- You don’t need to be rich to have an estate plan
- Making sure your will, trust and health directives are clearly planned is important in case you’re in a position when you cannot manage those things.
- Removing your ex-spouse from your will, trust and health directive is important, unless you decide that’s what you want post-divorce.
OUR GUEST – LAURA COWAN
Welcome to another episode of the exEXPERTS Podcast where we give you all kinds of information and tips on everything divorce. Why? We’ve lived it, so we get it! We’re Jessica and T.H.
TH: Hi, everyone. Welcome to today’s podcast. We are happy to have Laura Cowan here. She is the founder of the Law Office of Laura Cowan. She specializes in estate planning, so we’re going to get into a whole lot of detail of what that means. Welcome to the podcast, Laura.
Jessica: Thanks for being here.
Laura: Thank you for having me. Thank you.
TH: Let’s start with what we talked about just before we started recording. What is estate planning, and do you need to have a lot of money to be estate planning?
Laura: Yeah, that’s a great question and I get asked that all the time. It’s a big misconception for people to think, I don’t need estate planning because I don’t have an estate. We hear the word estate and we think that only really wealthy people have estates, so it doesn’t matter for me. That’s not true. What my definition of estate planning is that it’s about making things as easy and inexpensive as possible on your loved ones in the event you’re disabled, incapacitated, or if you pass away. It’s about making things as easy, inexpensive, painless as possible during that time. Everybody cares about those things, whether you’re leaving a lot of money behind, or just a little bit of money behind. I like to think of estate planning not so much as a necessary evil, but really, it’s like an opportunity. It’s an opportunity to get things down in writing so that everything happens with your assets and your family the way that you would want it to in the event of your incapacity or death.
Jessica: It’s such a, I think for some people, one of those morbid topics. You really have to come to terms of all of the ‘what ifs’ if you’re not there. But I feel like for most people in our community listening to the ExExperts, it’s a lot about unraveling the estate planning that you might already have in place, which can be really overwhelming when you’re on your own. You’ve made maybe all of these decisions with your former partner, and their siblings or family maybe weaved in there. I know that for us in terms of custody of the kids and things like that is all embedded together, and now you have to peel it all apart. If someone is starting this process on their own, what do you feel like are the first maybe two or three steps that someone should really think about before getting ready to actually go through with this?
Laura: Yeah. You do want to do exactly what you said which was to unwind whatever estate planning you may have already done. The first time that a lot of people get a will or a trust in place is when they either get married or they get married and then have kids. That’s when they tend to get started. It’s likely that a lot of people on this podcast might have an estate plan that was put together with their partner that involves their minor children. As soon as the divorce is final, and everything’s kind of been settled, that’s when you want to start to unwind whatever planning you did. The most important thing is that your ex-husband or ex-wife is no longer named as a beneficiary on any of your assets. The last thing you want is any of your money going to your ex-partner. You want to make sure that they’re not named in any major roles. You don’t want them to be the executor of your estate anymore. You don’t want them to be your healthcare proxy making any medical decisions for you or your financial power of attorney. You definitely want to undo whatever planning you have done.
TH: That was one of the first things I think I did was I looked for someone like yourself to clear up my health proxy.
Jessica: So he wouldn’t pull the plug. [Laughs]
TH: Right. Now my brother has a huge amount of responsibility that I’m sure he never wanted or predicted. But it also makes you sit down and like you were saying, it doesn’t mean you have to have a lot of money to have an estate. But for me, I feel isn’t the money the easy part of it? It’s the sentimental stuff, like I remember when my grandmother passed away and everyone’s fighting over stuff that doesn’t really cost anything, but it means a lot. For me also, I identified in my will after our divorce, the things that I want to make sure that this kid’s getting and that kids getting, and it may not be expensive, but it’s just important. So those things too, how does that weave in?
