Divorce Rich with Jacki Roessler, CDFA
Welcome to the Divorce Rich Podcast! Join your host, highly sought-after speaker and experienced Certified Divorce Financial Analyst, Jacki Roessler, CDFA in this engaging and down to earth show. Along with her guests, Jacki offers clear and detailed advice to improve your financial decisions before, during and after divorce so you can survive divorce rich! New episodes are posted every other Thursday! You can reach Jacki through her Michigan-based firm, Roessler Divorce Consulting, located at 600 S. Adams, Suite 300, Birmingham, MI 48009 or by email at jacqueline@roesslerdivorce.com.
Divorce Rich with Jacki Roessler, CDFA
Post Divorce Estate Planning with Attorney Kristen Gross
Unlock the secrets to fortifying your financial future post-divorce with the invaluable advice from estate and trust attorney Kristen Gross.
Diving into the complexities of post-divorce financial entanglement, our conversation navigates the necessity of severing fiscal connections with your former spouse. Learn how to avoid the common pitfalls that can lead to probate puzzles and unintended involvement from an ex in your financial legacy. Kristen and I dissect the strategic use of trusts and careful guardian selection, offering insights into maintaining control over your wealth and the future of your children. We highlight how an estate planning attorney can be your greatest ally in this process, providing the assurance that your estate is managed precisely as you wish.
RESOURCES;
- Learn more about how Kristen can help by clicking this link https://krglegal.com/kristen-r-gross/
- Reach out to Kristen to schedule an introductory appointment at 248-534-1004
- Read Kristen's blog about the importance of estate planning here https://krglegal.com/be-prepared-with-proper-estate-planning/
Visit us at https://www.roesslerdivorce.com/ to learn more about Jacki's practice and to find valuable resources for your case.
Welcome to the Divorce Rich podcast. I'm your host, jackie Ressler. I've been a certified divorce financial analyst for 28 years, helping clients and their attorneys navigate the often complex and confusing financial issues in divorce. If you're in the process of, or considering, divorce, now is the time for you to take a deep breath and give yourself permission to find clarity on the financial issues you're facing. Rich means many things to many people. I believe the best definition of being rich is someone who has access to many resources. Along with my guests on this podcast, I will be bringing you a wide variety of information so that you can make sound and informed financial decisions for your financial future. Often, we talk about topics that are all figure well-being during your divorce, so it's really exciting for me to get thrilled to have a state and trust attorney, kristen Gross who handles estate planning, trust administration, probate administration, trust and probate litigation and anything related to things that would happen in the probate court with me as my guest today to talk about this important topic. So welcome, kristen.
Speaker 2:Thank you very much for having me, Jackie.
Speaker 1:So let's get right into it. What I find is that after the divorce is done, one of the top things on the list that attorneys tell clients on their to-do list of go and do this right away is get your estate planning redone. But I also find that many clients procrastinate that piece and don't understand the importance of it and wait a long period of time, if ever, to get it done. So, in your experience, are clients protected by the language in their divorce decree if they decide not to follow through and redoing their estate documents?
Speaker 2:So the answer to that is sometimes, after a client goes through a long, grueling divorce process, I think the last thing they want to do is have to deal with another lawyer. But it is actually a very critical part of that close divorce work If they rely simply on the divorce judgment for some of their assets. Michigan law does see that divorce has the effect of revoking anything that is revocable, and the judgment itself may even indicate that. So things like revocable trust designations on certain beneficiary designated assets will be revoked. But where clients run into problems is for things like or RISA govern plans. So their 401ks or their work life insurance is not necessarily, or is not at all, going to be void by virtue of that judgment of divorce. So that means that at the very least and this is what I tell clients if you don't want to redo your estate planning right away, you should, because you're basically without anything right now but at the very least make sure you update all of your beneficiaries.
