Estate Planning for Same-Sex Married Couples

Estate planning is always a complicated and important issue, and in the case of same-sex married couples there may be additional issues that require extra planning. For same-sex unmarried couples, there are even more issues.

While the law obviously allows same-sex couples to marry in all states in the country, there remain some counties across the country where same-sex couples cannot marry.

It is recommended that same-sex married couples take the same steps in estate planning as other married couples in order to protect themselves.

The first step is to make sure you have a legal marriage license if you are married. Prior to the 2015 Supreme Court decision legalizing same-sex marriage, some couples married under existing state laws. If they later moved to a state that did not recognize that marriage, there could be legal consequences.

Once that’s done, the other legal steps in estate planning obviously start with a will. But as is the case in any marital relationship, a will is just the first of several legal steps and documents that you should consider.

I also strongly recommend the following: a living will, designation of health care surrogate, durable power of attorney and a declaration of pre-need guardian.

The importance of these documents cannot be understated especially if you have children in the family, and if there are other family members who are not happy with your same-sex relationship.

If you have any uncertainty or questions, or do not have all these documents prepared, I will be glad to help.

Planning a Business Succession

We recently wrote here about how to transfer small business ownership to your heirs. But what happens when there are no logical family members to take over your business when you retire?

You have options but as is the case in any other business planning, you need to start acting sooner rather than later. In many cases, small businesses simply fail if there is no plan in place when the owner is ready to step down. That doesn’t even consider what kind of plans may be in place if the owner dies or becomes incapacitated suddenly.

So the idea is to plan early, or before there is a crisis, and then be prepared to update that plan as conditions change.

The first step is obvious. Is there someone in your business who is the logical person to succeed you when you retire or become unable to continue to run the company? Take a hard look at your employees to determine if the person is there waiting to assume the leadership role. Ideally this should happen at least a decade before you plan to retire.

Next you need to develop a formal training program. If you don’t have a business plan, you probably need one before you can develop a training program. If you do have one but it has been sitting on a shelf too long, you may need to revise it.

Use the business plan to identify the most important aspects of your business. Your potential successor should become familiar with all of these critical functions. This person needs to learn over time all the details of your operation, not just the executive duties.

You need to set a timetable to determine how and when leadership of the company should change. Start to have your successor take control of various aspects of the business. Let them learn from mistakes and try not to contradict his or her decisions.

Then you need to start to plan your retirement, including when it will start. And this is a plan you should stick to. People often plan retirement but when it gets closer, they put it off.

Finally, when you retire, hand the company off to your successor.

All that sounds simple enough but there are implications along the way – many of them dealing with financial planning. It’s important to acquire the assistance of an attorney skilled in the practice areas of estate planning and business law. Those are both practice areas with which we have great familiarity and can help.

Transferring a Family Business

If you have owned your own small business for years and have seen it grow to be a successful endeavor, you may be facing a dilemma if you are reaching an age when you want to slow down or retire.

There are a number of options as to the next step for your business, and there are a lot of considerations.

Many people grow businesses with the ultimate plan of turning it over to their children. But turning to a son or daughter and saying, “This is now yours” is a little more complicated than that. That’s assuming the son or daughter wants the business. And if there are multiple children – and all are interested – it’s even more complex.

If there are multiple children interested in ownership of the business, the first step is to determine how the business will be structured. A sole proprietorship for example may have to become some sort of business entity such as a corporation or a limited liability company.

Once that’s done, it’s important to follow a very specific process with a few ultimate goals in mind.

Whether you sell the business or gift it to children, you must pay careful attention to any related tax issues.

Under IRS rules, you can set up a gifting program to transfer ownership in a way that reduces gift taxes. This method could take several years and requires careful planning.

If you choose to sell the business outright to a family member, there are ways to avoid or reduce gift or estate taxes.

There are other methods as well, including a buy-sell arrangement, a grantor retained annuity trust (GRAT), a grantor retained unitrust (GRUT), private annuities, family limited partnerships and more.

The best advice I can give you, if you believe this is a path you want to pursue with your family is to start planning early. I can help with this complex process.

Digital Assets and Estate Planning

Estate planning has never been easy for many reasons, not the least of which is that it’s something most people just don’t want to deal with.

But with the growing (maybe exploding) use of digital media, estate planning has become even more complicated, in part because it is a challenge to reconcile what you put on paper in a will or other document with what you put out on the Internet. Exactly how to deal with your digital assets after your passing is an ongoing issue that some states, including Florida, have started to consider.

