Who Will be the Captain of Your Estate Planning Ship?

Excerpt from Patricia’s new book: It’s More Than Money: Protect Your Legacy

“The thinking that created today’s problems is not the thinking that can solve those problems.” ~ Albert Einstein

9-14-2014 It's More Than Money Book CoverYour life and the legacy of your family is a movie (with sequels), not a snapshot. Why then do so many of us view our family values, financial decisions and legal documents as stand alone decisions that do not correlate with each other, are not compared to each other and are not integrated?

In my thirty years of practicing law and working with many families and family businesses in estate planning I have come to the conclusion that the most important role the head of the family can play is “Captain of the ship”. Effective planning is a bit like sailing.

When a captain sets off for a long sail, he needs to understand where he is going, how he is getting there, and what may occur along the way. Nature will always intercede. Weather and winds will change; storm waters and other hazards may lie ahead. But what is important is to set the plan and then stay flexible and keep checking the actual course against the planned course, and while doing that, to keep in mind the position of the compass set to “true north” – a fixed point centered on the values that are most important to you.

The elements of sailing are the foundation (an internal compass set to true north), goals and objectives (the mapped course) and the enabling structure (boat and sails). It is the responsibility of the Captain of the ship to be aware of all external forces (ocean, weather and wind) while sailing. The one element that is fixed is the direction of the compass – set to true north. All other elements must be congruent to true north and to each other. That gives the journey the best shot at success and sustainability.

For a family, sustainable planning includes the same elements – the foundational elements (values e.g. family first), the goals and objectives (how those values will be translated in life – family business, family investments, philanthropy, family activities) and the enabling structure (legal estate and business planning documents, financial investments and the team of advisors).

It is the responsibility of the family leader (the Captain) to be aware of all of these elements in the context of all external forces (changes in family members, changes in advisors, world economics, and business risks) while navigating life and legacy. These elements must all be congruent to the foundational family values and to each other. That gives the family the best shot at sustainability and legacy.

For many families the elements are done independently – with separate advisors who do not know each other, never speak and do not have direct knowledge of what the others are doing. And for many families at least one of these elements may not be done at all or may be quite outdated.

For a plan and its legacy to be sustainable, the elements must be integrated and congruent. The legal plan should align with the family goals and match the legal and financial documents. If your family is connected by a family business, real estate or philanthropic endeavor, is the estate plan for the family system in agreement with its financial plan and the family objectives? A congruent plan increases the probability of sustaining what that family has worked so hard to put in place and builds its legacy.

For most families the answer to this question is “no”, but not for a lack of effort. It is because a plan is built up over many years by many independent professionals – the estate planning attorney, the accountant, the financial planner, the banker, the life insurance professional, and the philanthropic advisor – each focused on a different part of the system. Even though their work may be independently excellent, most of the time they are responding to a need that was expressed in a certain time frame – minimize estate taxes, determine who should control the vote of the company stock, equalize the assets, protect assets from a child or sibling divorce, etc. Even if the “team” communicates well at these independent junctures, it is unlikely that communication is deep or continuous.
Professionals focus on what they know. Every well-meaning and talented advisor goes back to his/her specialty to answer a need or solve a problem. Some families have a family office or trusted advisor they are fortunate to work closely with.

Experience has shown that this improves communication but does not provide the unique perspective that can be viewed when zooming down on the system from 30,000 feet above. Perspective is important. It is only when the system is independently reviewed from on high – from that 30,000 foot level – that black holes in coverage – those areas that no family member or advisor thought of because each was focused on his own specialty – become readily visible.

No advisor can do that for you. It is your responsibility, as the family leader, to make sure all the elements of your plan are congruent, and the best way to for you to do so is to view the planning as Captain of the ship from that “on high” perspective.

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.

The Importance of Boilerplate Trust Clauses: Sterling, the Clippers, and Incapacity

Shelly and Donald Sterling Image, estate planningNBA team owner Donald Sterling was recently in a highly publicized court battle, in part, because of a trust clause that most clients likely gloss over.

Many clients sign estate planning documents without paying much attention to the clauses they contain. That is no surprise; the documents are complex, and death and disability are issues that no one wants to face.

While they may not be fun to contemplate, these clauses have real consequences. One clause in particular that few clients pay attention to is how that client’s incapacity could be determined—and therefore how the client could be stripped of the authority to serve in a fiduciary or trustee capacity. A high-profile case on this topic is playing out in California probate court. At issue was whether Shelly Sterling, the estranged wife of Los Angeles Clippers owner, Donald Sterling, had the authority to sell the NBA team to Steve Ballmer for $2 billion.

The Clippers were owned in a trust. Shelly Sterling gained control of the trust by assuming the role of sole trustee. This gave her the authority to negotiate the sale of the franchise. The trust agreement contained a provision (which Donald Sterling agreed to when he signed the trust) that authorized his removal as trustee based on expert determination he lacked mental capacity.

Trustee troubles

Shelly Sterling assumed the role of sole trustee after two doctors determined that Donald Sterling was mentally incapacitated and no longer able to conduct his legal or business affairs. Papers filed in the court include medical records that allege that Donald Sterling has mild cognitive impairment consistent with early Alzheimer’s disease or some other form of brain disease, and is at risk of making potentially serious errors of judgment.

The trust documents apparently did not prevent Shelly Sterling from assuming sole trustee power even if the couple were estranged.

