California Probate - Law Offices of Janet Brewer Blog

Big Mistakes in Estate Planning That You Can Avoid

It is important to have a plan and important to keep it up to date.

If you don’t have an estate plan, your family can face some really difficult times and find themselves in a disagreement that can cause harm, according to The San Diego Union-Tribune in “6 estate-planning mistakes to avoid.”

Even attorneys run into problems with their family estate plans. One attorney was devastated when her mother was diagnosed with Alzheimer’s disease. As the mounting costs continued for 10 years, and tragedy struck again when her two older brothers died just before her mother passed away, she learned first hand just how important having a plan in place can be for the family. Without a plan, everything is more challenging and costly. Here are the top six mistakes that people make:

Not having a plan. No one wants to think about death, dying or incapacity, especially when they are relatively young and healthy. However, that is the best time to put a plan in place. Start by making sure you have powers of attorney for both health care and finances. Otherwise, you risk having the court making decisions on your behalf, instead of a trusted family member.

Not communicating your plan or wishes. Make sure that your loved ones know what your plan is. The people who have been chosen as your financial power of attorney and health care power of attorney need to know that they have been named and what your wishes are. Having a plan is step one. Communicating its wishes and its location is step two. Miss one step, and the plan is worthless.

Doing estate planning only with taxes in mind. A comprehensive estate plan addresses much more than tax planning. It includes charitable giving, planning for a family member with special needs, succession planning, planning for children from a prior marriage, planning for your pets and more.

Leaving assets directly to minors. Giving assets to a minor will lead to the necessity of the court appointing a custodian or guardian, if one is not named in your will. There may be problems with a court-appointed guardian, who may have a different idea of how the money should be used, not to mention associated costs.

Neglecting to update how assets are titled. Today’s family often means a blended family. Therefore, how assets are titled can have a big impact. If one spouse purchased a home long before the second spouse and their children joined the household, who inherits the house? There are tax consequences and control issues that arise in a blended family that requires advance planning and a lot of communication. In community property states, this can become particularly messy.

Failing to fund or update trusts. If a trust is not funded, it will not achieve its desired outcome. Assets that are not retitled when trusts are created, will not avoid probate. These are the details that make or break an estate plan.

An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances, as well as keeping it up to date as changes occur in your life.

Reference: The San Diego Union-Tribune (April 18, 2019) “6 estate-planning mistakes to avoid”

Are Your Stepchildren Your Heirs? California Basics

In California, stepchildren can inherit from an estate if there is no will and under specific circumstances. If you have stepchildren, thinking ahead to your wishes for them may motivate you to do some estate planning.

Stepchildren and Intestate Succession

Intestate succession is the legal order in which heirs inherit if there is no will. Generally, intestate succession favors close relatives over more distant ones, and the spouse and natural children over anyone else. Since stepchildren are not natural children, they are not as likely to inherit. Some people do adopt their stepchildren, in which case the stepchildren are treated like natural children for intestate succession purposes.

In California, stepchildren can inherit from someone if there are no other close relatives alive. For example, if a person dies with no living relatives at all (no spouse, children, parents, nieces, nephews, aunts, uncles, grandparents, etc.), then the children of a spouse who previously died may inherit. Further, if a person dies with some relatives alive, stepchildren may still inherit if the spouse died only a few years beforehand. (See Probate Code Sections 6402 and 6402.5.) These situations are fairly rare, however, as most people have other relatives alive (such as cousins) when they pass away.

Stepchildren and Estate Planning

The rules listed above only apply if the person who dies has not made a will. You can purposely structure your estate to pass in part to your stepchildren by doing some estate planning. A will generally disposes of your money, real estate, and personal property to the heirs that you choose. You can make specific gifts in the will, or you can distribute a percentage of the estate to each heir.

Other estate planning structures can come in handy for making sure that you provide for your stepchildren. For example, you could create a trust that includes both your natural children and stepchildren as beneficiaries. Or you could consider contributing to their college funds while they are younger instead of, or in addition to, forming a trust. You have many options, but if you want your stepchildren to inherit, you should take some action to begin an estate plan.

Planning your estate and have stepchildren? 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.

Financial Advice for that Second Marriage

Marry a second time and keep finances separate? It may be a good idea at first but after a decade?

When people marry for the second time they often decide to keep things separate but perhaps as time rolls on it is a good idea to take a second look at that plan, according to AARP Magazine in “4 Money Tips for Second Marriages.”

Did you have a prenup before your second marriage? It’s not a big deal. You can also do a post-nuptial agreement. You can have either one one drawn up and put in a drawer. Chances are you came to the marriage with different incomes, assets and children. Talk about what is fair and come up with a document that works for both of you.

Do you have a system for paying ongoing household costs? One solution is a household account to which both partners contribute, with both contributing a certain amount, depending on income and asset levels. Some couples have a joint credit card, just like first-time marrieds, so every time you use the card, you’re not negotiating all over again about who is paying for what.

You might need help with managing your finances. If one of you is going to retire in the near future, how will that impact your finances? Can the person who is retiring first, wait to tap retirement savings before claiming their Social Security benefits? You need a strategy that will work for both spouses, and it  must take into account your ages, retirement dates, assets and any health issues.

