Avoid these shortcuts in estate planning & save your assets, protect your family, & leave a legacy

We’re all looking to save money and get our to do list done as quickly and easily as possible.  But when it comes to estate planning, quick and cheap shortcuts can end up not only costing you in the long run, but can hurt both your family and your legacy.

For example, if you decide to forego an estate plan for your real property, and instead opt for joint tenancy, then you are at best just delaying the probate process, and at worst exposing your home to complete loss in your lifetime. With joint tenancy, there may not be any need for probate or transfer proceedings at the death of the first spouse (just some simple) paperwork, at the death of the survivor, the property goes into probate, which can take years and cost up to 10% of the gross estate value, which can be in the tens of thousands of dollars even for estates with just a house – even one with substantial debt.  Putting a child on title to the property does not solve this problem, and can lead to your child’s creditors seizing the house, the inability to undo the transfer at a later date when needed, a loss of control over the disposition of the house, more complications in transfer at the survivor’s death, and more.

Another shortcut is either being incomplete or too vague in your estate plan documentation.  If you have a living trust, it must be funded completely.  It does not serve you or anyone else to leave “just that one account” outside the trust since it ‘has so little in it.’  Why leave a small account – or a large one – outside the trust and make it more difficult for your family to transfer it? It’s possible then that the bank will just get your money since it will be too much trouble to transfer the account outside the trust.  In addition, if you have provisions for the distribution of your estate, make sure you have alternate provisions in case your beneficiaries do not outlive you.  For example, if you are leaving everything to your children, make sure you have a provision for who gets your estate if the airplane goes down and you all pass at the same time.

There are a lot of aspects of estate planning that can easily be completed improperly, costing you, your family, and the estate you worked your life to build. Estate planning is not the place to look for a quick or cheap solution, but rather to take the time to ensure that all you’ve worked for is left just the way you want it.

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Property and debt division in California divorce

California law provides for an EQUAL division of any and all property and debt acquired during the time of your marriage. Exceptions to this are inheritances, which are separate, as well as student loans, which are separate debts. Note that if you are unaware of the acquisition of the property or debt, then this does NOT exempt you from the equal division. So, this means that if your spouse acquired credit card debt in the amount of thousands of dollars that you knew nothing about, you still have to share the payment of that debt with your spouse at divorce.

Also, note that title to the property is not the relevant issue, but rather the time you acquired the property. If you have a car, for example, that you bought while you were married but only put the husband’s name on it, then that car is still community property and subject to equal division.

Finally, “equal division” does not mean that we are dividing each and every asset, one by one. What we’re doing, rather, is dividing the value of your property. For example, if you have a house with equity in the amount of $100,000 and the wife has a community property pension in the amount of $100,000, then the husband can take the house in exchange for giving up any right he has to his wife’s pension. Generally, if one spouse can afford to keep an asset, then the court will not order its sale.

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Dissolution: issues in a California divorce

In every divorce (or dissolution) case, the court has a universe of issues it may resolve. The issues are common to most cases in that most cases have all of them, but some omit a couple. The issues are child custody and visitation, child and spousal support, property and debt division, attorney fees, and status. We’ll examine each of these in detail, but here’s an overview:

There are two aspects of the non-financial issues with your child (and I say child with the understanding that many folks have more than one child): custody and visitation (or parenting time). There is physical and legal custody, and you can have joint custody or sole custody (for one parent). Parenting plans vary like personalities. Some parents share parenting time equally and fluidly with few specifics written down. Some parents have to have every detail recorded in excruciating detail. There are some “standard” parenting plans, but by no means are they uniform.

Child and spousal support are also issues in a divorce case. Support is calculated using a software program adopted by the State of California. You can find it for free here: Support Calculations. Permanent, or long-term, spousal support is calculated using a variety of qualitative factors not necessarily related to the software, however.