Donald Sterling and his attorneys were challenging his wife’s authority to sell the team and are taking the position that he is mentally competent to handle his financial and business affairs. Regardless of how the matter played out, the Sterlings are in court in part because of a boilerplate trust clause that many clients would simply have glossed over.

Lessons learned

There are several lessons that an estate planning team, including personal financial planners and attorneys, can learn from this case—and pass on to clients. They include:

  • Clients should review all the “boilerplate” clauses in a document to make sure that clauses that may seem benign when the donor is healthy and competent would also apply later.
  • Planning for disability or incapacity should be as important to a client as planning for death.
  • Thinking through who will serve as successor trustee if the donor/trustee is removed as trustee for reasons of incapacity is important. Nuances, such as whether spousal estrangement should disqualify a party from serving as sole trustee, really do matter.
  • What checks and balances should a client put in place to avoid conflicts that may arise down the road?

For example, should someone who has a vested economic benefit in the outcome of such a critical decision be able to overrule the donor? Should Donald Sterling have designated someone to replace him so there would always be two trustees?

  • Should a donor such as Donald Sterling have mandated that his own personal physician be one of thephysicians who had to determine him to be incapacitated?
  • When legal estrangement with a spouse happens, it is good practice to review all financial structures and estate planning documents—especially the control provisions. Did Donald Sterling affirmatively decide that his wife would have control if he was unable to serve as trustee or did that happen by default?
  • Think through to whom the trustees should be accountable—the spouse and who else? Children? Independent advisers?
  • Who will serve as guardian of person and property if protective proceedings commence? That designation would be included in a client’s durable power of attorney. Being named guardian gives a person legal standing in most states to defend the client in an incapacity hearing.
  • This case underscores the importance of regular review. Disability or incapacity does not occur at once—it can creep in over time. Continuous (or at least annual) attention to planning is a safety mechanism that catches inconsistencies early on and allows adjustments to be made.

Life is a movie (with sequels), not a snapshot. The donor, as director of the movie, needs to understand that the course will not be linear and that care should be taken in the “casting” of those who will play important roles.


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.

Kennedy letters fiercely protected for decades

Daughter’s fight on auction follows a pattern

By Matt Viser

kennedy family
WASHINGTON — In 1966, in a letter to a friend in Ireland, Jacqueline Kennedy seemed to see her future. She described her “strange” world, one in which “privacy barely exists, and where I spend all winter in New York holding my breath and wondering which old letter of mine will come up for auction next!”

All these years later, her family is still carefully guarding her legacy — and launching a new attempt to prevent the auction of letters she wrote to an Irish priest.

Caroline Kennedy has gotten involved in trying to establish ownership over the batch of more than 30 deeply personal letters that her mother had written to the Rev. Joseph Leonard over nearly 15 years. Those letters — in which Kennedy revealed some of her most private thoughts on marriage, motherhood, and death — had been set to be auctioned.

Photos: Letters between Jackie Kennedy and Father Leonard

But under questions of ownership, copyright, and morality, the letters were pulled. The same day that attorneys for Caroline Kennedy contacted the Irish auction house planning to sell the letters, the auction was canceled. And the financially strapped college that discovered the letters and was hoping for a windfall — All Hallows College in Dublin — is now planning to close some 172 years after it opened.

“The Kennedys are very, very controlling. And I’m sure they don’t like when they don’t have control of things,” said Laurence Leamer, author of “The Kennedy Women.” Caroline, he added, “feels now that she’s the bearer of the legacy, and that’s why they have to be so careful.”

The dispute is only the latest twist in a years-long effort by Caroline Kennedy to protect the writings left behind by her mother.

When Jacqueline Kennedy Onassis died, she gave her copyright interests and all of her writings to her children. After John F. Kennedy Jr., died in a plane crash in 1999, Caroline Kennedy gained complete control.

“I request, but do not direct, my children to respect my wish for privacy,” she wrote in her will.

This is not the first time Caroline Kennedy has gotten involved in such a dispute. In 2003, the author Thomas Maier published a book, “The Kennedys: America’s Emerald Kings,” that contained a chapter based on interviews with Father Richard McSorley, a Jesuit priest who, during games of tennis, counseled Jacqueline Kennedy shortly after her husband, President John F. Kennedy, was assassinated in 1963.

The chapter – which tells of a grieving widow who talked about suicide and questioned her fitness as a mother — was also based on letters that Kennedy had written to McSorley, which were available in McSorley’s papers through Georgetown University.

Then, as now, questions were raised over whether such intimate thoughts and letters – particularly those expressed to a priest – should have been made public. The late Senator Edward M. Kennedy said at the time that he was “deeply disappointed that the privacy of communications such as these between a member of the clergy and his parishioner would not be respected.”

Just after the book was published, Maier said, Caroline Kennedy asserted that she owned the copyright to the letters and Georgetown put restrictions on the papers so they could no longer be viewed.

The head of the Jesuit community at Georgetown University apologized to the family. Maier was unapologetic.

“After 50 years, America deserves the full historical record to the best we can provide it,” he said. “Any actions that keep it as private property at this stage of the game are perhaps legally defensible but are not historically defensible. Especially when so much of the material is kept in taxpayer-funded archives.”

