I had the honor of being on Patti Handy's show, "Starting Over" on KHTS in Santa Clarita, California. This episode focuses on how estate planning dovetails with the issue of divorce. To learn more about Patti, visit http://www.PattiHandy.com.
Patti Handy: Hey there, and welcome to Starting Over. I am your host, Patti Handy. I'm so happy you're here. Thank you for sharing your lunch hour with me. You're listening to KHTS, your hometown station on AM 12:20, and 98.1 FM. We're also Facebook Live at KHTS, so you can send in questions if you want to. You could also download the app for free, KHTS app and listen live anywhere. The intro shared a little bit about Starting Over, but I wanted to repeat that, that the show is dedicated for those starting over after divorce or loss of a spouse. Having gone through a divorce myself, I understand the overwhelm, the feeling lost, the roller coaster that you're on. My focus is really to bring you tools, hope, inspiration, and navigate this time in your life. As a mortgage adviser, I'm going to talk about money and credit, but I'm going to also discuss very important topics such as estate planning, financial planning. We're going to have different speakers such as personal trainers, motivational speakers, nutritionists, therapists, life coaches. It just runs the gamut. Make sure you tune in second Wednesday of every month at noon, and welcome.
Rob Mansour is a dear friend of mine. He is an estate planning attorney here in Santa Clarita. I, right after my divorce, after I got my head out of the clouds, one of the first things I did was get an estate plan and living trust myself. My son was 18 months old, and I wanted to make sure that he was protected and everything was known as far as my wishes go. First, thank you for being here.
Rob Mansour: Thank you, Patti. Thanks for having me on your show.
Patti Handy: Welcome. I love that you're here.
Rob Mansour: I'm a little nervous. Is that okay?
Patti Handy: It's okay. It's all good. We're having lunch. We're just having lunch together.
Rob Mansour: Okay, very good.
Patti Handy: Just minus the salad. It's all good. Explain to us, out of the gate, what exactly is an estate plan.
Rob Mansour: Okay, I think it's a good place to start, because a lot of people heard the word estate planning, and some people think it has something to do with real estate. I'm like, "No, that's not what it is." Some people hear the word estate planning, and they hear that word, estate, and they think, "Okay, maybe I have to be really wealthy to do something like estate planning." I think it's the word estate that misleads a lot of people. They think that they have to live in a big mansion and they're like the Rockefellers. I said, "No, an estate plan is just a plan about what to do with your stuff." Whatever stuff you have, if you have $25,000 in the bank and that's all you got, that's your estate. If you have 5 million dollars in the bank, that's your estate. An estate plan is a legal tool box full of legal tools such as something you talked about just a second ago, a living trust, wills, powers of attorney, healthcare directives and healthcare documents, guardianship nominations for minor children. A lot of clients don't realize that that is what an estate plan is. It's a legal tool box full of legal tools, such as the things that I just mentioned.
Patti Handy: Yeah. That's huge. The important thing for me, too, not only was the financial piece but the medical directive. If something happened to me, who would take care of my baby? What was my wishes for that situation?
Rob Mansour: That's right. You'll notice something, a lot of what I talked about has absolutely nothing to do with wealth. It has a lot more to do with who has the legal authority to act on my behalf. That's really what this is about. It's about two things. That's what this estate plan does. Number one, who gets my stuff when I die? That's what most people think about. But the other more important thing is, who has the legal authority to act on my behalf? A lot of people think, "Oh, my spouse has that authority." No, that's not true. They might think, "My kid has that authority." No, that's not true. It's whoever has the legal documents to act. Even when I called my wife's credit card company to get information, I wanted to find out what her balance was, they wouldn't share that information with me because I did not demonstrate to them that I had the legal authority for that information despite being married. That's just the tip of iceberg.
Patti Handy: An estate plan obviously is important not just for those who are divorced, but everybody. There isn't anybody who shouldn't have one.
Rob Mansour: That's right, because there's going to come a time when you're going to need somebody to act on your behalf. You may not be able to do that, or you're in the hospital, or something like that, or after you pass away, who's going to get your stuff and how are they going to get it. Especially if you have minor children. You want to make sure that they get those things in a responsible manner, just like you were concerned about Blake about after your divorce. 18 months old, oh my goodness, you need to create a plan.
Patti Handy: Yes.
Rob Mansour: Yeah, absolutely.
Patti Handy: On that note, if somebody is going through a divorce or recent divorce, when is a good time to get this done?