Different investment portfolios may be needed if you have different investment comfort levels. Women are traditionally more conservative than men. Talk about your comfort levels with stock purchases and other kinds of investments. If you came to the marriage with a significant portfolio and a financial advisor, did you stay with your advisor or switch to your spouse’s? After 10 years, are you ready to combine accounts? Or, if for estate planning purposes, does it make sense to keep them separate?

If your second marriage has made it past the 10-year mark, when was the last time you reviewed your estate plan and your designated beneficiaries? We hope you updated your wills and reviewed all your accounts with named beneficiaries shortly after you were married, but if not, now would be the time to do this important task. You don’t want anyone’s ex receiving a large IRA or the proceeds from a life insurance policy.

This may be the time to consider your attitudes toward “mine and “ours.” For some people, the 10-year mark gives them the security that their marriage is a keeper and they begin to let go of some of the separated assets. 

If you have any questions about your current estate plan or how it could be modified, please call or email us today. We are here to help.

Reference: AARP Magazine (January 2019) “4 Money Tips for Second Marriages”

Divorce Means Taking a Fresh Look at Estate Plan

If your estate plan is not up to date and done well, it is possible that your assets will end up under the control of your ex-spouse.

For people who have minor children with their ex-spouse things may become difficult, so it is best to not forget about your estate plan, according to the Wills, Trusts & Estates Prof Blog in "Planning Ahead After Divorce."

Getting a divorce is a significant event that should cause everyone to revisit their estate plans to make sure their ex-spouse does not gain control of any of their property.

For some people, the law will automatically modify their plans should they pass away without eliminating an ex-spouse.

The big issue?

What if you pass away while your children with your ex-spouse are still minors? In that case, your ex-spouse will most likely have custody over the children.

Any property left for your children either in a will or by operation of the laws of intestate succession will then be under the substantial control of your ex-spouse.

Your ex-spouse will get to manage the property and be able to decide what to do with it on behalf of your children.

Many of the potential problems can be avoided by meeting with an estate planning attorney to advise you on creating an estate plan that fits your unique circumstances.

Reference: Wills, Trusts & Estates Prof Blog (Jan. 8, 2018) "Planning Ahead After Divorce."

Remarriage? Estate Planning Is Needed

What is the best way to protect an inheritance for children from a previous marriage?

There are numerous ways to protect an inheritance for children from a previous marriage, according to the Wills, Trusts & Estates Prof Blog in "Protecting Your Children's Inheritance After Remarriage."

If you pass away without a will, the general result is your closest living relative receives your estate, which means that if you are married, your spouse gets everything.

This can be a problem if you have children from a previous relationship, since your spouse is not required to preserve anything that he or she inherits and give it to the children.

However, there are some ways to protect the children from a previous relationship including:

• Get a prenuptial agreement before you get remarried. In a prenuptial agreement, you and your future spouse can agree that some of your assets will go to your children after you pass away.
• Create a trust that allows your spouse to use some of your assets while he or she is alive and that gives the remainder of the assets to your children after your spouse passes away.
• Name your children as beneficiaries of your retirement accounts or life insurance policies.
• Create a will that gives specific bequests to your children.
• Give your children gifts, while you are still alive.

An estate planning attorney can guide you in creating an estate plan that meets your unique circumstances, including protecting an inheritance for children from a previous relationship.

Reference: Wills, Trusts & Estates Prof Blog "Protecting Your Children's Inheritance After Remarriage."

A ‘Real Housewives’ Star Has a Real Battle

Television reality entertainer claims that her stepchildren are trying to take her home from her.

Alexia Echevarria, one of the Real Housewives of Miami, is fighting with her stepchildren over part of her late husband's estate, according to the Daily Mail in "Real Housewives of Miami star Alexia Echevarria accuses her stepsons of trying to seize her $3 million Miami Beach home and Maserati after her husband's sudden death."

Prior to marrying, Echevarria and her husband picked out a home in Miami Beach that he purchased in his name alone. A prenuptial agreement was signed which included a provision that upon his death, ownership of the house would be transferred to her.

The two announced that they were separating in 2015, but according to Echevarria, they continued to live together until his death in 2016.

His estate went to his two sons from a previous relationship. Echevarria claims they are attempting to seize the house as part of the estate.

It is not uncommon for stepparents and children to have disputes over an estate.

An estate planning attorney can advise you on creating an estate plan that meets your specific needs, even if you aren't a "real housewife".

Reference: Daily Mail (March 21, 2017) "Real Housewives of Miami star Alexia Echevarria accuses her stepsons of trying to seize her $3 million Miami Beach home and Maserati after her husband's sudden death."

Blended Family Does Not Have to Be at Odds

Proper handling of finances today and in the future can avoid tensions in blended families.

Advisor.ca recently offered some advice in the handling of problems with blended families in its article “Five ways to navigate blended-family finances,” which includes advice on the proper handling of finances in today’s world and in the future.