He added: “To not allow for the appropriate disclosure, more than 50 years after, does a disservice to history and to many Americans who are still alive who witnessed these events.”

Historians had long asked for the oral history Jacqueline Kennedy did with Arthur Schlesinger but were told it wouldn’t be available until 75 years after her death. Then, Caroline Kennedy came out with a book of her own that released those interviews.

The book became a best-seller.

“The family got fed up of everybody making money off of the Kennedys,” Leamer said. “They want the control. They want the money. . . . They’re very protective, and they feel these repulsive journalists are trying to say anything to make a buck. That’s not totally untrue.”

In general, while the physical copy of the letter belongs to the recipient, the copyright for the letter belongs to the author. The copyright transfers to a person’s heirs when he or she dies — as it did to Caroline Kennedy in this case.

The letters that her mother had written to and received from Father Leonard were rediscovered earlier this year when officials at All Hallows College — where Leonard had served and where he died — scoured their archives in an effort to find valuable materials that could be sold.

Jackie Kennedy first met Leonard in 1950, when she was 21, and over the course of nearly 15 years exchanged letters with him.

“I am so bitter against God,” she wrote a few months after the assassination of her husband. “I think God must have taken Jack to show the world how lost we would be without him. But that is a strange way of thinking to me – and God will have a bit of explaining to do to me if I ever see him.”

After Leonard died in 1964, a mutual friend – John A. Costello, a former Irish prime minister — contacted Kennedy and let her know that Leonard had numerous letters from her. Kennedy wrote to say how “touched” she was by the careful and confidential way her letters had been treated.

And she wrote about reading one of the letters to her 8-year-old daughter, Caroline, and the effect it had on her. Kennedy asked the college if there was something she could do to assist it, and she later sent autographed books about her late husband.

The Globe earlier this year was able to review summaries of those letters, but the college would not provide actual copies out of concern that the Kennedy family would object.

Philip Sheppard, who represents the auction house that was going to sell the letters, said in a recent court affidavit that Kennedy family attorneys contacted the firm on May 21, asserting that they owned the copyright of the letters, according to the Irish Times. Sheppard declined to comment.

His attorneys also declined to comment, as did Caroline Kennedy and her husband, Edwin Schlossberg.

Meanwhile, an order of the Catholic Church affiliated with All Hallows College, the Vincentians, has said that Leonard’s will gives them ownership of the letters.

Jacqueline Kennedy Onassis’ papers are held in various collections around the world, including many at the John F. Kennedy Presidential Library and Museum in Boston. But most of her personal correspondence – likely including many of the letters she received from Father Leonard – is not available to the public. In some cases, the papers have not been sorted through and indexed, and in others Caroline Kennedy has put restrictions on them.

The Kennedy Library has said it is not involved in trying to obtain the letters written to Father Leonard.

“It’s Caroline’s decision about what should happen,” said Hugh D. Auchincloss, who was Jacqueline Kennedy’s stepbrother. “Whatever she would suggest I would agree to.”

Auchincloss was with Kennedy when she first met Leonard, on a trip through Ireland in 1950.

“I’m sure that Father Leonard, having known him, if he were alive would have written Caroline and gotten her advice or permission as to what to do,” Auchincloss said.

At Caroline Kennedy’s suggestion, Auchincloss also donated all of the letters that he had ever received from his stepsister, dating from 1941 until shortly before she died. Those letters — about 180 items altogether — are now preserved at the library but are not available to the public.

Source: The Boston Globe – By Matt Viser

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.

‘She has a dream – to make a quick buck’: Martin Luther King Jr.’s daughter says family wants to SELL his Nobel Peace Prize

estate planning, bernice kingThis story makes you realize how important it is to have guidelines for specific pieces of your estate that you may not want your heirs to be able to sell or dispose of.

The estate of Martin Luther King Jr. is asking a judge to force the civil rights icon’s daughter to relinquish her father’s Nobel Peace Prize and ‘traveling’ Bible.

The complaint against Bernice King was filed in February in an Atlanta court by her father’s estate, which is controlled by her brothers, Martin Luther King III and Dexter King.

The lawsuit says Martin Luther King Jr.’s heirs in 1995 assigned their rights to property inherited from the civil rights icon to the Estate of Martin Luther King Jr. Inc.

Appalled: Bernice King claims her family wants to sell Martin Luther King Jr.’s Noble Peace Prize and ‘traveling’ Bible

The lawsuit says Bernice King has ‘secreted and sequestered’ the medal and Bible in violation of that agreement.

Bernice King says in a statement that her brothers want to sell the medal and Bible to a private buyer and that she opposes that.

‘In my opinion, there is no justification for selling either of these sacred items. They are priceless and should never be exchanged for money in the marketplace,’ King wrote.

‘While I love my brothers dearly, this latest decision by them is extremely troubling. Not only am I appalled and utterly ashamed, I am frankly disappointed that they would even

Opponents: Dexter Scott King has gone to court over his father’s legacy before, with his3-25-14_She_has_a_dream_2 siblings charging him with financial mismanagement

entertain the thought of selling these precious items. It reveals a desperation beyond comprehension.

‘As Mark 8:36 teaches, ‘For what does it profit a man to gain the whole world and forfeit his soul?’ Our Father MUST be turning in his grave.’

