Estate Planning for Non-Traditional Couples
AS A NON-TRADITIONAL COUPLE, WHAT CAN WE DO TO BETTER PREPARE FOR THE FUTURE?
Just this last fall, I opened the Sunday edition of The New York Times to find an article detailing an all-too-familiar story. Mr. Bill Cornwell and Mr. Tom Doyle lived together in their West Village brownstone loyally for over fifty years, creating a home together which nourished their deep and loving relationship. Sadly, Mr. Cornwell died in 2014; and now his will – which bequeathed the brownstone to his longtime partner – is in dispute. At the age 85, Mr. Doyle was turned out from the home he had known for the past five decades, and now is entrenched in a legal battle with Mr. Cornwell’s closest relatives. Mr. Cromwell created his last will and testament roughly a decade ago, naming his longtime partner as the recipient of all of his assets, including the three-story brownstone. Regrettably, the execution of the will was witnessed by one person and not two as required in the state of New York, making it “legally invalid.” Without a valid will, Mr. Cromwell’s assets go to his next of kin, two nieces and two nephews, who have since sold the brownstone for over $7 million dollars, leaving Mr. Doyle to live the remainder of his days in unfamiliar surroundings. I found myself asking the question, “Are we protected and, if not, what can we do to better protect ourselves?”.
For me, this story resonated deeply. After a recent move from St. Louis to Philadelphia, my partner and I were talking about our future. As we were settling into a new home where we could focus on our new life, including our passion for collecting, I began thinking about our own situation. Although I assist others with the management of their tangible assets on a daily basis, I still contend with the long-term care and management of mine. With over ten years in the fine art auction industry, I have witnessed the above situation countless times – in the arms of grief, friends and families alike are often not so concerned about the multi million-dollar family business or the generational summer home; these assets have usually been appropriately planned for years ago. But on many occasions, what they are quarreling over are high-value tangible assets with significant sentimental value. With the United States Supreme Court’s 2015 ruling in favor of same-sex marriage, these very problems now plague high net worth same-sex couples and can easily be resolved with appropriate planning and care.
Sexual orientation is a growing standard demographic variable in market research, along with traditional factors such as age, income, net worth, occupation, and education. A recent study conducted by Walter H. Zultowski, PH.D. shows that between 4% and 7% of high net worth households identify as gay, lesbian, bisexual or transgender. Although this may seem like a small number, of those polled 4% translates to approximately 300,000 same-sex households. This survey also shows that the high net worth LGBT market tends to be younger and slightly more educated than the high net worth heterosexual population. These individuals are also more likely to be found in professional occupations and business-owning categories where they can continue to grow their wealth and diversify investment though various asset classes. For many attorneys, wealth advisors, and risk management firms, this change opens a new segment of potential clients and raises the question: How do we solve problems for this new, and largely overlooked, demographic?
For advisors who are not LGBT themselves, it is important to identify and understand the very specific issues this group may face when managing risk and planning for the future. Tangible assets are now often considered a significant percentage of an individual’s portfolio, and these assets need both care and management, with strategic oversight for long term planning.
BELOW ARE THREE KEY FACTORS I LEARNED ALONG THE WAY
ASSEMBLE A TEAM OF EXPERTS
Clients and wealth managers who wish to appropriately manage tangible assets should first develop a team of trusted experts including accountants, attorneys, an independent appraiser, and an independent insurance advisor who specializes in high net-worth clients. Experts in their respective fields can easily guide clients through the unfamiliar waters of fine art and tangible assets.
SECURE AN ACCURATE APPRAISAL
The appraisal itself is the foundation for every decision made with tangible assets. In order to appropriately manage what can be a varied portfolio, it is important to conduct an insurance valuation for retail replacement purposes. This valuation reflects the cost of replacement after loss or damage. Oftentimes, responsibility for up-to-date values lies with the client. Being under-insured can result in loss, or worse, a voided policy. Having more insurance than necessary can lead to unnecessarily high premiums or disputes, in the case of a loss or damaged asset. An accurate appraisal will safeguard the owner from undue stress related to the loss and result in a quick settlement for replacement.
For those fiduciaries seeking to preserve wealth and manage tangible assets for same-sex couples, it is essential to remember that without a recognized legal relationship, there is no automatic safety net. According to the law, the estate (including high value tangible assets such as fine art, antiques, jewelry, investment wine and spirits, classic cars, etc.) will be inherited by the closest living family members, without proper estate planning in place. Like with heterosexual couples, a will can protect the assets and wishes of same-sex couples, properly dividing assets per an individual’s or couple’s wishes and avoiding costly inheritance tax issues. It is recommended that a fair market valuation is conducted for estate planning purposes. This valuation not only provides a clear understanding of the value of assets in the current market, but also provides a clear baseline value in terms of investment, return, and strategic estate planning.
TRACK NEW ACQUISITIONS AND MONITOR APPROPRIATE MARKETS
Collectors should consider cloud-based software to appropriately manage their assets. These convenient, access-anywhere systems can store important details about each asset along with value, provenance, exhibition history, and oftentimes, documentation. Further, collectors should continue to request and receive insurance schedule reviews by an independent appraiser in order to account for changing trends within the market. In addition, appraisers can continue to conduct annual and semi-annual revaluations for those assets that have experiences market shifts.
In the event that the Supreme Court decision is ever overturned, fiduciaries and non-traditional couples alike prepare for the unexpected. It is important that the estate planning strategy covers as many unknowns as possible. Encouraging non-traditional couples to create a domestic partnership agreement, living wills, and living trusts in order to properly manage their tangible assets will allow greater control of how these assets are distributed or monetized in times of disruption.
– Shane David Hall, National Tangible Assets Manager