’s home or pay for post-graduate education. Sitting down annually and writing a letter to the person your client’s has selected is a wise idea. The letter can be maintained with your client’s legal documents and replaced annually. That way, they can offer the guardian a guide to their child’s personality, such as what to watch out for and what to protect.

When choosing a guardian, if your client names a couple, such as their sister and brother-in-law, for example, then they must weigh the pros and cons. The “pro” side is since both will have the legal responsibility as guardians to make decisions, they will both feel involved actively in your child’s upbringing. If there is a medical emergency on the school playground, either one of them can act. Either one of them can attend school conferences. The “con” side is that if they divorce, your client’s child or children could be involved in a custody battle, or if one of them dies, the other, as legal guardian, has standing in custody matters.

Reason 4: If Your Clients Don’t Have an Estate Plan, Massachusetts, As the State in Which They Are Domiciled Will Write One for Them.

The laws of the state in which your clients live will dictate who receives any asset that is in their name alone. Many spouses are surprised to learn that in Massachusetts (and every other state) they do not automatically receive all of their deceased spouse’s assets. Any asset that is in your client’s spouse’s name will be split between them and their children.

Conclusion

It is an absolute must for you as the trusted advisor to raise the issue of estate planning now with your clients so that your clients can control the direction of their estate and ensure that their children, their own health and assets are taken care of in the way they would like it to be and not rest on others’ judgments.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently announced the release of an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  Annino’s book is an exhortation, resource and trusted companion for women in all facets of life.  To purchase the book visit:  http://amzn.to/hOHuEV or for more about Annino, visit: www.patriciaannino.com

 

 

Women And Money: 13 Strategies For Protecting Your Husband

  1. Know what assets are in your name, what assets are in your husband’s name, what assets are held jointly.
  2. Know who the primary and secondary beneficiaries are of any life insurance policy on your life and your husband’s life.
  3. Know who the primary and secondary beneficiaries are of any retirement plans, IRAs, 401(k)s or annuities on your life and your husband’s life.
  4. Know what your household assets are and what your household income is.
  5. Be sure you and your husband have durable powers of attorney, health care proxies, wills and trusts.
  6. Know who is named Executor in both of your estate planning documents, and who is named Trustee.
  7. Know what your husband’s income will be if you become disabled and your salary does not continue to be paid to support the family. If appropriate explore the purchase of disability insurance.
  8. Know what your husband will receive if you predecease him whether he will receive those assets outright or in trust, what debt exists and how it will be paid, and what liquid assets will be available to pay bills, debts, and mortgages.
  9. Know what your husband’s income will be if you predecease him and your income is no longer available and how your husband will be able to educate your children.
  10. Make sure your husband knows who the family advisors are (lawyer, accountant, financial planner, life insurance professional, investment advisor, business advisor) and to whom to turn if he needs assistance.
  11. Explore the purchase of long term care insurance for you and your husband.
  12. Designate a guardian and a trustee for you minor children in the event of you and your husband’s deaths, and decide at what age your children should receive funds.
  13. Review your property and casualty insurance to make sure that the appropriate levels of insurance are in place and consider purchasing umbrella liability coverage.

Patricia Annino is a nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  For more visit:  www.patriciaannino.com




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