Clients Divorcing? Be Sure to Handle These Estate Planning Details

Review all documents to ensure the right people inherit.

In my 30 years of practice, I have come to the conclusion that while a client may not want to be married to the person he or she is married to, that does not mean he or she wants to be divorced. Therefore, as the divorce progresses, emotions swirl, and anger and angst set in. The CPA, who has ongoing, in-depth knowledge of the client’scracked egg shell image, estate planning financial situation, can be instrumental in making sure that all details are attended to during this turbulent time.

Here are some issues CPAs and their clients must take into account during a divorce:

  1. Restraining orders. In many states, when a divorce petition is filed, what is known as an “automatic temporary restraining order” is put in place. Under a restraining order, most estate planning (such as changing estate planning documents or the designation of beneficiaries) cannot occur without a court order. In essence, all planning comes to a halt (unless a court rules otherwise) until the divorce is over. However, some documents may be revised while the divorce is pending. These may include a financial durable power of attorney and health care proxy documents, and documents that pertain to the disposition of the client’s remains. Ensure that your clients review such documents, especially if they put the client’s spouse in charge.
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  3. State law, particularly as it applies to wills. In many states, a divorce, once completed, revokes the provisions in a client’s will that name a spouse as a beneficiary. However, you should still encourage divorcing clients to review and revise all estate planning documents, especially wills. Otherwise, they may unintentionally leave portions of their estate to an ex-spouse or former in-laws, as happened in a recent case in New York (In re Estate of Lewis, 978 N.Y.S.2d 527 (N.Y. App. Div. 1/3/14)). New York resident Robyn Lewis left everything to her husband, including her home, in her will. She got divorced, but did not change her will before she died at age 43. Though, under New York law, her ex-husband was now not allowed to inherit, Lewis had left her home to her father-in-law as a default provision—a provision not automatically revoked under New York law. Lewis’s family of origin contested the will, but the New York appellate court upheld the decision that the home now belongs to her ex-father-in-law.
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  5. Beneficiary designations. When a client gets divorced, you should review all primary and secondary designations of beneficiaries for his or her life insurance policies, IRAs, and annuities, as getting a divorce does not automatically revoke those contract beneficiaries. In Hillman v. Maretta, 133 S. Ct. 1943 (U.S. 2013), for example, the U.S. Supreme Court ruled that a man’s ex-wife was still the beneficiary of a $124,558 life insurance policy, even though he had remarried before his death, as he had not changed his beneficiary designation after they divorced.
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  7. Life insurance. Life insurance policies need be carefully reviewed to determine how the divorce will affect them. For example, if a couple purchased a second-to-die life insurance policy because they thought the marital deduction would defer the estate taxes until they both died, that policy must be reviewed to see what happens in the event of a divorce.
     
    Sometimes, after a divorce, one party does rightfully remain the beneficiary of a life insurance policy on his or her ex-spouse’s life. In these situations, the named beneficiary should, during divorce proceedings, mandate that the policy remain in force and that duplicate statements be mailed to his or her ex-spouse to ensure that payments are made on time.
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  9. Estate tax. After they divorce, clients will lose the estate tax marital deduction—and therefore incur higher estate taxes if their spouse dies before they do. Prepare clients for these extra taxes by discussing topics such as what assets will cover the estate tax and whether they should obtain additional insurance.
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  11. Embedded income taxes. In a divorce, many clients view the assets at their current values. The reality is that an asset may have a significant embedded gain because of a very low cost basis, depreciation, or recapture or because it is a non-Roth retirement planning asset. CPAs can call a client’s attention to embedded taxes and make sure they are taken into account in determining how the assets are to be divided.

 
If you are representing both spouses, be aware of potential conflicts of interest when providing advice to either of them that may be perceived as being adverse to the other spouse. In addition, ensure that both spouses have formally agreed to have the CPA represent both parties during the divorce. CPAs should consider the guidance on conflicts of interest in the AICPA Code of Professional Conduct (1.110.010 Conflicts of Interest for Members in Public Practice).


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.

PERSONAL FINANCE: When Valentines and prenups go together

I participated in this article and wanted to share it because it has some great information about the prenup process.  Enjoy!

By Kathleen Kingsbury (a Reuters contributor. The opinions expressed are her own.)

NEW YORK, Feb 15 (Reuters) – With a flurry of Valentine’s Day marriage proposals over, it could be time for new fiancees to take a financial reality check.