Rob Mansour: Okay. Sometimes I get clients who call me literally the day after they get the divorce papers. "I want to do my estate plan." I say, "Well, there's not much we can do yet because the dust hasn't settled. We still don't know what's his, what's hers, how is the estate going to be divided, so you can't really do too much until everything has been divided. You have your column of stuff, he has his column of stuff." Then, you can say, "Okay, now that I have my stuff, my assets, now I'm going to make a plan with respect to those assets." I had a client one time, he called me and he said, "Listen, I want to move my house into a trust." I say, "Well, your wife's name is on the house. You can't just move it unilaterally." "OH, I can't do that?" "No, you can't." I said, "When the divorce is over, then let's sit down and create plan."I think that would be the when.
Patti Handy: Okay. I would imagine you would be separating, obviously through the divorce, the house, the banking, the debts, the whole...
Rob Mansour: Banking, IRA's, yeah.
Patti Handy: That leads me to the next question, how is the vesting? How should you, a medical term for that when you put your title into that trust?
Rob Mansour: How do I do it?
Patti Handy: Yeah. What's the ...
Rob Mansour: Okay, so let's say I'm John Smith, and I just got a divorce, and I have this thing now called the John Smith living trust. John Smith living trust says "Hey, I'm John Smith. This is my stuff, and this is where it goes when I die, and this is who is responsible if I can't act on my own behalf." Now, I have assets. The document itself doesn't have any magical properties to it. You actually have to go move your assets into the name of the trust. That requires assigning a new deed to your real estate, for example. Instead of the house being owned by John Smith, it's now going to say the John Smith living trust dated blah, blah, blah. You have to go to the bank. You say, "Hi, I'm John Smith. I have this living trust." They have to move the accounts from your name into the name of the trust which requires paperwork. A lot of people make this big mistake, they don't fund their trust.
Patti Handy: Funding, that was the term I was looking before.
Rob Mansour: Yes. Funding. They create this thing. It's like building a house but never moving into it.
Patti Handy: Got you.
Rob Mansour: They build the house to their specifications, all the things they want, but they never move into the house. My question to them is, "Well, what was the point of building the house?"
Patti Handy: Why do you have a trust?
Rob Mansour: Yeah, why do you have the trust if you haven't moved things into it? That requires paperwork and a little bit of leg work.
Patti Handy: The vesting on the house should be the trust, the vesting on all the assets, the checking, the savings, the IRA's, is IRA's ...
Rob Mansour: No, the IRA's, are a special animal.
Patti Handy: It's a different, okay.
Rob Mansour: That's right. I tell clients to imagine that there are two funnels. One funnel is called the living trust funnel, and some assets are going to pass by that funnel. Other assets like life insurance and IRA's, all they care about is what you put on a beneficiary form. Especially after a divorce, you want to revisit that, because what if your ex-spouse is still your primary beneficiary on a life insurance policy?
Patti Handy: Believe me, I visited that.
Rob Mansour: What if your ex-spouse is going to get your IRA? It's probably the last person you want to get your 401k.
Patti Handy: Yes.
Rob Mansour: Those assets you have to change the beneficiary. Now, the beneficiary can be your living trust. For people with minor children, I think that's a good idea, because my kids for example are 20 and 18. My life insurance policy is not payable to Alex and Veronica Mansour. Those are my kids. It's payable to the Mansour family trust because there's no way in heck I want that money to go directly to my kids at such a young age.
Patti Handy: The trust dictates when the money goes, at what age to the kids.
Rob Mansour: Exactly. Also, if you build it right, it also says when it doesn't go to the kids, so for example, what if my son is in a bad marriage? What if my daughter is in a middle of a lawsuit? What if one of my kids is disabled and shouldn't receive any money for some reason or another? There are protections that you can build into that living trust to protect your kids. Also, speaking of minor children, you may not want your ex-spouse managing the money for your minor kid. What could you do is the John Smith trust, you can say, "My brother, Jack, shall be my trustee." John's kids can get the money but his brother Jack will manage the money for the kids. Not John's ex-wife. That's especially important if your ex-spouse wasn't good at handling money or you suspect they're going to take the money and go to Vegas with it.
Patti Handy: Right, right. That's huge. You have to name who you want to manage those funds, and again, part of the trust that protects your kids.
Rob Mansour: That's right. That's exactly right. Also, don't just name one person. Name a deeper bench. Have like two or three people just in case the person you selected, exactly, can't do the job. Exactly.
