Florida Estate Planning, Probate and Asset Protection

Asset Protection with Postnuptial Agreements

Fifty-one percent of divorce attorneys polled by the American Academy of Matrimonial Lawyers say they have seen an increase in postnuptial agreements over the last three years. These agreements are voluntary contracts between couples who have already married and usually cover issues involving finances, property, assets, children, support, and probate.

Move over ‘prenup’, there’s a new marriage document in town that can protect your assets even after you’ve said “I do.” That’s right, more and more married couples are opting to protect their assets with a postnuptial agreement.

Although the idea of marriage is to be together forever, many couples recognize that things can go wrong in a relationship. The stuff that can throw a monkey wrench into a marriage are things like children from a prior marriage, separate assets and estate plans, and, yes, even inheritances. So, even if you did not work out agreements regarding such stuff before exchanging vows, there’s always a cure after the fact. Enter the postnuptial agreement.

According to recent studies and an article in Private Wealth titled “Postnuptial Agreements On Rise, Lawyers Say,” you may never have considered a ‘postnup’, but an increasing number of people have and are. Across various incomes, married couples have found them to be valuable tools. There are many reasons to support this trend, even between spouses who otherwise would not ordinarily commit such agreements to paper.

Whether or not a postnuptial agreement is right for you, make note that these agreements can provide a practical pre-condition for an heir and spouse to adopt as part of your estate planning.

Reference: Private Wealth (September 12, 2012) “Postnuptial Agreements On Rise, Lawyers Say”

Trusts – Better Robust Than Bust

Not all trusts are created equal, especially when it comes to protection in a divorce.

Trusts are like pocket knives, in a way. Even a fairly basic pocket knife can make your life immensely easier, especially in a pinch, but a particularly well built and expansive pocket knife is an actual survival tool.

When it comes to trusts, however, why settle for a basic trust when a robust trust can provide essential protection for your loved ones?

While surfing my news sources I discovered yet another, renewed, lesson in the robust set of provisions that can be crafted into a single trust, here. In addition, this article illustrates the difficult space between divorce and the trust, and that’s one more area where a robust trust can make all the difference.

Depending on how you’ve structured it, a trust can last for varying lengths of time and offer the beneficiary/child various ways of accessing those funds. You might use this to teach lessons, for example, but don’t forget that you’re not always planning for the budding child but also the future adult. Unfortunately, that future adult may have creditors who could attempt an attack on the trust funds.

More likely, however, is that a divorce and an ex-spouse will come into play, perhaps also children and child-support. How the courts treat your trust depends on numerous factors best considered at the formation and worthy of your consideration at that time.

For more ideas (and at least one promising court case) read the original article. In the end, as with so many planning devices, everything hinges entirely on you, your family, and your unique circumstances.

Reference: Financial Planning Magazine (February 1, 2012) “Trust, But Verify”

 

JOINT OWNERSHIP - HIDDEN PITFALLS TO AVOID

One of the most common estate planning mistakes that people make is joint ownership.

Estate planning can be daunting. Once you get past the fact that your very mortality (and morbidity) is the triggering event, estate planning means taking stock of all you own and, what is often more important, how you own it. Yes, there are many degrees of ownership and each can make for some difficult wrinkles.

One common phenomenon is joint ownership between generations. Not only is it common, but it can make for some unintended problems. Forbes recently ran a piece on some of these problems and the five reasons to avoid such ownership form. Let’s review some of the high points, but I would commend the full article to your reading file.

Joint ownership oftentimes is an attempt to simplify things, or at least that is why people use it as a means of holding title. Perhaps they want to simplify practical day-to-day financial management. Aging parents needing such help may add an adult child’s name to a bank account or investment, either for direct aid or for just assisting in managing the accounts or assets. Likewise, it could be done as an attempt to avoid probate. Adding the adult child’s name to the account, investment, or real estate as a form of will-substitute (a so-called “poor man’s will”). Of course, these are only simple solutions, and may actually work, when things go off without a hitch.

One problem to remember is joint-ownership is a two-way street. That means that adult child joint owner has equal ownership rights to the assets and so do any of that adult child’s financial predators. The adult child may have their own creditors, may be facing an acrimonious divorce, or may be sued for damages in civil court. In addition, while no parent would anticipate it, the adult child may use the jointly owned bank account for a “quick loan” when they are running a little short of cash. Any of these unintended consequences can not only jeopardize the financial independence of an aging parent, but can cause hard feeling among other adult children who may (or may not) be joint owners with their parent.