Four million Americans got engaged on Tuesday, as estimated by an American Express survey released in January. Unromantic as it may seem, everyone needs a frank conversation about finances before they walk down the aisle, including one that touches on
whether or not to sign a prenuptial agreement.

“All marriages terminate, whether it is in divorce or death,” says Patricia Annino, a Boston-based attorney and estate planner.  “Signing a prenuptial agreement is assurance your assets go where you want them to.”

Money issues are one of the most commonly cited reasons for marital strife. So, adding a candid financial assessment to one’s wedding to-do list might go a long way toward minimizing disagreements down the road.

 

WHO SHOULD SIGN A PRENUP

A common misconception about prenups is that they only apply if one partner brings in significantly more assets to a marriage, or in the case of May-December romances, where there’s a wide age gap. But they should also be considered by those marrying in
mid-career, or those remarrying.

“Statistics tell us that couples are marrying later in life, after they’ve had careers and separately built their own wealth. Or people are marrying for the second or third time,” says Steve Hartnett, associate director of education at the American Academy of Estate
Planning Attorneys. “These are the exact situations where prenups are critical.”

Equally important are situations where there are children from a previous marriage. “Parents will often want to be sure their children are provided for in case of their death, ” says Elaine Morgillo, a certified financial planner in North Andover, Massachusetts.

For younger couples, prenups are often sought when one partner stands to receive a large inheritance or holds a stake in a family business. Morgillo recalls one couple who had never been married and had similar incomes, but the bride-to-be expected an inheritance and the groom owned several rental properties.

“Inheritances aren’t always sacred, but she wanted hers protected and it helps to show intent,” Morgillo says. “She knew he felt the same way about his properties.”

 

GROWING IN POPULARITY

When her boyfriend of six years sat her down on their living room couch last Valentine’s Day, Christen Petitt Hailey thought she was about to get a vacuum cleaner. Instead, he proposed and the Tampa, Florida, couple were married last November.

“Before we were married, we came up with an arrangement where I always covered the mortgage and utilities, and she paid for groceries or entertainment,” says Shaun Hailey, 36, a mortgage underwriter. “She had slightly less income, so this division seemed to work out to be the fairest.”

Indeed, this kind of ad hoc divvying up is how most modern couples handle their finances. Many are realizing this might not be the smartest route, however.

“We like to say marriage vows today have become ‘love, honor, merge your finances,'” says Anthony Fittizzi, a wealth advisor for U.S. Trust, which recently launched a financial empowerment program to counsel clients ages 20 to 35. “Couples don’t necessarily take into account issues like the start-up costs of marriage, insurance, cash management or dividing property.”

Fittizzi’s motto: Sign on the bottom line before you say “I do.” Nearly a third of single Americans said they would ask their significant other for a prenup, according to a February 2010 poll by Harris Interactive. A second poll, by the American Academy of Matrimonial
Lawyers, found that 73 percent of divorce attorneys had seen an increase in prenups signed from 2005 to 2010, with more women initiating the process than ever before.

No doubt the high divorce rate has made prenups more acceptable, but the economy may be playing a role, too.

“With this uncertain economy, there is more insecurity about assets,” says Arlene Dubin, a New York City attorney and author of the book “Prenups for Lovers: A Romantic Guide to Prenuptial Agreements.” “Clients see prenups as vital to protecting what they’ve
built.”

 

MAKING A PRENUP STICK

Prenups generally cover real estate, estate planning, division of bank accounts, and alimony, in case the marriage should end. Child custody or support can’t be included, and protecting retirement or pension benefits may require extra steps. There are also steps that
should be taken to ensure that the prenup holds up in court. These include:

 

POPPING THE (PRENUP) QUESTION EARLY

Many lovebirds might find asking their betrothed to sign a prenup awkward, but waiting until the last minute can backfire. “You shouldn’t be bringing it up in the limo on the way to the church,” says Evan Sussman, a Beverly Hills-based divorce attorney. “From a
legal standpoint, you don’t want the other person to be able to claim duress later.” Sussman recommends the subject be broached before wedding invitations go out, or at least several weeks before the event.

 

AVOIDING FINANCIAL INFIDELITY

Prenups aren’t for every couple, but considering one often brings forth key financial questions that bring more honesty into a marriage. A 2010 poll by the non-profit CESI Debt Solutions found 80 percent of spouses spent money their partner didn’t know about.

