Articles

Women and Estate Planning

The key questions for anyone planning an estate are the following:

• How do I want to be cared for personally and financially (and by whom) when I can no longer care for myself?

• How can I protect my loved ones, particularly minor children, a spouse or life partner, a special needs child, or elderly parents if something were to happen to me?

• To whom shall I leave my assets—to my children, family members, friends, charities? How can I maximize the amount that goes to the people and causes of my choosing?

• What kind of end-of-life measures do I want when it is obvious that continued medical intervention will not increase the quality of my life?

• What has given my life true meaning—and what important personal and family stories, values, and insights do I want to live on in my descendants?

These questions provide the basic framework for estate planning, BUT they don’t address the particularities of a woman’s life that deeply affect how those questions are answered.

Why Women Are Especially Vulnerable:  Although estate planning is fundamentally the same for both men and women, there are several unique characteristics that set women apart from men.

For one, about ninety percent of American women will be making financial and legal decisions on their own, since women tend to live five to ten years longer than men--and will therefore spend significant time as single, divorced, or widowed women. As a consequence, fewer older women than men will have a spouse they can rely on as a primary caregiver and as a partner in decision-making.  They will instead depend on children and other caregivers for their well-being, who need clear direction regarding their desires and goals for care.

Given this longevity factor, women will also have a stronger need for community-based services such as senior centers and convenient transportation, and a greater reliance on care services such as home health care and nursing homes.  Therefore, once a woman reaches mid-life, it is prudent, among other things, to begin researching the services she can expect from her community as she ages so that she can develop a plan for herself and remain self-reliant.  Long-term care insurance, for those women who can afford it, goes a long way toward protecting a woman’s family from the considerable caregiving burdens that fall on loved ones when a loved one becomes disabled.  And disability becomes increasingly inevitable the longer we live, no matter how good our health has been historically.

Secondly, because of the present political, social, and economic climate, women will generally have less money to provide for themselves as they age than men do.  According to statistics gathered by the Department of Labor, women who usually worked full-time had median weekly earnings of $679 in the fourth quarter of 2010, or 81.8 percent of the $830 median for men. However, the female-to-male earnings ratio varied by race and ethnicity. White women earned 81.1 percent of their male counterparts, compared with black (96.2 percent), Asian (75.9 percent), and Hispanic women (89.9 percent).This amounts to approximately $200,000+ less for women over a thirty-five-year work life in some instances. To make matters worse, they have achieved equal pay in only five out of over 500 occupations. The figures are even lower for women of color.

In addition, women have traditionally received lower pensions and social security benefits because of a shorter work history than men: an overwhelming number of working women take time out of work to have and raise children, and to care for elderly parents. They also often opt out of contribution pension plans and deferred savings plans because of the need for current income. Consequently, not only will a vast majority of women be on their own for some significant period of their adult life, but they will have fewer resources for those extra years that they live on their own, particularly if they are single or divorced.  If lack of assets is a serious limitation for a woman, she may well need to find creative ways to deal with potential poverty and isolation by perhaps banding together with family or friends in intentional communities of mutual support and care.  She will need to have basic documents in place that will appoint people to safeguard her interests and help her navigate financial, legal, and medical challenges as she ages.

Only a small number of women have put in place the necessary legal mechanisms that will protect them, their loved ones, and their hard-won legacy in the case of death or incapacity.  Some have relegated this task to their spouses and know little about the details of the plans their husbands have put in place.  Others may have set the issue on the back burner and allowed themselves to remain vulnerable, given that there is no one else to make arrangements for them.  Another group of women thinks that they are “too young” to be concerned about planning, lulled by a false sense that nothing ever happens to anyone under thirty.

The fact is that every woman, regardless of economic status or age needs to at least educate herself about these legal matters, since not making her own decisions only means that she has relinquished the power to control her future to either the government, or a spouse who may or may not have adequately involved her in those decisions affecting her future. A pro-active approach to her special financial requirements and estate planning will help every woman ensure that she will not only take good care of herself, but also provide for her loved ones and any charities she values to the very best of her ability.