Another problem, especially from an estate planning perspective, is that joint ownership as a stop-gap or a will-substitute is not really estate planning and may run afoul of the parent’s actual estate distribution wishes. For example, the adult child who has joint ownership doesn’t have to share such assets upon the parent’s death. As you can imagine, it is very easy for such cases to spill over into family squabbles and even prolonged court-cases.

Sometimes joint ownership seems like a good idea and a quick fix to avoid probate. And, sometimes it is. Before you use joint ownership as a form of titling your assets, however, consider the drawbacks.

In the end, an estate planning attorney can help you determine whether joint ownership is appropriate under your unique circumstances. Remember: Look before you leap. The protection of your assets and family relationships are at stake.

You can learn more about Joint Ownership in the January issue of our free e-newsletter, “Joint Tenancy Troubles.” Visit our website and sign up to receive this valuable update for free every month.  

Reference:  Forbes (September 13, 2011) “Top 5 Reasons to Beware of Joint Ownership Between Generations”

 

ESTATE PLANNING / PRENUPTIAL AGREEMENTS

 

As more and more people marry more than once, prenuptial agreements have become an important estate planning tool. 

 

Marriage is a tricky institution, enough so to feed a thriving business for therapists and prime-time sitcoms alike. Re-marriage can be even trickier, especially when it comes to your estate planning. If you are considering re-marriage, you may be well advised to also consider a prenuptial agreement. Though it may not seem the most romantic gesture, a prenuptial agreement is simply an honest disclosure of both parties’ assets and agreement as to their distribution should the union dissolve, or at the death of either spouse. Enter re-marriage without one at your own risk – or that of your estate. Without a prenuptial agreement, your new spouse could invalidate your existing estate plan.

For example, suppose you and your new spouse each have children from a previous marriage. You intend for your house to pass to your children, but without proper planning and a prenuptial agreement in place, your new spouse could inherit your house and then pass it on to her children when she dies. Disinheriting your own children probably was not your plan.

You’ll need to follow special protocol to ensure your prenuptial agreement is valid, to include that it must be in writing, signed without pressure on either party, both spouses must read and understand the agreement, disclosures must be complete and completely honest, and the agreement cannot be grossly unfair or contain illegal provisions (such as a modification to child support obligations).

If you are already re-married and did not sign a prenuptial agreement, it may not be too late for you and your spouse to resolve these issues with a post-nuptial agreement.

Reference: ElderLawAnswers.com (June 6, 2011): Prenuptial Agreements Can Be an Estate Planning Tool.

 

ELDER LAW / SOCIAL SECURITY

 

From The Los Angeles Times - Business (March 6, 2011) “Divorce can Complicate Social Security Claims”

 

Knowing the rules involving spousal and survivor benefits can prevent costly errors.

 

If yours was among the roughly 50 percent of marriages that ended in divorce, you may want to brush up on the Social Security rules involving spousal and survivor benefits. Why? Because mistakes can be quite costly.

The LA Times recently offered a brief primer, highlighting the primary issues that could affect divorced people in their retirement years.

The Basics. If you were married for at least 10 years to someone who paid into the Social Security system, you are entitled to a spousal benefit, even if you are divorced from that person. Spousal benefits, if claimed at your full retirement age, usually amount to half of the wage earner’s full benefit (if you claim benefits early, the amount is reduced). If you worked for 10 years and paid into the system, you also may be entitled to benefits based on your own work record. However, you are only entitled to one benefit, you cannot claim both your own and spousal benefits.

60 is the Magic Number. If you remarry before age 60, you lose your ability to claim spousal or survivor benefits based on your former spouse.

Multiple Spousal Benefits. If you are single now but were married to more than one person for more than 10 years each, you may be eligible for spousal benefits based on the earnings record of each of those former spouses. However, you still are entitled to only benefit, though you may choose the one that would be most beneficial to you.

Survivor Benefits are Best. Remember, survivor benefits are 100% of the working person’s entitlement, as compared to spousal benefits which are only 50%. So, if your former spouse is deceased, claiming survivor benefits may be your best choice.

 

 

 

 

Link: http://www.latimes.com/business/la-fi-perfin-20110306,0,1315052.column