Patti Handy: Something happens. Yeah. Should you ever put kids on title of anything?
Rob Mansour: I'm not a big fan of putting children on title to anything. A lot of clients, after they get a divorce or they lose a spouse or something like that, they'll start putting their children on title. There are three or four reasons why that's a bad idea. Whenever you add somebody to an asset, let's say Mary puts her son, Johnny on her house. If Johnny gets into any trouble, Johnny gets into a lawsuit, Johnny files for bankruptcy, Johnny gets a divorce, something wrong happens to Johnny, her house has a bullseye on it because she put Johnny on there. Also, if you put somebody as a co-owner with you, like on a bank account, there's nothing to prevent them from walking into the bank and just taking your money and going to Vegas with it again.
Patti Handy: Oh boy.
Rob Mansour: Also, if you have multiple kids. Let's say you have three or four kids and you decide to put Johnny on title, when you die, Johnny gets all of that. Maybe Johnny doesn't want to share with the other kids for one reason or another. I'm not a big fan of putting children on title. Now, there is one caveat. If you're nervous about stuff, put most of the stuff in your trust, and then create a very small baby account with five grand in it, or $2,500 or something like that, and put one of your kids on title to that. That way, the kid can help you right checks, can help you do this or that, has access to immediate cash. But don't put them on the larger assets. Keep all of that in your trust.
Patti Handy: Okay. That sounds good.
Rob Mansour: Does that make sense?
Patti Handy: Yeah, absolutely.
Rob Mansour: Yeah. There are other tax ramifications but it's too complicated to get into on this show.
Patti Handy: Okay. I want to revisit one thing, just to make sure I understand it. On an IRA, 401k, those things are such that the beneficiary should be the trust, not the child's name.
Rob Mansour: It depends. If you have three grown children and they all have good heads on their shoulders, and they're all in their mid 30's, and they're going fine, nobody's got any problems, name the three kids. Make life easier for everybody. But if you have minor children or if you have a child with a disability, or some reason where you might want to protect the kids, you might want to name your trust as the beneficiary. There are a lot of caveats to that, but the point is the shortest distance between two points is just naming the child. Naming the individual that you want that money to go to, but only if you think that they're going to be okay. There's not any trouble on the horizon and all the kids are doing fine. My trust is my secondary beneficiary. I have my wife first, followed by my living trust. Why my living trust? Because my kids are still kind of young. 20 and 18. I would much rather wait until they get to their mid 20's, late 20's, and then say, "You know what, I'm now going to put them as individual beneficiaries."
Life insurance is different. When you pass away, the life insurance company just writes one big lump sum check. It's not the kind of thing that gets [doled 00:12:25] out overtime like an IRA. What I do with life insurance, I just say name your trust as the beneficiary. They'll just write a big fat check to the John Smith living trust, and then the John Smith living trust will say what happens with all that money. I hope that helps a little bit.
Patti Handy: Yeah, absolutely.
Rob Mansour: Yeah. That's what I usually say.
Patti Handy: Then, the person who you've dedicated in the trust to manage those funds, would manage that life insurance money?
Rob Mansour: That's right. For example, I have a million dollar life insurance policy. I am worth more dead than I am alive, right?
Patti Handy: Yeah. You and me both.
Rob Mansour: I sleep with one eye open. Basically, that money is going to be written to the Mansour family trust when I die. Now, if my kids are there, uncle Charlie, my brother-in-law will be managing that money for my kids so that they don't have immediate access to it. That's why.
Patti Handy: Okay. That makes sense.
Rob Mansour: Yeah.
Patti Handy: Guardianship of children, that's also specified?
Rob Mansour: Oh yeah.
Patti Handy: Then, speak about that, and then also before I forget, I want to talk about the probate piece. Some of that, I know we're kind of jumping ship a little bit, but the probate piece, isn't that also why a living trust is helpful?
Rob Mansour: Yes. A living trust helps avoid probate, but let me address the issue of guardianship first. One of the things that you can do in your trust, especially if you've recently got a divorce, sometimes you may not want that ex-spouse to be the guardian over your children. I had a client one time whose husband, her ex-husband was abusive. He was verbally abusive, not physically abusive but verbal abusive. What we did is in her will, we named other people to be guardians over her children, and we also said why the husband wasn't suitable. She explained why in her will, where she addresses the guardianship, why her husband would not be the bet choice. Why is she doing that? Because at some point, a judge might be reading that information, and it's a way for her to communicate to a judge why she doesn't think her ex-husband would be suitable.
