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What Happens to Your Estate if You Die Before Your Divorce is Finalized?

The untimely death of chef and actor Anthony Bourdain has brought to national attention the potential ramifications of a person’s death during a divorce proceeding. In the same vein, it has highlighted the importance of understanding what would happen to your estate if you were to die during the pendency of your dissolution without having made any changes to your estate plan.

As occurred with Mr. Bourdain’s untimely death, he had been separated from his wife of 20 years for a year and a half. Though the pending “divorce” was made very public, it is unknown whether any divorce filing actually occurred,

What if does indeed happen if you have not taken steps in expectation of a permanent separation (indeed some are more permanent than others)? The broad answer to this complicated issue depends on whether your passing occurs before or after entry of judgment terminating your marital status. This discussion describes what occurs under California Probate and Family Law. The rules for these scenarios may be different in other states.

Death Before Entry of Judgment Terminating Marital Status

If you should die before entry of a status-only judgment, the Family Law Court would lose jurisdiction over all issues, except those already adjudicated. In California, this is called Abatement, and it happens automatically in this situation. Under these circumstances, your share of the community property and all of your separate property would pass as if the Divorce had never been filed! This is true, regardless of who originally filed, how long the divorce went on, how long the period of separation, or how hostile the parties were to each other during the process. It is also true regardless of cohabitation with a new significant other, regardless of the length of that cohabitation.

Therefore, your assets would pass to the beneficiaries of your current estate plan, which is usually your surviving spouse. If you do not have an estate plan, your estate, if over $150,000.00, would pass through probate, and your spouse would potentially receive all of the community property assets and a share of the separate property. Any non-probate assets, such as retirement assets and life insurance plans, would pass to your designated beneficiaries, again, normally your estranged spouse.

Death After Judgment Terminating Marital Status

If you should die after a status-only judgment (a provision of California law that allows the divorce to occur before, or separate from, the resolution of the other issues) that expressly reserves jurisdiction over the remaining issues in the case, the Family Law Court would retain jurisdiction and the property division would take place there. The personal representative of your estate would be substituted in your place in the divorce for this purpose, and the Family Law Court would be able to decide the outstanding issues in the case. It is worth noting, that the court’s jurisdiction over custody, child support, and spousal support would terminate automatically upon your death in the vast majority of cases.

Death after a status-only judgment also has a very different impact on how your estate would be distributed. A judgment of dissolution automatically terminates non-probate transfers between former spouses, including wills, trusts, and beneficiary rights under retirement plans. It also terminates the right of survivorship interest in joint tenancies and community property with right of survivorship. Unless the respective wills provide otherwise, the judgment also revokes all testamentary transfers between former spouses and any provision in a will nominating the former spouse as trustee, conservator or agent. However, a judgment of dissolution does not terminate the surviving spouse’s rights as a designated beneficiary under the life insurance policy. While the ability to change a beneficiary of a retirement plan or life insurance policy may remain during a divorce, California law prohibits such a change after the filing or service of Divorce papers.

One issue that everyone should consider with an impending divorce is that if you do not sign documents specifically stating otherwise, your estranged spouse will continue to hold the power, upon your incapacity, to make medical decisions on your behalf and, like in the case of Anthony Bourdain, will be the person to make all decisions regarding the disposition of your remains.

While no-one anticipates their death, the best course of action, always, is to prepare for that eventuality with an updated, current estate plan, which takes into consideration all aspects of your life, including an impending divorce. Sometimes doing nothing is indeed a conscious choice; by way of illustration a person with knowledge of a terminal illness also going through a divorce who chooses to maintain or change his/her estate plan. Sometimes it’s simply doing nothing.

Obviously we recommend that you always make that conscious choice knowing all of the consequences of that choice.

7 Ways Estate Plans Fail

Failing to plan is planning to fail. But just having an Estate Plan isn't enough.

Estate plans have to be regularly updated to account for major changes, such as marriage or divorce, the birth of a child, acquisition or divestiture of property, or changes to the law itself.

Here are some reasons that we've seen Estate Plans fail (and helped clients to recover from those failed plans):

1. NO HEALTHCARE PLAN

Do you have religious beliefs with regards to health care? Have you made a legally enforceable plan, or will you be at the mercy of others? Is there one person in your family that you would trust more than the others to make such decisions? (And if that person isn't available, is there a second person?)

2. IGNORING FAMILY DYNAMICS

No matter how “Leave it to Beaver/Brady Bunch” your family is, Trust Administration tends to bring out the worst in family dynamics, especially where multiple people share authority (sibling co-trustees).

