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WHAT DO YOU MEAN THE HOUSE IS NO LONGER MINE?
THE DIVORCE DILEMMA: LOSING THE HOUSE YOU PURCHASED BEFORE MARRIAGE
Written by Scott Feig, Esq.
What do you mean the house is no longer mine? I purchased it before I married her. And all the mortgage payments were made from my salary while she stayed home with the children. How can this be?!
This exclamation is often heard in the halls of the attorney’s office. In fact, all too often a spouse, to his or her dismay, learns that the house that he/she purchased before the marriage is now partially his/her soon-to-be ex-spouse’s upon the dissolution of the marriage. The misconception that so many people share is that the house they purchased before the marriage is 100% percent their house upon divorce. But, in California, this may not necessarily be true. And, for many people, this is a tough pill to swallow.
So, the best place to start is to understand that California is what we call a community property state. In fact, California is 1 of only 9 community property states. To keep it simple, without discussing any of the exceptions, generally, community property is all property, such as homes, land, cars, and personal belongings acquired by you or your spouse during the marriage. Note the operative term here—during. Generally, and to keep this very simple, community property is often split up between the spouses at divorce.
Thus, the flip side of this is to understand the other type of property—separate property. You can see where this is going. Generally, separate property is all the property you acquire before the marriage. Again, note the operative term—before. Generally, and to keep it simple, people often keep their separate property at divorce.
So, with this understanding, it makes sense if you are exclaiming: “My house that I purchased before marriage is mine, right?! To your dismay, possibly not. Up until the date of marriage, the house was your separate property. But let’s look closely at the mortgage payments. If you paid the mortgage from your salary, note that California considers your salary community property, absent an agreement to the contrary, because your effort to earn it is a community effort, even when the other spouse stayed home with the children. Again, this may be a tough pill to swallow.
Thus, during the marriage, when you paid the mortgage on “your” house, the community began to earn a percentage in the home. Some of it depends on how much you paid down the mortgage during the marriage. The community may have a 10%, 20%, 30% or even much more interest. And, remember what was said above, generally community property is divided at divorce. So, at divorce, you may find yourself having to split part of the value of “your” house with your ex-spouse.
Please note that the above information was kept in simplest form to help give you a primer of a situation that surprises many people at divorce. As many areas of law, the complexity is understood and handled well by an attorney. Thus, it’s helpful to know that an experienced attorney is a phone call, or email, away to help provide guidance both before the marriage and at the difficult time of dissolving the marriage.
WILLS AND TRUSTS 101—Part 1 Of 2
Written by Scott Feig, Esq.
Very often we hear these terms used together—Wills and Trusts. However, they are not the same thing and, in many instances, serve different functions. It’s likely that many of us have seen those infamous scenes on T.V. programs, or movies, where the lawyer reads the Last Will and Testament of the deceased uncle to the surviving members of the family—each member on the edge of his/her seat wondering whether they were left the uncle’s millions. And, as for a trust, it’s likely that many of us think of wealthy adult children receiving money from a trust—often called trust babies. But, both of these images limit really how important it is for the every-day person to have some type of will or trust in place.
It is likely that you may be reading this because you, like so many of us, know that having some type of document directing how our assets are to be given away at death, as well as who will take care of our children at our death, is crucial. And, knowing we have these documents in place helps us sleep better at night. To this end, this week, which is Part 1 of 2, we will start with understanding will basics.
What’s probably the most important issue for many of us is that a well-drafted will tells our survivors who will be the guardian of our children. For example, if a single person with children dies without a will, his/her survivors must file papers with the court to determine who will be the guardian of the surviving children. This can be a long and expensive process and may not necessarily carry out the deceased person’s unwritten wishes. A well-drafted will is analogous to the adage—an ounce of prevention is worth a pound of cure.
Please note that it cannot be stressed enough how important it is to seek guidance from an attorney regarding will formation. In fact, a well-drafted will distributes our property to the survivors we choose—like making sure your ‘69 Camaro goes to your brother, your coin collection goes to your son, and your ‘75 Thurman Munson baseball card goes to your best friend from childhood. However, without a will, it is unlikely that the ‘gifts’ will be made. In fact, in California, if you die without a will, then State law, not you, chooses how all of your property will be given away at your death. For example, if a married person, with no children, but surviving parents, dies without a will, then half of his/her property will go to his surviving wife, and the other half will go to his surviving parents. That’s it. So the car he wanted to give to his brother, and the baseball card collection he wanted to give to his best friend, may never happen.