Speaker 2:I have run into the circumstance where a person has died and left their ex-spouse and then been married to a new spouse, their work life insurance or their work 401k. That creates an unbelievable problem for that new spouse who's thinking that they're going to inherit their deceased spouse's plan. The other thing that you run into is issues with real estate, and I think you, in fact, may have discussed an issue with me on a real estate matter where clients may hold property. A divorced couple may hold property formerly as husband and wife. When they get divorced, that property has the effect of being converted to tenants in common, which means they own a 50-50 interest. So if they do nothing, that 50% interest will have to be probated in the estate of each person. Do you follow?
Speaker 1:Wow. So you're saying that just by virtue of being divorced that everything reverts to tenants in common it?
Speaker 2:does. Now, often the judgment will address the real estate. It might say that the family home will go to a particular party. If that is the case, they can actually end Sometimes I find and no disrespect to divorce attorneys, but they don't always follow up and prepare the necessary deeds. So when it comes to me, we have to either get that former spouse to sign off or, alternatively, we know we can always record the judgment, but that becomes problematic because a lot of couples my clients don't want their judgment out there being recorded in the public in the register of deeds. So if the real property is not given to a particular party, it has the effect of becoming tenants in common. So it's really important to tie up all those assets in a nice fall, figure out where everything is titled and make sure that your clients deal with all those things. It's not enough just to have that judgment entered. You understand the importance of that process of dealing with all the assets afterwards, and I'm obviously working with people like you to make sure that those lands are actually carried out.
Speaker 1:So just to clarify, it makes it that I am understating this right, because I actually have a couple cases right now that I think I need to get your input on. If the real property is awarded to one party or the other, then it doesn't become tenants in common if they don't go ahead and follow through on changing the title, or it does, Because I think that people do not go ahead they might think that their judgment says they get a certain asset but they may not ever change the title.
Speaker 2:So I guess the question you're asking me is if they passed away before they carried all this stuff out the judgment, the judgment could be recorded. That would have the effect of transferring the property to the correct party. But very often the reason that it is held up and not all the way not completed is because there's often a mortgage tied to the property and the goal for the spouse who doesn't receive the property is to be released from the mortgage. But of course we don't want that to happen until the other spouse gets the appropriate refinance so that they can remove the first spouse. So it's something that often complicated by that need and it has to be cleaned up before they pass away. Otherwise you're dealing with a complete mess. I have a case right now in the Probe Court where the parties waited. He actually had a judgment that entitled him to be released, required his ex-wife to refinance. She waited 10 years. He went back to court. He got another judgment and it was never effectuated. She died.
Speaker 2:Her son was living illegally in the home. He couldn't get the son out. There was all sorts of problems with the residents, there was water damage and yet he was still on the hook for the mortgage. The mortgage company was going to him. Wow, he, the lord, did Right. So, even though he didn't care that much about the house, he didn't want it to mess up his credit. So we were faced with having to open up an estate. We had to have a public administrator appointed. It has been a complete mess. Lo and behold, we found out that she then took out a second mortgage on the property and so he was never a rule from the first lien and there at the sale has now resulted in very little equity for him to now even recover when he should have recovered 10, 15 years ago. So it can get very ugly and so you want to take care of it while you know exactly what needs to happen and there's no other intervening kind of circumstances that could further kind of damage or water down your interest.
Speaker 1:Right, that sounds like a horror story to me.
Speaker 2:It has been, it has been, it has been, so it. And they couldn't get the son out. The son was squatting illegally, so we had to have him evicted so terrible. So these are the things that I just you may not even think about, but don't procrastinate. I understand that clients are raw after a divorce and the last thing they want to do is deal with another attorney or another bit of administration or more costs, but it is critically important to get it done.
Speaker 1:I agree 100%. I think that so many of these things. I always tell clients that when the divorce is done and you're ready to be, you just want it to be over, and that's the point that a lot of clients take their foot off the pedal, and that's when they really need to get engaged right away with whether it comes to getting the quadros done, estate planning, assets transferred. The minute that you're done with the divorce, I always tell clients it's like there's a bomb ticking over your head. You have to get those things done. And you're right. Nobody wants to hear it. I was going to ask you what is the most costly oversight you see the clients make after the divorce is over, but maybe you already gave me a couple examples of that.