3. NO PET PLAN

Pets are often closer to us than most of our family, yet many fail to plan for them. What will happen to them when you are not around? Did you even know that a pet trust is an option?

4. NEW OR VACATION HOMES

If you fail to properly fund, update, and maintain your trust, you will end up in probate, which defeats one of the primary reasons for creating a trust in the first place. Major financial transactions, such as purchasing real estate, necessitate a revision.

5. MISSED CHANGED LAW

Tax and probate laws change. If your plan is out of date it could cost you dearly in taxes or require your family to deal with costly probate proceedings.

6. MISSED LIFE CYCLE EVENTS

Marriage, Birth, Death, Divorce. Your trust is a living document. It is meant to grow with you. To most effectively carry out your wishes, it must be current.

7. OUT-OF-DATE ACCOUNTS

Even if you update your trust, you may still need to update your external financial accounts to account for changes in beneficiaries due to life cycle events. Where should proceeds from your life insurance, retirement, and other accounts go?

If you have an existing estate plan, whether we drafted it or not, bring it by and our Corona estate planning attorney will review it to ensure that it meets your needs and complies with current laws.

The 9 Essential Steps to Estate Planning

While most people are aware that an estate plan is something they should have, many believe that simply creating a will or trust is all they need to secure their future. While these documents are indeed important, they are not catch-all solutions to all of the potential issues that can arise in the event of your incapacity or death. To ensure your future and family are protected, be sure to consider the following checklist when creating your estate plan.

  1. Draft a will: The backbone of your estate plan is your last will and testament. This document will allow you to provide instructions to your family on how you want your property to be distributed in the event of your death, as well as name beneficiaries and guardians to care for your minor children in your absence.
  2. Create a trust: Holding your assets in a living trust will allow you to ensure they are smoothly transferred to your chosen beneficiaries at the time of your passing rather than being collected and distributed through probate, a notoriously expensive and frustrating process. Living trusts can be used to transfer real estate, savings accounts, mutual funds, and certain other investments to your beneficiaries with ease.
  3. Create health care directivesAdvanced health care directives such as a “living will” allow you to provide instructions to medical personnel regarding the treatment you would like to receive in the event of your incapacity, such as whether or not you want to be put on life support.
  4. Create a financial power of attorney: Similar to a power of attorney for health care, a durable power of attorney for finances allows you to grant someone the power to handle your financial and property matters if you should become incapacitated.
  5. Protect your children’s inheritance: If you have minor children, you should name a trusted adult who will manage any property or money you leave to them until they are of age. This person may be the same as the guardian you have designated in your will.
  6. File beneficiary documents: Bank accounts, retirement plans, stocks, bonds, and brokerage accounts can be made to immediately transfer to a designated beneficiary and skip the probate process in the event of your death by filing beneficiary forms with their respective managing institutions.
  7. Consider purchasing life insurance: There is a possibility that you may owe significant debts or estate taxes when you pass away. If you have young children or own a home, purchasing a life insurance policy may be wise to protect them against these expenses.
  8. Make funeral arrangement: Document your wishes regarding organ and body donation as well as whether you want your body to be buried or cremated. Likewise, create a payable on death bank account with funds to be used to cover your funeral and burial expenses.
  9. Establish a business succession plan: If you own a business, be sure to consider its future in your absence. Creating a thorough succession plan or buyout agreement can help ensure control of your business is transferred to the appropriate parties in the event of your passing.

While nobody ever wants to entertain the thought of their own passing, it is an inevitability which must be planned for ahead of time. At Holstrom, Block & Parke, APLC, our Southern California estate and probate lawyers can provide the steadfast guidance you need to create a comprehensive estate plan with ease. From creating wills and trusts to establishing guardianships and more, we have what it takes to help you achieve peace of mind.

Call (855) 747-6225 or fill out an online form today to schedule your free phone consultation.

Dying Before the Divorce is Final

The purpose of this week’s article is to reveal the potential problems that can arise, without the proper planning, when one spouse dies during the divorce process. Yes, death is a difficult topic to address, especially when coupled with divorce. But, the hard truth is that ignoring it does not make it go away. In fact, it’s likely that so many of this article’s readers are often confronted with the following recurring, nagging thought: “Tomorrow, yes tomorrow, I’ll put my will together.” Sadly, many people never get around to having their will drafted. And, as a result, the distribution of their estate may be averse to their unwritten wishes. In simpler words: Your coin collection, 69’ Camaro, and 5 acres of land in Arizona may not go to your son. In fact, if you are in the middle of a divorce, and you die without a will reflecting your current wishes, your soon-to-be ex-spouse could likely acquire the gifts you wanted to give to others.

