Changing retirement & insurance 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. This was a sad situation that could have been easily avoided.

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?

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.

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.

Protecting What May Be Your Most Valuable Asset

Today’s repeat guest blogger is Sarah Tolson, a Certified Financial Planner with her office in Danville. Her bio and contact information are below.

If you are young and healthy, you might think your chances of becoming disabled are fairly slim. And you wouldn’t be alone in your belief: 64% of workers believe they have only a 2% (or less) risk of suffering a disability that could sideline them for three months or longer.1

But statistics tell a different story: 43% of 40-year-olds will suffer at least one long-term disability (90 days or longer) before age 65.2 Despite this risk, 38% of working Americans say they would be able to pay their living expenses for only three months or less if their incomes were interrupted; 65% would not be able to cover expenses for one year. These findings become all the more alarming when you consider that the average long-term disability lasts for two and a half years.3

If you wouldn’t think of going without insurance coverage for your home, health, or car, it doesn’t make much sense not to protect what may be your most valuable asset: your ability to earn an income.

A Policy That Can Protect

An individual disability income insurance policy can help replace a percentage of your salary, up to the policy limits, if you should suffer an illness or injury that makes it impossible for you to continue working. The benefits can continue until you recover or for a predetermined number of years, whichever comes first. If you pay the premiums yourself, the benefits usually are not taxable. Some policies will pay if you can’t perform your current occupation, whereas others will pay only if you cannot perform any type of job.

Many workers have some type of short-term group disability coverage through their employers. Group plans rarely cover as much as the 70% to 80% of income that individual policies typically offer, and the benefits from group plans are taxable to the extent that the employer pays the premiums.

Your Future Could Be at Stake

In the absence of an adequate, long-lasting source of disability income, you could be forced to use your retirement assets to pay living expenses and medical costs. If you have to withdraw assets from a tax-deferred retirement account, the withdrawals may be subject to a 10% federal income tax penalty if you are younger than 59½ (depending on the severity of the disability), as well as ordinary income taxes. Even worse, tapping your retirement assets could interfere with progress toward your retirement goals, creating the possibility that you might not be able to attain the retirement lifestyle you envisioned.

The appropriate disability income strategy may help reduce the financial consequences if you lose your income because of an illness or injury.

1, 3) Council for Disability Awareness, 2010
2) 2010 Field Guide, National Underwriter

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

Sarah Tolson, Certified Financial Planner™ recipient, is passionate about building the next generation of her family’s legacy of personalized financial planning; and she is committed to helping professionals create wealth-building plans tailored to their age, goals, and life circumstances.
4115 Blackhawk Plaza Circle, Suite 100, Danville, CA 94506
phone: (925) 736-3024 / fax: (925) 736-3026
http://www.GirlsJustGottaHaveFunds.com

 

Why You Want to Know How Much Your Business Is Worth

Today’s repeat guest blogger is Sarah Tolson, a Certified Financial Planner with her office in Danville.  Her bio and contact information are below.

Business Valuation Can Be Valuable Even When No Sale Is Planned

If you have no plans to sell your business, an up-to-date valuation may seem like an unnecessary expense. But you might be surprised at how important the current value of your business can be to achieving your long-term goals. The current value of your business can affect how you approach everything from retirement to estate conservation and your succession strategy.

Your Retirement Lifestyle

The typical business owner has 50% to 70% of his or her net worth in the business.1 If you expect your business to help fund your retirement, a significant change in value might mean you need to adjust the amount of income you are investing for retirement. A shift in value might also affect the date at which you expect to retire, which could influence the timing of your decisions about the kinds of preparations you expect to make to get the business ready to sell or pass on.

Estate Conservation and Succession

It’s understandable if you would rather not spend too much time thinking about whether your business has lost value, but there could be an upside to knowing. If you are expecting to transfer ownership to the next generation, lower asset values may help you transfer a larger share of the business without tax consequences.

If your business has a buy-sell agreement that values the business too highly, a more reasonable valuation may help the survivors or successors take over without paying more than the business is actually worth.

If you discover that your business is responsible for more of your net worth than you realized, it could indicate that it’s time to diversify away from the business. It’s rarely a wise move to let your financial future hinge on the fate of a single asset — even if it is your own business.

Given the events of the past few years, you may be more inclined to focus on today’s problems than on what could happen years from now. But a precise valuation may provide you with valuable information that you didn’t realize you needed.