Legacy: Martin Luther King III wants his sister to turn over their father’s achievements

3-25-14_She_has_a_dream_3Neither Martin Luther King III or Dexter King have responded, but Atlanta news outlets such as My Fox Atlanta report that such a statement is expected soon.

The siblings are no strangers to Atlanta’s courts. In 2009, the trio took 15 hours to reach a settlement regarding who would run King Inc., the corporation that controls the use of their father’s intellectual property. That deal temporarily placed a third party in charge. 

That settlement was the result of Bernice and Martin filing suit against Dexter, who’s financial mistakes they claimed were hurting the family’s legacy, according to the Atlanta Journal-Constitution

Source:  By Daily Mail Reporter and Associated Press Reporter  Click here for entire article.

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.

Is it Reasonable to Expect Alimony for Your Eggs?

The September 7th New York Times has an op-ed piece by Sarah Elizabeth Richards, author of “Motherhood Rescheduled: The New Frontier of Egg Freezing and the Women Who Tried It”.

In that op-ed piece Ms. Richards discusses the case of a 38 year old woman who is asking her soon to be ex-husband of 8 years to pay $20,000 to cover the cost of her egg freezing procedure, medication costs and several years of egg storage on the grounds that when theyalimony, alimony after divorce got married they started with the expectation they would start a family and now she may not have that chance much longer.

The couple had been unsuccessful in fertility treatments and as part of her legal case she is arguing that since fertility treatments were part of the marriage, they should be considered part of the marital lifestyle, which should be maintained as long as possible post-divorce.

The lawyer representing the woman is quoted in the article as saying that he hopes the case settles out of court. Should this go to court it would be a case of first impression in the country and we will all be watching what happens.

Read the entire article here: http://www.nytimes.com/2013/09/07/opinion/alimony-for-your-eggs.html?_r=0

Source:  www.nytimes.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.

New Risks to Business Ownership

family owned businessWhether the traditional family business ownership or assets such as real estate ventures owned jointly by family members in limited partnerships, corporate or LLC forms.

Traditional risks to business ownership and the economic sustainability of the family enterprise include the death or the divorce of a shareholder if proper planning is not in place.

The new risk to business ownership is the increasing attack by the courts on the family business when allocating assets in a divorce. In some states, known as equitable division states, gifted and inherited assets are divisible in a divorce. This does not just include what the about-to-be divorcing family member owns when married; it also includes the expectancy of what that divorcing family member will receive in the future.

Those expectancies are taken into account when determining the allocation of assets between the couple about to be divorced. As an example of the division of gifted/inherited assets in an equitable division case consider the 1981 Massachusetts court case, Vaughan v. Vaughan. In that case the parents of the son gave the couple (who were in their 30s without children) the annual exclusion gift of $10,000 a year for a period of years. The daughter-in-law sued the son for divorce and her attorney subpoenaed his parents asking that as part of the divorce the parents turn over copies of their estate planning documents, the date they were last amended and an approximation of their net worth (plus or minus $500,000).

The rationale for doing so was that the pattern of gift giving was inextricably interwoven into the lives of the son and daughter-in-law and it was “was what allowed the daughter-in-law not to work.” The expectancy of what the son will receive when his parents die is a factor that is taken into account in determining how the assets of the couple are to be divided in the divorce. The parents refused to provide these documents, but the Judge ordered them to do so. The parents then appealed that order all the way up to the Supreme Judicial Court in Massachusetts (the highest court in Massachusetts).

In a Single Justice decision, the court agreed with the daughter-in-law and ordered the parents to comply with the court order or face jail for contempt. The gifting of cash in annual exclusion amounts is easy to value – what if instead that gift had not been of cash but had been of an interest in a family owned business or an LLC, or investment in a family limited partnership? Then not only would the asset be considered an expectancy but the valuation of that asset would be part of the son’s divorce proceeding. That adversary valuation may do serious damage to the estate plan of the older generation. Placing the assets in trust does not necessarily take them off the table – it may only affect the valuation of those assets in a divorce.

In addition to the allocation of assets, there is an increased risk for the allocation of alimony. Many family businesses or co-owned assets have phantom income or Subchapter S income – income that is earned during the course of the marriage which shows up on the tax return and is plowed back into the family business. At issue is how that phantom income should be treated for alimony purposes.

If it was earned during the marriage, is it marital income taken into account for alimony and child support purposes even though not actually received?  When thinking about these risks, it is important to remember that it is not the law or the court in the jurisdiction of the parent or grandparent that will control these decisions; it is the law and the court in the jurisdiction of the divorcing spouse that will control these decisions. These risks can be mitigated by a well negotiated pre-nuptial agreement or post-nuptial agreement.

Prenuptial agreements are not new.  Court records show that a James Young and a Susan Huffman entered into a premarital agreement in Page County, Virginia in 1844.  Prenuptials are also not just for celebrity couples like Jackie Kennedy and Aristotle Onassis, Michael Douglas and Catherine Zeta-Jones, Madonna and Guy Ritchie, and Paul McCartney and Heather Mills.  Increasing numbers of women today remarrying in their 30s, 40s, 50s, 60s, 70s and 80s consider these agreements an important part of secure financial planning.

That’s because a prenuptial agreement can safeguard assets, protect family members, keep a business in the family, and in certain circumstances, even cover such specific details as how the mortgage and daily expenses are to be are to be paid if and when a marriage ends. They can be as broad or as limited as the parties decide.