It’s important to look at a few things here to set the groundwork. First, generally, a divorce in California takes six months and day for the couple to be “legally” divorced. So, after one spouse files a petition with the court to initiate the divorce, the spouses are now involved in a “dissolution proceeding.” This means that during these six months, and very often longer, the spouses are seeking assistance from the court. This assistance includes such things as temporary spousal support payments, temporary child support payments, and even requesting that the other spouse pay for attorney fees. All these mini-trials along the way occur before the divorce becomes final.

So, the salient question is—“What happens if I die after the divorce proceeding has begun but before the divorce is final?” Ready for this? Generally, it’s the same as dying like you are still happily married. This truth should be a great motivator for people to confront the reality of death and the increased hardship it can cause during divorce without the proper planning.

First, if you don’t have a will, or you had your will drafted before the divorce proceeding, visiting an attorney’s office to help you draft a new will is an important step to help ensure that your property, like your 69’ Camaro that you purchased before the marriage, will be given to your brother, not your soon-to-be ex-spouse.

Next, if you and your soon-to-be ex-spouse own a home together, it is likely that you and your spouse took title to the home as either community property with right of survivorship or as joint tenants. If so, it’s important to know the effects of holding title like this. Generally, and to keep this simple, it’s easy if you picture ownership as each spouse owning his/her own 50% of the house. And, if the spouses hold title in one of the two forms mentioned above, then when one spouse dies, the other spouse will take the other half of the house, thus becoming 100% owner. (Of course, there are a few papers to file with the court, but these filings are a topic for another article).

So, if you die before the divorce is final, generally, (without discussing the complexity of bifurcation issues), your soon-to-be ex-spouse may take your 50% of the home. Go figure. Usually not what people expect when seeking a divorce. So, it’s crucial to discuss with your attorney the possibility of changing your 50% interest in the home to tenants in common, which is another way to hold title to a home. This could prevent your soon-to-be ex-spouse from getting your 50% interest in the home as a result of your death.

In short, working with your divorce attorney as well as an estate planning attorney can protect many of your interests during the divorce. And, because these issues are complex, your attorney can help provide the proper guidance, like, in addition to helping you draft a new will, counsel you about how to deal with your 401(k) and IRA beneficiaries during the divorce proceedings. To proceed without an attorney in these complex areas can result in troublesome situations to say the least. So, during this stressful time of divorce, thinking about death as well may be the last thing you want to add. But, before you get too deep into this alone, please know that an experienced family law attorney, especially one whose firm also practices estate planning, is a phone call away to help guide you through this difficult time of dissolving the marriage.

What Are Advance Directives?

Some decisions are best not left until the end of life. One of these is to put safeguards in place regarding medical treatments you wish to receive or not receive in the event of serious injury or illness. Advance healthcare directives are the best way to make sure that your health care wishes are known and considered if for any reason you are unable to speak for yourself.

At Holstrom, Block & Parke, we draft advance healthcare directives for families and individuals in Southern California. These legal instruments, along with the durable power of attorney, are essential parts of any good estate plan; they are also very affordable. In other words, there is no good reason not to have them.

For a free phone consultation — call any of our three Southern California office locations directly or schedule an appointment by contacting us online.

Avoid Mistakes by Working With Our Experienced Estate Planning Team

California law allows you to do either, or both, of the following:

  • Appoint an Attorney-in-Fact – If you are unable to make your own health care decisions, then the person you have appointed as you attorney-in-fact will be your health care agent and have the legal authority to make your medical care decisions.
  • Fill Out an Advance Health Care Directive Form – This allows you to write down, in detail, your healthcare wishes. For example, if you are terminally ill and do not wish to receive treatments that will prolong the dying process, you can create an advance directive, and your appointed agent and doctor would be legally obligated to follow your instructions.

To learn more about advance directives or about any of the other estate planning services our lawyers provide — call any one of our office locations directly or contact us online.

Free Telephone Consultations- (855) 747-6225 - Major Credit Cards Accepted

Potential Pitfalls of Holding Title in Joint Tenancy

We have a lot of clients who ask us “Why don’t I just put my children on my home/bank account as a joint tenant to avoid probate?” While this method may, in fact, avoid the necessity of probate, it just might have some unintended consequences that you may not have considered.

