Joe Hermitt/The Patriot-News, via Associated PressJoe Paterno and his wife, Sue, addressed students and the media outside their house last week.

So why did Joe Paterno, the former Penn State football coach, “sell” his home to his wife for the paltry sum of $1?

The timing of the transfer, on July 21, has raised the issue of what Mr. Paterno was trying to accomplish. Last week, he was ousted as head football coach after 45 years amid questions about his response to allegations of sexual assault against one of his coaches.

As an article in The Times notes, some legal experts have theorized that Mr. Paterno could be a target of civil actions, and one lawyer was quoted as saying that the transfer “sounds like an attempt to avoid personal liability.”

There is no way to know for sure, but there could be something more routine at work. Putting the house – valued at $594,484.40 — in his wife’s name is one way to equalize what each spouse owns for estate tax purposes.

Patrick Smith/Getty Images The home in question.

Here’s a bit more about how this works. Without any kind of a special trust, all of Mr. Paterno’s assets would pass to his wife free of estate tax if he were to die first – and vice versa, if his wife died first. But the concern here isn’t with the surviving spouse; it’s with the children or whoever else would inherit the money once the second spouse dies.

Right now, the estate tax exemption is $5 million per person, or $10 million for a married couple. People with more than that amount of money typically create trusts for each spouse, so when the first person dies an amount equal to whatever the exemption level goes into that person’s trust. (The rest passes to the surviving spouse.)

When the second spouse dies, the same thing happens with his or her trust. In doing this, the couple makes sure they take full advantage of both of their tax exemptions, thus lowering the bill for their heirs.

If Mr. Paterno were to die without a trust, his wife would not pay an estate tax bill during her lifetime. But when she dies, their heirs would have to pay taxes for any inheritance beyond $5 million (or whatever the exemption is then; it can and does change) instead of the full $10 million that a couple would have available.

For someone at Mr. Paterno’s age (he is 84) and level of wealth (he earned $1,022,794 last year and is also eligible for a state pension of about $500,000 a year), regular tweaking of an estate plan is common.

Stuart Kessler, a director and estate tax expert at J.H. Cohn, the accounting firm, said that this move has all the marks of simply equalizing the estates so that his wife has enough assets to make good use of her exemption. (Then again, a good lawyer attempting to shield assets would want to leave all of those marks.)

As for any significance to selling it to her for a dollar –  plus “love and affection,” as the article noted — there may not be any. “It’s just the attorney saying this is for good consideration,” Mr. Kessler said. Mr. Paterno “is making a gift so there are no tax connotations to it.”

Article source: http://feeds.nytimes.com/click.phdo?i=ccef32f3a389d554147dd7e65d389f4a