Can Your Ex Still Make Decisions for You During Divorce? With Greg Bennett | 70

What You Need to Know About Powers of Attorney, Wills & Trusts

Most people going through divorce never think about this…

• What happens if something happens to YOU before the divorce is final?
•  makes medical decisions for you?
• Who controls your business?
• Who can access your bank accounts?
• Who decides what happens if you’re incapacitated?

And here’s the scary part: if you haven’t updated your powers of attorney, the answer could still be your (soon-to-be-ex) spouse.

In this episode of The Splitting Smart Podcast, Kelly Bennett sits down with her hubby of nearly 40 years, estate planning attorney Greg Bennett, to talk about one of the most overlooked legal issues during divorce: powers of attorney, wills, trusts, and what you absolutely should update before things go sideways.

Because while most people are focused on custody schedules and dividing assets, almost nobody is thinking about who could legally step into their shoes during a medical emergency.

And yes… this stuff matters way more than people realize.

Kelly and Greg talk about:

•  Can you change your will or trust during divorce?
• What happens if your spouse is still your medical power of attorney?
• Can your ex make medical decisions for you while you’re separated?
• Who controls your business if you become incapacitated?
• What is a financial power of attorney during divorce?
• Do you need a trust before your divorce is finalized?
• What happens if you have no estate plan at all?
• temporary decision-making agreements

This episode is practical, easy to understand, and full of the kinds of things nobody tells you when you start a divorce.

Because protecting yourself during divorce isn’t just about splitting assets.It’s also about protecting your future if life takes an unexpected turn.

About Greg Bennett
Greg Bennett is an estate planning attorney and partner at Sapere Law & Mediation in Temecula, California. He helps individuals, families, and business owners protect what matters most through expert legal planning. In this episode, he explains how wills, trusts, HIPAA releases, and powers of attorney can become incredibly important during separation and divorce.

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RESOURCES

MEDIATION STARTER GUIDE: https://mailchi.mp/2939c428981d/mediation-resources
KELLY'S BOOK: Victim Is Not Your Name https://a.co/d/e4VguRk
LEGAL & MEDIATION HELP: https://saperelawfirm.com
INSTAGRAM: https://instagram.com/saperelawfirm
FACEBOOK: https://facebook.com/saperelawfirm