Some attorneys recommend asking for a credit report. At the very least, Dubin says, “You need a line-by-line statement of assets and liabilities so you can deal with the ramifications.” Student loans, credit card balances, and IRS liens are some of the debts a spouse can later be held responsible for.

Still, Dubin says, “Before you start this process, prepare yourself for whatever may come. And know at what point you’d have to walk away.” The same, of course, goes for asking for a prenup and having your partner turn you down.

 

RETAINING SEPARATE LAWYERS

A second means to challenge a prenup in court is if the couple are not represented by separate attorneys. This is to guarantee that one spouse, usually the less-wealthy partner, is not taken advantage of.

“Imagine if Mark Zuckerberg wanted to marry his housekeeper who didn’t speak English and he insisted she sign a prenup,” Hartnett says. “Having a competent lawyer on both sides of the table means each party gets a fair agreement.”

That said, when choosing legal representation, be sure the attorney you choose understands this is the start of a marriage, not the end.

“When a lawyer is overly adversarial, it can lead to a lot of distrust and ‘do you love me’ questions,” says Cicily Maton, partner at the Chicago firm Aequus Wealth Management. “You should choose an advocate, but do your due diligence about their style.”

Of course, prenuptial agreements can always be renegotiated as a marriage evolves. “The first draft can always be torn up,” says Ginita Wall, a San Diego-based certified financial planner. “I had one set of clients on the sixth iteration of their prenup when they decided to divorce.”

For the Haileys, being engaged meant much financial discussion. They chose in marriage to keep all their finances separate, including their tax filings. They didn’t opt for a prenup, but “getting it all out on the table upfront means no surprises,” Shaun Hailey says.

Instead, he says, “We can concentrate on saving for the important things, like a honeymoon.” (Editing by Jilian Mincer, Bernadette Baum and Andrew Hay)

Source: © Thomson Reuters 2011. Business & Financial News, Breaking US & International News | Reuters.com http://www.reuters.com/assets/print?aid=USL2E8DFF4Y20120215

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.

New Risks to Family Cohesiveness: Damage to the Family Reputation or Family Brand

In the area of family cohesiveness, reputation or the family brand is at risk. Traditionally this risk was triggered by a scandal that leaked out to the press. The new way this risk is triggered is through social media.

To date, Facebook has approximately 500 million users and on any given day 50% of those users are online. Many of our children and grandchildren are spending an increasing amount of time living, working and playing online- sometimes with the wrong people.

One click of the button, one Facebook page or one YouTube vignette can go viral instantly and affect the family’s reputation and brand. It can be used in divorce actions, custody matters and employment decisions. Once viral, it is hard to eradicate. Social media is discoverable in litigation. Social networking sites are an investigative tool that gives the lawyers information that will lead to the evidence they need to present in a trial. Information gathered from social network can be used to attack credibility, discover relevant character evidence, dispute damages, determine or rebut state of mind and identify witnesses.

Facebook has been used to show the teenage driver who killed her best friend in a car accident was a party girl who drank heavily. Posts and pictures of her in many party situations abounded.

In divorce and child custody cases investigators look to confessions-things that people have done, places they have been and people they have had their children around.  People post revealing pictures and video on the Internet they would never share in the day to day world.

As an example there is a Facebook group entitled, “I hate my Ex???”. The group was created for “everyone who hates their ex-boyfriends or girlfriends or ex-husband or ex-wife.” Actual posts on that Facebook page include the following:

“I hate my ex husband wish he wasn’t the father of my kid so he could be out of my life for good!!!”

“My daughter hates my ex, her father, and the courts say she has to visit him. He gets her all this week for vacation.”

“My ex should die a slow painful death for what he put us through.”

“I hope my ex gets herpes.”

In Georgia, the Court of Appeals reviewed posts such as those (High v. High, 389 S.E.2d 690 (2010)) and admitted into evidence posts on the issue of the father’s suitability to have custody of the minor children.  The court commented that it was disturbed by the statements contained in the father’s MySpace page where he wrote “I’m actually a little sorry for [mother] just because losing her job affects my children. Well, maybe not. Now I’m financially more than able to support [the kids] if [mother] gets out of the way or is pushed out.” Relying on these posts the Court observed the father’s hostility, animosity and anger towards the mother and awarded the mother sole custody.