Speaker 2:Yeah, I mean, I can reiterate, and it's really what you already articulated it's not changing beneficiaries, it's not suffering all financial ties, assets and liabilities with your former spouse, it's not finishing the quadro and dispersing the assets. I've run into that problem too. Quadro doesn't get fully dispersed and one of the parties dies. It's usually the party that has the significant retirement assets. Then what happens? It's much harder then because you're not dealing with that spouse. Now you're dealing with the estate of that spouse, which could be his or her new spouse or his or her family, and so you don't even want to deal with that for sure. Not transferring real estate. So all the things that we already discussed huge problems if you don't deal with it.
Speaker 1:Right. I mean we've had in my quadro preparation part of my practice. We would have people call all the time that their divorce had been finalized 10 years and my first question always to them is what prompted you to call us now? Did your spouse die? And 9 times out of 10, the answer was yes, and it's such a mess. I always tell clients if your spouse retires, remarries or dies before you get those entered, you are in for a big headache and you may not get anything at all. So when they're different, I have clients that once the divorce is over, they tell me that they went to see an estate planning attorney and when I take a look at what they've had done and what they actually implemented, it becomes really clear to me that it makes a difference, just like it makes a difference what divorce attorney you have. It matters what. There are certain things that you're looking for in an estate planning attorney. What kinds of questions do you recommend that clients ask when they're interviewing estate planning attorneys?
Speaker 2:So we pride ourselves on being very detail oriented and asking a lot of questions, which makes for a fairly long intake initial meeting, but I feel that it's worth it. Any good estate planning attorney should address the very specific needs of a newly divorced person, and I think that one of the biggest issues is, if they have minor children, asking them about whether they've considered whom they'd want to be in charge of the assets, because one of the things that is very upsetting for newly divorced couples is the issue of guardianship. If it's very contentious and one of their reasons for divorcing their spouse and they have been that person was alcoholic or a drug abuser or just overall, not a very good parent. And one of the things that I always emphasize is we can't control whether or not they become a guardian. If they have not lost their parental rights, they will be the guardian. Sara, there's not a lot we can do on that front, but what we can always control is who is in charge of the money, and so it's really important for you if you don't want your ex-spouse to become the conservator for your child's assets if you die, then you need to establish a trust and appoint people whom you trust to disperse those assets and I put very specific language in documents of divorced people indicating that we never want ex-spouse to be appointed as trustee. We don't even want them to have any kind of decision-making role, so we try to minimize their role as a decision maker and we even put language in there to hopefully avoid having to distribute or provide an account to the ex-spouse, because if the ex-spouse is a guardian, then they're going to have a right, as the child's legal representative, to receive information about that child's assets or the trust assets. We utilize things like a trust director, which we can get into later, but it's basically an independent party who could receive those accounts from the trustee. That way we're providing a check and balance, but we're ensuring that we don't have to provide those accounts that are required to be furnished to a beneficiary. When we have a minor beneficiary, we have to furnish it again to their legal representative. What we're doing is providing a mechanism by which those accounts could be provided to a third party but not the ex-spouse.
Speaker 2:It's important that the prospective client asks things like what are the specific things associated with me being a divorced person that I should be thinking about? One of the things I always say is control of assets, also getting a very accurate intake of assets. Sometimes we're the ones that discover that the real estate hasn't yet been transferred, that they're still leaning on the mortgage that should have been sold, or that the mortgage should have been transferred over to the party that's receiving the property. We're the ones that often uncover that. We may also be the ones that find out oh well, you were supposed to get this portion of your ex-spouse's retirement plan. Why hasn't the quadril been effectuated? Let's get you in touch with someone to make sure that that is carried out, because it might come to you, but it might also come to me. First. I'm going to be definitely looking at all of those things when I do that intake. It will reveal a lot of what has maybe not been finished.
