California Probate - Law Offices of Janet Brewer Blog

What Does My Estate Plan Look Like after Divorce?

“Some marriages end in noise and pain. Other marriages drift away quietly with the signing of documents and only a hint of acrimony.”

Planning an estate after a divorce involves adopting a different type of arithmetic. Without a spouse to anchor an estate plan, the executors, trustees, guardians or agents under a power of attorney and health care proxies will have to be chosen from a more diverse pool of those that are connected to you.

Wealth Advisor’s recent article entitled “How to Revise Your Estate Plan After Divorce” explains that beneficiary forms tied to an IRA, 401(k), 403(b) and life insurance will need to be updated to show the dissolution of the marriage.

There are usually estate planning terms that are included in agreements created during the separation and divorce. These may call for the removal of both spouses from each other’s estate planning documents and retirement accounts. For example, in New York, bequests to an ex-spouse in a will prepared during the marriage are voided after the divorce. Even though the old will is still valid, a new will has the benefit of realigning the estate assets with the intended recipients.

However, any trust created while married is treated differently. Revocable trusts can be revoked, and the assets held by those trusts can be part of the divorce. Irrevocable trusts involving marital property are less likely to be dissolved, and after the death of the grantor, distributions may be made to an ex-spouse as directed by the trust.

A big task in the post-divorce estate planning process is changing beneficiaries. Ask for a change of beneficiary forms for all retirement accounts. Without a stipulation in the divorce decree ending their interest, an ex-spouse still listed as beneficiary of an IRA or life insurance policy may still receive the proceeds at your death.   

Divorce makes children assume responsibility at an earlier age. Adult children in their 20s or early 30s typically assume the place of the ex-spouse as fiduciaries and health care proxies, as well as agents under powers of attorney, executors and trustees.

If the divorcing parents have minor children, they must choose a guardian in their wills to care for the children, in the event that both parents pass away.

Ask an experienced estate planning attorney to help you with the issues that are involved in estate planning after a divorce. If you have any questions about your current estate plan, please call or email us today.

Reference: Wealth Advisor (July 7, 2020) “How to Revise Your Estate Plan After Divorce”

Why Is Estate Planning more Complicated with a ‘Gray Divorce’?

“Rising divorce rates among Americans over the age of 50 are causing more conflict in estate planning, new data shows. According to a recent survey by TD Wealth, up to 40% of financial planners say that rising gray divorce rates are leading to an increase in family strife with estate planning as the top conflict.”

The increasing divorce rates among Americans over the age of 50 is a problem, because minimizing discord among beneficiaries is one of the top three reasons why people engage in estate planning.

The Clare County Review’s recent article entitled “Rising Gray Divorce Rates Are Making Estate Planning Problems More Complicated” notes that along with prolonged life expectancy and rising healthcare costs, this upward trend in couples divorcing after the age of 50 has created activity and interest in estate planning.

According to the CDC, the divorce rate in the United States is 3.2 per 1,000 people. The ‘first divorce rate,’ or the number of marriages that ended in divorce per 1,000 first marriages for women 18 and older, was 15.4 in 2016, according to research by the National Center for Family and Marriage Research at the Bowling Green State University. As noted earlier, black women experience divorce at the highest rate, 26.1 per 1,000, and the rate is lowest for Asian women at 9.2 per 1,000.  In Michigan, the current divorce rate is 9%, but Tennessee is way up at 43%.

Gray divorce is adding another level of complexity to estate planning that already happens with blended families, designation of heirs and changing domestic structures. Therefore, it is more crucial than ever to proactively review and discuss the estate plans with your estate planning attorney on an ongoing basis.

According to the TD Wealth survey, 39% of respondents said that divorce effects the costs of retirement planning and funding the most. Another 7% said that divorce impacts those responsible for enacting a power of attorney and 6% said divorce impacts how Social Security benefits will be determined.

It’s important to communicate the estate plan with family members to reduce family conflict during the divorce process.

The divorce process is complicated at any age. However, for divorcing couples over the age of 50, the process can be especially tough because the spouse is frequently designated as a beneficiary on many, if not all, documents. Each of these documents will need to change to show new beneficiaries after the divorce has been finalized. It means that wills, trusts, retirement accounts, life insurance policies and listed assets will need to be revised.

If you have any questions about your current estate plan, please call or email us today.

Reference: Clare County Review (Feb. 10, 2020) “Rising Gray Divorce Rates Are Making Estate Planning Problems More Complicated”

Should Seniors in Love Tie the Knot?

