The new normal

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January 05, 2018


Nontraditional families may have become the new norm in the United States.

 

Blended families, single-parent households, multigenerational households, single-person households, same-sex couples and other nontraditional family structures represent almost 70 percent of the U.S. population, according to recent data from the U.S. Bank research report “Financial Insights for Modern Families.”1

 

Nontraditional families need to think more strategically about wealth transfer goals and how to use tools at their disposal to achieve them, says Shannon Baustian, Senior Wealth Planner for U.S. Bank Private Wealth Management in Minneapolis. “Every family has different concerns and needs,” she says. “Paying attention to the financial part of that is important.”

 

Two years after the landmark 2015 Supreme Court ruling Obergefell v. Hodges legalized marriage for same-sex couples, many confusing financial issues have been resolved — but some are still being untangled. After years of having to carefully plot their wealth transfer plans to ensure their surviving partners were cared for, same-sex couples are now officially afforded all the legal and financial rights of heterosexual married couples. That includes access to the unlimited marital deductions that allow spouses to gift any amount of money or property to their partners without gift taxes.

 

“A lot of same-sex couples are still unwinding the trusts and other financial instruments they put in place because they are no longer necessary,” says Ann Dyste, LGBT Strategy Manager for U.S. Bank in Minneapolis. But for other nontraditional families, these tools are still vital to making sure their wealth transfer goals can be potentially upheld with minimal taxation.

 

Matthew Tilghman-Havens, Senior Wealth Planner for U.S. Bank Private Wealth Management in Seattle, adds, “Even among LGBTQ couples, there are still quirks around public entitlement, veterans’ benefits and state rules that can affect their estate.” 

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January 05, 2018


Trust choices

 

Creating an estate plan may help these families avoid surprises, clarify their legacy goals and prevent disputes over who gets what, Tilghman-Havens says. For example, he recently worked with a wealthy client and his attorney to update his estate plan after marrying his fourth wife. The client established trusts that would benefit her immediately upon his death, as well as designating assets to her children, along with his own children and grandchildren. If he had neglected to make an estate plan or will, she would have had to split the estate equally with his children, which means they could demand she leave her home, and it could lead to litigation over the long-term value of various assets.

 

Fortunately, there are financial tools that can help families get started. “One of the easiest — and most overlooked — is the beneficiary designation,” Dyste says. Bank accounts, retirement plans, annuities and life insurance policies all require a designated beneficiary who will automatically inherit that asset at the time of death. Dyste suggests that investors review the beneficiaries on all their accounts once a year to be sure the right people are in line to receive that resource. 

 

Wills and trusts are also useful tools for distributing assets to extended family members and for avoiding probate. They are especially valuable for high net worth individuals who may be subject to estate taxes in excess of $5.49 million per person ($10.98 million per married couple), depending on whether tax reform legislation currently being debated in congressional committee increases these limits or repeals the estate tax, Dyste says.

 

Families, or those worried about how taxes and estate rules will impact their assets, should work with a financial advisor and their tax and legal advisors to be sure they have a solid plan in place, Dyste says.

 

1 U.S. Bank, “Financial Insights for Modern Families,” July 2016

 

Categories:
Estate Planning , Wealth Transfer , Online Exclusive