In Ohio, The Court of Appeals affirmed a lower court decision to consider text and picture posts on a mother’s MySpace page (Williams v. Gonzales, 2010 WL 3365741). The maternal grandmother filed a third party motion to modify custody of the mother’s children. The grandmother put forth evidence that the mother maintained a MySpace page under the name “Sexy Nurse Williams”. The mother posted pictures of her children which one expert called an “oral aura” in a slideshow with two sexually explicit graphics. The grandmother’s expert on social media and expert on risks to children regarding sexual matters, testified the pictures were displayed in a “sexualized manner” and created a “pedophile’s dream.” When these facts were taken into consideration the trial court found that a change of circumstances had occurred and modified the custody order.

In Indiana the Court of Appeals affirmed a lower court’s decision to consider the MySpace posts of one mother who mocked her children and their allegations that the mother’s boyfriend has been physically abusive to them. (In the matter of the Paternity of P.R. and A.R. 2010 WL 538476). The father petitioned the court to modify custody and support. The court, after reviewing the mother’s MySpace page and the allegations she made that mocked her own children for statements they made about her boyfriend who had one felony conviction for battery on a minor under the age of fourteen, awarded sole custody to the father.

With sites such as Facebook and MySpace the user can instantly download pictures and videos. People now have the ability to do that with themselves and even scarier, others have the ability to post that information about you and put them on their profiles without your knowledge.

As an example, the Ohio Court of Appeals in In re N.F. (2009 WL 1798146) the mother’s boyfriend (an exotic dancer) posted pornographic pictures on the mother’s MySpace page. These pictures were easily accessible. The court took custody away from the mother, ruling that even though she had demonstrated the ability to care for her children, work two jobs, provide financial support and strive for her GED degree, her home and personal life was chaotic and problematic.

In Michigan, Copeland v. Mitchell (August 5, 2010 Docket No. 290381) the Court of Appeals awarded the father full custody after considering pictures of the children posted to the mother’s MySpace page showing the girls without blouses.  The Court also ordered the mother to immediately remove the pictures.

The younger generation, if not educated, is not mature enough to understand the afterlife omnipresent power of the digital era. A strong family risk management policy should include education about the dangers of social media and a morally binding decision among family members to understand the consequence of social media on the reputation of the entire family.

How are you protecting yourself and your family wealth when considering these new risks?  Share your thoughts and comments below.

 

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.

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

 

Picking Guardians for Young Children

Why it is such an estate planning obstacle!

In my 27 years of estate planning, I’ve found choosing a guardian for young children to be the most difficult decision for couples to agree on and the most common reason why they either don’t complete or keep revising their estate-planning documents. It is important that your clients start on the estate planning path sooner rather than later. As the CPA and trusted advisor you are in a prime position to begin this vital conversation and help them reach a decision.

Guardian Selection Criteria

Factors to consider in selecting guardian(s) include the maturity of the person, whether he/she has a true concern for the children’s welfare and whether he/she has the ability and time to handle the extra responsibilities. Analyze what would happen if your clients added their children to the suggested guardian’s household? Do they have children close to their own children’s ages? Do they share your clients’ religious focus, moral beliefs and overall value system? Are they willing to take on the responsibility of raising your client’s children?

Being a guardian is a legal responsibility. The guardian will decide everything from where the children live, what schools they attend, where they worship and what kind of medical care they receive.

Your clients should come to as good a decision as they can, knowing that they can always change it. But they need to make this decision now. If they put off choosing a guardian and they both die while their children are minors, anyone who is interested can ask the court to be appointed guardian. The judge will then decide, without the benefit of their input, who will do the best job of raising your client’s children. The person the judge chooses may not even be someone on their “short list” of possibilities!

Should your clients appoint a person or a couple?

Do they want to name a sister as their child’s guardian or should they name that sister and brother-in-law? There are pros and cons to either decision. If they name just one, the other may harbor resentment and never fully participate in the child’s upbringing. On the other hand, if they name both people in the couple to be guardians and the couple divorce, then the child will be part of that divorce proceeding.

Suggest to your clients that they name successor guardians, if at all possible. Their first choice may not be in the right phase of life to act as a result of divorce, disability, financial hardship or problems with their own teenagers. Having successors named makes it easier for everyone.

This is probably the most emotional decision your clients will have to make in the estate-planning process. The exercises below are designed to help your clients find the answers to the question of who they want to take over parenting responsibilities:

1. Examine Your Priorities.

The act of parenting involves many different types of activities, responsibilities, value systems and rituals, many of which are done instinctively with little analysis or introspection.