In some cases, you may not have much leeway because the judge is going to order the natural father, or the natural mom, but there may be times when that person is not available or doesn't want to be the guardian of the kids, is an absent father, an absent mother, so you should name in your documents who's going to be legally responsible for your children. Now, with respect to probate, probate is something that happens if you pass away and you've got something just sitting in your name alone, like a piece of real estate, and it's just in Patti's name. That's all, it's not in your trust, there's no joint owner, it just says Patti on it. In that case, I may have to go to court in order to get a judge to give that asset to your kids, to Blake. Why? Because I can't just walk unto the property and give it to Blake. I have to go get a judge's permission to do that.
Now, if it was in the name of your trust, I don't have to do that because your trust owns that asset. Probate only comes into play if there are assets that are sitting in your name alone, and in California, the current rule is if they exceed $150,000 in value. That's the current rule, but a lot of clients think that probate is a necessary evil, but the truth is if everything is properly titled, either by way of beneficiary or by way of your trust, you will avoid the probate system almost all the time. Which is a good thing. You want to stay out of the courts.
Patti Handy: Yeah. Absolutely. If somebody already has an estate plan, living trust, will in place, they just want somebody to take a look, make sure it's current, they did it 15 years ago, 20 years ago, and they want to just have it looked at again, will you review documents?
Rob Mansour: Yeah. I do that a lot. Clients will come with a previous estate plan, and say, "Hey, listen, first of all, what does this say? Is it any good?" Sometimes I tell the client, "This is actually very good. You don't need to do anything." But I will say, if it's been more than 10 years, at the very least, you probably want to freshen up the powers of attorney and the healthcare documents. Here's why. Even though they may be legally sufficient, and they're fine, they might be legally fine, as a practical matter, you present a very old document to a financial institution or to a doctor or a hospital, they might look at it and say, "Do you have anything newer than this? Do you have anything more recent?" It's not because of anything that you did wrong, it's just because their policy at that particular place might be, "We don't honor anything more than five years old, or more than seven years old, or more than 10 years old." You might have to go to court to get that enforced, but boy, that's a big pain.
As a practical matter, I'd say every seven years, revisit what you have, especially if it doesn't say what you want it to say anymore. You want to change guardians, you just got a divorce and you don't want your husband to have anything to do with this anymore, you want somebody else to manage the money for your child. Those are perfect examples of when you might want to do that.
Patti Handy: Yeah. Great point. If you're married, and you have this living trust in place, and you get divorced, obviously you don't want that trust to ... that's void...
Rob Mansour: That's right. You want to remake it. You want to revoke everything and start brand new.
Patti Handy: Start from scratch.
Rob Mansour: Exactly.
Patti Handy: Yeah. I could see that as being a huge piece.
Rob Mansour: That's right.
Patti Handy: Talk to us about remarriage. We don't have much more time but I know this is another probably...
Rob Mansour: You meet somebody new, right, after your divorce, right?
Patti Handy: Yeah. If you meet somebody new and you remarry, and you have blended family, second marriages. How does that play into ...
Rob Mansour: That's a very good question. Now, John Smith has his stuff, he made his own living trust, and he lives for a few more years, five years, six years, and he meets Sally, his new love. Sally maybe has children of her own. Maybe she's also divorced. Maybe Sally has her own estate plan, and maybe she has her own living trust. Sometimes, what I tell clients is, "Look, there's many ways you can go." I'm a big fan of his and hers trust, especially if people are getting married later in life. They already have their stuff, John wants to be in charge of his stuff, Sally wants to be in charge of her stuff. Sometimes what we do is we leave John's estate plan alone, but we make sure we include Sally now in some way, and then Sally sits down with me and she makes her own estate plan that includes John. That way, she's in charge of her own things. She can make changes if and when she wants to, and he can make changes if and when he wants to.
After they get married, their new marriage, let's say 10 years down the line, John and Sally may say, "You know what, this is going swimmingly. This is wonderful. We don't want to have his and hers stuff anymore, we want to have ours." In that case, we would just get rid of both of those trusts and we create the Smith family trust. A joint trust for both of them, but it's very important to address one elephant in the room, what happens when one of them dies? John has kids from a previous marriage, Sally has kids from a previous marriage, so let's say if Sally passes away, what's going to happen to her kids? Who's going to watch over those kids? Kind of like the Brady Bunch. What if Carol Brady dies? What if Mike Brady dies? We always have to talk about what happens if the first spouse dies, how are we going to take care of those children. Also, that's an example of where everybody gets along. I had a client, a couple of clients where his children did not like the new wife. They hated her. They despised her.