The court will also divide all property and debt you and your spouse acquired during your marriage. This includes any real property, or homes, as well as personal property, vehicles, bank and stock accounts, 401Ks and pension/retirement accounts, and any and all debt. California law provides for EQUAL division of all property and debt.

The court can and will also resolve the issue of attorney fees, particularly if the incomes of the spouses are very different. If one spouse makes the majority of the money in the household, the court will likely order that spouse to pay the majority of the attorney fees.

Finally, there is the issue of your status. Your status is whether you are divorced or single. You can separate, or bifurcate, the issue of your status and become divorced if you feel your case is taking too long. Divorce cases can last several years. Most often, your status is dissolved, making you a single person, at the resolution of your case. The earliest this can happen is six months and one day from the time the Petition was served on the Respondent.

Ready to make an appointment & get more information specific to you and your case? Click here to access our appointment scheduling calendar.

California Divorce: How to divide the stuff, from the wedding ring to the collectibles to the couch

Lawyers and judges do not like to get into the business of dividing a couple’s personal property in divorce.  The value of your personal property when you get divorced is not the price it would take to replace what you have, but rather the garage sale price.  So, when you value your personal items (furnishings, kitchen items, jewelry, personal items, etc.), think of holding a large garage sale where everything in your house is for sale.  Then imagine at the end of the day, the house is empty.  How much money do you think would be in the tin box at the end of the day?

For most couples, this doesn’t amount to more than a few thousand dollars, and since each party generally takes some of the personal items, frequently there isn’t any kind of equalization in the divorce.

Of course, if you have valuable antiques, jewelry, or collections, then there can be disputes.  The first dispute is often the worth of the collection.  Husband says his gun collection is worthless because none of the guns work.  Wife says it’s worth tens of thousands because of what the couple paid for it.  The answer is generally to get an independent appraisal and go from there.  The item or collection can be sold and the proceeds split, or one party can buy out the other party’s interest by paying half the value.

Another common question involves gifts.  Gifts given to one spouse are that spouse’s separate property.  Often the biggest gift is that of the engagement ring.  Upon divorce, the wife keeps the engagement ring as hers, regardless of whether the ring is Husband’s grandmother’s.

Finally, when attorneys and courts do not generally want to get into the division of personal property, what is a couple to do?  The best way, I think, is for each spouse to get a different color of Post-It.  Each spouse then goes around the house and ‘tags’ the items they want.  Then at the end, only those items with two Post-Its on them are items of contention. This makes it easy to identify what items need to be discussed without having to discuss every item – it narrows the field, which can reduce the conflict.

How did you divide your personal items when you divorced?

Income and assets requirements to qualify for Medi-Cal – and how to qualify for California Medi-Cal benefits if you’re over those amounts

To qualify for Medi-Cal, one must not have more than $2,000 of countable assets and $35 in income each month. But this rather scary figure leaves out the rest of the story, which is considerably less frightening.

First, the asset rules. The $2,000 limit is for “countable” assets only, and countable assets do not include your home (and furnishings/contents within your home), your car, your retirement (IRA, 401k – though there are special rules for these so don’t ever assume you can properly plan on your own with an article about Medi-Cal basics) and certain other assets. In addition, if you are married, your spouse can keep up to $119,220 (in 2016) in countable assets.

In terms of income, the spouse of a married applicant can keep ALL income in his/her name and can even receive income from the Medi-Cal applicant spouse if the well spouse’s income is below about $3,000. The rest of the income of the applicant spouse goes towards their “share of costs” for the nursing home care, and is likened to a copay or deductible.

But that’s not all. First, there are legal ways to transfer your assets to protect them, in effect keeping more than the stated limits (there are pros and cons to these kinds of arrangements, but my clients pretty uniformly consider the cons to be far less difficult than paying $10,000 or more a month on nursing home care). This kind of Medi-Cal planning is quite common even though it’s not very well known. In addition, it can be possible to ask the court to increase the limits in certain situations. There are a lot of available options for qualifying for Medi-Cal if you have more than $2,000 in assets – or more than $119,220 – even if your assets and estate are substantially more than these limits.