1) Financial Advisor, August 27, 2010

Sarah Tolson, Certified Financial Planner™ recipient, is passionate about building the next generation of her family’s legacy of personalized financial planning; and she is committed to helping professionals create wealth-building plans tailored to  their age, goals, and life circumstances.

Sarah joined her family’s wealth-building business to help the children of her family’s clients begin to start building their own wealth, with someone who understood their values and who would not be judgmental or lecture them like a parent.

Sarah has a Bachelor of Science in Business from the Kelley School of Business at Indiana University. She joined her family’s firm in 2006 after several years in a successful retail merchandising career with Target Corporation and Abercrombie & Fitch.

As an active member of the Junior League of the Oakland-East Bay and the Pleasanton North Rotary Club, Sarah participates in philanthropic work regularly. Sarah is on the Board of Directors for the Financial Women’s Association of San Francisco and helps to organize events especially for members who live in the East Bay. She is also the Vice President for the Founder’s of Success chapter of Business Network International (BNI) and a member of e-Women Network.

In addition to financial consulting, Sarah is an entertaining and captivating public speaker; and she is currently writing a book about financial planning for women with young families. In her spare time, Sarah enjoys playing tennis, cooking, and traveling.

4115 Blackhawk Plaza Circle, Suite 100, Danville, CA 94506

phone:                         (925) 736-3024             / fax: (925) 736-3026

www.GirlsJustGottaHaveFunds.com

 

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

Sarah Tolson is a registered representative of and offers securities, investment advisory, and financial planning services through MML Investors Services, Inc. Member SIPC. (2121 N. California Blvd. #395, Walnut Creek, CA 94596 (925) 979-2300). CA Insurance License #OF43069.

 

Guest Blog Hot topic: Inflation gets Personal

Today’s guest blogger is Sarah Tolson, a Certified Financial Planner with her office in Danville.  Her bio and contact information are below.

Christina’s note:  this is a really important issue, because we need to prepare for retirement and our elder years in ALL ways, and not just with our estate plan.  Planning financially is critical, especially these days where we are living longer and longer, so we need more resources for a longer time.

Inflation is defined as the long-term, sustained rise in the general price level of goods and services. The most popular measure of inflation is the Consumer Price Index.

The CPI, calculated monthly by the Bureau of Labor Statistics, tracks prices for a basket of commonly used goods and services (such as food, clothing, housing, and medical care) to measure inflation at the consumer level. In 2009 the inflation rate was 2.72%, but over the past 30 years inflation has averaged 3.51% annually.1

The CPI attempts to measure the rate of inflation experienced by the average American, but this figure may not be entirely applicable to your situation. For example, depending on your lifestyle and where you live, your costs for housing, food, and medical care may vary significantly from the national averages.

Because the CPI may have only limited usefulness when trying to measure how inflation affects your personal finances, the accompanying worksheet can help estimate your personal inflation rate. This information may help you better understand how inflation could affect your financial future, especially retirement.

1) Thomson Reuters, 2010 (CPI for the periods 12/31/2008 to 12/31/2009 and 12/31/1979 to 12/31/2009)

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2010 Emerald.

Sarah Tolson, Certified Financial Planner™ recipient, is passionate about building the next generation of her family’s legacy of personalized financial planning; and she is committed to helping professionals create wealth-building plans tailored to  their age, goals, and life circumstances.

Sarah joined her family’s wealth-building business to help the children of her family’s clients begin to start building their own wealth, with someone who understood their values and who would not be judgmental or lecture them like a parent.

Sarah has a Bachelor of Science in Business from the Kelley School of Business at Indiana University. She joined her family’s firm in 2006 after several years in a successful retail merchandising career with Target Corporation and Abercrombie & Fitch.

As an active member of the Junior League of the Oakland-East Bay and the Pleasanton North Rotary Club, Sarah participates in philanthropic work regularly. Sarah is on the Board of Directors for the Financial Women’s Association of San Francisco and helps to organize events especially for members who live in the East Bay. She is also the Vice President for the Founder’s of Success chapter of Business Network International (BNI) and a member of e-Women Network.

In addition to financial consulting, Sarah is an entertaining and captivating public speaker; and she is currently writing a book about financial planning for women with young families. In her spare time, Sarah enjoys playing tennis, cooking, and traveling.

4115 Blackhawk Plaza Circle, Suite 100, Danville, CA 94506

phone: (925) 736-3024 / fax: (925) 736-3026

www.GirlsJustGottaHaveFunds.com