Divorce Estate Planning

A spouse or domestic partner who is looking to protect his or her assets prior to divorce is in an unusual position. Marriage or a registered domestic partnership imposes fiduciary duties on the partners that can limit estate planning options. Asset protection and estate planning in the pre-divorce stage must adhere to the rules governing fiduciary relationships.

After the petition for divorce is filed, standard (or automatic) temporary restraining orders will apply. These restraining orders are in addition to the fiduciary duties spouses and partners continue to owe to each other. The temporary restraining orders will last until the divorce is finalized. The restraining orders prevent any transfer, encumbrance, or disposal of community or separate property without the written consent of the other party or order of court, except in the usual course of business or for necessities of life. The restraining orders also bar cashing, borrowing against, canceling, transferring, or changing the beneficiaries of any insurance policy or other coverage. In addition, they prohibit creating a nonprobate transfer* or modifying a nonprobate transfer in a manner that affects the disposition of property subject to the transfer without the written consent of the other party or order of the court. A nonprobate transfer can include a trust, beneficiary designation, totten trust, and payable on death accounts.

Newly divorced spouses should create appropriate estate planning documents, such as a new revocable living trust, a pour-over will, a power of attorney, and an advance healthcare directive. When that is accomplished, you will at least have provided for the most important persons in your life and have documents in place to protect yourself.

If you have a new spouse on the horizon, a dissolution is also the time for you to give serious consideration to the preparation of a premarital agreement, in order to preserve the separate character of your existing assets, to determine the character of new earnings, and to handle such matters as spousal support and succession to property on death. You can also decide in a new will or trust whether to provide for your new significant other.

Divorce is not as certain as death, but you can still prepare for the complexities surrounding the intersection of divorce and death with your estate plan.

Contact us today:  https://santabarbaraestateplanner.com/

Santa Barbara Estate Planner
21 East Carrillo Street, Suite 110
Santa Barbara, CA 93101
(805) 669-7009

*A nonprobate transfer is probably best described as a type of lifetime transfer, because a probate transfer is the transfer of property as a result of death upon order of the court.

Incapacity Planning is Party of a Comprehensive Estate Plan

Comprehensive estate planning is more than planning for gifts after death and avoiding probate. Estate planning must also create a means for managing your affairs if you become ill and mentally incapacitated. As a result, an essential part of any comprehensive estate plan are the documents that provide your trusted individuals with the authority to manage your health decisions and finances if you become ill. Two essential estate planning documents are an Advanced Health Care Directive and a Durable Power of Attorney.
Advanced Health Care Directive
An Advanced Health Care Directive allows you to select the individuals that will make health care decisions for you in the event you cannot make them for yourself. The Directive also allows you to make decisions regarding end of life, pain management, quality of life, donation of organs at death, and the disposition of your remains.
Without a Directive, your family may not be able to make health care decisions for you and may be denied access to medical information during a crisis situation. They may even end up in court fighting over what medical treatment you should, or should not, receive.
Durable Power of Attorney
A Durable Power of Attorney allows you to select the individuals that will manage your finances during a period of incapacity. Even if you have a Revocable Trust, you still need a Durable Power of Attorney because some assets cannot be held in a trust, and your agent may need additional financial authority.
Without a Durable Power of Attorney your family may not be able to pay bills, make financial decisions, manage investments, file tax returns, mortgage and sell real estate, and address other financial matters that are described in the document.
What Happens Without Incapacity Planning?
Without a comprehensive estate plan in place, a judge may need to appoint a conservator to take control of your finances and health care decisions. The conservator will make all personal and medical decisions on your behalf as part of a court-supervised conservatorship proceeding. Until you regain capacity or die, you and your loved ones will be faced with an expensive and time-consuming conservatorship.
At the very least, everyone should have a Durable Power of Attorney and an Advanced Health Care Directive. They are statutory forms in California, and they are fairly easy for an attorney to draft. In addition, I have reviewed many “estate plans” that do not have these two core documents. A Revocable Trust and a Will are not enough to take care of you during an illness and help prevent the need for a conservatorship. For your sake, and your loved ones, make sure that you are protected today.

Three Common Estate Planning Myths

Estate planning has its share of myths and misconceptions.  Understanding some estate planning myths may help you create and maintain a plan that will work the way it was intended.  Three common estate planning myths we encounter at Santa Barbara Estate Planner are discussed below.

Estate Planning Myth #1 – I Don’t Need an Estate Plan Because my Spouse Will Inherit Everything.

A common belief is "if you are married and don’t have a will or a trust, your spouse will still inherit everything."  Unfortunately, this is not always the case.  The person who will inherit your estate, even if you are married, depends on many different factors, including how your property is titled, who you have named on your pay on death beneficiary designations, and the laws of the state where you live and any other state where you own property.  The only way to insure your spouse will inherit everything is to sit down with an experienced estate planning attorney who will help you create an estate plan that will meet all of your goals.

