Family law has become a challenging and dynamic legal specialization, whether it applies to couples before marriage, families going through the transition of divorce or helping today’s modern families establish an appropriate legal framework. At BNY Mellon Wealth Management, we work with matrimonial attorneys and their clients to implement a comprehensive approach to their wealth management needs with a focus on family circumstances and goals.
Our expertise helps clients and their advisors fully consider the financial impact of tax and legal regulations when creating a complete wealth management strategy. We have ample experience in assisting with premarital agreements, structuring post-divorce settlements and replicating familial structures through the use of trusts and related agreements.
We help clients who are opting for prenuptial agreements understand the full disclosure of all combined financial assets, the proper titling of these assets and the asset protection consequences of sole name, joint tenants, tenants in common and community property titling. We also provide expertise in segregating inherited or gifted property.
Throughout the divorce process, we work with clients and their advisors to analyze settlements and manage assets afterward. We go beyond the standard “lump sum” approach to settlements and define the value of particular assets, both at present and over time. We work with attorneys and advisors to analyze factors such as annual living expenses and standard of living maintenance, and our supporting financial analytics often serve as the core of a highly defensible settlement request.
The basis for any sound settlement is a complete and equitable picture of the assets in discussion. What may appear to be an equal distribution of assets can change dramatically when cost basis, other tax consequences and retirement plan or securities law restrictions are considered. Portfolio allocation and risk tolerances, concentrated holdings and near-term/long-term liquidity needs should also be considered when building a complete financial picture. Our focus on wealth management issues complements the work of our clients’ legal and accounting advisors.
The division of real estate holdings, particularly a family home, is often a highly contested aspect of divorce and, as such, can benefit greatly from detailed analysis. We work with advisors and their clients to assess the ability to qualify for and service mortgages, as well as to consider the various tax ramifications of sales and transfers, both before and after the divorce takes place.
The rules which govern dividing qualified retirement plans and IRAs are very technical, and we can help identify the optimal way to do so tax-free or coordinate with other advisors to create a qualified domestic relations order (QDRO), separating qualified plans. Where executive compensation is involved, we have extensive experience incorporating stock options and deferred compensation packages into settlement planning.
In long-range divorce planning, the loss of the estate-tax marital deduction at first death should be considered as this usually requires estate tax to be due upon the first death. Additionally, there are less obvious estate tax ramifications to be considered. For example, if a charitable remainder trust (CRT) is involved and intended to provide income for the lives of both spouses, the marital deduction for the survivor’s interest would be lost unless the CRT is divided pursuant to specific rules.
While often overlooked, the consequences of filing a joint tax return during the divorce proceedings should be explored for each specific situation.
After the settlement has been reached, we work directly with the client to create a plan that delivers the highest value. We recognize that, in addition to the stress of divorce, many divorced spouses are long removed from day-to-day financial and longer-term wealth planning issues. Our wealth management experts are experienced in providing a level of detail and service that the newly divorced spouse is most comfortable with, whether it be checking, savings and mortgage services, strategic asset allocation, risk management, or complex intergenerational planning structures.
If an estate plan exists, a thorough review is a fundamental first step. Areas of consideration include:
Our wealth planning professionals are experts in identifying the investment, estate and related planning issues that accompany such settlements.
Quite often, benefits provided to “traditional” families can be replicated for non-traditional family structures through careful consideration and planning. When working with non-traditional families, including opposite-sex couples who choose not to marry, same-sex couples, divorced persons, surviving spouses and extended families, we work with clients and their advisors to identify arrangements which, when put in place, may help protect estates and achieve the desired intentions for clients and their families.
Trusts often play a critical role in wealth management planning for non-traditional families. While wills have a role in complete estate planning, trusts are more durable and less prone to challenge. This is particularly important when competing interests — such as family members who do not support the relationship — might be involved.
Because the estate-tax marital deduction is unavailable for non-married couples, shielding assets from estate tax requires innovative thinking. Certain kinds of charitable planning (e.g., CRTs) can support the surviving partner while offering estate tax benefits. Additionally, life insurance can provide the liquidity needed to cover ongoing family obligations or pay estate taxes which may be due.
At the core of each non-traditional family plan is a legally recognized estate plan, which is often supported by:
Our broad expertise has allowed us to assist individuals, families and their advisors to arrive at sound, logical strategies that protect assets and minimize tension among family members. Our proven, pragmatic approach to matters relating to family law and governance can assist you and your clients. Whether through comprehensive wealth management strategies, or addressing a specific need, such as credit and escrow requirements or post-divorce mortgage refinancing, we welcome the opportunity to work with you. To learn more about BNY Mellon Wealth Management’s Family Law Advisory capabilities, please contact your relationship manager or click the Contact Us button.
This material is provided for illustrative/educational purposes only. This material is not intended to constitute legal, tax, investment, or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not intended to be a full and exhaustive explanation of the law in any area or of all the tax, investment, or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation.
BNY Mellon Wealth Management conducts business through various operating subsidiaries of The Bank of New York Mellon Corporation.
The information in this paper is as of July 2022 and is based on sources believed to be reliable but content accuracy is not guaranteed.
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