Let’s take a closer look at the needs of women in different life situations and the way estate planning can help (feel free to browse the following pages for a situation that relates to you:

All Women, Young and Old: From the time she can articulate a sense of identity, a girl or woman has a legacy to share.  As an example, were it not for her humble diary, we would all have been deprived of the immense treasure that was the life of Anne Frank, who despite her tender age, left behind a radiant testament to her love of living even amidst the bleakest of conditions.

We must attempt to do the same. However far we feel we are from the “grace of being” of an Anne Frank, we can learn to unearth the meaning in all that we have lived--and tell our story.  Women’s voices add a dimension to the collective that is much needed, and the sooner we begin to let those voices ring the better, as not one of us knows how long we will have the privilege of being alive.

Each of our stories is unique, unrepeatable.  Never again will anyone live just like us, seeing what we’ve seen, feeling what we’ve felt.  My own sweet daughter wrote luminous, mature poems as early as age ten and they gave me a deep, resonant understanding of her heart that was inaccessible in the daily round of meals, homework and car trips to the market.

Another woman may immortalize who she is in the beautiful photographs she has taken of family members and friends, or the letters or articles she’s written.  Still others in the family recipes or family history they’ve lovingly compiled, or the drawings or artifacts created on a multitude of Saturday afternoons.  The medium is mostly irrelevant…the heart of the matter lies in the impulse to pass on something of deep meaning, however simple the offering.  

Without this human touch an inheritance may ring strangely hollow, and an estate plan lack the comfort that is so deeply needed in a moment of loss.  With this infusion of the deeply personal as a basis, the practical acts of “putting one’s affairs in order” take on a different tone…and we become capable of leaving behind a wholistic legacy that will nourish loved ones--and maybe even the world--for a very long time to come. 

Younger single women:  These women, even those as young as 18, need to decide whom they want in charge of their medical and financial affairs if they lose the ability to handle those important matters themselves.  They also need to determine how their assets will be distributed at death, particularly if they have no children.

Any woman who is of legal age should have an Advance Health Care Directive and a Power of Attorney for Finances in place, in case they want their parents or other trusted friends or family to be able to access important medical information or financial information on their behalf in case of an emergency. Not having these in place can cause unnecessary headaches, and even tremendous heartache and expense—as in the case of Terry Schiavo.

A friend of my daughter’s from high school became acutely ill while attending college on the east coast from a condition that had not resurfaced since birth.  Her doctors in New York needed some records from her doctor in California, but her doctor refused to release the records to her mother because she had no legal authority. My daughter’s friend had to attend to all the administrative details needed to get her records to New York, despite the fact that she was doubled over with pain and would have much preferred for her mother to take care of her affairs at this time.  A simple Advance Health Care Directive and HIPPA authorization would have avoided the entire problem. 

Similarly, a financial power of attorney can prevent an expensive court-ordained conservatorship in the event that a single woman became incapacitated, which could happen as a result of an accident or sudden illness at any age.  Periodically, young women should also check beneficiary designations on IRAs and retirement accounts to ensure that they reflect their wishes.

Finally, if a young woman has established a career and amassed a significant amount of wealth before she decides to marry, she may well want to preserve those assets as her own, even though she also may believe that everything created together during a marriage should be shared equally.  Many men share this view, so a woman should educate herself on how she can preserve her separate property if she wishes to do so, both during the marriage and if there is ever a divorce, which presently ends more than half of all marriages. 

Prenuptial agreements are one way to ensure that separate property is kept separate, and such an agreement can also make it possible for a couple to change the California default rules regarding marital property as they see fit.  These agreements may also be amended, and often they are changed as the couple’s marriage grows in maturity and stability.

They are invaluable tools in protecting against the all-too-frequent scenario of the woman who works while her husband goes through advanced schooling, only to be served with divorce papers shortly after her husband gets his medical or law degree! 

Older Single Women:  It is particularly important for an older woman who may be more susceptible to medical conditions as time passes to choose the right persons for her care in case of incapacity. Would the best person be a child, a sibling, a good friend, or a small team of people?  Would a professional fiduciary be the safest bet if there are no relatives or close friends nearby to attend to her needs? If so, how do you determine what fiduciary is trustworthy?

Is long-term care and disability insurance an option, or will she need to become knowledgeable about the social services available for single women who have no significant wealth in her city, county, state?  These are questions that are better answered sooner rather than later, as thoughtful planning almost always produces a better outcome. 