Speaker 1:It sounds to me like some of the things that you just brought up I never think about. I think that I'm pretty thorough in thinking about post-divorce issues. How often does that occur, that clients will create a trust for their assets and put their assets in the assets that are going to be transferred to their children? I could see how that could create real problems too for the other party, depending on what their financial needs are to take care of the children.
Speaker 2:One thing that if you don't mind my expounding on this just for a moment one thing that we also include is language that instructs the trustee.
Speaker 2:If the ex-spouse is the guardian for the child, which is often the case, then we want the trustee to very carefully scrutinize the requests made by the ex-spouse to the trustee, because one thing to be mindful of is, when you die, you no longer have a legal obligation to support your child, but their parent, their surviving parent, does.
Speaker 2:So we want to make sure that we certainly most of my clients don't want to deprive their child of getting braces or soccer lessons or getting a car if they need it. But we also don't want to create a situation where the surviving spouse has no legal responsibility to provide for the child. This money is saved for the child, so we want it to go to things that will benefit him or her perhaps later on down the line. So we also provide language in the trust that says if you need to pay a creditor directly, like the child needs braces, pay the orthodontist directly. Don't give the money to the ex-spouse to pay the orthodontist, particularly if there are trust issues. So all of this language is very intentional, so that we kind of keep that spouse former spouse out of the financial matters in the trust as much as possible.
Speaker 1:I think that's a really important tip. As far as preserving wealth for your family after divorce, that is again something that idea, that concept is completely new to me. You mentioned that part of your job is. It sounds like you're very hands-on in your practice and I know that you're very detailed and part of your job is to make sure that the assets are shepherded to the new trust itself. I've seen it again many times, even in just my regular financial planning practice, where clients come to me and they're getting divorced and they have a trust that's been drafted, but they don't have any assets in the name of the trust. And can you speak to that a little bit and why, if assisting clients with those things is an important part of your practice?
Speaker 2:I'm going to give a really brief answer here, and then I want to go back and make one other point, which is tangential to this question but related also to your previous question. So I would say yes, yes, yes, finding critical, absolutely critical, because a trust, as you know, only controls what it owns, and so most clients will also have a poor over will, which will direct the assets if a client forgets to designate their trust as a beneficiary or retitle an account. So the poor over will will serve to effectuate that goal, but it also, though, requires probing Right, and one of the goals when they set out to do the trust, was to avoid probing typically, so we want to make sure that that is done. One other thing, though, that I said that I wanted to bring up hopefully, if we're okay with timing is, I'll propose to the question you asked me before, and that is failing to designate the trust as a beneficiary, for example, on your retirement will, could results, especially if your divorce is even more complicated, but could result in any, and you intend your only heirs are your children and their minors. What that will result in is a conservatorship, first of probate, because your assets don't have a beneficiary on them. So let's say you didn't update or you removed your spouse, but you left it blank. Whatever reason you didn't tidy it up, the asset, like life insurance, will give as that example, will have to be probated and a state has to be opened. And then, because you have a minor children, a conservatorship would have to be established so that someone is in charge of those assets until your child attains the age of 18. Michigan thinks that at 18, you are of the age of majority, so you should receive the assets I know having. I have 18 year old, yeah Right. So we know that 18 year olds are generally not the most fiscally responsible and most people don't want their kids receiving those assets at 18.
Speaker 2:I had a case where that situation divorce couple, a no-counter man dies. Life insurance goes ultimately to his minor son he was nine years old and his wife, his ex-wife. My client couldn't get appointed as a conservator. She had some creditor issues. She couldn't get a bond. The judge got kind of exhausted with her and he asked me to serve as this child's conservator, which was fine. It's not ideal, but for nine years I was this child's conservator. I had to file annual accounts, I got to bill at my hourly rate. So it obviously ate away at what this life insurance was, this policy was to be used for. At the end of the nine years, I was able to distribute it to this child and he used it for college, which was great. I had nine years to work on him and make sure that he was going to use it for the right day.
