Estate planning for same sex couples in California

California has made some strides toward equality for same sex couples, but it cannot be said that there isn’t still a long way to go.  As unfair as it is, same sex couple have to do more: prepare more documents, plan for more contingencies/eventualities, update more frequently – than their heterosexual counterparts.  The worst thing that a same sex couple can do is bury their heads in the sand, hoping or assuming it’s ok not to put anything in place – that somehow, some way, it’ll all be taken care of should something go wrong.

Uh, no.

Even in the best of circumstances, what you effectively do when you don’t plan is place an enormous burden on your loved ones; the ones who have loved you and cared about you the most, and the ones you have loved and cared about the most, are going to be put in a horrific situation should something happen to you and you haven’t planned for it.  And this horrific situation, not only does it come at a time of grief for your loved ones, but it is entirely avoidable.

Some tips to get you started:

  1. With no estate plan (will, trust), you die intestate (i.e. the government decides your estate plan) and the government’s plan discriminates against same sex couples.
  2. Without powers of attorney in place, the parents who threw you out of the house when you came out could be making medical and financial decisions for you if you’re incapacitated.
  3. Being a Registered Domestic Partner in California, or married, does not change these points in their entirety.
  4. Holding your property in joint tenancy with your property will not avoid the problems here, plus they could work to DIS-inherit your children and/or cause additional problems down the line.
  5. Not choosing a guardian for your child(ren) could mean they end up in foster care should something happen to you.
  6. Without a living trust, probate fees could take up to 10% of your gross estate (your estate not taking debt into account) and take 2-3 years – if not more – to resolve.

The best way to take care of your family when you are a same sex couple is to put an estate plan in place.

Financial issues in California divorce

Since we’re talking about California divorce this week, I thought I’d add a note on finances, since they seem to be at least one of the top reasons for divorce. Untangling your financial lives can be really tough, even out of court.  Here are some things to consider:

During divorce:

Tax implications – what are the tax implications of your filing status as you go through divorce?  What are the implications of your asset division?

Expert fees – what are your attorney/accountant/child custody evaluator/financial advisor fees going to be?

Support – there are tax implications to paying and receiving child and spousal (or family) support in California. If you just take the highest/lowest amount because funds are tight, you may be in trouble later.

But the divorce process is just the beginning.  You also have to consider the financial aspects of your post-divorce life.  You need to consider these things as soon as possible, and not wait until it’s happened.

Post-Divorce:

Cost of living adjustment – here’s still the same bills, but only one of you is paying them.

Change in auto/home/health insurance costs

Increase in “combined” costs.  Did you share a Netflix account?

Lower savings and discretionary income due to the tightened financial belt.

Loss of assets in the divorce – that retirement home may be gone.

Needing/getting new employment – what do you do if you’ve never worked?

Reduced retirement income or savings – you may have thought you were set for retirement…now what?

The theme for this week seems to be planning.  Planning is you’re thinking of divorce, and planning if you’re in the process of divorce.  Don’t let the process or anything that happens in the process to take you by surprise.  It doesn’t have to if you know what to look for and where to look. Need more help? Click here to make an online appointment.

Changing beneficiaries during/after California divorce

While you are married, generally you name your spouse as the beneficiary on your life insurance, 401K, pension, etc. Once you get divorced, however, you are going to want to change those beneficiaries. This may sound simple, but it is extremely common for someone to forget and their ex-spouse ends up with their assets upon their death.

Why is that? I can only guess. First, as I have discussed before, during the time your case is in the court system (after you have filed your Petition but before you have your Judgment), you MAY NOT change any of your beneficiaries or your will or trust without consent from the other party. You cannot even sever a joint tenancy without notifying your spouse. But AFTER, when the case is over, you are not only free to do so, but you really need to.

I think some people forget, or once they have their Judgment, they want to put all of the hassle behind them. Don’t do this! You took the effort to get divorced – don’t forget to complete the process and change the beneficiaries on your accounts!

A friend of mine came to me recently because the spouse of a colleague of his had passed away. The only asset this person left was a life insurance policy that named a girlfriend of his from nearly twenty years before. She’s likely to lose her home because her husband, in twenty years, never changed his life insurance policy beneficiary.

Retirement planning and dividing assets in California divorce

When a couple is dividing their assets in a divorce case, it’s easy to just look at the numbers on the page and divide them. For example, say we have two stock accounts. Let’s have $100,000 in each account. It can be easy to say that they each take one of the accounts and call it even. But, is it?

It could be, but it’s more likely not. If the couple has two accounts, it’s likely that they have them for a reason. For example, maybe one is intended for the long-term and one is a shorter-term investment. If the couple does not evaluate the projections of each of the accounts, one of them could be left holding the short stick.

During the divorce process, however, you can get very tired of negotiating, of waiting, and of just being in the middle of it all. Evaluating the accounts is just another step that you may think really won’t make a big difference. But ask any financial advisor – it DOES matter, and while you may not care now, you WILL later, particularly if you’re the one with the short stick.