Give us a call at 925.307.6543 or click here to make an appointment directly using our online scheduling. We have offices all over the Bay Area for your convenience, with our main office in Dublin and satellite offices in Oakland, Walnut Creek, San Francisco, San Mateo, Palo Alto, Sunnyvale, San Rafael and Antioch.

Income and assets requirements to qualify for Medi-Cal – and how to qualify for California Medi-Cal benefits if you’re over those amounts

To qualify for Medi-Cal, one must not have more than $2,000 of countable assets and $35 in income each month. But this rather scary figure leaves out the rest of the story, which is considerably less frightening.

First, the asset rules. The $2,000 limit is for “countable” assets only, and countable assets do not include your home (and furnishings/contents within your home), your car, your retirement (IRA, 401k – though there are special rules for these so don’t ever assume you can properly plan on your own with an article about Medi-Cal basics) and certain other assets. In addition, if you are married, your spouse can keep up to $119,220 (in 2016) in countable assets.

In terms of income, the spouse of a married applicant can keep ALL income in his/her name and can even receive income from the Medi-Cal applicant spouse if the well spouse’s income is below about $3,000. The rest of the income of the applicant spouse goes towards their “share of costs” for the nursing home care, and is likened to a copay or deductible.

But that’s not all. First, there are legal ways to transfer your assets to protect them, in effect keeping more than the stated limits (there are pros and cons to these kinds of arrangements, but my clients pretty uniformly consider the cons to be far less difficult than paying $10,000 or more a month on nursing home care). This kind of Medi-Cal planning is quite common even though it’s not very well known. In addition, it can be possible to ask the court to increase the limits in certain situations. There are a lot of available options for qualifying for Medi-Cal if you have more than $2,000 in assets – or more than $119,220 – even if your assets and estate are substantially more than these limits.

Give us a call at 925.307.6543 or click here to make an appointment directly using our online scheduling. We have offices all over the Bay Area for your convenience, with our main office in Dublin and satellite offices in Oakland, Walnut Creek, San Francisco, San Mateo, Palo Alto, Sunnyvale, San Rafael and Antioch.

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.

Property and debt division in California divorce

California law provides for an EQUAL division of any and all property and debt acquired during the time of your marriage. Exceptions to this are inheritances, which are separate assets, as well as student loans, which are separate debts. Note that if you are unaware of the acquisition of the property or debt, then this does NOT exempt you from the equal division. So, this means that if your spouse acquired credit card debt in the amount of thousands of dollars that you knew nothing about, you still have to share the payment of that debt with your spouse at divorce.

Also, note that title to the property is not the relevant issue, but rather the time you acquired the property. If you have a car, for example, that you bought while you were married but only put one spouse’s name on it, then that car is still community property and subject to equal division.

Finally, “equal division” does not mean that we are dividing each and every asset, one by one. What we’re doing, rather, is dividing the value of your property. For example, if you have a house with equity in the amount of $100,000 and the wife has a community property pension in the amount of $100,000, then the husband can take the house in exchange for giving up any right he has to his wife’s pension. Generally, if one spouse can afford to keep an asset, then the court will not order its sale over objection.

Suze Orman’s divorce and finance advice

Some really like, and some really dislike Suze Orman, and regardless of how you feel, she speaks her mind.  She recently weighed in on divorce and finances, and for the most part she has sound advice.

One thing I think needs to be clarified is that, in today’s economy, it can become impossible for one spouse to refinance the house mortgage in their own name alone.  In a perfect world, yes you need to ensure you get your name off the debt so you’re not responsible, but if you both want to keep the house for your own reasons (for the children’s stability, for example, or to try to wait until the market recovers somewhat), then you can include a clause in your divorce decree that makes it clear that you are not responsible for the loan.  If you can, refinance, but if you can’t, it’s not the end of the world.

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.