“There are some major financial benefits to tying the knot. From IRAs to Social Security and tax exemptions, there are many reasons (besides the obvious one: love) for older couples to say I do.”

There are many financial pros and cons to getting married, but for people who are nearing retirement who’ve been dating for a long time, there are some federal laws that provide some strong financial reasons to give this serious consideration.

Kiplinger’s recent article entitled “Financially, Marriage Makes a Lot of Sense for Retirees” explains that if you’re married, you can roll your deceased spouse's IRA over to your own IRA and wait to take required taxable distributions (RMDs) until you’re 72.

If you’re not married and you’re the beneficiary, your best plan will be to transfer your deceased partner's IRA to the less tax favorable inherited IRA. However, with the new Secure Act, it will probably result in more taxes. So, for example, if you’re not more than 10 years younger than the deceased partner, rather than being able to delay taxable distributions until you’re 72, you’d have to start taking them every year starting in the year after the deceased partner passes away.

However, if you’re more than 10 years younger than the deceased partner, then the tax consequences will likely be even worse, because you’ll need to remove all the money from the IRA by the end of the 10th year starting in the year after the deceased partner passes away. That means bigger average taxable distributions, than if taken over your life expectancy.

If you’re married, federal law requires that your spouse's monthly pension benefit must be created with a survivorship benefit, which is usually 50% or more of the deceased spouse's benefit, to be paid to the surviving spouse for the rest of their life beginning at a certain age. If you're not married and your partner passes away, this survivor benefit isn’t available.

As far as Social Security Benefits, if you’re married, after your spouse starts taking their benefit, you can claim half of it at your full retirement age (rather than your own, if it’s more). You can also take a reduced amount based on half of the other spouse's benefit as early as 62, if it’s more than your own reduced benefit amount at 62. If your spouse dies, you receive 100% of their Social Security benefit if it's larger than your own, beginning at your full retirement age or a reduced amount as early as 60.

Obviously, if you’re not married, there’s no coordination of Social Security benefits between the couple. You can only take your own benefit starting as early as 62, even if it's a lot smaller.

Next, we’ll look at IRA contributions. If you’re married and have no earned income, you’re still permitted to deposit $7,000 into an IRA, if you’re 50 years of age or older (and $6,000 if you are under 50) based on the earned income of the other spouse. If you’re not married and not working, you can’t contribute to an IRA, even if your partner has earned income.

A major reason for wealthy couples to marry is to get the advantages of portability, which could save on death taxes. Portability allows a wealthy married couple to combine their $11.58 million in federal death tax exclusions into one $23.16 million exclusion. This could mean millions of dollars in death tax savings.

Talk to an experienced estate planning attorney before you make any moves, like saying “I do.”

Reference: Kiplinger (March 9, 2020) “Financially, Marriage Makes a Lot of Sense for Retirees”

How Will a Divorce Affect Your Estate Planning?

If you are going through a divorce, you will want to make some key changes to your estate plan as a result. Divorcing a spouse has a big impact on estate planning because most people name their spouses as heirs or beneficiaries. If you no longer want your ex-spouse to inherit, you need to change your plan.

Limiting Your Ex-Spouse’s Rights as an Heir

A California law provides that a divorce or marriage annulment revokes all bequests that you made to your spouse in your will. (Cal. Probate Code § 6122.) In other words, your ex-spouse will not automatically inherit through your will. But you should not rely on this law to protect you. Not every state has a law like this, so if you own property in other states you may not have legal protection. Plus, the California law only works after the divorce is final.

To most effectively limit your ex-spouse’s right to inherit through your will, you need to make a new will. Making a new will does not have to wait until the divorce decree is finalized. You can tear up the old will and sign a new one immediately. In your will, you may want to specifically state that your ex-spouse should not inherit anything or be the estate executor. You also may want to include a beneficiary designation so that just in case you and your ex cannot care for your children, the court will know your wish about who should be the children’s guardian.

Limiting Your Ex-Spouse’s Rights as a Beneficiary

Beyond changing your will, you should change the other legal documents that will give away some of your assets upon your death. These documents include retirement account beneficiary designations, life insurance policies, pay-on-death bank accounts, and trusts. Unlike for wills, there is no state law that revokes gifts of a life insurance payout or the contents of a P.O.D. bank account when someone divorces. You have to actively request a change of beneficiary from the company that owns the policy or holds the account.

Changing Your Powers of Attorney

If you signed any powers of attorney or an advance directive for end-of-life decisions, you should change those too. Again, you can make the changes before the divorce is final. When you no longer want your ex-spouse to be your agent for power of attorney purposes, select someone else who is close to you.