Perhaps there is concern about being saddled with a fiancée’s business debts.  Or with the demands of an ex-spouse. Or concern about how much you will have to contribute to the support of a spouse’s children.   A well-drafted prenuptial agreement can handle all of these issues.  If the person is giving up a career or a lucrative job to get married, a prenuptial agreement can also set forth compensation for sacrifice if the marriage fails. A main reason to ask your children and grandchildren to enter into a pre-nuptial agreement (or a post nuptial agreement) is to protect what you chose to give them during your lifetime or at death.

A pre-nuptial agreement can address the division of assets at various stages in the marriage.  Many prenuptial agreements specify that if the marriage lasts less than two years, the division may be minimal or nonexistent, but that the payout portion will increase as the length of the marriage increases.

A prenuptial can address the issue of alimony in the case of divorce, assuring the wealthier spouse that the financial impact of a divorce will be controlled, and at the same time assuring the less wealthy spouse that she or he will be provided for adequately.

Without a prenuptial agreement in place it is up to the laws of the state in which the divorcing person is domiciled (and, in certain cases, the states in which the divorcing person owns real estate) to determine what assets or income the spouse is entitled to keep in a divorce and which assets will pass to the spouse at death. In most states, without a prenuptial agreement, a surviving spouse has the right to inherit one-third to one-half of the decedent’s probate assets. It is important to remember if you are the parent or the grandparent, it is not the law of the state in which you are domiciled that controls the division of the gifts/inheritances that the child/grandchild receives or is expects to receive – it is the law of the domicile of the child/grandchild when divorcing that controls.

A prenuptial agreement can override that and make sure that the property you owned prior to the marriage is given to your children from your prior marriage at your death. It can also specify that assets you do decide to leave to your spouse will not be left outright, but will remain in trust for the duration of the spouse’s lifetime, and then pass to the children when both of you die.

It is important to remember when having that vital conversation with the next generation that a pre-nuptial agreement is a shield – in a good marriage it can be overruled by transferring assets to the other party or into joint names or by an estate plan which leaves them to the spouse. The goal of a pre-nuptial agreement is to protect the assets if the spouse wants them and you don’t want to give them.

If you live in one of the nine community property states – Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin – without a prenuptial agreement, the law says that property accumulated during the marriage will be equally divided. In all other “equitable distribution states,” assets are divided according to what a judge determines to be fair or equitable (which does not necessarily mean equal). In making that decision the judge takes into consideration factors such as the length of the marriage, whether or not there are children, and the couple’s age, health, and job skills. Alaska is different.  It is an equitable distribution state but allows the parties to enter into a community property agreement.

Typically, a prenuptial agreement will address several categories of assets: those assets acquired and owned prior to the date of marriage, all income and appreciation on property owned and acquired prior to the marriage, all property earned and acquired by either spouse during the marriage, all appreciation in the value of assets acquired during the marriage, and all assets received by gift or inheritance during the marriage.

If each party has assets of comparable value, it may make sense to establish the what is mine is mine and what is your is yours type of agreement, specifying that the assets I bring to this marriage (and any appreciation during the course of the marriage on those assets) is mine, the assets you bring to the marriage (and any appreciation during the course of the marriage on those assets) is yours.  Any assets we acquire together during the marriage will be put in joint names and will pass to the surviving spouse at death – or split equally if we divorce.

A mine is mine and yours is yours agreement may not be fair if one party entering in the marriage has very little net worth.   In that type of case, a smart move may be to guarantee the less wealthy a specific amount of money, either when the contract is entered into or when the marriage ends. That helps make the agreement enforceable.

After re-marrying, you may decide to live in your home, or in his home. You may both sell your homes and purchase a new one together. In second marriage situations the home is an asset with strong emotions… and who has the title is an important issue to address in a prenuptial agreement. In many states, ownership of a primary residence is based on survivorship:  if one spouse dies, the ownership passes by law to the surviving spouse. In a second marriage, that could mean that the children of the first spouse to die lose inheritance rights to the house they grew up in.

An alternative is for the re-marrying couple to hold the property as tenants in common, a form of joint ownership without a survivorship right. Each person’s percentage in the home would pass through his or her will (or trust if probate had been avoided) to those persons that the spouse has selected. In such situations it’s common to have the deceased spouse’s interest in the home held in trust for the duration of the surviving spouse’s life, then at the death of both of them, the home would pass to the deceased spouse’s children.

The surviving spouse could even be the sole trustee during his or her lifetime, which gives him or her flexibility to sell the home and reinvest the proceeds in a smaller condominium or a home in another state. It also guarantees that although the surviving spouse has that flexibility, at the death of both spouses whatever the assets have been invested in – the current home, proceeds of the sale of the home or a new home –will pass under the terms of the deceased spouse’s estate plan to his or her children.

There are certain issues that cannot be legally agreed to in a prenuptial agreement. For example, parties cannot contract what child support would be if the marriage ends in divorce. Under current law, they also can’t contract for child-related issues such as custody or visitation. Many parties will, however, include language which states their intent on those issues when the agreement is entered into. Parties also cannot stipulate that they will not be responsible for their new spouse’s medical care.  That is against public policy.