Inability to control your assets

When you add a child or another person to your bank account or home, you make them a partial owner of that property. This ownership gives them control over your home and if you decide to sell or refinance your home, that child will have to consent to and sign on the sales documents. If they cannot or will not consent, then you can find yourself in an unintended legal battle with your child to allow the sale or refinancing of the property. Similarly, placing a child on your bank account gives them access to the account and the ability to “borrow” the money in your account without your permission, prior knowledge, or consent. While most of us would like to believe that our children would never withdraw money without consulting us first and would always abide by our wishes when it comes to the management of our property, unfortunately, family circumstances change and holding title in joint tenancy with a child may open you up to these problems.

Gift Taxes

When you add your child to your home as a joint tenant or add them to your bank account, you are, according to the IRS, making a potentially taxable gift to that child. Currently, in 2015, the IRS allows a person to make an annual gift of $14,000 to any person tax free. However, if the value of your gift is greater than $14,000 per year, per person, which would include almost all transfers of real property, then the gift tax provisions of the Internal Revenue Code are triggered, a gift tax return will need to be filed and gift taxes could be incurred.

Debts and Lawsuits

If your child finds himself owing debts to creditors or the subject of a lawsuit due to an accident or other event, those creditors may be able to attach your home in order to pay those debts or judgments and can potentially force the sale of your home to pay off your child’s debts.

Divorce

Transferring your home to a married child may, if your child makes any contribution of community property funds to the mortgage, upkeep or property taxes on that home, give your child’s spouse a community property interest in the home. This community property interest would have to be resolved through a buy-out or division of property in family court in the event your child divorces.

While the establishment of a joint tenancy may be easy and quick, it may not be the best way to avoid probate of your assets. A better way to avoid probate is through the establishment of a revocable living trust. A revocable living trust allows you to maintain control over your assets during your life, avoids gift taxes, attacks by children’s creditors, and ensures that your property passes in a timely manner to your child upon your death.

In order to make an informed decision regarding the transfer of your assets either during your life or upon your death, it is important to discuss your options and the potential consequences of each with an experienced estate planning attorney before making such a transfer.

About Dayn Holstrom

Dayn Holstrom is a hard working, compassionate problem solver who welcomes the opportunity to serve you in any way he can. His maximum availability to your questions and concerns begins with your free initial consultation. He is well-seasoned in all matters related to family law and a skilled negotiator and litigator.

What are the Steps for Estate Planning?

Estate planning can be an uncomfortable topic to address; however, it should not be ignored.

Every adult should have an estate plan. Whether your estate planning needs are relatively simple or extremely complex, you need a plan that is customized to your assets, family structure and your specific goals.

A properly created estate plan is necessary to ensure proper growth of your assets throughout your life, execution of your wishes in times of illness, and distribution of your estate after your passing.

A good estate plan details how to handle your investments, insurance, retirement, disability, and other assets while you are alive and after your death. It can bring peace of mind to your family and loved ones, and help keep you on track to reach your financial life goals.

There are twelve points to keep in mind while estate planning:

  1. Make a will – State who you want to inherit your property. If you have children – in the event something happens to you – who will be your children’s guardian.
  2. Consider a trust – No hassles in probate court for your beneficiaries.
  3. Health care directives – If you become unable to make your own decisions regarding your health, it is important to have someone to do so for you. These directives include a living will and a power of attorney for health care.
  4. Financial power of attorney – If you become incapacitated and unable to handle your own affairs, this person can handle all financial transactions for you.
  5. Your children – It is important to name an adult who can manage any money and/or property left as an inheritance for your minor children.
  6. File beneficiary forms – Name a beneficiary for your bank accounts and retirement plans. This process makes accounts automatically payable on death to your beneficiary.
  7. Life insurance – Something to consider when you have minor children, own a home and have significant debts that need to be paid.
  8. Final arrangements – Inform your family of your wishes regarding the disposition of your body, stating whether you want a burial or cremation. Do you want to donate body parts?
  9. Funeral expenses – Set up account to pay for funeral expenses.
  10. Estate taxes – The federal government imposes an estate tax upon your death, but only if your taxable estate is worth more than $5 million dollars.
  11. Your business – It is important to have a succession plan if you are the sole owner of a business.
  12. Storing your documents – Store important financial documents safely and securely for your attorney-in-fact and/or executor.