Speaker 1:My brain is spinning with all of these things that you're saying. So messy is my problem. Wow, it's like whenever I give a lecture for the first ICLE on quadros and I see a sea of people with their eyes about to pop out. That's how I feel right now.
Speaker 2:Listen to this.
Speaker 1:This is scary stuff actually, especially for clients that work so hard to get the right financial settlement for themselves when they get divorced and then to let these things go and potentially ruin their entire plan. It is scary, okay, so let's move on to another scary topic prenuptials. So I actually in my practice I have kids right now, in fact where I am dealing with the enforceability of a prenup when clients get divorced. But one of the key ways for clients post-divorce to preserve their wealth is to get a valid prenuptial agreement prepared. So you prepare those for clients. What is required for it to be enforceable in Michigan?
Speaker 2:So and that's an important question because I'm only licensed in Michigan, so I will speak to Michigan specific Most states have certain requirements that are pretty much universal, but there are certain Michigan specific rules that are important to know. So it has to be in writing and signed by the parties, it has to be entered into voluntarily, so no fraud, mistake, duress and, importantly, there has to be full disclosure of assets, debts and liabilities, and this is an important one. It has to be fair and not unconscionable when it's executed and and this is Michigan specific the circumstances must not have changed so much that by the time of enforcement that it's later, that it's later enforcement would be unconscionable. So it creates a situation where it may have been okay at the time, but now that it's being enforced there are circumstances that make it unconscionable. Like you know, the person who one of the parties, who's being kind of impacted by the prena, is suffering from a catastrophic, you know, illness.
Speaker 2:And so somehow the provisions might be unconscionable because of those very, very kind of fact, specific circumstances. And the other thing that's important to note is you can't contract around child support issues before you have kids.
Speaker 1:Okay.
Speaker 2:Well, go ahead Sorry.
Speaker 1:This is a question that has come up in the current case that I have. Is there any issue at all? Well, and I know that every things vary by state, just like with family law, every you know every state has different rules In Michigan. Is there any timeframe connected with a pre-nup? Is it only? Does it expire? Is there an expiration date? Does it matter how long ago it was signed?
Speaker 2:So the answer is it depends they, they could. It could be drafted with a timeframe. It could say something like if we're married for 20 years, these provisions will no longer you know, they'll be void. I don't do that very often. I think what I'll do more more commonly is a scale where maybe after a certain number of years, the person you know, the parties and often it's the less wealthy party will be entitled to more as they accrue years in the marriage, and that's a fairly common provision. But there could be an expiration and the parties put, of course, always revoke it at a later date. But I would probably dissuade a client from putting a time period or an expiration date on it just because I would say that in 20 years, why don't you just revisit it rather than make it expire at a particular time? You don't know where your life will be.
Speaker 1:That makes sense.
Speaker 2:That's a personal recommendation.
Speaker 1:Right. So this is a question that has occurred to me again in a few cases that I have. If there is one provision in a prenup that seems unenforceable, does it nullify the entire agreement?
Speaker 2:The answer on that is it probably depends. Typically, like any contract, there should be a provision that says that if one provision is found to be invalid, it will not have the effect of invalidating the entire document. I will always include something like that, because even in my estate planning documents like powers of attorney, sometimes we need them to be honored in other jurisdictions because people are now they're much more portable in their lives. We move around more, so we want to make sure, though, that documents are able to be valid in other states. So what I'll say is our intention is that, if you valid, simply don't dismiss the provision that might be invalid in this jurisdiction, but follow the rest of it, or follow the spirit of the document.
Speaker 1:That's my last question for you. I have so many more questions that I thought of that. I would love to ask you for another time, so we'll have to have you back on the show. But what I find this is the most common mistake that I see people make after the divorce, and this is one of the things that I pride myself on in my practice. When clients work with us after the divorce, we help them make sure this doesn't happen.