Furthermore, the single woman needs a will or trust to give her assets to the people and organizations of her choice. If she has no children, she is in a great position to consider how her hard-earned money can benefit hospitals, scholarship funds, the environment, animals, churches, museums, or any other cause that moves her heart.  Without a will, the State has a distribution plan that may not match her wishes, and the absence of a trust may mean that far less of her hard-earned money will go to her loved ones, be they family or friends--or causes dear to her.  Some women even opt to pre-plan and pre-pay their funerals so that they can rest assured that their wishes will be carried out.

Women with Elderly Parents: Women are often caught in the “sandwich role” of caring both for parents and children.  Quite simply, this is a formidable responsibility that men generally don’t bear, so taking the time to put the right legal and organizational mechanisms in place will go a long way to helping the overworked modern woman maintain her sanity.  These are some important questions women should ask themselves as they consider their parents’ options: 

• Do you know the terms of your parents’ wills or trusts and their wishes concerning end-of-life choices? Do you know who they’ve chosen to take care of them if they become incapacitated, and are the necessary legal documents in place to give this person or persons the authority to do so?

• Are your parents dependent on you for their hands-on care, or for the management of caregivers? If so, what provisions have you made for their care if you should die before them? 

• Have you signed the necessary legal documents to authorize you to speak with personnel at these institutions and is the successor designated on all important paperwork?

• Have you given the chosen successor clear directions on what it takes to care for your parents so that there are no major glitches if that person needs to step into the role of care manager in your place?

• Are you aware of the important social services available for the elderly where your parents live?

• Do you know what will happen to your parents’ resources if they experience an unforeseen, expensive, long-term illness? If they need to go on Medicaid or Medi-Cal what will happen to the family home? Is there any way to prevent having to reimburse Medi-Cal by turning over the home after the parents’ death?

Although all of this may seem overwhelming at first glance, slowly but surely a woman can begin to take care of these matters one by one with the help of qualified financial and estate planning professionals.  Once she begins to steer the ship of her parents’ care safely to shore, she will get a tremendous feeling of satisfaction knowing that she has taken care of someone who took care of her.  She will also have done herself a great favor as things will be easier to manage in the long term.

Lower Income Women: A woman without a lot of resources should purchase term life insurance that will cover expenses if she is not around to raise her children.  If she gets the protection early in life while still healthy, term life insurance is a great way to create wealth for a surviving spouse and children’s care at a very reasonable price. Good life habits will get her a better rate, and a term policy can be obtained for 10-20-30 years at a potentially low rate so that she can cover her children’s growing years and the college years as well.  

A trust can be a very wise investment if a woman has a home because probate fees are assessed on the fair market value of a house, not its net worth.  This means that if a lower income woman has struggled to become a homeowner and has very little equity in her home, her heirs may end up paying almost as much in probate fees as there is equity in the home!  Here’s an example:  Maria buys a home worth $350,000 and her bank accepted a low $20,000 down payment during the housing boom.  Maria, a young woman, dies in an accident without a trust, though she had managed to put a will in place and nominate guardians for her children.  Nonetheless, because she didn’t have a trust, the probate process will eat up four percent of the fair market value of her estate at a minimum.  Even if the house was the only thing needing to go through probate, the probate fees would be $14,000 beyond the cost of the will she originally set up!  Furthermore, statutory fees for the executor could make these costs even higher. If she had not determined her own fee for the executor in her will, then the executor would also have the right to claim an estimated three to four percent of the estate, bringing the total to approximately $24,000 in probate fees just for the house!  With a trust in place, she could have probably saved her children as much as $20,000, after accounting for the cost of the trust itself and the trust administration after death, unless someone contested her trust in court.  Given this return on investment, it is a good idea for a lower income woman with a home to set aside money week by week if necessary until she can invest in a trust that will put more money in the hands of loved ones, and less in those of legal administrators.

As mentioned earlier, it is also of vital importance for lower-income women to become informed about community resources and to build a community of support around them so that they will not be marginalized by poverty.  Creating meaningful relationships over time will go a long way toward mitigating any hardships to be endured.  It is the kind of “wealth” that money cannot buy.

