Question: My wife (age 61) and I (64) equally own all of the stock in a small restaurant business and jointly own the real estate on which it is located. We also own a home jointly and have $200,000 in cash. Our only child, a 39-year-old son, works with me in the business. Since my wife and I are getting divorced, and she no longer goes to the business, our lawyers have worked out me buying her stock in the business by giving her the house and some money, but we can’t agree on the real estate and building. She wants to receive rent, but I use the rent to pay the mortgage. The lawyers are at an impasse. Do you have any suggestions?

Answer: Assuming that your son will be the beneficiary of both your and your wife's estates, she may want to consider a private annuity that can be used effectively in family situations to transfer assets from one generation to another without estate taxes. For example, your wife could transfer her interest in the land to your son in return for his unsecured promise to pay her a fixed amount of money for the rest of her life. The amount of the payment will be based on annuity table valuation factors. Part of each payment will be without tax, part will be capital gains, and part will be income. If a payment lower than the minimum is negotiated, there may be gift tax from your wife to your son.

At your wife's death, your son's cost basis in the property will be adjusted to reflect the amount paid to her. Since the payments to your wife would terminate at her death, the private annuity is generally considered to have no value, and therefore should avoid estate taxation. Since you are near retirement and are interested in continuing the business through your son, you might also think about disposing of your interest in a similar fashion.

Warning: While legally enforceable, the private annuity cannot be secured by a mortgage. Therefore, if your son is married and gets divorced or dies first, there could be big problems. Should you and your wife think the private annuity option might be viable, make sure you hire attorneys and accountants who fully understand and can explain all the ramifications before you act.

Question: For five years, my ex-husband has refused to live up to any support obligation ordered by the courts. Every time I go back to court to get more money, he cries poverty. He has been found in contempt several times and even though he says he has only a small income and no assets, he ponies up just enough not to go to jail. He has remarried and works full time in his wife’s business for a salary. Quite by accident, my 14-year-old found some financial records at his home that show my ex and his wife have been covering up income and assets for years. My lawyer says that now I can collect what's due, but I think I am entitled to the increases that I asked for in the past.

Answer: We agree with you. Depending on the law of the state where you live, based upon your ex-husband's undisclosed earnings and assets, you may be entitled to a retroactive increase of your support. If you have found assets that could be used to satisfy arrearages, the court has jurisdiction to require a transfer of those assets. If your ex-husband’s wife didn’t tell the truth while under oath, or helped him cover up income and assets, she may be subject to a contempt proceeding. And, last but not least, you may also have a civil cause of action against your ex and his wife for conspiracy to defraud you -- and your children -- from that to which you would otherwise have been entitled.