Speaker 1:But I have clients that come to me and you know as gray divorce has become more prevalent.
Speaker 1:In other words, people that are getting divorced at an older age because they're getting married at an older age might be a second marriage or a third marriage.
Speaker 1:They have more complicated assets in those situations and one of the problems is that they often do have a prenup that says this is the separate property that I'm bringing into the marriage and it's going to be my separate property when I when I leave the marriage and it's very clear in the prenup. But then when I look at their account statements, they continue to contribute to those same assets and accounts during the marriage, making it really difficult to unwind the earnings that accrued from what was there prior and after, and a prenup doesn't ever get into that kind of specific detail in terms of how you would calculate the earnings. That should be separate. I also have clients that will change the title at an asset. It might be they, their prenup, says their marital, their separate property house, will be their separate asset and then they change the title on that. So how can you help clients avoid those mistakes when you're working with them to create a prenup?
Speaker 2:So we often do pre-nutz in conjunction with their estate planning. So we might do the pre-nutz marriage and then we would do the estate planning once they are married, because it's very important that the will, the trust, identify your spouse. So we might be doing them in that same period of time. But one might occur. One would have to occur obviously before, which is kind of the word pre, and then the estate plan we would carry out or execute after they write. It could be right after they are married.
Speaker 2:That mistake that you mentioned is very calm. It's important that the pre-nutz too. I always tell them when they sign it. You can change this by how you title your accounts. You have a lot of control over how this pre-nutz can be either nullified, if you choose to. Frankly, if you put everything in your joint names, then nothing is going to be separate anymore. That even happens in cases where the one client owns the house and it's separate in the pre-nutz, but then the other one contributes or pays the mortgage or pays for costly improvements to the house.
Speaker 2:Well then I say what's your argument? Give me that very, very gray. Why wouldn't that person have any kind of a clean in your house now? So I make it clear to clients if you are owning the house, then you should be paying the mortgage of the house from your separate account. Even if your spouse is making a contribution to household expenses in a joint bank account, you should be paying them for the house out of your separate property. You should be paying for the remodeling of the kitchen. Don't let your spouse contribute to any of that, because that makes it gray. That waters down the validity or the import of the pre-nutz. It gives the divorced spouse an argument. We don't want them to have an argument. Keep it clear. It's hard to do that.
Speaker 1:Even if you've got a 401k, if that's a premarital asset and you're working for the same employer, you don't have much of a choice about whether or not you're going to continue to contribute. I also have clients that are contributing to joint accounts that they said were separate. This is becoming a big percentage of my cases where I am hired to trace the earnings. It depends whether or not the account has been actively or passively managed.
Speaker 1:The law in Michigan is very gray, as far as my understanding of it is, in terms of how do you calculate the earnings on premarital assets. We actually there's a case law that goes both ways that says can you do it? In other states they actually have a formula for how you would calculate that, but we don't have that In Ohio. They have a very clear formula on how to calculate earnings on premarital assets. Then I have clients that are trying to make arguments that seem like they want to pretend that they had a prenup. They didn't about what their separate property and what is marital. I think you make a really good case for why someone should go to a state planning attorney like you to get the prenup done because the divorce attorney or the family law attorney is not going to help them with retitling their assets and giving them that specific advice that you do.
Speaker 2:No, that's another thing. Is that creating the trust if it's an individual trust and ensuring that your separate property gets titled into that individual trust really creates a clear and definitive line of segregation of assets? It's another way to evidence what the goal of the prenup was and to effectuate its terms.
Speaker 1:This has been so helpful. I am so happy that we had you as a guest and we have to have you back again. I hope you'll be willing to come back. We're going to put your contact information in the show notes, which can be found below. I hope that people reach out to you because you are, I think, extremely unique in the estate planning attorneys that I've worked with in terms of your attention to detail. It's so important. Again, thank you so much for being here today.
Speaker 2:Thank you so much for giving me the opportunity to talk about something that we both feel is really, really important.
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