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January 06, 2021 at 11:51 AM
For most high-net-worth individuals, election cycles mean reshuffling tax planning strategies around areas such as estate, charitable donations and capital gains.
Given the expectation the Biden administration will roll back some of Trump’s favorable policies of the past four years, tax consultants and accountants are already hard at work.
But for HNW women, dealing with election fallout is minor compared to the bigger fish they have been frying in the tax pan for decades.
‘What If?’ Becomes ‘What Now?’
In the event of a sudden death or divorce, HNW women can find themselves in a precarious financial position if they haven’t prepared. While no one is ever “prepared” to lose a spouse, women are at a particular disadvantage because in many cases they are not responsible for managing the household finances.
But as women tend to outlive men, there always should be a plan for unexpected events.
Also, as attitudes shift and more women build wealth for themselves, they are less likely to stay trapped in unhappy marriages. While divorce rates are declining in the United States, for couples over age 50 the numbers are increasing. For more U.S. women today, “What ifs?” are becoming “What nows?”
One essential step in planning for HNW women is to consider what assets they will require to live comfortably, and what assets will be available to them should they lose a spouse to death or divorce.
The Spousal Lifetime Access Trust is an irrevocable trust available for couples but not to singles. In fact, the SLAT agreement may include a provision that terminates any spousal trust rights upon divorce. Women should plan their lives under the assumption that these assets might not be accessible upon divorce.
There also are future costs associated with losing a spouse — women should consider purchasing long-term care insurance for themselves as they get older.
It’s an Avoidance Thing
Many women find themselves unprepared to deal with the legal ramifications that often accompany the emotional trauma of life changes like the above scenarios. As a rule, divorcees and widows do not have the same tools available as married couples, so they need to be more proactive with estate planning prior to major life events.
For women, this sounds easier than it is. A 2020 U.S. Bank Survey revealed that more women than men associate negative words like fear, anxiety, inadequacy and dread with financial planning, and that they start managing money later than men.
