Divorce has become a reality for many couples, and for most, the details of dividing property, developing a parenting planand helping their kids adjust to what will be a new family situation are consuming. There are often additional challenges, including selling the family home, packing, moving to a new neighborhood and enrolling in a new school. With these kinds of pressures, it’s not surprising that people aren’t thinking about their Living Trusts and other estate-planning documents at times like this. But failing to update these documents to reflect the changes in your life can have significant long-term consequences.
California: A community property state
According to California’s community property law, upon divorce, each party is entitled to half of all property accumulated during the marriage, and each spouse is entitled to retain control and ownership of separate property.
Once divorced, most estate-planning documents are legally nullified, yet that nullification can be enforced only if an estate is submitted to Probate.
While the divorce is pending, those documents remain in force unless legally modified.
If one party dies before a divorce is granted, the courts may treat the parties as if they are still married, depending on the stage of the divorce proceedings when the death occurred.
Temporary restraining order prevents disposing of property without spousal consent
When someone files for Divorce in California, the court issues an automatic temporary restraining order (ATRO). This order prevents either party from disposing of any property–whether community, marital, or separate–without written notice to the other party. If that order is ignored, the offending party may be assessed attorney’s fees and be ordered to provide full restitution. However, nothing prevents making changes to appointments and bequests in estate-planning documents. So if one spouse were to sell or redistribute a property without notifying the other spouse, there would be consequences, but changing the way that property will be distributed in a Living Trust is legal.
Divorce clients: Strongly consider reviewing your estate-planning documents
Because of the document nullification issue, it may be in the best interest of Divorce clients to review their Wills, Living Trusts, Powers of Attorney and Advanced Health Care Directives. It may be time to revoke your Joint Trust and create new individual Trusts. Appointing new representatives and adjusting bequests ensures that intent is clear and will not be subjected to legal challenge. Failure to adjust bequests can raise the question of whether someone actually intended to benefit an ex-spouse. Documents that are revised and executed after a Divorce assure that the issue has been addressed.
In our youth-driven culture, we hear more about people losing jobs because they’re too old than we do about those over 50 who are launching new businesses. In the UK, however, this demographic is thriving. An estimated one in five people over 50 is self-employed—a higher proportion than for any other age group. They’re called olderpreneurs, and there are now nearly 1.8 million self-employed people over the age of 50, an increase of 21% since 2008.
Entrepreneurship is no longer the exclusive domain of the young
Many of those starting new businesses realize that they have the life skills, contacts and business experience that will help make them successful. They understand sales cycles, marketing, the importance of relationships and often have more money for the startup investment. Statistics show that older entrepreneurs tend to be more successful than those who are starting businesses at a younger age.
Other typical demographic information of olderpreneurs in the U.S.
According to Jeff Williams, founder of BizStarters, a service that coaches older entrepreneurs here in the U.S., roughly 60% of clients prioritize schedule flexibility over economics—being able to take time off to travel or spend time with family is important.
Very few older business founders are trying to replace corporate salaries; average earnings expectations are $50,000-75,000 a year.
The majority also prefer to be solopreneurs, depending on strategic alliances when necessary. Many have spent their careers managing workforces and now prefer to create a simpler business model that fits their new lifestyle—without employee concerns.
The internet, which enables research, virtual sales and sourcing, has made the solo enterprise model infinitely more accessible.
Regardless of age, new business owners need to identify a business formation structure
Whether 25 or 65, those starting new businesses in California need to identify a business formation structure. Many people with years of industry experience retire and become consultants, often going back to their former companies on an advisory basis to share their expertise. For these individuals, a sole proprietorship may be the right business structure. California Document Preparers assists our clients in preparing the documents to set up the business structure, such as an LLC or S Corp, that is the right fit at the right time for your business.
From sole proprietor to corporation
A number of our clients starts out as sole proprietors, but as their businesses grow, as they hire either part-time or full-time teams, they choose to incorporate, separating the business from the owner. A corporation acts like a separate body that can do things like buy and sell property, be taxed and enter into contracts. Perhaps most important, it protects its owners from personal liability for corporate debts and obligations.
The growing popularity of LLCs
Many business owners who wish to incorporate these days are choosing LLCs because of the personal liability protection, flexibility and tax benefits. An LLC can be one or many members; they’re not required to have Boards or keep meeting minutes and can be managed by the members themselves.
Clients frequently come in to our offices seeking to get a Power of Attorney and Advanced Healthcare Directive for a parent who is suffering some degree of dementia. In many cases, one parent has died, and the remaining parent is no longer able to manage his/her financial matters or make informed health care decisions. Unfortunately, by the time these clients come in, it is often too late; that parent is no longer legally qualified to sign documents.
Jane Bryant Quinn recommends long-term planning to protect against poor decision-making later in life
Jane Bryant Quinn, a personal finance advisor who writes for the AARP, discusses the importance of making important life decisions while you still can, protecting yourself against the risk of poor decision-making in the later stages of your life when you may be affected by dementia or other illnesses.
Quinn uses the example of a University of California professor whose 85-year-old father had fallen down the stairs, broken some bones and had become very weak. Yet for some reason, without consulting his son or healthcare providers, he decided to cancel his long-term care insurance. Within two years, he wound up in a nursing home, uninsured. That fall had taken a big toll and the client’s father was no longer thinking clearly. If anything, the fall and its subsequent debilitating effect should have prompted him to take out more long-term care insurance—not cancel it completely!
Loss of powers might come on us gradually or suddenly
The better prepared we are, the safer we’ll be. Below are some suggestions on ways to plan for old age now to ensure you will be making sound decisions.
Simplify your finances to make it easy for someone to take over.
Consolidate any scattered CD accounts and IRAs.
Set up automatic payments for household bills.
Create good financial files that are easily accessed. If you pay your bills and access your accounts online, provide login information.
Choose an Agentwho will help you with your finances if you become uncertain or unable. Give your Agent durable financial Power of Attorney.
Get in the habit of talking to your Agent about even small money decisions.
Make sure your financial adviser(s) is part of your plans and has the name of your Power of Attorney and can contact him/her if you begin to do irregular things with your money.
Create an Advance Healthcare Directive and name an Agent. This person will be making critical medical decisions for you if you can no longer do this yourself.
If you’ve not already done this, create a Living Trust and make sure this is funded and updated with important life events. At California Document Preparers, our Living Trust package includes a Power of Attorney and Advance Healthcare Directive.
Other considerations for your long-term planning
Where will you live? The family home may be more than you can manage. This may be the time to downsize to a smaller home or condo or investigate independent or assisted living possibilities. Many senior communities provide a wide range of activities and care designed to help keep seniors from becoming isolated.
Think about when you’ll give up driving. This may be part of the downsizing plan that will determine where you live. If you give up driving, you may want to live where you’re able to walk or take public transportation to services and activities.
The more work you do now to prepare for the possible eventualities of old age, the easier it will be for your children.