Patti Handy: Oh dear.
Rob Mansour: She said, "Well wait a minute, if he dies first, I don't want them just looking at me waiting for me to die. Just like, Hey, when are you going to die so we can get our stuff?" What we did, is when he died, we created a plan that says his children are going to get X, they're going to get $100,000 each, and then they're going to leave her alone. We created a plan that accounted for what happens when he dies first, take care of his kids, and now she rests easy knowing that she doesn't have to worry about those kids anymore. Or you can make a life insurance policy payable to those kids. In that way, you've taken care of them, and that way the new wife or the new husband doesn't have to worry about those kids. Blended family's absolutely a must, where you want to sit down and create a plan.
One last thing, if you meet that new spouse and you go meet the lawyer, both of you should come. The husband and the wife should come. Everything I above board, we create a plan that suits everybody's needs, because it's really hard to devise something if just one person comes to my office. I always recommend that they bring both people.
Patti Handy: That makes perfect sense. Just out of curiosity in that case, how often do you see the desire to have one trust with the blended family versus his family-her family, and keep it separate?
Rob Mansour: Well, it depends on the situation. For example, I just did one, it was his and hers estate plans. Why did I do it that way? Well, because Cathy, my client, she had a previous estate plan from before. A lot of her assets were already sitting in the name of her trust. It was going to be a real hassle to retitle all of that stuff.
Patti Handy: Sure.
Rob Mansour: What we did is we just tweaked her trust to include her new husband, and he did his own plan. Plus, they also liked the idea of having dominion over their own stuff. If he wanted to make changes, he could, he didn't need her signature and vice versa. But then I have clients who are like, "You know what, it's not going to be his and hers, it's just going to be one pot." The trust can still say what happens when one person dies and what happens when the other person dies. I would say it's about 50-50 where clients do his and hers, and the other 50%, they just decide to start over with a brand new joint estate plan.
Patti Handy: I would imagine too that if both parties have no children, it's a little simpler and that there's not much as far as protecting the kids and...
Rob Mansour: Fewer complications.
Patti Handy: Yeah, less activity going on in that.
Rob Mansour: That's right. That's right. Actually, the more details you put in the trust or the trusts, and the estate plan, the less problems you tend to have. The problems that we see a lot is where the trust is silent on a particular issue, or people got it from legal zoom or something like that. It's fine, but it doesn't say enough. It doesn't address thing specifically enough. That's where you run into problems. That's why when my clients come and visit with me, they're like, "Oh my goodness, I didn't know there was that much to talk about." I'm like, "Yeah, there's a lot to talk about."
Patti Handy: There's so much to that. We've covered a lot of great information. I need to have you back, because we need to talk about when the spouse passes away and how to deal with that, and so I will have you back.
Rob Mansour: All right. If they let me back in the building, yeah.
Patti Handy: You know what, I think you're good. There hasn't been anybody coming after us just yet.
Rob Mansour: All right, very good.
Patti Handy: Thank you. Tell us where people can reach you.
Rob Mansour: Sure. My website is the best place to find me. There's a lot of helpful videos there, et cetera. The website is mansourlaw.com. My last name, Mansour, which is M-A-N-S-O-U-R, then the word "law," .com. The phone number if people want to call is 661-414-7100.
Patti Handy: Awesome. I can attest to what an amazing individual you are. Not just brilliant attorney, but just a warm, kind human being that has the client's best interest at heart.
Rob Mansour: Thank you, Patti. You're going to make me blush. That's very kind.
Patti Handy: I'll collect my $20 later. No, honestly, I am proud to call you my friend, and I'm happy that you joined us.
Rob Mansour: Likewise, Patti. Thank you.
Patti Handy: You're listening to your home town station, KHTS, 98.1. Come back, we have a financial planner coming up in the next half hour. Stay tuned and we'll see you soon.
My thanks to Patti Handy (www.PattiHandy.com) for conducting this interview about estate planning issues after a divorce. Click above to hear the interview.