However, when considering how you want your children to be raised if you are not going to be the one raising them, you should take a long hard look at the qualities you want your substitute to bring to the role as parent and evaluate the relative importance of each of those qualities.

a) Family. How important is “keeping it in the family?” Are blood ties paramount? Do you come from a close-knit family that prides itself on bonding together in times of trouble and “being there” for its own? Do you feel that naming a relative as guardian of your children will keep them in the nest and come closest to duplicating your parenting style?

b) Finances. You will, as part of your estate planning, take steps to provide your children with enough money in case you die early, to provide the lifestyle you desire for them. Does this lifestyle match that of the guardian? Will your children be living as “poor relatives” in a wealthier guardian’s home? Or will they be able to enjoy greater material benefits than the guardian’s own children, thereby creating tensions? Is the guardian you are choosing financially stable enough to assume this new responsibility?

c) Lifestyle. City life vs. country life; staying in the same community versus moving; emphasizing outdoor sports vs. emphasizing academics; relaxed supervision vs. strict discipline: What are the lifestyle choices you have made in raising your children and how important is it to you to choose a guardian who will replicate them?

d) Love. They say no one can love you as passionately as your own parents, but some guardians will come closer than others. How important do you feel heartfelt affection is in child rearing and how important is it to you to choose a guardian you believe will offer your child unconditional love?

e) Religion. If religion has been a backbone of your parenting, can you be sure the guardian you choose will perpetuate the traditions and teachings you have inculcated? Would it bother you if the guardian you choose brings up your children in a different religious faith? How important to you is a religious match in choosing a guardian?

f) Stability. How emotionally stable is the person you are choosing to care for your children? How strong is that person’s marriage? Employment record? Position in the community? How good is that person’s health? Is age a factor?

g) Time. How needy for attention are your children and what priority do you want the raising of your children to assume in the guardian’s life? Are they workaholics? Overcommitted to community activities? Preoccupied with their problems and responsibilities?

h) Temperament. Is it important to have a mood-match in choosing a guardian and if so, do your children need a soft, loving embrace and an emotionally sensitive attitude or will it take the personality of a drill sergeant to get them to finish their homework? Do they expect outward shows of affection or cringe at them? Is the person you are considering too moody, irritable or self-absorbed to come through?

i) Values. How important are the moral, religious, social, racial and political values your clients have tried to pass on to their children and how important is it to them that the guardian shares them and continues the teaching?

2. Evaluate Your Client’s Child’s Priorities.

Your client’s guardian decision will probably need to be updated as their children grow because their needs vary greatly from one stage of life to another. For example, the nurturing adoration of a grandparent that makes a four-year old feel loved and secure may suffocate a teenager. At some ages, being able to continue living in the same neighborhood with the same friends and going to the same school is far more important than living with a beloved aunt and uncle.

Rate the relative importance of the different guardian characteristics listed above, but this time examine them in terms of what your clients see as their child’s priorities rather than their own. If your clients have more than one child, they should rate each one’s priorities separately and compare the results, searching for a compromise.

Conclusion

As your client’s decision becomes clear about their priorities and their children’s, it will be easier for them to choose guardians now and give them the peace of mind that their children are protected, no matter what happens to them.

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

 

 

Gifting Land and Keeping it in Our Children and Grandchildren’s Hands

Gifting Family Property

Protect Your Assets: Question and Answer with Patricia M. Annino, Esquire

Question: Our family and extended family has always lived close to each other. We own quite a few lots of land that homes could be built on. We would like to give one to each of our children but we would like to make sure that it remains in the hands of our children and grandchildren-not their spouses. What do you suggest?

Answer:

Whose name is on the title to the house is one of the most emotional issues in any marriage.  My home is my castle is part of the American dream. If you give the lot directly to your child and that child maintains title in his or her name alone there is power imbalance in the marriage.

It can have deep consequences. It also has practical problems-who will be on the mortgage? Should both spouses pay the payment? Would it be fair to ask for your daughter to ask her husband to pay part or the entire mortgage from his earning but not give him an equity stake in the house? If the lot is in joint name then without a contrary written agreement should the couple divorce your ex son-in-law would in all likelihood receive one-half of the equity of the lot.

A possible solution is to ask your daughter to enter into a pre-nuptial agreement prior to marriage that mandates that if there is a divorce the value of the lot at the date of the marriage comes back to her first and any appreciation is split 50/50. An alternative is to lend, not gift the lot to both your daughter and son-in-law and have them sign a promissory note and recorded mortgage. Should they divorce both of them owe you the money and only the net equity in the property would be split.

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

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