Rothman Gordon: Ownership of Assets, Part IV: Ownership of Property After 10 Years of Marriage

Ownership of Assets, Part IV: Ownership of Property After 10 Years of Marriage

In prior articles, we explored ownership of family assets during the early years of marriage. Generally, after 10 or 15 years of marriage, the children have been born, the decision has been made whether the mother will return to the workforce, the couple has purchased the home in which they will raise their children, and the couple begins focusing on the issues of paying for their children's education and their own retirement. Last week we recommended that retirement savings should be a priority over savings for children's college education.

Now, assume that one spouse inherits $250,000 from a grandparent. How should the investment of this money be titled? Should the investments be in the name of the spouse inheriting the money or in joint names? Should the monies be contributed to qualified college savings plans? Does it make a difference if the person inheriting the funds is the primary bread winner or a stay at home spouse?

Here the estate planner must carefully assess the strength of the marriage. Where the planner believes the marriage is enduring, a stay at home spouse with two children who have no prior college savings should invest $110,000 each to two qualified college savings plans for the children, designating the inheriting spouse as the owner, and the other spouse as successor owner. The remaining investments should be titled in the name of the inheriting spouse. If the couple have been adequately funding qualified college savings plans since the birth of the children, a more modest sum, if any, may be contributed for that purpose. The inheritance should allow the couple to apply any savings from earnings after maximizing contributions to qualified retirement plans to be invested jointly.

A different conclusion would be reached where the earnings are already sufficient to maximize both retirement savings and contributions of $11,000 per year to qualified college savings plan for each child. In that case, a strong argument can be made for the inheriting spouse to invest the money received in his or her own name with the working spouse using surplus savings to build a separate estate in order to maximize tax savings at the death of the survivor by each taking advantage of available exemptions.

Articles are not intended to be comprehensive. Readers should not act upon any information herein without seeking specific legal advice from the Firm's attorneys.

We are required by Treasury Regulations to advise that this writing is not intended as a reliance opinion and cannot be used for purposes of avoiding IRS penalties.