Here is a transcript of the interview:
Patti Handy: Hi, and welcome to Money Rules 101. I'm your host Patti Handy. I'm super excited today to have my good friend Rob Mansour in house. Rob is a estate planning attorney, and we're gonna talk about starting over after divorce, and specifically regarding estate planning. And I can just speak from my personal experience, when I went through my divorce, my son was 18 months old, and first and foremost, I wanted to make sure that he was protected. If, God forbid, something happened to me and I wanted to make sure that my ex had nothing, no claims to my funds, and I wanted to make sure he was protected 100%.
Rob Mansour: Right.
Patti Handy: So the plan was one of the first things I did post-divorce. So, Rob, start us off with some of the things that you, when you talk to your clients, what you share.
Rob Mansour: Well first of all, let me say I'm very happy that you're super excited, because estate planning is rarely super exciting, so it's always nice and refreshing to have somebody super excited.
Patti Handy: I'm always excited to see you, Rob.
Rob Mansour: Well, thank you. Most people are very excited to see me. But, that aside, one of the things ... I get calls all the time, clients, either they had a divorce, or they are going through a divorce. It's easier to handle the estate planning part if they're coming to me after the divorce. Because things have kind of finalized, the dust has settled. And now they kind of want to get their house in order. There's not so much I can do during the divorce because there's, California law basically puts a hold, if you will, on estate planning while you're going through a divorce. You can't make changes to wills, changes to beneficiaries, changes to executors, trustees, while your divorce is going on. So, it's better sometimes just to wait until after you're done.
So if you've had your divorce, and now you've separated from your spouse, and you have your assets, one of the first questions I talk to my clients about is, what assets do you have? So the divorce is final, okay, he has his stuff, you have your stuff. What is your stuff? What do you own? Where are your bank accounts? Do you own any real estate? Do you have any retirement accounts? Because the advice that I give the client has a lot to do with what assets they have at the end of the day.
Patti Handy: Mm-hmm (affirmative).
Rob Mansour: We might find that a simple will is good enough. Or we might say, you know what, I think a living trust would be more appropriate for you. Also, with respect to every asset, we have to look at how title is held to those assets. So, if let's say a gal named Sally comes to see me, and she says, "I just got a divorce." And then we see that her sister's on all of her accounts.
Patti Handy: Mm-hmm (affirmative).
Rob Mansour: I would tell her, "Well Sally, that means when you die, your sister gets all of those accounts." And that may not be exactly what they have in mind. Or some people will put their children on all their accounts, again, not a very wise idea. That may not be what they want to do. So we have to examine title to all the assets, and then once we've done that, then we can make recommendations to the client. If they don't have an estate plan, the client never had a will or a trust or anything like that, they really should get one. I mean you, Patti, saw the wisdom in setting yourself up and taking care of your house. Putting it into order to protect yourself and your son. Especially because you didn't want everything to be controlled by your ex-spouse.
Patti Handy: Right.
Rob Mansour: So, that's a very important reason. You want to get an estate plan in effect if you don't have one, if only to protect yourself and your children, if you have any. Also, we have to ask ourselves, is there a divorce decree? So at the very end of the divorce, there's a court order signed by a judge, and it says XYZ. So we can't always just do whatever the heck we want to do. We have to sometimes take a look at that divorce agreement, and see, make sure that whatever we are doing with your estate plan doesn't run afoul of what your divorce papers say.
Patti Handy: Mm-hmm (affirmative).
Rob Mansour: So that's something that I also consider when a client comes in. The estate plan of course, we talked about wills and living trusts, but there's other parts of it too. For example, power of attorney. Who has the legal authority to act on your behalf after your divorce? So perhaps if you already had an estate plan, maybe your ex-husband is still on those documents. Maybe your ex-husband still had the authority to make healthcare decisions for you.
Patti Handy: Mm-hmm (affirmative).
Rob Mansour: For your advanced healthcare directive. That's probably not what you want.
Patti Handy: Right. Right.
Rob Mansour: And if you have other people in mind, you really should revoke those prior documents and start new documents with the people that you want. Now you also may have some accounts, like retirement accounts, and life insurance policies, where you have what's called a beneficiary on those. And so you want to make sure you revisit all of those accounts, and make sure that you don't have your ex-spouse as the beneficiary of your life insurance policy.
Patti Handy: Yeah.
Rob Mansour: I recently had a client who passed away, and she had an IRA. And she passed away, and her husband was still the beneficiary of that. It was not exactly an IRA, but it was a retirement account through her work, and he got all the money after she died.
Patti Handy: The ex-husband?
Rob Mansour: The ex-husband.