With guidance from an attorney who has an advanced understanding of estate law, you will be able to protect wealth, avoid probate, plan for incapacity, and enjoy peace of mind that your affairs are in order.

Contact the Family Law offices of Holstrom, Block & Parke – serving the San Bernardino, Riverside, and Orange County areas.

Estate Planning- Don't Forget Your Puppy!

The number of households in America owning pets is at a record high – 68 percent. Many people think of their pets as family members and want to make sure they are well provided for should something happen to them.

More and more people are making provisions in their wills to provide for these animals after they are gone. In order to ensure that your pet is cared for as you intend, it’s important to set up a pet trust – an arrangement that most states permit. An attorney experienced in probate and estate planning litigation can help you ensure that your pet is protected and cared for after your gone.

While some people leave thousands of dollars for the care of a pet, most pet owners allocate only enough to cover necessities like food and veterinary care. Did you know that from 2010 to 2012, the percentage of dog owners making such arrangements rose from 5% to 9%?

Recognizing the desire of Californians to have a means to care for their companion animals after death, California legislature enacted Probate Code Section 15212, the Pet Trust Law. According to the law, “A person can create a trust for the care of a designated domestic or pet animal for the life of the animal. The duration will only be for the life of the pet, even if the trust instrument contemplates a longer duration.”

In a properly drafted Pet Trust a pet owner can:

  • Name the pet(s) as the beneficiary of a Will or Trust
  • Appoint a caretaker for the pet and a trustee who will manage the money for the pet
  • Appoint someone to enforce the trust to ensure that the trust’s terms are carried out as the owner desired

The trustee pays the pet’s bills and oversees the performance of its caretaker; however, trustees can double as caretakers. Be sure those you appoint want to perform their duties and name a successor just in case.

Pet trusts can take effect either after you die or while you’re alive. The latter provides for care of the pet in the event you suffer an accident or illness that leaves you unable to take care of your animal.

When you can no longer take care of your pet for any reason during your life or after your death, promises by family or friends may be forgotten or broken. It is truly important to create a legally enforceable plan to protect your beloved pet.

If you have questions regarding a Pet Trust or any other type of Estate Planning, contact the Family Law offices of Holstrom, Block & Parke for the answers and options you need.

We have offices in Riverside, San Bernardino, and Orange Counties for your convenience.

About Dayn Holstrom

Dayn Holstrom is a hard working, compassionate problem solver who welcomes the opportunity to serve you in any way he can. His maximum availability to your questions and concerns begins with your free initial consultation. He is well-seasoned in all matters related to family law and a skilled negotiator and litigator.

Don't Leave Your Estate In California's Hands

Every adult should have an estate plan. Whether your planning needs are simple or extremely complex, you need a plan that is customized to your assets, your family structure and your goals.

Whether you choose to have a Will or a Living Trust, both provide for the distribution of your estate upon your death. Deciding which fits your needs depends on your specific circumstances.

A Will is a legal document that allows you to choose your beneficiaries and leave them specific items from your estate. You will need to designate an executor to carry out your wishes. In addition, it gives you the chance to nominate a guardian if you have minor children. It is subject to probate and comes into effect upon your death.

As for costs to prepare, a Will costs less than a Trust; however, costs to probate a Will can be substantial.

Even though a Will comes into play upon your death, a Living Trust can start benefiting you while you are still alive. It allows you to transfer substantially all of your property into your Trust during your lifetime and it is revocable, which means you can make changes. It will be used to manage your property before and after your death, as well as provide how your assets will be distributed after your death. If you become disabled or incapacitated, the Trust is in place to manage your financial affairs. A great benefit is that it is not subject to probate and all provisions will remain private.

As for costs to prepare, fund and manage, a Living Trust costs more than a Will; however, it avoids probate costs if all assets were held by the Trust.

If you die without a Will or Living Trust, your estate will be handled and your assets distributed by the court – probably to your spouse or closest heirs. This may or may not be what you wanted.

Estate planning involves difficult decisions about your personal matters. It demands individualized solutions for your objectives.

Whether you’re just beginning the estate planning process, or you need to update an existing plan, contact the Orange County Family Law offices of Holstrom, Block & Parke because we take pride in providing experienced counsel with excellent service in determining the right estate planning tools for your family.

About Dayn Holstrom

Dayn Holstrom is a hard working, compassionate problem solver who welcomes the opportunity to serve you in any way he can. His maximum availability to your questions and concerns begins with your free initial consultation. He is well-seasoned in all matters related to family law and a skilled negotiator and litigator.

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