Respecting the Divorce Decree

Finally, respect the terms of the divorce decree when changing your estate plan. You should speak to both your divorce lawyer and your estate planning lawyer about how to make sure that you divide up property per the decree and meet any child support obligations.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

If I’m 35, Do I Need a Will?

“It's never too early to start estate planning. If you already have a family, getting your personal affairs in order is a must. The sooner you start planning, the more prepared you will be for life's unexpected twists and turns.”

Estate planning is a crucial process for everyone, no matter what assets you have now. If you want your family to be able to deal with your affairs, debts included, drafting an estate plan is critical, says Wealth Advisor’s recent article entitled “Estate planning for those 40 and under.”

If you have young children or other dependents planning is vitally important. The less you have, the more important your plan is, so it can provide as long as possible and in the best way for those most important to you. You can’t afford to make a mistake.

Talk to your family about various “what if” situations. It is important that you’ve discussed your wishes with your family and that you’ve considered the many contingencies that can happen, like a serious illness or injury, incapacity, or death. This also gives you the chance to explain your rationale for making a larger gift to someone, rather than another or an equal division. This can be especially significant if there’s a second marriage with children from different relationships and a wide range of ages. An open conversation can help to avoid hard feelings later.

You should have the basic estate plan components, which include a will, a living will, advance directive, and powers of attorney. These are all important components of an estate plan that should be created at the beginning of the planning process. A guardian should also be named for any minor children.

In addition, a life insurance policy can give your family the needed funds in the event of an untimely death and loss of income—especially for young parents. The loss of one or both spouses’ income can have a drastic impact.

Remember that your estate plan shouldn’t be a "one and done thing." You need to review your estate plan every few years. This gives you the opportunity to make changes based on significant life events, tax law changes, the addition of more children, or their changing needs. You should also monitor your insurance policies and investments because they dovetail into your estate plan and can fluctuate based on the economic environment.

When you draft these documents, you should work with a qualified estate planning attorney. Contact our office today to schedule your consultation.

Reference: Wealth Advisor (Jan. 21, 2020) “Estate planning for those 40 and under”

Why You—and Everyone—Needs an Estate Plan

“What's going to happen to your assets after you die? Your parents die? Your spouse dies? It's a conversation that's uncomfortable to have, but one that's extremely important.”

At its essence, estate planning is any decision you make concerning your property if you die, or if you become incapacitated. There are a number of things to keep in mind when creating an estate plan, says KTUU in the article “Estate planning dos and don’ts.”

The first task is not what most people think. It’s very basic: making a list of all of your assets and how they are titled. Remember, the estate plan is dealing with the distribution of your assets—so you have to first know what those assets are. If you are old enough to have lived through the sale of several different financial institutions, do you know where your accounts are? Not everyone does!

Next, you need to be clear on how the assets are titled. If they are joint with a spouse, Payable on Death (POD) or Transfer on Death (TOD), jointly with a child, or owned by a trust, they may be treated differently in your estate plan, than if you owned them outright.

Roughly fifty percent of all adults don’t make a plan for their estate. That becomes a huge headache for their loved ones. If you don’t have an estate plan, your property will be distributed according to the laws of your state. What you do or don’t want to have happen to your property won’t matter, and in some instances, your family may be passed over for a long-lost sibling. It’s a risk.

In addition, if you don’t have an estate plan, chances are you haven’t done any tax planning. Some states have inheritance taxes, others have estate taxes, and some have both. Even if your estate’s value doesn’t come anywhere close to the very high federal estate tax level ($11.4 million per person for 2019), your heirs could inherit far less, if state and inheritance taxes take a bite out of the assets.

For a blended family, there are a number of rules in different states that divide your assets. In Alaska, for instance, if some of the children of one spouse are not the children of the other spouse, there is a statutory formula that depends on how many children there are and which of them are living. Different percentages of money are awarded to the children, which becomes complicated.

Another reason to have an estate plan has to do with incapacity. This is perhaps harder to discuss than death for some families. Estate planning includes preparing for what the individual would want to happen, if they were injured or too sick to convey their wishes to others. Decisions about health care treatments and end-of-life care are documented with a Living Will (sometimes called an Advanced Care Directive), so your loved ones are not left wondering what you would have wanted and hoping that they got it right.