So, why an attorney? And not a pre-printed form from a stationary store or an online form from a website that advertises wills? Like all areas of law, there are many concerns involving technicalities being carried out correctly so the will is valid when a person dies. An invalid will is the same as dying without a will. And, at times, portions of a will may be invalid without the proper legal guidance. For example, let’s look at a common scenario: A person has a valid will drafted where, among other things, leaves his expensive coin collection to his oldest brother. A few years later, he and his oldest brother have a falling out. So, this person takes a pen and crosses out his oldest brother’s name in his will and writes in his youngest brother’s name—believing that he cancelled the ‘gift’ to his oldest brother and made a ‘gift’ of this coin collection to his youngest brother. Are you ready for this? Neither the oldest brother nor the youngest brother gets the coin collection via the will. The law regarding crossing out on a will is complicated. And, often, when a person takes his/her own pen to a drafted will, problems arise. Thus, attorney guidance regarding will drafting, and even changes to the will, is highly recommended. In case you are curious, the coin collection would be distributed as if the person died without a will. So, if the man is survived by parents only, then the entire coin collection will go to his parents. This is quite a dilemma now for the parents if they have to choose to whom the coin collection should be given.
Please note that the above information was kept in simplest form to help give you a primer of a situation that is important to many people’s piece of mind. As many areas of law, the complexity is understood and handled well by an attorney. Thus, it’s helpful to know that an experienced attorney is a phone call, or email, away to help provide guidance.
WILLS AND TRUSTS 101—Part 2 of 2: Estate Planning Primer
Written by Scott Feig, Esq.
This week, we start off addressing the need of the every-day person to set up an estate plan. It’s likely that many readers shy away at this idea, especially when reading that amorphous word—“estate.” And, it’s also as likely that many of us think that an estate plan is reserved for those who own multiple homes, a boat, numerous fancy vehicles, and loads of cash and jewelry stored away in some safe deposit box. But, that’s not the case.
Ask yourself, do you own a home (or pay a mortgage, which is likely the more accurate question)? If so, you have an estate. Do you own a car? If so, then this too is part of your estate. How about jewelry? A guitar? Tools? Something you can fit in a box? I’m sure you see where this is going. Any real property (which is a fancy way of saying your home or land) and any personal property (which is all your other property) is part of your estate.
So, why an estate plan? Let’s be real. Most of us know what a will is, which was addressed in Part I of this series of articles. And, whether you read the article or not, it is likely that we are familiar with the purpose of a will, which is to make sure our property goes to the specific people we name in our will. Well, that property you list in your will is your estate. It’s that simple.
But, sometimes, writing a will is not enough of an estate plan. Don’t worry if that’s all you’ve set up. If so, you are probably in a better position than most people, who delay setting up any type of plan. But, there is a more complete estate plan for the every-day person, which has four parts: (1) a revocable trust; (2) a durable power of attorney; (3) a healthcare directive; and (4) a pour-over will. This may seem like a lot to swallow, but delaying such an estate plan flies in the face of the adage: an ounce of prevention is worth a pound of cure.
So, why this comprehensive four-part estate plan? To keep this very simple, and to not stray from this article being a primer, such an estate plan functions at a person’s death as well as during a persons’ life. A will, however, functions only at a person’s death.
The following may help: A will’s function is to make sure property of a deceased person goes to the person identified in the will. Such as when a person leaves his ‘69 Camaro to his nephew. But what if the nephew is 11 years old? Is he really ready for the ‘69 Camaro? This is where the revocable trust steps in. You can make sure that the ‘69 Camaro is taken care of until your nephew turns 21, when he can handle such a car. In your revocable trust, you appoint a trustee (some you trust, makes sense,right?) to watch over the car when you die and then give it to your nephew when he turns 21, or any other age you choose. A trust is a more effective way to carry out this plan.
As for the durable power of attorney, as well as the healthcare directive, these two parts of the four-part estate plan provide the assurance that if you become incapacitated before your death, someone that you have chosen, while you were alive and lucid, will take care of your finances, property, and make health care decisions that you wish to be carried out. Again, you choose someone whom you trust.
Although a more detailed explanation will be reserved for a future article, please know that the above information was kept in simplest form to serve as a primer to let you know that you likely have an estate. And, like many of us, planning for such things in the future, which will likely benefit others in our life, helps us sleep better at night. As many areas of law, the complexity is understood and handled well by an attorney. Thus, it’s helpful to know that an experienced estate planning attorney is a phone call, or email, away to help provide the necessary guidance.
DYING BEFORE THE DIVORCE IS FINAL
(Facing the morbid, but hard truth)
Written by Scott Feig, Esq.
The purpose of this week’s article is to reveal the potential problems that can arise 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? 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 yourwill drafted before the divorce proceeding, visiting an attorney’s office to help you draft a new will is an important step to help assure 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 will 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 and an estate planning attorney as well 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 and estate planning attorney are a phone call away to help guide you through this difficult time of dissolving the marriage.