Prenuptial agreements can be challenged – at the time of divorce and at death. One of the key issues the court considers in reviewing the agreement’s validity is how honest the parties were in disclosing their finances.  After all, a party to an agreement can only knowingly waive rights to an asset if she has sufficient information about what the asset’s true value is. “Assets” include tangibles like heirlooms, houses, and finances, and intangibles like intellectual properties, copyrights, royalties, medical licenses, and law degrees.

The court also considers whether both parties had competent legal counsel. Director Steven Spielberg’s wife, Amy Irving, walked away with half their net worth because their prenuptial agreement was scribbled on a napkin, and she was not represented by an attorney.

The court will also consider whether or not the party was under duress when the agreement was signed, and “duress” can be something as simple as the fact that the prenuptial agreement was signed so close to the wedding date that a signing party did not have time to consider the consequences of the agreement. When Donald Trump filed for divorce from Marla Maples in 1997, three months after they separated, Maples fought the prenuptial agreement that allotted her $2,000,000 in the event of a divorce on the grounds that she had not read the prenuptial agreement before she signed it. They settled the case without a trial and her lawyer reported in the news that Trump promised to pay her more than what was stated in the contract.

The court may also determine if there was fraud involved during the negotiation and/or signing of the agreement.

Even though it is not required in many states, the court may also consider whether or not each party had separate and independent counsel. If you choose to waive the right to counsel in signing a prenuptial, you might want to state that in the document – that the right to retain independent counsel was explained and understood but the party chose to proceed anyway.

Finally, in many states, an agreement can be challenged on the grounds of its not being “fair and reasonable.” This can be a two pronged test: 1) whether the agreement was fair and reasonable when the marriage was entered into and 2) whether the agreement is fair and reasonable when the marriage terminates. In such cases the judge is asked to determine whether one spouse took advantage of the other.

Even though prenuptial agreements can be challenged, the trend in case law is to uphold the agreement. In California, for example, the Supreme Court unanimously upheld the premarital contract between San Francisco baseball star Barry Bonds and his wife, Sun. The couple met in Montreal in 1987 when Bonds was a fledgling baseball player for the Pittsburgh Pirates and his wife was studying to be a beautician. They were both 23 years old. They courted for three months and became engaged.  The baseball player had the counsel of two attorneys and a financial advisor. His wife, a Swedish immigrant, who had been told about the agreement a week before the wedding, had a friend from Sweden advising her.  She was told the day of her wedding that the wedding would be canceled if she did not sign the agreement. On the way to the Phoenix airport, where they were catching a plane for their wedding in Las Vegas, they stopped at Bonds’ lawyer’s office and signed an agreement she had seen for the first time only hours before. This agreement dramatically limited the amount of money she would receive upon divorce.

Why did the court declare this prenuptial agreement valid?  Because, the Judges said, Sun seemed happy, healthy and confident. The week prior, Bonds’ lawyer had suggested that she retain her own attorney and she chose not to do so. What is more, the wedding was so small and impromptu that Sun could have easily postponed it if she had decided to retain counsel to review the agreement. Other cases in various states have achieved similar results.

The lesson to be learned is that voluntarily entering into a prenuptial agreement as a consenting adult is entering into a contract you cannot easily walk away from later.

Today, it is also common for the prenuptial agreement to be reviewed after you have been married for several years. Prenuptial agreements can be amended.  If, for example, you have children in the course of the marriage, or if one of you becomes seriously ill, or if a significant amount of time has passed, or if there is a change in the tax, estate, or marital laws – all of these are good reasons to amend your prenuptial agreement.

If you do choose to amend it, then all of the same formalities – separate lawyers, full financial disclosure – apply as much to the amendment as they do to the original agreement. Sometimes, the agreement has a built-in “sunset clause” that specifies that the contract expires if the parties have been married for a certain length of time, which is frequently 10 years.

It is important to remember that a prenuptial agreement is the base upon which future planning can be built. In other words, it sets the stage for what each party agrees he or she is entitled to receive.

Sometimes a prenuptial agreement does not work in the family structure. There may be emotional reasons that make the topic difficult to discuss. The parties may not wish to reveal their financial information. Another technique to consider is the use of self-settled trusts to protect the family assets. Some jurisdictions such as Delaware (even if you are not domiciled there) allow an individual to establish a self-settled trust to protect assets from creditors (which include a spouse or a future spouse). A self-settled trust allows the person transferring the assets to remain a beneficiary of the trust.  To be valid, a Delaware self-settled trust must:

1)    be irrevocable;

2)    appoint a trustee with the discretion to administer the trust;

3)    must appoint a trustee, whether corporate or individual, that is a resident of the jurisdiction in which the trust is formed (so if a Delaware trust then there must be a Delaware trustee);

4)    Contain a spendthrift clause which restricts the beneficiary’s ability to transfer the trust property (whether voluntary or involuntary).


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.

The Prince Charles Syndrome: Family Business Succession Planning for the “Lost” Generation

No one knows better than Prince Charles about the consequences of the older generation living longer, remaining competent, and Family Business Successionperforming well far past traditional retirement age. These days, in addition to the traditional risks of illness, death or incapacity of a key family figure, the new risk to family cohesiveness is the impact of an increased lifespan on individual goals and life plans. Is there now a “lost generation” of baby boomers that have worked their entire lives for a seat at the table that may never be theirs? As advisors, how can we convince families to put that conversation on the table and what are some of the solutions to this issue?