One last point about an estate plan: be sure to check beneficiary designations while you are doing your estate plan. If you own retirement accounts, life insurance policies, or other assets with named beneficiaries, the assets will pass directly to the named beneficiary, regardless of the instructions in your will. If you opened an IRA when you had one child and have had other children since then, make sure to include all of those children and the proportion of their shares. There may be tax implications, if only one child receives the assets, and there may also be family fights if assets are not distributed equally.

You can read more about how our process works, how we can make sure we are a good fit for your needs, and how to get started on creating or updating your estate plan today right here.

Reference: KTUU (August 14, 2019) “Estate planning dos and don’ts”

What’s Best for You, a Will or a Trust?

“In past generations, families were very close, there were few estates that had any tax liability, and children respected their parents’ wishes, both before and after the parents passed away.”

That may be an idealistic portrayal, but there is some truth to it. It is no longer unusual for families to engage in estate litigation, according to The Northside Sun’s article “Do You Have a Will or a Trust? Why?” Many families who have estate plans incorporate trusts to ensure that their directions are followed.

One of the many differences between a will and a revocable living trust, is that a will operates only after your death. By contrast, a trust performs many tasks while you are still living. A last will and testament is how assets are distributed after death. A living trust takes effect as soon as it is created and funded, allowing your assets to be protected during life, disability and after death.

A will must go through a court proceeding known as probate, before it becomes a legally effective means of carrying out your wishes. A living trust functions without the need for court involvement, both in cases of incapacity and at death.

While you definitely need a will as part of your estate plan, a comprehensive estate plan will also have provisions to prepare for incapacity. Many people have a durable power of attorney. However, this is just one part of the necessary documents for incapacity. In fact, if the power of attorney is too old, the bank may refuse to honor it. This is an all-too frequent occurrence.

In the absence of a recognized power of attorney, the family may need to apply to the court for a conservatorship, which can be costly. A living trust, on the other hand, can be created to facilitate access to assets, without needing court intervention.

Some families try to create an informal estate plan, by putting their children’s names on assets so they can help their parents in the event of incapacity. These self-created plans usually don’t work. The assets are now exposed to any creditors of the child and are at great risk, if there is a divorce or bankruptcy.

Similarly, making an adult child a co-owner of real property will not give the child the ability to sell the property, and once again the asset is subject to the claims of creditors.

This is also the case when using lifetime gifting to avoid probate or minimize the size of a taxable estate. A trust can serve the same purposes, without the risks that an outright gift presents.

This is especially problematic in the event that a child goes through a divorce. The assets could actually end up being owned by the former spouse’s new spouse. Using a trust can maintain control of the assets.

Another family dynamic where trusts are valuable, is when there are children from multiple marriages. When the married couple creates a will that leaves their assets to each other, one set of children is likely to be accidentally disinherited. Let’s say a father has two daughters and a mother has two sons. They marry, and create wills to leave each other all of their assets. If the father dies, the mother inherits his entire estate. When the mother dies, it is more likely that she will leave her estate to her two children. A trust can be created that will facilitate the distribution of the remaining assets that had belonged to the father to his daughters.

Speak with an experienced estate planning attorney to learn how you can use trusts as part of your estate plan, in planning for life, incapacity and death. Trusts don’t have to be complicated to serve your needs. Make sure you understand the trusts, how they work and that they will achieve your goals.

Contact our office today to schedule your consultation.

Reference: The Northside Sun (August 14, 2019) “Do You Have a Will or a Trust? Why?”

Can You Disinherit a Relative in Your Will?

Californians may decide for a variety of reasons that they want to disinherit a relative in their will. Because of specific California laws, disinheriting someone can be tricky and may even lead to a dispute in court.

California’s Legal Presumption for Close Relatives

The law in California includes a presumption that people intend to provide for their spouses and children in their wills. In other words, if you simply leave your spouse or a child out of the will without mentioning any inheritance, the courts may require one anyway. The omitted spouse or child can take the will to probate court, and the judge may decide that you inadvertently omitted them. Then a share of your estate would go to the omitted relative.

It is very difficult to get around the legal presumption in spouses’ and children’s favor. Even if you include language specifically disinheriting them in the will, a court may still disregard it – especially if the children are under age 18. A court is more likely to honor an explicit clause disinheriting an adult child, but you should carefully consider the wording to avoid offending your child and sparking a legal battle. If you want to disinherit a close relative in your will, consult a lawyer about the best approach.

Disinheriting Other Relatives

Your parents and other more distant relatives have no legal entitlement to receive anything from your estate (unless you have no spouse, no children, and no will). Without a will, your parents and other relatives could inherit, if your spouse and children do not survive you or you do not have a spouse and children.