As a couple builds their life, they make plans for their retirement. A smart plan has several components, and the couple is likely thinking not only of their own retirement, but also their children’s college expenses, when each of them will retire, and what kind of lifestyle they’re planning on. They may have compromised during the marriage, but at the divorce, each individual needs to come up with their own plan for these issues. Ensuring that the division of the assets is truly equal, and not just the same dollar figure, will be the first step.

Estate planning “musts” to take care of NOW

I often get asked what the most basic “must dos” or “must haves” are in estate planning.  Here is the answer:

  1. Talk to an estate planning attorney.  Most, like me, offer free consultations, so you don’t have to spend anything but time, and then at least you’ll know and understand your need and risks, and be able to make informed decisions
  2. Talk to a financial advisor.  See above – you only lose your time, and if you find a reputable one (your estate planning attorney should know several fantastic ones, as I do), then you can make sure that as  you grow older, you are working toward your financial goals.

Those two items will give you all the information you need.  But more specifically:

  1. If you have children, decide on and formally nominate a guardian to care for them if you are unable to.  If you don’t decide?  A judge – a stranger – will make the decision for you.
  2. Create a will or trust.  If you don’t decide who will get your stuff, someone else will.  You’ll also pay a lot of money for the privilege.  Again, talking to an estate planning attorney to find out your risks and options costs nothing.  Why remain uninformed?
  3. Make sure you have enough life insurance.  What you think of as “enough” and what is really and truly “enough” should your spouse die may be entirely different amounts.  If one spouse doesn’t work, and the working spouse dies, wouldn’t you want to have enough life insurance to allow the survivor to take time to grieve, take care of the children, and then think about work, instead of having to worry about finding work right away?
  4. Make sure your retirement and life insurance beneficiaries are always up to date.  If you’ve been married for 20 years and your life insurance names your girlfriend of 25 years ago when you pass away?  Then your girlfriend gets the money and your wife doesn’t.  Is that what you want?
  5. Make sure you have long-term care insurance if you need it.  A financial advisor can help you to decide on this, and the earlier you get it, the cheaper it is.
  6. Make sure both spouses know and understand the family finances, even if one spouse does the day-to-day management.  Do not get caught in a situation where one spouse dies and the survivor does not even know what accounts exist.
  7. On that note, put your paperwork in order, or at least in one place.  Even if it’s disorganized in a drawer, make sure all the important paperwork, account statements, estate plan, life insurance, etc. is all in one place and easy to find.  Should you pass away, your family will be going through a rough enough time as it is – don’t make it worse by leaving a scattered financial life.

None of these items are difficult or even time-consuming, but they mean everything in the world to your family should something happen to you.  What are you waiting for?

Your 2012 estate plan guide: when, how and why to update your existing plan

One of the most common estate planning questions I get is when and why you would need to update your estate plan. For 2012, here is your custom guide to ensuring that your estate plan is current:

  1. Has the value of your estate increased substantially since your last update?  Do you have more than $5 million if you’re single, or $10 million if you’re married?  Is this a change from before?  If so, then you may want to consider a review of your estate plan.
  2. Did you complete your powers of attorney before 2003?  In California the forms changed at that time, so now would be a good time to take another look.
  3. Are your beneficiaries on your retirement and life insurance accounts updated?
  4. Does your estate plan reflect your current family and desires for distribution to them?  Or has there been a birth, death, marriage or divorce since your last estate check up?  If so, you may need a review.
  5. Are you protected for a time (the time) when you are unable to think or care for yourself? Do you have your powers of attorney? Long-term care?  Advances in medical care mean we will live longer, but at the same time we will more likely experience a diminishing of capacity before we pass on.  Without these basic planning tools, we leave our family with these burdens.  Are you approaching 50?  If you don’t have long-term care yet, now is the time to get it.  You can’t wait until you need it or you won’t qualify.
  6. Have you chosen a guardian for your minor children?  If you don’t, then your children could become the subject of a custody battle if something happens to you, or they could be place in foster care while the decision is being made.  Don’t take this risk!

If it has been a while since you created your estate plan, or you don’t have one at all, now is the time to put the tools in place to protect your family and your assets.  Schedule a FREE appointment online, or call us at 925.307.6543.

Why and when you need an estate planning/elder law attorney

Top reasons why you may need an estate planning or elder law attorney:

  1. To keep more of your assets and money for your family than for the government/attorneys
  2. To have peace of mind that your family and all you have worked for is protected
  3. To avoid the state’s plan for the passing of your estate (probate) because it is complex, difficult, expensive, and time-consuming, and you want to make sure you don’t put your family through it
  4. To acknowledge that your needs will change as you age, and it takes critical planning to ensure that you and your family are cared for as you grow older
  5. Because the government (through Medicare/Medical/Medicaid) will not be sufficient for your long-term care, and you know that an attorney can help you to evaluate your options to make sure you are protected

Top reasons when you may need an estate planning or elder law attorney:

  1. Your estate becomes worth $150,000 or more (not including debt)
  2. Your loved one has been diagnosed with dementia or Alzheimer’s
  3. You are worried that you do not have a plan in place for your estate and family after you’re gone – everyone needs a plan, regardless of age, estate size, or family composition
  4. You are concerned about your or your loved one’s ability to cope with rising costs, continue to pay bills, or provide for ongoing medical care

Do you have any of these concerns?