Single Mothers: A woman in this situation should also have adequate life insurance, and should nominate a guardian for her children that the father can also agree on, since he will be the guardian at her death, unless a court finds that he is unfit for the role. If there is a compelling reason why she would not want the children’s father to be the guardian, it is important to put this in writing (though not necessarily in the will) to alert the court to any problems.

She should also designate alternate guardians for her children in case the first choice can’t serve, and decide how the guardian should use funds for the child.   A single mother should also consider having separate persons serve as personal guardian and as money manager since this provides a system of checks and balances, particularly if there is not a lot of family to look out for the children’s best interests.   

To further secure the well-being of their children, single moms should do what they can to facilitate the cultivation of meaningful relationships between their children and respected adults, so that if the unthinkable happens, the children will have a loving community to fall back on.  As relationships can never be forced, this requires a long-term commitment to creating occasions where the children and the adults can spend relaxed time together. 

Minority Women: This group has the same issues of other women, but many minority women do not speak English as their first language, or else have parents who speak another primary language.  Because estate planning is inherently so complex even for those with a perfect command of English, it is vitally important that minority women choose a lawyer who can speak their language, and who has some understanding of their cultural background.  They should also help their parents find such counsel so that they can reap the benefits of protective legal and financial mechanisms without undue confusion. 

A lawyer who takes on clients at any cost,  regardless of whether the client truly understands what the lawyer is saying is doing the client a great disservice and walks a fine line this side of malpractice.  Some highly responsible attorneys I know are even wary of using an interpreter, as there is no assurance to the attorney that the concepts are being communicated accurately. 

Non-Citizen Women or those with Holdings in Other Countries:  Women who are non-citizens need to understand the different rules that apply according to their residency status, and anyone with property abroad needs to be aware of the disclosure rules in place for property owned in other countries.  In recent years, the federal government has set more stringent reporting standards for foreign banks holding assets of U.S. citizens or residents, and the owners of those assets will be charged with stiff penalties if they fail to disclose the property they own outside the United States.

Married Women:  Women need to be equal partners in all financial and legal matters affecting their futures and those of their children. They need to discuss these matters with their spouses so that they have a clear understanding and a mutual agreement about what will happen if they are left alone. One of my clients was unable to successfully manage her finances after her husband’s death, and nearly lost her home a few years later. My best efforts to counsel her during the last months of her husband’s life did not overcome her long years of passivity in dealing with financial and legal affairs, and only after some difficult lessons did her life finally begin getting back on track. 

More concretely, a woman should know who all the primary and secondary beneficiaries are on all IRAs, 401ks, bank accounts and life insurance policies.  All economic matters should be above board, as partners in marriage not only have a personal commitment to each other, but also a fiduciary duty to look after each other’s best interests.  

A woman should also be aware of what her income will be if her husband were to become disabled, and no longer in command of a salary to support the family.  If the family is depending on this one salary, a woman needs to do her research and see if disability insurance is a viable option, as well as assess what her marketable skills will bring her if she were forced to become the primary breadwinner in the family.

Does the family have wills, a trust and powers of attorney for health care or finance?  Without a financial power of attorney, a woman would have to go to court in order to refinance any property held in joint tenancy if her husband became suddenly incapacitated and there was a need for added funds!

If there are minor children, have guardians been selected to care for them both personally and financially if something were to happen to both parents?  Has the couple determined how children are to receive assets and when? 

A woman should also understand the terms of any wills or trusts that are in place and be able to name the people who have been chosen for executor and/or trustee.  She should be clear on what she will receive if her husband predeceases her, whether those assets are to be distributed to her outright, or in some kind of trust, and what liquid assets will be available to pay bills, debts, and mortgages. Any lawyer engaged should have the patience to thoroughly educate both the husband and wife on what is being signed. 

If a husband dies, a woman should consider how she will be able to educate her children without the husband’s income.  Was enough life insurance on the husband’s life purchased for that purpose? Does the family have trusted advisors (lawyer, accountant, financial planner) that both spouses are comfortable with or are these people intimidating and difficult to understand for either spouse? Does she have long-term care insurance so that she will be taken care of without unduly burdening children and/or other loved ones? 

