Estate Planning After Divorce

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.