In the family business, and in the increasingly common co-ownership of investment and commercial assets through family limited partnerships and limited liability companies, the increased work lifespan of the older generation can lead to the delayed succession of the middle generation.

In essence, with the older generation in good physical and mental health and working far longer, the middle generation may, in effect, be knocked out of position and never get its day in the sun. By the time the older generation decides to move along, the individual goals and life plans of the middle generation may have been passed by, and the baton may be passed to the next generation.

Strategies to mitigate this new risk include intentional strategic planning and clear communication among all generations as to what the expectations are for the working lifespan and when the baton should/will pass. A first step is to try to have an upfront conversation with the family about what is going on and what it means. This new risk has financial consequences to the “lost generation” family member who may have been counting on the ascension to leadership to finally attain his or her financial goals of asset ownership and increased salary;  if his or her “day in the sun” never comes then financial security may never happen.

From an overall estate planning point of view, it may make sense to “skip” the lost generation and transfer the wealth to the next generation that may have more desire to innovate and risk. However, the financial security of the “lost generation” is a real issue that must be acknowledged, addressed, and handled so that the entire plan can move forward.

If there are insufficient resources to satisfy each generation’s financial needs and expectations, hidden conflicts and agendas can surface. The “next generation,” likely chomping at the bit to take over, needs to understand that the middle generation and its financial expectations need to be addressed, and the senior generation needs to understand that they must eventually pass the family baton. Family members, however, won’t want to move aside for the next generation unless they know that they are set financially for the rest of their lives. This is fundamental to human nature.

The issue of creating financial security can be solved, however, with intentional planning that includes family business members as part of the strategic plan. By building a sustainable net worth outside of the business, the next generation is more likely to have the resources to buy, sustain, and grow the enterprise. Family members that are secure outside of the business have the additional luxury of knowing that the younger generation can take risks – and if the risks don’t pan out, their own financial security will be unaffected.

It is critical for family business owners to understand that it is not about the successor, but rather the succession process itself. This insight, summarized perfectly in KPMG and Family Business Australia’s Family Business Survey of 2011, stated, “successful succession planning can involve juggling personal financial considerations, retaining family harmony, reconciling the ambitions and expectations of particular family members and safeguarding the future of the business.”

The CPA as trusted advisor can assist in this succession planning by working closely with the family on a regular basis. Topics and strategies should include:

  1. Intentional financial planning. As part of an annual review, discuss the net worth of key family members, particularly the net worth outside of the family business, and then help develop a process for evaluating each of their personal financial wealth and income goals.
  2. Communication. This is key. Each year, ask questions that bring these issues to the forefront – how long do you expect to be involved? When do you see succession happening? Is there an exit strategy?
  3. Having a multigenerational discussion. Today, the concept of generational transfer is not really the right one – a 50-year-old woman may be re-entering the work force at the same time as her 22-year-old grandson – and they each may have similar prior work experience. It is critical to understand the fluidity of traditional generational lines and the changing roles and expectations.
  4. Urge all family members to begin financial and wealth planning early. Encourage the family and family business system to be aware that while the business is the main source of income and wealth for all generations, it is critical to view it as a “system.” Every action causes a reaction and intentional planning is as much about making sure that all other key stakeholder’s plans are in place as your own plan is in place.
  5. Understand that life is a movie not a snapshot. As life advances, business, planning, and financial requirements must also be adjusted.


We don’t yet know if Prince Charles will become the next King of England, or if the crown will skip to Prince William. My guess is that it’s a topic that has come up on more than one occasion, although the Queen shows no visible signs of retiring. Time will tell whether Prince Charles will get his seat on the throne, but families should take note and talk openly about who will be filling the seats at their table in the coming years.


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.

Britney Spears and Adam Lanza: At What Point Should a Parent Become a Guardian/Conservator of an Adult Child?

guardian, guardianshipMore and more often, we see front-page news of adult children with issues so significant that they need a parent or another adult to become their legal guardian or conservator. When we think of traditional legal guardianship or conservatorship, we think of the minor child whose parents may have died young, the elderly parent with dementia or Alzheimer’s, or an adult who has been severely injured and can no longer take care of himself.  But is there a new category evolving? That of an adult child whose decisions are impaired?

Britney Spears’ father has been her court-appointed conservator since 2008 and has been in charge of her legal and financial decisions since then. Britney, however, performs worldwide, is a brand spokesperson for perfume, records albums, and has regular visitation with her minor children. Yet while she is under conservatorship, she does not have the legal right to make financial or legal decisions… and she may not have the right to make decisions concerning her own medical care.

Elsewhere on the spectrum, Adam Lanza, the young man responsible for the Sandy Hook massacre, was not under any guardianship or conservatorship. Yet he was obviously in need of care.

At what point does it make sense to appoint a guardian or conservator for a young adult who is struggling with life decisions and displays an impaired ability to care for him or herself? When a person is put under guardianship or conservatorship (in some states, conservatorships are called adult guardianships, but the terms mean roughly the same thing), then that court-appointed fiduciary has the legal right to overrule the decisions the ward makes. The court-appointed fiduciary must report to the court and in certain circumstances, such as ordering anti-psychotic medication, must prove to the court why it is essential to do so. The issue at hand, however, is when and where to intervene and seek guardianship. After all, plenty of young adults in this country make bad, and sometimes unsafe decisions. They may be addicted to alcohol or drugs, but does that mean that their personal liberties should be taken away and their rights overruled?