1. Has the family recently reviewed their property and casualty insurance to make sure that they are at appropriate levels?  Is umbrella liability coverage a good option for the family?  Many vocations and professions expose one to high liability (financial services, law, medicine, contracting) and one must rest assured that one’s resources would not be decimated by an unfortunate incident because of poor coverage. 

Divorced Women: A divorced woman needs to thoroughly understand the terms of the divorce agreement and what her former husband’s obligation is relative to spousal and/or child support.  Is the obligation ordered by the court to be backed up by an insurance policy on the husband’s life? The idea behind such a policy in a divorce agreement is to ensure that there will be assets to compensate for the lost future income available for the support of the spouse and/or children if the insured former spouse dies before spousal or child support payments are scheduled to end. 

If such a life insurance policy is part of a divorce decree, a woman should check every year to confirm that the premiums are being paid, that the beneficiary has not been changed, and that the policy remains in force. One approach is to mandate in the divorce agreement that the insurance policies be held in a trust and that the premiums be paid by an independent trustee who will have a fiduciary duty to make sure that the premiums are collected and paid on an annual basis subject to a court order.  A divorce lawyer can provide the best advice on this subject. 

After the divorce, a woman needs to revise any estate planning documents that were drawn up during the marriage.  She must also be careful to check all retirement accounts and other bank/brokerage accounts to make sure the husband has been removed as a beneficiary since this does not happen automatically.  There are many ex-spouses who have received assets in error because beneficiary designations were overlooked after a divorce!

While a court will most likely appoint the ex-spouse as the personal guardian of any minor children if something happens to a parent, there may be serious reasons why a woman doesn’t think that this will be in the best interests of her children.  Those reasons should be put in writing and left with her will so that an executor can present the writing to a court if necessary. 

Even in cases where there is no problem with the ex-husband serving as the personal guardian of children, it is important to choose an alternate, in case something happens to the father.  Father and mother should reach agreement on this issue because it will otherwise create confusion for the court if different alternates are nominated in the respective wills of the father and mother. 

However, when it comes to the assets a woman leaves behind for children, the ex-spouse does not have to be the person in charge of the money.  Therefore, if letting an ex-spouse manage the money you’ve left the child does not seem like a good idea to you, you must nominate a guardian of the estate for your child, or better still, choose a trustee for a trust for your children to manage their finances until the age you think they are old enough to manage whatever money you are leaving them. One can even include a provision in the trust saying that under no condition should the ex-husband or his spouse be appointed trustee as an added protection. 

Most women want to protect against an ex-spouse using the money they’ve left their children to discharge the obligation of support the father has to care and support his children. Instead, a mother’s money can be saved and invested for children by a trusted family member, friend, or financial institution to fulfill later goals of the children. 

Finally, if you are a woman contemplating divorce (or know that your spouse may be doing so) it is a good idea to consult with a divorce lawyer early on so that you know how to prepare yourself.  Once a proceeding has begun all assets are frozen, so you want to know, among other things, whether your estranged spouse can withdraw large amounts of money from joint accounts without your signature.   

Widowed Women: Many women historically relegated “serious” financial and legal matters to their husbands.  The hard lessons were learned when they became widowed and found themselves lost in the complexity of legal and financial affairs they had never developed the skills to handle. To avoid such bewilderment, they should follow the suggestions outlined above for “married women”, but there is additional work to be done once widowed. Women must review estate planning documents after a husband’s death and revise them to reflect her new status as a widow. They should be clear on what aspects of the plan can be changed and which ones are irrevocable.  If the designations on the part of the plan that she can change no longer reflect her desires, then she should revise them.  All beneficiary designations should be updated, and if a home was held in joint tenancy it should be put into a trust to avoid the expensive, time-consuming, and public probate process when she dies. If at all feasible, she should seriously consider obtaining long-term care insurance. 

In almost every case, widows should assemble a team of competent, honest advisors (estates and trusts lawyer, accountant, financial planner, and insurance expert) who can help them set their new lives on the right course. These may be the same people who helped during marriage, or a whole new group of advisors that is a better fit.  Trusted friends are a great resource for reliable referrals.   

