Wealthy Women Face Challenges in Estate and Tax Planning

Given the expectation the Biden administration will roll back some of Trump’s favorable policies of the past four years, tax consultants and accountants are already hard at work. But for HNW women, dealing with election fallout is minor, compared to the bigger fish they have been frying in the tax pan for decades.

Wealthy Women Face Challenges in Estate and Tax PlanningElection cycles often mean changes to estate and tax planning strategies around estate planning, charitable donations and capital gains, but that’s not the only challenge facing wealthy women now, says a recent article “For Wealthy Women, Tax and Estate Planning is Weak Link” from Think Advisor. Preparing for big changes, from presidential elections to death or divorce, is all too often a surprise, even for accomplished and financially successful women.

Statistically, women do outlive men, so there needs to be a plan for the unexpected. As attitudes shift and more women build their own wealth, they are less likely to stay in unsatisfying marriages. Although the overall rate of divorce in America is declining, the number of “gray” divorces is increasing.

One essential step in planning for high net worth women is to consider what assets they will need to continue their current lifestyles, and what assets would be at risk, in case of death or divorce.

Some assets are not available to singles, like the Spousal Lifetime Access Trust, an irrevocable trust available to couples but not to singles. For those considering divorce who have a SLAT agreement, speak with your estate planning attorney, as the SLAT may include a provision that terminates spousal trust rights upon divorce. Women should not assume that these or other assets will be available to them in case of a divorce.

There are also future costs associated with losing a spouse. If women do not have long-term care insurance, it should be purchased, if she still qualifies. These policies become more expensive as time goes by, so the 40s and 50s are the ideal time to invest in them.

Timing and tax policy changes from a new administration make this a good time to begin planning for any changes that may come in the next year. Women with substantial net worth should be making plans for gifting and trusts now. The gift tax lifetime exemption remains at $11.7 million, but even if there is no legislative action, on January 1, 2026, this will return to $5 million.

Dramatic changes in asset valuation resulting from the pandemic may make this a good time to transfer shares to children and grandchildren, including real estate holdings and closely held family businesses.

The effects of COVID-19 have provided a global lesson in preparing for the unexpected. Among many other issues has been a huge backlog in most surrogate courts. Even families who had an estate plan in place, found their estate planning hampered by waiting for courts to appoint executors.

In many cases, surviving spouses (mostly women) found themselves unable to move an estate plan forward, gain access to assets, even to pay household bills. Families who have been lucky enough to escape the impact of COVID-19 so far, should take the opportunity to plan for the unexpected, including the creation of a revocable trust, so the trustee can swiftly access assets and start managing right away, rather than waiting for courts to clear.

One of the main goals of our law practice is to help families like your plan for safe, problem free, and successful transfer of assets to the next generation.  Call our office today to schedule a time for us to review your estate plan and identify the best strategies for you and your family to ensure your legacy of love and financial security.  Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.

For more information and articles on estate planning, probate, trust law, and business planning, please visit our website and subscribe to our monthly e-newsletter.

Reference: Think Advisor (Jan. 6, 2021) “For Wealthy Women, Tax and Estate Planning is Weak Link”

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