Patti Handy: Oh, dear.
Rob Mansour: And she had wanted that to go to her children. Unfortunately-
Patti Handy: Ugh.
Rob Mansour: I mean, it wasn't a tremendous amount of money. It was about $20,000, which is a lot. But that went to her ex-spouse because she didn't bother to revisit her beneficiary designations on all of those accounts. And then of course, the other very important issue is the minor children, if there are any minor children. I had a client one time, his name was Tim, and then he says, "Listen, what if I do nothing?" I said, "Well, if you do nothing, and you stay unmarried, everything is gonna go to your child." And he's like, "Super, that's fantastic." And he started to walk out the door. And I said, "Wait a minute. How old is your kid?" He goes, "Oh, she's eight years old." I said, "Well, the life insurance isn't gonna pay $500K to an eight-year-old. They're gonna pay it to the guardian of that eight-year-old. And who is that?" He says, "Oh, that's my ex-spouse."
Patti Handy: Oh, dear.
Rob Mansour: So I said, "Okay, that's obviously not what you want, so we need to set up something so that somebody else controls the money for your child, not your ex-spouse."
So, and the last thing that you might want to do after a divorce is make sure that you have the proper guardianship nominations for your children, because you may not want your children ... especially if ... I don't know what the custody arrangement is after the divorce, but you may not want your child going to your ex-spouse for one reason or another. You may have somebody else in mind to raise your children.
Patti Handy: Mm-hmm (affirmative).
Rob Mansour: And you should put that in your will or your nomination of guardian at some point. You should make sure that you nominate who you want to care for your children, so that at least you have a voice in the matter after you've, if you should pass away.
Patti Handy: Mm-hmm (affirmative).
Rob Mansour: So those are the kinds of things that I review with a client after a divorce. Dot our i's and cross our t's.
Patti Handy: Yeah. Great advice. You know, it's so important, especially like you said, with minor kids who can't speak for themselves.
Rob Mansour: Right.
Patti Handy: It's just that they're really tiny, like two, three, four years old.
Rob Mansour: Mm-hmm (affirmative).
Patti Handy: They can't speak up. And then having that guardian in place just gives you peace of mind, knowing that it's not going to the ex, if that ex was abusive or ... you know, there was issues with drugs, alcohol, or whatever.
Rob Mansour: Yes.
Patti Handy: That's-
Rob Mansour: As a matter of fact, there's something ... we kind of call it anti-nomination. Where for example, in your nomination for guardian, you could say, "I want my sister Mary to be the guardian of my minor children. And I don't want the guardian to be my ex-spouse for the following reasons." And you can list out those reasons. He was abusive, or he was verbally abusive, or demeaning to my children. Whatever you ... he was arrested several times, whatever the case may be. You can sometimes explain why you don't want your child going to the ex-spouse in that nomination of guardian.
Patti Handy: Yeah, nice. That just gives you peace of mind as mom or dad.
Rob Mansour: Sure.
Patti Handy: I think that's great advice.
Rob Mansour: You do your best.
Patti Handy: Yeah. Great advice. Thank you, Rob. So, I know there's gonna be so much more to talk about this, and people may want to reach out to you personally. So how can they reach you?
Rob Mansour: Well, my website is always available 24/7, which is nice. 'cause I do have to sleep sometimes. But it's ... you can find that in www.MansourLaw.com. So that's my last name Mansour, spelled M-A-N-S-O-U-R, the word law, dot com. Or they can call the office at 661-414-7100.
Patti Handy: Wonderful. Thanks so much, Rob.
Rob Mansour: Thanks, Patti.
This blog post is a "guest-post" by my colleagues at the Reape-Rickett law firm. The attorneys at Reape-Rickett handle divorces, custody matters, child support issues and related family law matters in Santa Clarita, CA and surrounding communities.
What do estate planning attorneys and dissolution attorneys have in common?
The short answer is ‘more than you may think’. Consider the case of In Re Marriage of Holtemann. In this divorce case, Husband and Wife were married in 2003 and separated a short three years later. Husband had a number of assets while Wife did not have many. As many estate planners know that with considerable assets, spouses must regard considerable taxes upon death if the spouses fail to make the appropriate estate-planning decisions. These parties did just that and sought the appropriate guidance. The parties prepared a Living Trust and a Spousal Property Transmutation Agreement so as to minimize their estate tax. What this Spousal Property Transmutation document set forth was that all of Husband’s considerable separate property was transmuted to community property. Without getting into too much legal-speak, in a divorce action, when a spouse comes into a marriage with assets he/she had prior to the marriage, and does nothing to affect the title of those assets, they will remain his/her separate property upon divorce. Things purchased during the marriage will be presumed community property or owned by both spouses. Back to the Holtemann case. These parties, again to limit estate taxes, indicated in this document that all of Husband’s separate property was changed (the official word is “transmuted”) to community property.