Women in Second or Third Marriages:  Women who are entering marriage for the second or third time, especially where there are children from prior marriages involved, must do their estate planning as soon as possible to make arrangements that will protect not only the couple’s interests, but the interest of the children from the respective marriages. It is important to get all the concerns out in the open early on to prevent ill-feeling up the line after the parent is gone and only the second spouse is left to deal with any unresolved issues with the children of the deceased spouse.  

Furthermore, where significant assets have been accumulated either through career or inheritance, the couple should seriously consider drawing up a prenuptial or postnuptial agreement.  If a woman is concerned about how much she will have to contribute to the support of her new husband’s children, or if she is giving up her career or job to enter the marriage, a prenuptial agreement can describe how she will be compensated if there is a divorce.   

Women in second or third marriages also need to address the issue of living in a spouse’s separate property home after he has passed away, especially if there are children from a prior marriage.  There are many cases where a woman has been ousted from a home she shared with a spouse for years because it was technically not her property and the husband’s children wanted to sell the home.

Women with Children with Special Needs:  Generally speaking, private health insurance and personal savings will not be enough to cover the costs of caring for a severely disabled child.  Medicaid/Medi-Cal, Social Security and state programs are often the source of such additional benefits and in order to safeguard them, it is important to leave assets for a child in a well-drafted Special Needs Trust that will provide funds for supplemental needs that public benefits do not cover:  vacations, transportation, entertainment, additional therapies or medical care.  Without such a Special Needs Trust, eligibility for public benefits can be jeopardized. 

There is also the issue of deciding who will care for the special needs child once parents die.  Great care must be taken to think through who will monitor the child’s care and help him or her apply or re-apply for public benefits.  It is especially important in this case to line up successors if the person initially chosen cannot serve or continue to serve as the child’s trustee or guardian. 

Women in Same-Sex Relationships: More than any other group, women in same-sex relationships need to stay abreast of the federal and state changes in the law that affect their destinies. Because rights of same-sex couples are more limited than those of married heterosexual couples, they need specialized help in reaping the maximum benefit from existing laws in their favor.   Navigating the pros and cons of registered domestic partnership and marriage is one concern… passing on property to a beloved partner in a tax-efficient manner is yet another.  A great number of same-sex couples enter formal property agreements to set the terms of their relationship in the absence of sufficient default legal safeguards and to get clear on mutual expectations for the long term.  Even more important are arrangements about guardianship of children, adoption, and health care.  These should be written, legally enforceable agreements.  Something as simple as an Advance Health Care Directive would allow your loved one to be there and care for you in a medical emergency instead of being denied access at such a critical time.

Heterosexual Women with Life Partners: As in the case of women in same-sex relationships, this group has fewer protections under both federal and state law. Without the proper legal documents in place, a lifelong partner has few rights, is susceptible to increased taxation, and could receive nothing at death because the partner is neither a “legal” partner, nor a family member! There is no “registered domestic partnership” status for heterosexual couples under 65 that will enlarge the scope of legal rights within the relationship. 

Wealthy Women: This group of women will need to pursue more advanced knowledge of gift and estate tax repercussions associated with having a high net worth.  At the very least, a married wealthy woman needs to know who the key players are in her husband’s or in the couple’s joint estate plan so there are no surprises if a husband dies first.

What do the documents say about control of assets during incapacity and after death?  What level of freedom is she given in those documents relative to her husband’s assets and how free is she to dispose of those assets in a way different from what’s spelled out in the written document?

Are there any special arrangements that have been made regarding charitable giving, such as charitable lead or remainder trusts, or family foundations?

If she is single, has she updated her estate planning documents for the maximum in tax savings so she can use her money for the purposes and causes she chooses? Has she carefully researched charitable institutions so that her wealth is put to good use for the public good and is not wasted on the excessive administrative costs of ill-managed organizations? Has she chosen her advisers with great care to avoid exploitation on account of her wealth?

Last Words

Regardless of our situation in life, all of us women can do better in taking care of ourselves financially and legally.Just as important is the matter of finding some medium through which to express our essential selves so that we can move forward as whole persons and leave behind a legacy reflective of the entirety of who we are. I hope that these pages have given you renewed impetus to create such a legacy.

© Aida M. del Valle.  All Rights Reserved.