Think about this. You have social media and networking accounts including LinkedIn, Facebook, Twitter YouTube and others. What happens to them when you die?

Most of these social media platforms will not let someone – even a relative – have access to your accounts, although that is slowly changing. Facebook now allows you to name a legacy contact – a person who can post your obituary on your timeline and convert the site to a memorial page. But in order for that person to have access, you must identify them in advance to the social media platform and designate that they are in that role.

Even more complicated than what happens with your social media accounts is what transpires with your online social media accounts.

Florida passed the Florida Fiduciary Access to Digital Assets Act in 2016. Described as a good first step by many in the field, this law identifies what would be considered digital assets. It also identifies who can be the custodian of your digital assets and gives them authority to work with your financial institutions.

But while the law is in place in Florida, it does not help you or your beneficiaries if you don’t take the necessary steps by which your assets can be dealt with after your passing, or after you become unable to communicate your desires and wishes.

So the best message I can give you is to act quickly to deal with all your assets in appropriate estate planning and be sure to include digital assets in that planning. As always, I can help you through that complicated process.

Leaving Assets to Children

Leaving assets to minor children and having those assets stay protected is often a challenging process. It is a little easier when leaving assets to adult children because of the assumption that, in most cases, they will know how to appropriately deal with these new assets.  Unfortunately, even with grown children, financial responsibility is sometimes a problem.

If there are multiple children, you must consider how to treat your children fairly. That may involve a decision as to how to divide your assets among your children. Treating children fairly does not necessarily mean that each gets an equal amount of your estate. When considering how to leave assets to your adult children, first decide how much you want each one to receive. There may be legitimate reasons why one child would get more than another – maybe based on their careers for example, one might be a brain surgeon with an extremely high income and another might be barely making ends meet.  For some, a consideration is who has been more conscientious about taking care of you in your later years.

You may also be concerned about giving too much to your children. Will a large inheritance change their lifestyle in a negative way? You might consider giving some inheritance directly to grandchildren. One of my future articles will deal with how to give assets to minor children or grandchildren. And of course, you could decide to leave some of your assets to a charitable cause.

If you are planning to give children different amounts, it would be very important to have a  conversation with your children about your decision and your reasons for the decision. That may or may not avoid any possible ill will that could occur later.

Once you’ve decided how much, you need to focus on how.

An option is to start giving away some of your assets to your children while you are still alive. That way you get the enjoyment of seeing their responses. This could be in the form of helping to pay for a new home, or college tuition and fees. For some, making gifts has tax consequences.  You should consult with a lawyer or CPA before making gifts of a substantial amount.

Another decision is how you want your children to receive their inheritances. You have several options from which to choose. There may be some family heirlooms that are particularly special for one child or another. Giving those to your children while you are still alive can be a great emotional experience for everyone.

More traditional is giving away your assets in a lump sum. This generally, but not always, occurs through a will after your passing. One consideration about this method is how responsible your children are. You don’t want to give someone a significant amount of money or other assets, if they have never shown the ability to budget and handle money wisely. If they are not careful, that inheritance can be lost to creditors, bad investments or other factors. If you have concerns about in-laws and whether your children are in marriages that could become problems that would be another reason to hold off on a lump sum.

If you have concerns about giving your children a lump-sum inheritance, installments could be the answer. You might even start this while you are still alive to give guidance and guard against them spending an inheritance unwisely. You can set up any kind of installment plan – breaking up the inheritance so your children receive a certain amount every few years. You might consider a certain amount when children reach a certain age. That way, even after you have passed away, it’s possible a child might learn from bad financial planning with the first installment.

Finally, you can consider setting up a trust – even for adult children. That way you can provide for them without their getting the assets directly. Assets in a trust are protected from their creditors, lawsuits, irresponsible spending and ex-spouses. This is especially helpful for any special-needs dependents, or if a child were to become incapacitated. Any other benefits they may be receiving would not be in peril from an inheritance. Trusts also allow you to motivate a child who might need some incentive to earn a living. If your child is financially secure, you can set up a trust for your grandchildren and future generations as well. This option allows for flexibility and offers control and protection over the assets you worked hard to accumulate.

There is no one-size-fits-all choice. You need to take a hard look at your family and learn your options. I can help you through that process, so you make the best decisions for you and your family.