The tips include:

• Make sure all estate planning documents are updated to reflect the circumstances of the blended family. Asset distributions may need to be modified to make sure everyone gets a fair share of a parent’s estate.
• Choose an executor carefully as you will need to designate someone who has the respect and trust of both the new spouse and the previous children.
• Creating a trust and a gifting plan can be great ways to make sure adequate provision is made for everyone in the family. Trusts can be used to make sure a spouse has the necessary resources to live on and that children from a previous marriage cannot be cut off from receiving an inheritance.
• Buying life insurance can be another good idea as it can provide needed cash for expenses and help equalize inheritances when assets are difficult to divide.
• In some situations the best thing to do is to get a prenuptial agreement before getting remarried.

An estate planning attorney can guide you in avoiding the usual problems of dealing with a blended family.

Reference: Advisor.ca (Aug. 3, 2016) “Five ways to navigate blended-family finances”

 

Remarriage Should Cause Second Look at Estate Plan

Remarriage should spark a renewed interest in your estate plan, according to a CNBC article “Getting remarried? Protect your assets and your interests.”

Most of the difficulty in an estate plan caused by divorce and remarriage can be avoid if the estate plan is updated properly to reflect the circumstances.

The CNBC article lists some common estate planning mistakes that people make when getting remarried, including:

• Not deciding whether beneficiary designations on financial accounts should be changed.
• Not having a plan for which assets can be comingled with the new spouse’s assets and which should not be.
• Not having an estate plan at all.
• Not considering a prenuptial agreement.
• Failing to give proper verbal instructions to family members.
• Not deciding whether a house needs to be re-titled.
• Not purchasing long term care insurance or otherwise planning for nursing home care.

An estate planning attorney can guide you in avoiding the problems.

Reference: CNBC (July 28, 2016) “Getting remarried? Protect your assets and your interests.”

 

Boxing Legend's Estate May Prove Complicated

Muhammad Ali passes away leaving a large estate and nine children from different marriages.

Boxing icon Muhammad Ali has passed away leaving a sizeable estate and the Daily Mail recently reported on what is currently known about his estate in "Ali's family to spar over his $50million fortune: Fourth wife Lonnie will act as executor as his NINE children, exes and brother prepare to enter the ring for a slice of inheritance."

The known details include:

• It is believed that Ali's fourth wife, Lonnie, will act as the executor of his estate.
• His known potential heirs include nine children, a brother and his ex-wives. However, it is not currently known which if any of them will inherit a portion of Ali's estate or how much. For that reason, it is not currently possible to know whether a challenge to his estate plan is likely.
• It is estimated that Ali's net worth at the time of his passing was approximately $50 million.
• Up until the time of his death Ali continued to earn money through the company he founded, GOAT LLC. However, he sold the majority of the company a few years ago and retained only a 20% interest in it.
• His estate also includes property in Arizona and Kentucky. It is also possible that his estate will include memorabilia from his fighting days that could potentially be worth millions.

Reference: Daily Mail (June 2, 2016) "Ali's family to spar over his $50million fortune: Fourth wife Lonnie will act as executor as his NINE children, exes and brother prepare to enter the ring for a slice of inheritance."

 

A Second Marriage Could Threaten Assets

A remarriage can cause problems with distributing assets as a new spouse enters the picture and children from the first marriage receive a smaller inheritance. There are a number of ways to handle the situation but sometimes one can go too far.

A secret divorce in a foreign country has caused some problems with the protection of assets, according to the New York Post's recently published article on a bizarre lawsuit in "Husband secretly divorced wife after wedding 'to protect assets'."

It seems some 20 years ago Cristina Carta Villa, now 59 years old, married Gabriel Villa, now 90 years old. According to Cristina, as far as she knew the two of them were still married and they have lived together ever since.

However, when a tax bill for their Manhattan home arrived she grew suspicious when her name was not listed as an owner of the property. Gabriel is alleged to have taken her name off the deed. He did this by claiming that the couple was not married.

Apparently, a few months after the wedding ceremony, Gabriel Villa hired attorneys in the Dominican Republic to divorce the couple in that country even though the two of them were not living there and never appeared in court.

Cristina Villa claims that Gabriel is now trying to sell the Manhattan home to his adult daughter and cut her out. She is suing him to have the divorce she did not know about invalidated.

Perhaps one of the strangest aspects of this case is that Gabriel Villa is a lawyer. Consequently, he should have known that there were far better ways to shield some assets from his wife if he wanted to make sure they went to his daughter from a previous relationship.

For starters, before getting married Gabriel could have arranged for a prenuptial agreement. After marriage he still could have asked for a postnuptial agreement. Despite those two options, Gabriel should have remembered that a spouse does not necessarily need to inherit all of the assets of the deceased spouse. In fact, the surviving spouse is entitled to an elective share, but any assets beyond that can be distributed however the deceased wants as part of an estate plan.

We can assist with any questions you may have about your own assets in regards to your unique marriage situation, simply visit our Contact page to reach out to us!

 

Reference: New York Post (Jan. 24, 2016) "Husband secretly divorced wife after wedding 'to protect assets'."