This week, we celebrate Pride Month with a feature on estate planning considerations for the LGBTQ+ community. I sat down with family dynamics and trust and estate experts to hear about the issues the community faces when it comes to estate planning and how things become more complex depending upon marital status. Read on to learn about the key items not to be missed.
We also spotlight Bank of America’s recently released wealth report, which states most Americans do not have a proper estate plan in place, even though the great wealth transfer is looming. The study reveals that 48% of 1,000 surveyed Americans with a net worth of at least $3 million have the basics of an estate plan — considered to be a will, advanced health care directive and durable power of attorney.
As always, we appreciate any comments, ideas and insights that would make this newsletter more useful. I look forward to growing this family office community with your help. Please email me at [email protected].
HANDPICKED: Trust and estate planning tips for the LGBTQ+ community
By KRISTEN OLIVERI
When Tim Volk came out of the closet to his family earlier in his life, he experienced firsthand the dynamics that come with having a gay family member.
“My own experiences suggest that with a mindset of inclusion and the underlying love that exists, time can heal many wounds,” he told Crain Currency. “For those of us who may not have been welcomed with open arms at the beginning have become the rock for the family.”
Fast-forward to today. Volk — born into a Midwestern, entrepreneurial family business — has launched his boutique advisory firm, T. Volk + Co., and the podcast the “Rainbow Bull,” which helps families with the human issues surrounding wealth and strategic planning.
One of the most pressing issues Volk sees for LGBTQ+ family members relates to trust and estate planning. “Many Americans realize that we have cultural variation in the U.S.,” he said. “However, another cultural difference exists between the straight world the LGBTQ+ community.”
For this reason, Erika Shaw, executive director of the J.P. Morgan Private Bank, has built a practice around covering marital planning, family planning, and legacy and estate planning. “It’s about being intentional and strategic and making sure there’s a game plan going forward,” Shaw said. “Because unfortunately, members of this community may find problems with other family members, and wills may be contested by family members.”
LGBTQ+ family and estate planning has changed considerably since the legalization of gay marriage, said Michael Greenberg, founder of Michael J. Greenberg PC, whose practice focuses on estate planning and eldercare.
While these couples are still 40% less likely to be married than heterosexual couples, marriage planning comes into focus more than ever before. “For those who are not married but who are cohabitating, what happens if you break up?” Greenberg said. “We’re doing much more cohabitation agreements now that are similar to pre- or post-nups for couples who are not married.”
When working with LGBTQ+ couples, Greenberg encourages them to make sure to have an estate plan in place, a health care proxy and someone who handles their estate assets and will when they die. “Every state has estuary laws,” he said, “and a person might not be close to their parents or siblings and prefer for their assets to go to a friend or charity.”
Volk believes this is a noteworthy point to consider thoughtfully. “Many of those in our community have estranged family members,” he said. “It is not unusual that if the correct planning is not done, they will take control, ignoring wishes of their kin and their partner. Most of these stories end badly for the surviving spouse, let alone for the money to reach the intended bequeaths.”
Another proactive option for unmarried couples is to consider a revocable trust. “It’s much harder to challenge a trust as opposed to a will,” Greenberg said. “If they want to keep their plan private or their family out of it, having a revocable trust makes sense for them.”
Shaw echoes the sentiment, adding that it’s most important to clearly state to whom they want their wealth passed. “Whether it’s a will or trust document, say what you want,” she said.
THE FAMILY CONNECTION
For LGBTQ+ members with children, planning becomes more complex depending upon marital status. Kim Kamin, chief wealth strategist at Gresham Partners, said that following the Obergefell case in 2015, “same-sex married couples should have all the rights and privileges of marriage that different-sex couples experience, but they can still face challenges in their ability to adopt children. And gay couples who depend on assisted reproductive technologies like IVF [in vitro fertilization] or surrogacy can face increasing challenges,” she said.
Shaw understands the nuances on the road to parenthood and adds this: “If one of the parties is not the biological parent, it is imperative they establish legal status as a parent. If there is a breakup, they still want access to their kid.”
Multiple ways exist to establish legal parentage — including that if you are married, you can adopt your child in certain states. In others, you can go to court and confirm legal status as a parent and get a court order that will legally acknowledge your right as a parent in another state, Shaw said.
When working with same-sex couples, Kamin encourages them to carry on their cellphones their marriage certificate, if they have one, and their power of attorney for health care and property “in case they need to prove legal authority, such as if their partner/ spouse is unconscious in the hospital.”
THE GOLDEN YEARS
As LGBTQ+ couples age, it’s important to think about higher costs and health care, particularly if they don’t have children. “They can look to estate planning strategies that make sense for the community without kids, like looking into a commercial annuity for an income stream for life,” Shaw said. “Or perhaps look at a charitable remainder trust, making sure that any wealth left over goes to places that are important to them.”
Given the intricacies of planning, remember to stay proactive, said Volk, who sees this as a huge opportunity for advisers to educate themselves to help their clients through these challenges.
“Wealth advisers can begin to narrow the gap with this cultural difference by growing awareness that the LGBTQ+ client has had a vastly different experience interacting with mainstream society from which a straight person has,” he said. “Individuals have often endured a lifetime of fear, bullying, family rejection, job losses, verbal harassment and physical attacks along with other forms or harassment and discrimination.
“Advisers can make a positive impact when they bridge this cultural divide.”
Bank of America study finds most wealthy Americans lack estate plan
By ANDREW COHEN
As the U.S. gears up for its greatest wealth transfer in history, fewer than half of wealthy Americans have a proper estate plan in place, according to a new report from Bank of America.
The study says 48% of 1,000 surveyed Americans with a net worth of at least $3 million have in place the basics of an estate plan — considered to be a will, advanced health care directive and durable power of attorney.
“Families are surprisingly unprepared for wealth transfer,” Mike Pelzar, head of investments at Bank of America Private Bank, told Crain Currency.
Around $84 trillion will shift from older to younger generations through 2045, according to Cerulli Associates. Spurring the enormous transfer is the massive wealth accumulated by baby boomers, who are projected to pass down 63% ($53 trillion) of the total transfer.
Wealthy Americans surveyed by Bank of America listed tax law changes as their top reason to update their estate plan (38%), beating out reasons such as a significant change in wealth, life events (birth, marriage, divorce) and regular annual updates.
Among the wealthiest families with assets over $10 million, 27% said they’ve already made estate plan changes because of the potential expiration of the Tax Cuts and Jobs Act, signed by then-President Donald Trump in 2017. An additional 25% of the wealthiest families surveyed said they plan to make changes by 2025 because of the impending expiration of the act.
Under the act, the federal estate and gift tax exemption is currently $13.61 million per person and $27.22 million for married couples. Those exemption limits are expected to be cut in half once Trump’s tax cuts expire at the end of 2025, and their renewal is considered to be dependent on the results of the upcoming election in November.
LOOSE CHANGE
Koch family invests in pro basketball: Members of the billionaire family — Julia Koch and her three children — will buy a 15% stake in BSE Global, the holding company that owns pro basketball's Brooklyn Nets, New York Liberty and the Barclays Center.
Apex Group hires leader for family office services: The financial services firm has appointed Katie Baxter to be its new head of private clients and family office. She will be based in the UK.
Family-owned White Castle remains Great Place To Work: It’s the fourth consecutive year that the Great Place To Work survey has honored the fourth-generation burger chain, which has nearly 10,000 employees and 340 restaurants.
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