Laura: Yeah, so that’s a great point. It isn’t all about the money. A lot of it is just about the sentimental things that aren’t necessarily worth a lot, but you want to make sure that the fighting is minimized after you’re gone. If you’re listening to this podcast and you were married, and you didn’t have any estate planning documents in place, now’s a great time to get them in place. Because, for example, let’s say you have minor children, and of course you want to name guardians for your minor children, if something happens to you, they’re likely going to go to your ex-partner. But in the event that they’re pre-deceased, you want to have guardians named in a will in that case. Then you also don’t necessarily want your ex managing your kids’ money when you’re gone, so if they’re the guardian, you want to name someone else as the trustee over the money. Most people want that. It’s not set in stone. Now is the time to put an estate plan in place and name someone else as the trustee over your minor children’s money if you don’t feel comfortable having your ex-spouse managing their money. The point being, regardless of whether you have an estate plan in place now or not, post divorce is a really good time to get these documents either revamped or get a whole new set of documents in place.
TH: Now should you have two different people? Am I right, you have a trustee and then you have someone with power of attorney?
Laura: Yeah, so that’s a great question. The power of attorney is someone who takes action when you’re alive, but incapacitated. In the event that you’re sick, you’re disabled, you’re not able to manage your own bills, or file your taxes, that would be the power of attorney and that would normally be your spouse. But you wouldn’t want it to be your spouse anymore if you’re getting a divorce. That’s what that person does. The trustee steps in after you’re gone, and so that will be the person who wraps up your affairs when you’re gone, and then it’s the person who might manage your kids’ money until they turn 18. It’s two different roles, and sometimes it’s the same person, but it’s two different jobs.
Jessica: To help clarify for people who like myself, when I had first gotten divorced, this for me was the area that I really knew nothing about. I think that for a lot of people, the overall finances are the most overwhelming part, which is completely understandable. For me, I totally had a handle on all of that, and it was more about this part that I didn’t know anything about and I felt really overwhelmed with. There’s a lot to think about. Can you help break down what some of the specific parts are to the estate planning when it comes to wills and trusts and like you said, power of attorney and the executor, those kinds of specific positions and stuff?
Laura: Yeah. A comprehensive estate plan usually includes several different documents. It’s not just a signed will, that’s not nearly comprehensive enough. Everybody should have either a will or a trust, and I don’t want to get too much into the details of the difference between the two, the benefit of a trust is that it can avoid probate courts. If you don’t want your family to have to deal with the expense and hassle of a probate court, a trust might be a better option. But either way, you should have a will or trust and that’s where you’re going to name your beneficiaries for your assets. Then everyone should have the health care proxy that we spoke about. This is where you name someone to make medical decisions for you in the event that you’re not able to communicate them yourself. This is very important, especially today during COVID, with these crazy times we’re living in. That’s an important document for everyone to have. Then a power of attorney, this is something else that you want to have in place in the event of your incapacity: Who is going to pay your bills? Who’s going to file your income taxes? Who do you trust with your money? That’s the document that everybody should have as well. And then our estate plans include things like final disposition instructions. Do you have any preferences in terms of burial vs. cremation? We really go over all of the different things that you’re going to need to think about. If you’ve got minor children, that’s a big concern. One of the things that you want to make sure you’ve done is you’ve named guardians for your minor children in an estate plan. God forbid something happens to you and your ex, who’s going to raise your children? Who’s going to be in charge of their money? That’s a big piece of the puzzle as well. Then there’s various things like if you have a big enough estate, you might have to look at some estate tax issues, and it goes on and on.
Jessica: What about things like, I remember when I had gotten divorced, and I don’t remember what part of the processes this was, but my ex-husband had to get life insurance in a certain amount of money, where I guess it’s for the benefit of the kids, but I was the beneficiary or the trustee. I don’t know what the specifics are but (a) who determines that, and (b) is that amount of life insurance or whatever it is part of the overall estate planning?
Laura: Right, so that’s a great question. One of the things you’ll definitely want to do right away is give your estate planning attorney a copy of your divorce agreement, because they’re going to need to know what obligations you might have to your ex in the event of your death. Then, yes, you might be required to purchase life insurance for the benefit of the children. You’re going to want to make sure that you abide by that. My understanding is that it’s the family law attorney who’s working with you on the divorce, who decides how much life insurance needs to be purchased and whatnot. But then the estate planning attorney will review that to make sure that your estate plan is aligned with whatever your divorce agreement says.
TH: Are standards the same across the country, or really is it based on which state you’re in?
