Inside Joe Paterno's estate planning play

Criticism over Penn State legend's transfer of home to wife is unwarranted, lawyers say

Nov 20, 2011 @ 12:01 am

By Liz Skinner

Joe Paterno's transfer of homeownership to his wife in July most likely wasn't an attempt to shield assets before a sexual-abuse scandal hit Pennsylvania State University's football program.

Instead, the move was by the legendary coach more likely made to take advantage of expiring estate tax rules, lawyers said.

Mr. Paterno switched ownership of his ranch-style home in State College, Pa., from joint ownership with his wife, Susan, to her full ownership July 21 in a $1 transaction, documents filed in Centre County, Pa., show.

A New York Times story Nov. 15 suggested that the move could have been an effort to shield the home from future lawsuits that may arise from the child abuse scandal that was first revealed early this month.

But attorneys familiar with Pennsylvania law said that the property already was protected from creditors because it was jointly owned and therefore couldn't be subject to creditors of only one of the spouses. The only way that the house, valued at $594,484, could be exposed to creditors is if both Mr. Paterno and his wife were targeted in a lawsuit, lawyers said.

“I don't think it had anything to do with the Penn State situation,” said John May, a Lancaster, Pa., estate attorney. “If the house had been in his name alone, then it would appear to be an effort to protect that asset.”

UNIFIED CREDIT

Putting the home in Ms. Paterno's name likely was done to take advantage of the unified credit that applies to federal estate taxes, Mr. May said. The law exempts $5 million per spouse from estate taxes, though that is set to fall to $1 million each in 2013.

Ms. Paterno may have needed more assets to build up her estate to $5 million, Mr. May said. He said that he has no knowledge of Mr. Paterno's estate-planning motivations and isn't involved in the Penn State case.

'WHOLLY UNRELATED'

Mr. Paterno, who was fired as the university's football coach Nov. 9 after 46 years, isn't accused of anything illegal and isn't a target of a police investigation, according to Pennsylvania's attorney general. The Penn State board of trustees fired the 84-year-old coach as criticism flared that Mr. Paterno and other school leaders should have done more to stop alleged abuse by former assistant coach Jerry Sandusky.

Some have suggested that Mr. Paterno could be the target of civil actions, however.

The transfer of the Paterno home “was wholly unrelated to the Sandusky matter and was a component of long-term estate planning,” Wick Soellers, Mr. Paterno's attorney wrote in an e-mail.

Mr. Soellers declined to describe the estate-planning specifics but wrote that he concurs that the home was protected from creditors when it was jointly owned.

“Husband-and-wife ownership of assets is completely safe in the claims of creditors in Pennsylvania and in about one-third to half of all states,” said Jack Terrill, a West Conshohocken, Pa., estate-planning attorney.

'TENANTS BY THE ENTIRETIES'

When a husband and wife buy a property together in Pennsylvania, they are considered “tenants by the entireties,” meaning that each spouse technically owns 100% of the property. Therefore, a creditor of one spouse can't take property that is held by both, lawyers said.

The house transfer makes sense only as an estate-planning step, not as an asset protection move, Mr. Terrill said.

He said that he regularly recommends that wealthy couples shift assets to take advantage of the federal estate tax exemptions.

The estate tax provisions are set to change Jan. 1, 2013, unless the president and Congress can agree on new terms. The estate tax is set to rise to 55% with a $1 million exemption, from 35% with a $5 million exemption.

University of Pittsburgh law professor Lawrence Frolik — who was quoted in a New York Times story as saying that he thought the house transfer sounded “like an attempt to avoid personal liability” — wrote in an e-mail that he had no comment for this story.

Email Liz Skinner at lskinner@investmentnews.com

0
Comments

What do you think?

View comments

Upcoming event

Oct 22

Conference

San Francisco Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in six cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Most watched

INTV

Young professionals see lots of opportunity to reinvent the advice experience

Members of the 2019 InvestmentNews class of 40 Under 40 have strategies to overcome the challenges of being young in a mature industry.

INTV

Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

Latest news & opinion

New Jersey fiduciary rule: Pressure leads to public hearing, comment deadline extension

Industry push results in chance to air grievances on July 17 and another month to present objections.

InvestmentNews' 2019 class of 40 Under 40

Our 40 Under 40 project, now in its sixth year, highlights young talent in the financial advice industry. These individuals illustrate the tremendous potential of those coming up in the profession. These stories will surprise, entertain, educate and inspire.

Galvin to propose fiduciary rule for Massachusetts brokers

The secretary of the commonwealth is proposing a fiduciary standard in response to an SEC investment-advice rule he views as too weak.

Summer reading recommendations from financial advisers

Here are some books that will keep you informed and entertained during summer's downtime

4 strategies for Roth conversions

There's never been a better time to do a Roth conversion, and here are several ways to go about it.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print