Legal Issues Facing Women in RetirementAnchin in the NewsNovember 2, 2017
Tax Principal Mela Garber shares her perspective on late-in-life financial management and what is necessary for women to have financial success.
“What I find from my experience is that women do address these issues more diligently than men, perhaps because they want to take care of their families and not leave legal messes for their kids,” says Mela Garber, tax principal at Anchin, Block & Anchin.
“The reason I often recommend [revocable trusts] is they provide certain benefits a will does not,” says Garber.
A trust’s assets may be controlled but not technically owned by the creator, and if the creator dies or becomes incapacitated, the trustee or co-trustee can step in, preventing a costly, drawn-out probate.
“I feel that, especially with today’s market volatility, this is an important tool for making decisions immediately,” Garber adds.
While wills don’t avoid probate, they can be useful for other purposes. Only a will can name guardians for children and leave instructions on how debts should be paid, for instance, and they’re cheaper and simpler to set up.
Important for advisors to note: Whether a client sets up a will or trust (or both), the allocation of the assets it assigns may impact its legitimacy. “Quite often, this is an issue with second marriages,” says Garber. A husband, for instance, might set up a trust from which his current wife is entitled to all income and principal, and from which the remainder passes onto his children from his first marriage when his current wife dies.
“These types of trusts are quite often subject to litigation and present a challenge for money managers,” says Garber. “It’s important to structure the portfolio in such a way to benefit the current beneficiary – your female client – and take into account the future beneficiaries – her stepchildren.”
While some couples don’t make these decisions until after one has passed, they delay at their peril. Wills and even trusts that haven’t been recently updated tend to generate litigation, particularly in families with children from multiple marriages.
Mixed marriages aside, a lack of preparation or an open-ended “I love you” will can also leave a widow in a tough spot. “It’s very hard for a woman to make financial decisions within the first year of her husband’s death,” says Garber. “Very often kids other others start asking the mother for gifts, and it’s very hard to handle when she doesn’t even know whether she has enough to support herself.”
The bottom line: prepare thoroughly, prepare early, and bring couples together before either falls ill. “It’s extremely important for both husband and wife to be part of the estate planning process,” says Garber.
“I’ve seen situations where a man remarries, divorces and forgets to the change the beneficiary on his IRA,” says Garber. What happens after his death depends in part on state law, but in general, beneficiary designations override wills. Even a long-divorced ex could get the money.
“Financial advisors know when somethings changes in the family, and they can always keep an eye on their situation and make sure documents reflect those changes,” says Garber.
In addition to the money manager role, advisors can bring together professional teams to benefit their clients.
“A majority of the time, you’ll need an attorney, accountant and financial planner, and it’s unrealistic to expect one person to understand the complexities of all three disciplines,” Garber adds. “It’s very important to have that team working together so the clients gets the true benefits of each professional service.”
Read the complete article on ThinkAdvisor.com.