Laura: Yeah, that’s a great question. Wills are state specific, so if you do a will, and you live in New York, you’ll need to work with a New York licensed attorney. Then if you move to a different state, you’re likely going to want to get a new will, even New Jersey or Connecticut. Having said that, one of the benefits of doing a trust is that those are valid across all 50 states. Just a disclaimer here, this is not legal advice, this is just legal information, but the vast majority of my clients choose to do a trust over a will, and that’s one of the reasons. You don’t have to redo your estate plan if you move to Texas or Florida.
Jessica: What would happen? I have a will in New York, and then later on I moved to Florida and my will is invalid?
Laura: Well, it wouldn’t necessarily be invalid. If your New York Will followed the rules that Florida sets out then Florida would accept it, but if you moved to a state that had different rules, then they wouldn’t accept it. It depends on what state you move to.
Jessica: That’s really an important fact to know. That’s crazy.
TH: I think that’s our headline.
Jessica: Especially since so many people, as they get older and retire, choose to move to other places. My parents live in Florida now, and we were in New Jersey. I feel like I need to call them and be like, did you redo your will?
TH: I think you need to phone a friend right now.
Jessica: That’s major.
Laura: It is. It’s one of the reasons most of my clients elect to do a living trust instead of a will. That’s one of the main benefits. You’re not going to have to redo your documents if you move to a different state.
TH: So why would anybody do a will?
Laura: It’s so funny that you say that. My clients always ask me that after I’ve gone through this. The only instance that I can really think where it might make sense to do a Will is that if you’re anticipating any litigation after you’re gone, if you’re anticipating fighting. With a will, a court is going to be overseeing the whole process. Normally, you want to avoid that because it’s expensive and whatnot, but if you’re anticipating fighting, it might make sense to do a will.
Jessica: Do you mean fighting among your heirs for what [you’re leaving them?]
TH: It brings out the ugly, Jessica. It brings out the ugly.
Jessica: I know it does, but I thought you had mentioned before that with a trust they can’t fight it.
Laura: Well, that’s one of the benefits of a trust is that it minimizes fighting because first of all, it’s a private document. Wills become a public record when you pass away, and a lot of people also don’t realize that. It seems strange to write a will and then know that it’s going to get filed out by the probate court and anyone can go look at it.
Jessica: And see what everyone else got.
TH: I think I’m switching mine to a trust.
Jessica: I feel like maybe that’s what I need to do. I need to find out what I have right now. I have no idea.
TH: I have a will and I just updated it because I changed my last name, but holy moly, there’s a lot we need to know here. Don’t move, get a Trust.
Jessica: Right. Well, wait, what about things like your health care proxy and those kinds of things? Are those documents also recognized nationwide? Or if I had a health proxy that said I don’t want heroic measures and I live in New York, and then I’m living in New Jersey, is that now null and void?
Laura: Yeah, so that’s a great question. Every state has their own version of a health care proxy and a power of attorney as well. Again, if you move to a different state, you’re probably going to want to get their version. Those documents aren’t very expensive, so that’s not as big of a deal. But yeah, in terms of the trust vs. the will, I generally recommend a trust, and that’s generally what my clients choose. Ultimately, it’s their decision, but there are some other things you can do with the trust as well. For example, I have yet to meet a parent who wants their kids to get their inheritance on their 18th birthday. That’s the age they are legally entitled to inherit.
Jessica: What is the average these days would you say?
Laura: Average age that people –
Laura: So if you don’t want your kids getting their inheritance at 18, and nobody does, you need a trust to say, well, no, they get maybe a third at 21, a third at 25, or third at 30. You can pick whatever you want and you’ve got some other options. But the point is if all you have is a will, your kids are going to get their inheritance at 18, and nobody really wants that. So it’s another –
TH: I think we have to dissect this podcast for pros and cons of wills vs. trusts. So far, a will just doesn’t sound like a good idea.
Laura: It doesn’t do nearly as much as people think and it comes with a lot of downsides as well.
Jessica: But I feel like for someone who is in a situation where they’re not coming with a lot of assets, and there’s not a lot of that stuff, it might just be the simpler thing to do if they don’t really have a lot to leave.
Laura: That can be the case as well. Ultimately, it depends on your specific finances and your family circumstances. Sometimes my clients do just choose to do a basic will and that’s fine too, and then you can upgrade to a trust later.
