Page 38 - June2019_BarJournal

BarJournal ESTATE PLANNING

JULY/AUGUST 2015
FEaTUrE and Preserving Neighborhoods
Closing the Wealth Gap

with Estate Planning

BY MATTHEW P. YOuRKVITCH & CATHERINE R. DONNELLY

any consider Estate Planning to $0.20 of wealth. (Thomas Shapiro, et al., The Roots fix it up. It languished in this condition for several
be of value only to those with of the Widening Racial Wealth Gap: Explaining the years and was the target of vandals and criminals,
large estates. But Estate Planning Black-White Economic Divide, Institute on Assets which made it less attractive for the family members
can bring benefits to families of and Social Policy (February 2013).) Effective Estate to address it.
M all means, while its absence can Planning may be as much a matter of racial equity The children allowed a relative to live in the
accelerate neighborhood blight. Larger value estates as reducing wealth disparities. property (typically rent free) but never took the
create their own incentive for families to get help Estate planning can mean that future generations legal steps necessary to transfer the title. The
both with planning and probate. But for small may not have to start from scratch and can benefit lack of interest and investment in the property
estates, families often feel estate planning isn’t worth from the wealth creation of their parents and led to tax delinquency and the property rapidly
it. Then, after Grandma or Grandpa passes, probate grandparents, by reaping the benefits of inheritance. decreased in value. Without title, the relative
seems too complicated and expensive. According to For many lower income families, not only does no living there was unable to obtain financing or
the Gallup polling service, while 55% of Americans wealth transfer between generations but rather, grants to make repairs. The family members,
with household incomes above $75,000 have wills, often, liabilities pass instead. lacking time and energy to clear the title, let the
only 31% of those with incomes under $30,000 do. Home ownership makes up the largest piece property become abandoned. The surrounding
(Jeffrey M. Jones, Majority in U.S. Do Not Have a of most Americans’ wealth. (Matteo Iacoviello, neighborhood meanwhile found itself dragged
Will, Gallup (May 18, 2018) https://news.gallup. Housing Wealth and Consumption, Federal down by this deteriorating asset. But with no one to
com/poll/191651/majority-not.aspx.) The gap is Reserve Board (August 2, 2011).) Passing on the take action against, the neighborhood community
starker between white and minority families. Only family home means passing on not just wealth development corporation must wait until either the
28% of nonwhite adults have wills as compared to but also memories and stability. But where estate County initiates a tax foreclosure, or the Municipal
51% of white adults. (Id). planning has been neglected, a family home may government brings legal action for criminal code
By bringing cost-effective Estate Planning to go from a source of pride to a millstone. What were violations. Obtaining clear legal title in the name of
low-income and minority communities, attorneys once thriving homes become ghost properties, with a single party who desires to address the properties
and estate professionals can help families with small no clear owner. For families, the lack of clear title status would require consolidating the property
estates preserve assets. Preserving assets in families can mean having the liabilities of homeownership interests among multiple siblings, who at times
helps build intergenerational wealth. While fewer without the benefits. For neighborhoods, these live in multiple states.
adults in disadvantaged homes have wills, the wealth ghost properties can be devastating, as a home In the instance of the Blue home, Yourkvitch &
gap has been growing. According to the Urban without a title owner can’t readily be sold and put Dibo assisted the local community development
Institute, wealth disparities between income groups back into productive use. Often, the only recourse corporation with bringing a nuisance abatement
are as much as three times greater than the income for a neighborhood is to wait until taxes pile up action, which often leads to a receiver’s lien
disparities. (Serena Lei, Nine Charts about Wealth and the property is foreclosed on. By that time, it and foreclosure, thus clearing title. While such
Inequality in America, Urban Institute (October 5, may be too late to save the structure, and a piece of actions can help resolve blight, they do nothing to
2017) http://www.urban.org). Over the last 50 years, the neighborhood’s history disappears into rubble. salvage the wealth lost by families like the Blues.
families in the bottom 10th percentile of wealth have The Blue family (not their real name) lost Many nonprofits and community development
fallen from simply having no wealth on average generations of both wealth and memories through corporations are already focused on increasing
to being $1,000 in debt, while families in the 99th a lack of estate planning. Mrs. Blue proudly raised homeownership as a tool to improve wealth
percentile have seen their wealth grow sevenfold. her family in a beautiful historic home. During disparities. However, when those same families
(Id.). Likewise, white families on average have five to Mrs. Blue’s lifetime, the home was the center of fail to plan, this increased wealth may not transfer
seven times the wealth growth of minority families. the family’s universe, as all major family events to future generations.
(Id.) White families are five times more likely to took place there. Mrs. Blue took great pride in Planning ahead can help families pass on property
receive an inheritance than African-American being a home owner and took excellent care of her while avoiding probate and the concomitant costs.
families. (Id.) Meanwhile, one study found that home, but as she grew older, she deferred routine The Transfer on Death Designation Affidavit is
white families more readily built wealth from an maintenance. As Mrs. Blue’s health declined, she an excellent example. It allows a homeowner to
inheritance, with every inherited dollar contributing was placed in a nursing home. The children’s careers designate who will take title on her death and
to $0.91 of wealth. Among African-American had taken them far away; they had no use for the to record that designation. The title can then be
families, the same inherited dollar yielded only property. It sat vacant, with no one to clean it out or transferred outside of probate. Completing the
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