In 2006, Wife files for divorce. After separation, realizing that in the Trust he changed all his separate property from his sole ownership to jointly with his Wife, now states that the Trust is revoked in an effort to cancel the transmutation. At their divorce trial, Wife, of course, uses the Trust to show all the property is owned 50-50 and she should be awarded her one-half. The trial court agreed with Wife and awarded her one-half of the property. Of course, Husband appealed that decision. The Court of Appeal upheld the trial court’s ruling and Wife was entitled to one-half of the property. The Appeals Court looked to whether or not there was a change or transmutation of the property from separate to community and not why the parties were interested in making the change, i.e., to save on estate taxes. The Court of Appeals stated that the evidence at the trial level was clear that Husband was fully aware of what he was doing with the property and the language used in the Separate Property Transmutation Agreement was sufficient and did change the property from separate to community, regardless of the “why” he made the change. Therefore, as the reader can see, estate planners and dissolution attorneys have more in common than one might think.
To learn more about the lawyers and staff at Santa Clarita, CA family law and divorce lawyers Reape-Rickett Law Firm, call their office at (661) 288-1000 for a consultation. The Reape-Rickett law firm serves Acton, Agua Dulce, Canyon Country, Castaic, LA, Los Angeles, Newhall, San Fernando, Saugus, Santa Clarita (SCV), Stevenson Ranch, Valencia, and greater Los Angeles County.
Divorce can be very rough on the individual and their family. If you already have an estate plan in place, it is certainly time to review it after a divorce. After all, do you really want your ex-spouse making health care decisions, handling your estate for you, or having access to your accounts?
However, if you don’t have an estate plan, it may be an excellent time to establish one after your divorce to protect yourself and your loved ones. Single people are especially vulnerable without a plan in place.
Let me tell you a story:
John came to me shortly after his divorce. He wanted to find out if doing an estate plan made sense for him. Like most people, he figured estate planning is only for rich people (which is the biggest mistake most people make – do you ever wonder how reach people stay wealthy?).
I explained to him that estate planning deals with many issues, most having nothing at all to do with the amount of wealth one has or estate tax issues. It’s about protecting oneself and one’s family using the legal tools available to all, irrespective of wealth. I asked him, “What legal documents do you have in place in the event something happened to you? How will people be able to help you?”
John then explained why he got a divorce. There were many reasons, but the main reason was that John’s ex-wife always spent all their money, just as soon as it was deposited into their bank accounts. She did not believe in saving money and spent far more than they could afford. Financial problems often lead to divorce, and John’s marriage wasn’t immune.
Then John asked me the common question: “What if I do nothing at all?”
I explained that if he did nothing, California law would dictate what happened to his estate. If he remained unmarried, his estate would end up going to his 8 year old daughter. He seemed very relieved to hear that. However, I explained that a minor child can’t own real estate, and a life insurance company certainly won’t write a check to a minor. Also, during and after the probate process, the court would insist that any inheritance going to John’s daughter be managed by her guardian.
Then I asked a question: “Who would likely be your daughter’s legal guardian if you died?”
There was a silence.
Then he said, “Oh my God…my ex-wife would control everything!” And I added, “Yes, and anything left (if anything) would go to your daughter at age 18 so her no-good boyfriend could steal the rest.” Of course, there is no boyfriend in her life yet, but some people stand in line to be a boyfriend/girlfriend when there is money involved.
Needless to say, John quickly appreciated the need to establish an estate plan to protect his daughter…to make sure her inheritance was handled properly (and out of reach from his ex-wife). By the way, this story is not intended to malign the ex-wife as the roles could easily have been reversed.
In addition, we made sure John had a solid Durable Power of Attorney and Advance Health Care Directive to further protect him and his estate.
Robert Mansour is a Wills & Trusts Attorney in the Santa Clarita area (serving Valencia, Saugus, Canyon Country, Newhall, Stevenson Ranch, Castaic, and beyond). Call today to see how an estate plan might help protect you and your loved ones after a divorce. Don't leave things to chance.