Jessica: What do you see as maybe the common challenges or things that people should be most aware of in this specific situation of divorce of, as we said, unwinding what you’ve already had vs. someone who’s coming to you for the first time to create their estate planning?
Laura: Yeah, you just want to revoke most of what you’ve done so that none of your money goes to your ex, so that your ex, like I said, is not making any important decisions for you. You basically need to kind of redo your documents now to reflect your new circumstances. Your assets are different now, they’re no longer held jointly with a spouse, and your family situation is different. You need to just redo your documents, basically, to make sure that nothing goes to your partner and that they’re not in charge of anything.
TH: I will say that I did mine when I was divorced in 2012, and then I just redid it, but it was great because I was like an autopilot. I have this lawyer, I’m pretty sure I met him once, and then I get a calendar every year so I remember his name, his phone number, and address. Then I knew who to call when I changed my name so that it would change in my documents, but I feel like I have to go back and look, because I do have a trustee and I had a last will and testament. Do people have both?
Laura: Well, the trustee, if you have a last will and testament, then you should have an executor who is going to manage everything when you pass away.
TH: Which I do.
Laura: Okay, and then the trustee will be the person, maybe you set up a trust for your kids, and they’re in charge of that money.
TH: I don’t know. I better go look it up.
TH: I think I did everything. I think I was like I wanted every form.
Laura: That brings me to an important point though, which is these documents are going to change as your life goes on. Even if you aren’t going through a divorce, your life is going to change, the laws are going to change, or your assets are going to change. You want to work with an estate planning attorney who’s in contact with you frequently to make sure that your documents, if they have to be tweaked as time goes on, make sure that they do what you want them to do when you pass away.
TH: I also have his name and information in my safety deposit box, and I guess that’s fine to say publicly, so that if anything should happen to me, my kids know who to call for my will. My brother has a copy of it also and my health proxy and all that stuff. So make sure that you’re also giving a copy to whoever that person is and also keep something somewhere safe.
Jessica: That’s actually also an excellent point. It makes me realize my brother has a copy of mine also, and I need to redo it, but my brother has a copy of it and that’s huge because you have to have somebody else who has access to it, who’s going to be able to pull it out when needed if the whole idea is that, unfortunately, the purpose is that when you’re not around anyway.
TH: Also for my health proxy, put it on file with your doctors. It’s on file with my primary doctor and it’s on file with the hospital, so I don’t have to dig it up. Shit happens, and if you end up in an emergency situation, it’ll be in your files. That was another really important thing I learned.
Jessica: Yeah, that’s a really good tip.
Laura: Yeah, that’s great advice. Do the documents and make sure your family knows how to access them. Like you said TH, especially the health care documents because those are the ones that might need to be accessed in an emergency, so you want to make sure people have easy access to those.
Jessica: This has been so much great information. Thank you so much for sharing it with us and the ExExperts community because everybody needs to know. This is really one of the main things when you’re getting divorced. This is what you have to manage. This is pretty much literally your life and everything else moving forward, so it’s hugely importantly. For anyone who’s interested in more information or getting in touch directly, what are the best ways for them to find you?
Laura: Yeah, so my website is www.lauraecowanlaw.com and that’s my email as well: firstname.lastname@example.org. What I usually recommend if people are interested in just learning a bit more about me and my process is to schedule what we call a ‘peace of mind’ planning session. This is something we normally do in person but during COVID we do it over Zoom. This is just a session with me. We’ll talk about your goals or concerns, your family circumstances, and then I’ll read you your options with you and then we’ll go over our fees and estate planning packages. If you decide to move forward, we’ll talk about next steps. We usually charge $450 for this, but anyone listening through the webinar, we’ll waive the fee. If you’re listening to this podcast, we’ll offer that for free and you can book that right online. Send me an email, go to my website, or reach out. If you’re listening to this we’ll offer the session for free.
Jessica: That is so generous, thank you.
TH: Jess, you better go sign up.
Jessica: That’s right. I need to redo my stuff. All right, excellent. We’re going to have all that information on our site as well. Thank you so much for joining us. I can’t wait to have you back to further discuss.
TH: Thank you.
Laura: You’re very welcome. Thank you for having me.
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