It is interesting to note that in many states, the protective proceedings of guardianship or conservatorship can be voluntary – the person involved can agree to have a legal guardian or conservator appointed so that financial and/or legal decisions can be made. A distinct advantage to this type of protective proceeding is that it does not have to be adversarial. Twice in my practice I have seen a person enter into a voluntary protective proceeding and then have that protection end after a few years, eventually taking charge of his life and making his own legal and financial decisions.

It is (and should be) difficult to put adults under guardianship or conservatorship against their will. Taking away someone’s personal liberties is not something to take lightly. To complicate matters, many states define competence for legal purposes differently from competence for medical purposes. In all states, however, those seeking to place someone under involuntary guardianship or conservatorship must first produce ample medical evidence to support this course of action. The decision of whether or not to embark on a guardianship or conservatorship for an adult is a tricky one – in this country we are presumed competent until proven otherwise and when it is proven the person under care no longer has the right to make his or her own decisions.  Embarking on the process of taking away someone’s personal liberties and substituting your decision for their decisions is fraught with emotional and legal peril. Courts should go very slowly and carefully on this slippery slope.

The person being put under guardianship or conservatorship receives advance notice of the court proceeding and then has the right to object to it. Court proceedings can take time and can be costly – including legal fees, fees for the person acting as guardian or conservator, and possible fees for medical testimony and court-appointed investigators. Plus, court proceedings are public. If the proceedings involve finances, the court-appointed fiduciary must also file annual accountings.

Even in such difficult circumstances, families don’t want to believe that the situation is as bad as it appears. They focus on the good days and shrug at the bad ones. No matter how bad things are, they want to believe that the situation might still improve. Therefore, the decision to embark on an adversarial protective proceeding is extremely difficult for a family to make – especially if the outcome of that proceeding is not clear. The adult child may create a rift within the family, where some agree that this is the wrong way to go, while others feel it is the only alternative. If the adult child “wins” and retains competence, then family relations will break down and any trust or confidence between the parent and adult child will evaporate.

A lesser route, and an important first step for many, is putting in place the basic estate planning documents – durable power of attorney (for financial purposes) and health care proxy (for medical purposes). These documents are important because they start the process of providing another person with the legal authority to act. Another advantage of these documents is that they exist outside the court system. Therefore, any financial actions taken by the attorney in fact under the durable power of attorney, or health care actions taken by the health care proxy, are private.

These documents are also important for parents who wish to view the medical or financial records of their adult children – because once young adults attain the age of majority (age 18 or 21 depending on the state of domicile), then no one has the right to access their records without a HIPPA release. These documents waive the HIPPA privacy rights. In most states, adults have the right in a durable power of attorney to designate who they would name as their guardian/conservator should protective proceedings commence. The person nominated as a fiduciary has the right to be present in a protective court proceeding, if such a proceeding commences. Unfortunately, in extreme cases, it also gives that person the right to revoke these documents.

For many of our clients, dealing with an adult child who has significant mental, drug, or addiction issues can be a considerable challenge that disrupts the family. In addition to the traditional paths of medical and psychiatric care, the appropriate legal mechanisms should be explored. At a minimum, for any child at the age of majority, a health care proxy and a durable power of attorney should be executed. For more extreme situations, the legal protective proceedings, guardianship or conservatorship (voluntary or involuntary) may be an answer. To fully explore the available courses of action, I recommend consulting an estate planning or disability planning attorney, a physician, and a psychiatrist.


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.

Women and Money – Patricia Annino on Family Business

Women have control of more personal wealth than ever before, yet many women do not take the steps necessary to protect that wealth for themselves and their families. Attorney and author Patricia Annino discusses the biggest planning challenges facing women today, and the most important steps a woman can take to plan for her financial future. Ms. Annino is interviewed by Donald Levitt, Ph.D.

Source: FamilyBusinessWiki.org http://familybusinesswiki.ning.com/video/women-and-money-patricia-annino-on-family-business-wiki-s-4

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.

Cracking the Code: Connections Build Business

Men take the importance of connections seriously and put together a game plan on how to leverage them and make them business networks imageeffective. One of the first law firms I worked in had an annual Christmas party for its important clients. The lawyers in the office were handpicked. You were selected that year if you were a “star” and if you had the opportunity to increase the depth of the relationship between the firm and the clients.

The managing partner of that firm took building those relationships and the money expended to make it happen very seriously. Each year on the day of the Christmas party he would call into the conference room all of the selected lawyers – most of whom were older than I was and most of whom were men – and he would remind them of the rules that were to be followed at the party:

  1. No lawyer was to eat the shrimp-that was for the guests and too expensive.
  2. You had to have a glass of beer or wine in your hand so the guests felt comfortable, but you were not allowed to drink it
  3. No lawyers were to congregate and speak to each other; the point of the evening was to connect with clients.

His preplanning and “lecture” worked. Every year the firm achieved new connections, strengthened existing relationships and increased revenue from the party.

Men also understand that the entire world is connected and positive connections may prove useful later on. One of the first firms I worked in had a policy that whenever an attorney left (unless the attorney was fired) there was a lunch in his or her honor where the attorney’s contributions to the firm were applauded. That firm knew that it is a small world. That attorney could very well end up in a position to refer business back or to recommend someone in the firm for a position.

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