Estate Planning Myth #2 – I Don’t Need an Estate Plan Because my Family Knows my Final Wishes.

You have shared your final wishes with your family, and you are confident that they will “do the right thing” after you die.  Even if you are confident that your family will "do the right thing" after you die, they may not be able to accomplish your wishes without a valid will or trust.  First, the title on the property will determine who inherits it (not the person you instructed your family to gift the property to).  In addition, if you fail to complete or update pay on death beneficiary designations for assets such as bank accounts and life insurance policies, your family does not have any authority to tell the bank or insurance company who should inherit the proceeds.  Finally, without an estate plan, the laws of the state where you live and any other state where you own property will dictate who inherits your probate estate, not your family.  The only way to insure that your property will go to your intended heirs is to sit down with an experienced estate planning attorney who will help you create an estate plan that will meet all of your goals.

Estate Planning Myth #3 – I Made an Estate Plan, I'm Done.

An estate plan, drafted by an experienced estate planning attorney that meets all of your goals, will still require regular maintenance.  As the years pass, laws change, people and relationships change, and your needs, goals, and concerns may change.  The only way to insure that your plan will work the way you intend it to work is to pull it out of the drawer every few years and have it looked over by your estate planning attorney.

Final Thoughts About Estate Planning Myths

These are only three common estate planning myths.  Unfortunately, there are many more.  The only way to separate myth from reality, and get a plan that will work for you and your family, is to retain the services of an experienced estate planning attorney.  Call us today at (805) 669-7009 or email us at tim@santabarbaraestateplanner.com.

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Wills vs. Trusts: A Quick & Simple Comparison

Confused about the differences between wills and trusts?  If so, you’re not alone. Here’s a quick and simple list of what wills and trusts can and cannot do:

What Revocable Living Trusts Do – That Wills Can’t

• Avoid a conservatorship and guardianship. A revocable living trust allows you to authorize your spouse, partner, child, or other trusted person to manage your assets should you become incapacitated and unable to manage your own affairs. Wills only become effective when you die, so they are useless during incapacitation.

• Bypass probate. The probate process, designed to wrap up a person’s affairs, is public and can be costly and time consuming – sometimes taking years and tens of thousands of dollars to resolve. Property in a revocable living trust does not pass through probate, while property that passes using a will guarantees probate.

• Maintain privacy after death. Wills are public documents; trusts are not. Anyone, including nosey neighbors, predators, and unscrupulous “charities” can discover the details of your estate if you have a will. Trusts allow you to maintain your family’s privacy after death.

• Protect you from court challenges. Although court challenges to wills and trusts occur, attacking a trust is generally much harder than attacking a will because trust provisions are not made public. 

•  Allows for increased flexibility. Assets can be added or removed from a living trust at any time. This allows you to make changes without following the complicated and strict formalities that come with drafting and amending a will. 

What Wills Do  – That Trusts Don’t

• Instructs the Probate Court about what you have done with your estate.  Since a will can only be administered through the probate court, your will is primarily an instruction to the court about what you want done with your estate after you die.

• Specify an executor or personal representative. Wills name an executor or personal representative – someone who will take responsibility to wrap up your probate estate after you die. This typically involves working with the probate court, protecting assets, paying your debts, and distributing what remains to beneficiaries. However, if there are no assets in your probate estate (because you have a fully funded revocable trust), this feature is not necessarily useful.

What Both Wills & Trusts Do:

• Allow revisions to your document. Both wills and trusts can be revised whenever your intentions or circumstances change so long as you have the legal capacity to execute them.  However, as discussed above, a will revision may require a more intensive process than a revocable living trust.

• Name beneficiaries. Both wills and trusts are vehicles which allow you to name beneficiaries for your assets.
• Wills simply describe assets and proclaim who gets what. Only assets in your individual name will be controlled by a will. 
• While trusts act similarly, you must go one step further and “transfer” the property into the trust – commonly referred to as “funding.” Only assets in the name of your trust can be controlled by your trust.

• Provide asset protection. Trusts, and less commonly, wills, are crafted to include protective sub-trusts which allow your beneficiaries access but keep the assets from being seized by their creditors. The problem with a trust created in a will is that administration shall supervised by the court, and this creates an additional expense.

While some of the differences between wills and trusts are subtle, others are not. Together, we’ll take a look at your goals as well as your financial and family situation and design an estate plan tailored to your needs. Call me today at (805) 669-7009 or email me at tim@santabarbaraestateplanner.com and let’s get started.

https://santabarbaraestateplanner.com/

We Finished Our Estate Plan, What Do We Tell Our Adult Children?

A well-crafted estate plan should prevent any anticipated conflicts between your beneficiaries, however, an unhappy beneficiary can always challenge the trust after your death.

