Anna Nicole Smith, widow of 89-year-old Billionaire J. Howard Marshall,
continues her battle for a piece of his estate. The Supreme Court recently
ruled in favor of Anna Nicole, and she will likely have a new hearing in front
of a lower court to address the substantive issues of her case. Although
everyone is focused on the glitz and dollars (all $1.6B) there are valuable
lessons in this case.
There are specific steps even average families can learn from this case to
protect themselves and their heirs. While Anna Nicole may be the most talked
about case, these issues affect women and non-married partners as well, and so
caution is the recommendation for all:
Sign a pre-nuptial agreement and do it right: each party should have
his or her own attorney. When discussing the terms of the pre-nuptial
agreement, there should be complete financial disclosure between the
parties. If an engaged couple is hesitant to share all information, this
may be a sign of problems to come. All financial information should be
discussed and dealt with well in advance of the wedding.
Sign a will clearly stating what is intended for the new spouse. Wait
six months. Re-visit the will, making changes to other provisions, but
leaving the bequest to the new spouse intact. Sign the new will. Save the
old wills to demonstrate a consistent pattern of distributions to the new
Have a trust set up for your new spouse. This can give him/her the
right to distributions from the money, but assure the remainder reverts to
your family. Consider using a uni-trust payment arrangement (e.g., 5% of
principal paid to your new spouse each year). This approach can protect
your new spouse and children who receive the trust assets on his/her later
demise, while enabling your trustees to invest using an asset allocation
model that benefits all parties.
If there is a change from the pre-nuptial agreement, e.g. favoring the
new spouse, have your matrimonial counsel amend the prenuptial agreement,
using all appropriate formalities. Revise your will and other estate
planning documents to confirm these wishes. It's important that all
documents are consistent to minimize future problems and to ensure that
your intentions are fulfilled.
Have your new spouse waive any rights under state law to claim a
specified portion of your estate (called spousal waiver of right of
Don't video tape your will signing. Contrary to popular belief, video
tapes can often be used by a forensic expert to undermine your
Sometimes, there are easier steps to keep everyone happy. If health and
age permit, insurance can be used as the great equalizer. Example: Set up a
life insurance trust to own enough life insurance to provide for
your new spouse, and then leave your estate to your children. That way, you
know that after you die, everyone is taken care of.
Don't forget, it's not only about a will. What if you designate
your new spouse in a form durable power of attorney as your agent? Some
form powers of attorney permit gifts without limit, and the right of the
agent to change beneficiary designations. If you become incapacitated, might
your new spouse make gifts to himself /herself and name himself/herself as
sole beneficiary on your retirement assets. Powers of attorney can be very
Watch the title to assets. If you change assets to joint with your new
spouse, your will won't affect those assets.
The tax allocation clause in your will could be critical to the
ultimate disposition of your estate. Example: You bequeath half of your
estate to your new partner and the remaining half to your children, but
they pay the state and federal estate tax on their receipt. The taxes might
shift the net effective allocation to 2/3rds your partner, and
1/3rd your children.
If you are already married and do not have a pre-nuptial agreement, or
if time just ran out before you got married and you couldn't get the
document signed, don't worry, it is not too late! Once you are married,
you can sign a post-nuptial agreement to the same effect as a pre-nuptial
agreement. Alternatively, you can begin more comprehensive estate planning
with an attorney or financial advisor.
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