If you truly do not wish to leave anything to your parents or other relatives, you can explicitly disinherit them in the will. Again, the wording of the clause in the will can be crucial to avoiding a dispute later in probate court. Your lawyer also may suggest including wording that says you have provided for everyone that you wished in your will and omission of anyone is intentional. You might also consider giving relatives small token gifts rather than disinheriting them altogether.

No Contest Clauses

Finally, California permits you to include a no contest clause in your will. This language typically says that anyone who contests your will in court is automatically disinherited. A no contest clause can be useful to protect your estate plan.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

Remarried? Look Carefully at Your Estate Plan

There are many issues to address in a remarriage, especially if it blends families.

Remarriages are on the increase, with four of 10 existing marriages now remarriages. That means an estate plan should be created or the current one updated, according to the Cleveland Jewish News in the article “Estate planning documents for second marriages.”

In the article, a couple who each have children from a prior marriage are planning to marry again and blend their families. Consequently, the couple needs to address income taxes, a prenuptial agreement, pension and 401(k) benefits, Social Security, college funding, cost sharing and estate planning documents.

Here’s an example of how important estate planning is for blended families. A couple who has children of their prior marriages get married. Twenty years later, the husband dies. He had wanted to provide for his second wife, so his will stated that all his assets went to his wife, with the understanding that on her death, those assets would go back to his children.

What actually occurred was that his wife lived a long time after he passed, and she simply combined their assets. When she died, the money went to her children, and her husband’s children received nothing. The husband’s children didn’t believe that he meant to do that, but because of the lack of planning, that’s exactly what happened.

What were the alternatives? He could have set up a marital trust that would have held the assets for his second wife on his death, but upon the wife’s passing, would have gone back to his children. The trust document prohibits the wife from transferring the assets to her children.

It’s wonderful to have a verbal agreement with your spouse, but if you don’t set up a formal legal plan, there’s no way to be sure that assets will be distributed as intended.

Another way to ensure that children from a blended family receive what they are intended, is to have an independent person or entity, like a bank or a trust company, oversee a marital trust.

Other important documents include a durable financial power of attorney, durable health care power of attorney and a living will declaration.

Anyone who has been divorced needs to review their estate planning documents to ensure that they reflect their new marital status, especially when they marry again. That is also the time to review beneficiary designations that appear on insurance policies, 401(k)s, pensions, retirement accounts and investment accounts.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, including a remarriage.

You can read more about how our process works, how we can make sure we are a good fit for your needs, and how to get started today right here.

Reference: Cleveland Jewish News (May 7, 2019) “Estate planning documents for second marriages”

Is a Joint Will with Your Spouse a Good Idea?

You may have heard about making a joint will with your spouse and wondered if it was a good idea. While joint wills used to be very popular to save time and money, they have fallen out of favor for some excellent reasons.

1. What Is a Joint Will?

A joint will is a single legal document that includes the last wishes of two people. Usually the two people are husband and wife at the time they make the will. When one of the two passes away, the executor administers the estate using the joint will as the instructions for how to distribute the deceased person’s property. Afterwards, the joint will also acts as the last will and testament for the second, still-living person.

2. Life Changes Make Joint Wills Outdated

Joint wills cause problems when the second person who signs a will has major life changes after the first passes away. For example, the second person might remarry. With the old joint will still in effect, the second person would leave his or her estate to someone besides the new spouse. Or a child who was supposed to inherit everything could have a falling out with the family, or even pass away before the parent.

In some instances there could be an argument that the second person is bound to the joint will – without the ability to change his or her wishes. This joint will could remain in effect for many years, especially if the first person dies young. Even if the joint will is not binding on the second person for life, the second person would have to prepare and sign a new will to change his or her last wishes.

3. Couples Have Different Wishes and Property

Joint wills do not work well when couples have different last wishes and separate property. Often, spouses may want their estates distributed in very different ways. One spouse may want many small gifts to relatives, while the other may leave his or her entire estate to the children. Further, many couples own separate property, whether purchased before the marriage or acquired separately (such as inheritances). Joint wills may restrict the opportunity to dispose of separate property as a member of a couple chooses. Or spouses could feel a lack of privacy because their partner knows exactly what is in their will.

4. Alternatives to Joint Wills

These days, most lawyers recommend that each member of a couple make a separate and distinct will. The wills should not be combined with all signatures at the end. Many couples do want “reciprocal” or “mirror” wills, in which each spouse gives all or most of their assets to the other spouse. Again, these wills are separate documents, each signed only by the spouse whose will it is.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.