Those of you who have known me for a while know of Judith Volkmann. Judy was and still is a mentor and a friend of mine since before I was licensed to practice law, and it was refreshing for me to see how another Attorney / CFP(R) approached estate planning. During her time practicing law as as an practitioner, Judy was very much about keeping things simple to avoid the controversies that arise due to complex estate planning issues, though I was surprised how she approaches two difficult estate planning circumstances: Non-marital couples and non-citizen couples.
Unmarried couples lose out on certain estate tax exemptions, such as taking advantage of marital credit shelter trusts and QTIP trusts. Non-spouses also do not have a claim as to making health care or financial decisions for their companions. Lastly, non-marital couples do not have any legal right to their partner’s estate assets (remember, there is NO common law marriage in New York). And while GRATs and other complex trusts can overcome these issues, the desired outcome is not guaranteed.
Judy’s answer: Tell the clients to get married.
Couples who have a non-US Person as a spouse lose out on certain estate tax exemptions as well. The non-citizen can receive income estate tax free from a QDOT trust, but principal is estate taxable. A non-citizen may have trouble becoming an Executor to an estate.
Judy’s answer: Get dual citizenship.
The simplicity of these suggestions may seem almost too intuitive, but the answer goes right to the heart of the concerns that partners / spouses have. Maybe the cohabitating couple has always had separate finances and don’t want to be liable for the other partner’s future health care needs, or don’t want to have their children’s future bequests diminished by having a spouse (I wrote on this dilemma in AARP’s online magazine about four years ago – both very valid concerns). The non-citizen may find that dual citizenship dilutes their identity or creates a stigma toward their family.
I can appreciate these concerns, but must also remind people that their behavior is often changed where increased money may be available to them. If these concerns outweigh the financial detriment they shall face then they can feel free to create that complex estate plan. However, if money is the driving motive, sometimes taking the easiest path is the best advice an estate planner can provide.
