Yesterday I told you the state’s plan is shockingly bad, so today I’ll deliver the goods. PS – Even people like Sony Bono and Jimi Hendrix aren’t exempt from this (neither one created an estate plan prior to his death).
Here’s the plan when you or a loved one dies. California has decided if you are married your spouse gets all of your community property (unless there is another arrangement in writing). Community property simply put is what you acquired during your marriage unless it was a gift. Anything you owned prior to marriage or received as a gift during marriage (think inheritance from your parents) is considered separate property so long as it has been kept separate from your community property (again this is very general and of course there are exceptions to these generalizations).
Here is the kicker and something most people don’t understand. While your community property goes to your spouse, your separate property DOES NOT go entirely to your spouse. That’s right – it is split up between your spouse and your children. So that inheritance you received from your parents – that money you ear marked with your spouse for your vacation plans, house remodel or living expenses – it will now be split between your children and spouse. Every spouse and biological child gets something, even if they are newly married, terrible, estranged, a drug addict, someone who has already gotten a lot of help from that person during life, or in jail (all real scenarios we have had in our office for families that did not plan in advance). The only exception is if they murdered the person who died they do not get anything, but even that is not as cut and dry as you would expect.
And here is the cherry on top. Just to be sure that everyone gets an equal crack at your cash, the state requires that notice of the death be published in the newspapers so that every last cell phone bill, credit card company, and other creditors we would rather forget about has an opportunity to come forward and scoop up what’s left before your loved ones get it.
It goes without saying that no one on earth would choose this plan if they knew they had other options. But if you do not have a will or trust (what we call an estate plan), you are currently saying yes to this plan.
You may be wondering why no one is talking about this (beside the fact that it is not exactly uplifting). It would shock you if you knew how many of your friends and co-workers have experienced this, but don’t talk about it because it is downright terrible and after it’s over, they never want to think about the pain of these circumstances again.
I asked my Facebook friends a few years ago why they have not gotten a will or trust yet, and many of you said that you were not sure where to start, what the benefits are, and who to trust.
So over the next several days, I am going to explain all of that to help get rid of whatever roadblocks that are holding you back so that you can give a big, fat NO THANKS to the state of California on this one. If you want to join a free virtual workshop later this month to get this resolved for your family, join this group.
In tomorrow’s post, I will break down the exact cost of the state’s plan if you or a loved one dies and owns a house and/or has some savings.
By the way, no one in the above picture had an estate plan! Pretty crazy huh?