A common example occurs when family members do not agree on the financial decisions being made by the trustee.  When the family home, a major asset of the estate, is appraised and sold at market value after the parent’s death, a beneficiary may be unsatisfied with the proposed sale of the home (wanting it to stay in the family), or even with the sale price itself.  The unhappy beneficiary may challenge the trust, which can cause a long and costly delay in the distribution of assets and incur legal fees that reduce the size of the estate.

An ideal way to head off this conflict is to communicate your wishes about the distribution of your assets with your children in advance.  We understand that this is a difficult subject to discuss, but the chances of a beneficiary challenging the trust after the death of a loved one can be significantly reduced when all parties to the trust are aware of the parent’s intentions.

To help ease the discomfort of discussing financial arrangements, you should consider inviting your estate planning attorney to meet with you and your heirs when you choose to have that discussion.  Timothy Follett, Attorney at Law, is more than happy to discuss your goals and concerns with your children.

We believe an open discussion allows everyone to voice their thoughts, understand how the trust affects them as a beneficiary, and potential disagreements can be tackled and resolved upfront.  This is a difficult conversation to have, but everyone benefits by avoiding conflicts, court challenges, and delays when the trustee is administering and distributing the assets.  More importantly, you may find that the family comes together after they find out that you have thought of everything and everyone!

Let us know how we can help you. Call our office to schedule an appointment to talk to Timothy about how we may guide you in talking to your heirs, or to schedule an appointment to bring everyone together. 

https://santabarbaraestateplanner.com/

(805) 669-7009 or tim@santabarbaraestateplanner.com

What Can I Do if my Parents Do Not have an Estate Plan?

Begin a Conversation with your Parents

Discussing your parents' estate plan can be an emotionally difficult conversation because money, health, and control are all sensitive subjects.  Consider bringing up estate planning with your parents by telling them you are working on your estate plan, and ask if they have done their own.

You may be able to encourage your parents to plan their estate by discussing how they can use a trust to avoid exposure to taxes, avoid probate, and control how or when their beneficiaries receive certain assets. In addition, you may want to point out that an estate plan can make your parents’ intentions clear, which may help avoid conflicts among family members after they have passed away.

Image credits belong to HelenOnline

If they do not have an estate plan, you can refer them to an estate planner.  You can also use the checklist below, to help discuss estate planning with your parents.  A checklist can help with the estate planning conversation because it is acts as a step-by-step guide that can direct your conversation and help minimize emotions.  The checklist conversation may also help motivate your parents to plan their estate.

Estate Planning Checklist

I. Make a List of Key Contacts for Financial Matters

Write down the names and contact information for any professionals involved in your parents’ financial care. This list should include any financial planners, investment advisors, brokers, lawyers, and accountants.

II. Make a List of Medical Professionals and Resources

Since you may be called on to help with medical decisions for your parents, make a list of their doctors, other health care professionals, and health insurance policies.  In addition, you may consider including member ID numbers, long-term care policies, and any medications they may be taking.

III. Make a list of Assets, Account Numbers, Account Locations, Personal Identification Numbers (PINs,) and User IDs

If you ever need to step in and help manage their finances, you need to know your parents’ assets, including bank accounts, brokerage and mutual fund accounts, life insurance policies, and real estate.

IV. Identify a Suitable Location for Sensitive Information

If for some reason your parents do not want to give the above details to you, ask them to make a list on their own and store it in a secure location that you can access.

V. Decide on How Financial and Medical Affairs will be Handled with Legal Documents

Your parents will need legal documents to give an agent or trustee the authority to manage their financial and medical affairs if they are unable to do so for themselves.

A Trust - A trust is a legal arrangement in which your parents appoint a person to act as a trustee to manage their assets for their benefit if they are unable to manage the trust assets for themselves. The trust provides their trustee with a set of rules that must be followed when managing their assets.  It also creates a fiduciary relationship between them and their trustee, so that their trustee is personally liable for the mismanagement of trust assets.  After their death, their property will be distributed according to the directions in the trust.

A Pour Over Will – A Pour Over Will acts as a safety net for their estate. At the time of your parents’ death, it collects assets that were not made property of their trust and moves those assets into their trust. In addition, conservators may also be nominated in a Pour Over Will.

A Durable Power Of Attorney - appoints agents to make financial decisions for your parents regarding non-trust assets in the event they are not able to make financial decisions for themselves.

An Advanced Health Directive - appoints agents to make medical decisions for your parents in the event they are unable to make medical decisions for themselves.

Summary

Consider recommending Timothy Follett at Santa Barbara Estate Planner for your parents' estate planning needs. We are experienced at helping first time estate planners navigate the complicated estate planning process in a stress free environment.  We will take the time to provide counseling so your parents are comfortable and help them make informed decisions about their estate plan.

For more information visit our website:  https://santabarbaraestateplanner.com/    

(805) 669-7009 or tim@santabarbaraestateplanner.com