Transcript

1:17

Alright. Well, today we get to talk about can you do estate planning while you're going through a divorce. And we've got Sapere Pro, Greg Bennett, my significant other here. Before we start to talk about some, a main piece of an estate plan that people don't think about and those are the powers of attorney. Let's talk for a minute about what makes up an estate plan. People throw that term around all the time. What is an estate plan? Right. So If you got your estate plan done right, say a lawyer did it for you, rather than going to a Legal Zoom or something and doing it yourself. Your estate plan has multiple parts. The first and what most people think of as, the most important part is the trust. That's where you put your assets. Tell, you know, say you want to get your stuff when you die, those kinds of things. But there are other thing parts of the, of the estate plan, one of which is, say a HIPAA declaration, which says who gets your medical information? When you are, incapacitated, so you're in the hospital and the doctor needs to know who can they release your medical information to? That's what the HIPAA release is for. So you're, you're just talking about......who's entitled to receive your medical information. Okay. Okay. So under the law it would just be like your spouse, right? Right. But if you want, say your parents or your children to also receive that information. Or you're going through a divorce and you don't want your spouse to have that information, you can change your HIPAA declaration because it doesn't have anything to do with the assets and the divorce. And that's the main thing you have to think about is am I changing something that affects the divorce or is it affected by the divorce? Such as changing who the beneficiaries are of the community property and the trust. You can't do that, right, because it's part of the divorce. It's what the divorce is, well... kids too. But a lot of times the assets are the main thing that is part of the divorce. The other thing is, so you've got your trust, you've got your HIPAA declaration, and you've got a will. So when you have a trust, your will is mainly for the things that you forget to put in your trust. So you have a trust. It's 10 years old, you buy, you buy a new house. Hopefully you would put that into your trust, but if you don't, your will... It's called a pour over will. So it would pour what's in your, what's in your own name back into your trust. So, so it doesn't get, have to go through probate when you have a trust. Okay? Right. That's what your will is for. So the, so a lot of people don't realize this, who don't have what we call a living trust, is that a trust package has a poor over will or a will component to it. A lot of people think about, I either have a will or I have a trust. But what you're saying is that will piece of it is I put all this stuff in the trust and then as life goes on, if I die before I get, maybe I buy two rental properties and I haven't updated my trust. Right? That pour over will basically says anything that's not caught up into the trust is addressed this way. Is that, is that right? Yeah. Yeah. I mean, there are, there are things you have to do to, to put it back in the trust through the probate court, but that's a different discussion for a different day. The bottom line is if you have a trust and you have a poor over will, there's a way to get anything that's in your own name poured back into the will. But for today's conversation, the most important things that are part of the estate plan are not the trust and are not the will, and are not the HIPAA disclosure, it's the powers of attorney. Ah-huh. And a power of attorney simply means that you're, that you're giving somebody the authority to step into your shoes legally, under certain circumstances. So for example, in when we set up trust, we usually set up two separate kinds of powers of attorney. The first would be a financial power of attorney. And so what that would say is, if you are incapacitated for some reason. Say you get in a car accident and you're in a coma. Okay, sorry. But that things like that happen. That's why we have these documents. It tells the, tells the court or tells the world who's entitled to make financial decisions for you. So they're entitled to your banking information. They're entitled to say, sell real estate. If you need to pay, sell a piece of property to, pay for some medical expenses, deal with your investments, deal with anything financial. Okay? That's a financial power of attorney. And in that kind of a scenario, what might that look like? Where, let's say you have a business, you're a CEO of a medium sized business with 50 employees, or under a hundred employees. And, and there's no plan within the business. It's, you still pretty much run it yourself, even though you've got a lot of employees. And so you don't have a bunch of shareholders, you're privately owned and, you get into an accident and you're in a coma. Is that the kind of scenario we're talking about where, if you didn't have a power of attorney, would it default to the spouse to make all the financial decisions for the business? How does that work? Yeah, it would. So let's say you're going through a divorce and you get in a car accident and you own a business, let's say you're a sole proprietor, okay? Let's make things easy so you don't have any corporate documents to interact with the situation. Okay? Our attorney brands are going crazy on the hypo. I know, I know. You have a sole proprietorship business that you run and you are in a coma. Okay? So who runs your business? If you don't have any documents, that would be the person who's next in line. Basically your heir, right? And so that would be your spouse if you're married, that would be, your eldest born child if you're not married. But let's say you're going through a divorce, do you want your spouse running your business? Right? You're the person you're divorcing, right? Probably not running your business. Yeah, No. So, if you have a trust, then you would've had, you would've signed a financial power of attorney. Most of the time people put their spouse on as the first person who would step into their shoes. We call that person the attorney in fact, just the term of art, meaning the person who can act on your behalf pursuant to a power of attorney. So you're going through a divorce, your spouse is named as the attorney in fact on your financial power of attorney and you get in a car accident, could no longer run your business. Who's going to run your business? The person you're currently divorcing is going to run your business. Right? Right. And that's the last thing you want to have happen. So let's get a little clear on this. So we talked about the components of a trust, and so we've got the actual trust itself, right? We've got financial and medical powers of attorney. Yeah. We haven't talked about medical yet, but... Yeah, right. And then we've got a will, which we call a pour over will. That's the catchall for things that don't make it into the trust before you... mm-hmm....pass.. and are there other components of the trust? I don't need to get too technical. They hit to disclosure. There's a couple other insular documents, but we don't need to talk... So you just said, when you're getting divorced, when we started out talking about the ATROS, the automatic temporary restraining orders, you can't change an existing trust. So does that apply to the financial power of attorney? The financial power of attorney can be changed because that's, that's all you're doing is telling the world who you want to act on your behalf. It doesn't have anything to do with who gets the house. It doesn't have anything to do with, you know, who gets any of the other community property assets in the trust. All it's doing is saying, this is me and I want person X to act on my behalf if I'm legally incapacitated. So during the divorce, at the very beginning of the divorce, you should change your powers of attorney. Let's think about it for a different thing. Like you mentioned a medical power of attorney. Mm-hmm. So there's two powers of attorney, financial and medical. Right. That's an advanced directive. A lot of people call it an advanced directive. and that will tell the, the hospital, say, who's entitled to pull the plug if you're in a coma. Right. What medication to give you, what level of pain relief to give you. All the medical decisions that you would normally make on for yourself, you can no longer make'cause you're legally incapacitated. So this person who's normally the spouse, if you enter into the trust and you sign the power of attorney while you're married, 99% of the time the person puts their spouse as their first choice for a medical attorney in fact. So now you're going through a divorce and you're in a coma. Do you want your spouse, who you're divorcing to make the decision on whether to pull the plug or not? Probably not. And here's the other question. So, and this is not farfetched. It's not a hypothetical that is never seen. In fact, it, it does get seen from time to time. We don't change the power of attorney on medical or financial. We get into a position where we're incapacitated, but we're going through a divorce and that spouse is, or soon to be ex-spouse, is still in the driver's seat. But you've moved on and you're starting to build your life differently and perhaps you've got your own significant other. Isn't it true that, that spouse, as long as they remain in the driver's seat on the medical side, can prohibit who without a court order, who can come in and have access to you and see you while you're hospitalized and all of those things. Sure. I mean, that's a combination of the HIPAA disclosure and the power of attorney. But yeah, basically they step into your shoes. So if you have a new girlfriend say, and the spouse you're divorcing, isn't appreciating the new girlfriend very much and she wants to come see you in the coma ward, that spouse could say, no, you're not allowed. So it's very important that when you are starting a divorce that you get your powers of attorney updated. Because if you don't, like we're saying, your ex, could make all these decisions for you while you are, you know, lying there in a semi vegetative state. It happens a lot and it can be very, very, unfortunate. They have fiduciary duties. Right. It's not like they're, they can come in and do whatever they want. They're still a fiduciary. Right? They're your attorney in fact, they have, they have a duty to act on your behalf in the manner that they think that you would want. What people don't realize is it's not all or nothing. There are some remedies if the family members or other people right, think that the attorney in fact is breaching a fiduciary duty and not acting in the best interest of the person who is incapacitated. There, there are avenues of going into court. Can you talk for a minute about what that entails? I mean, it's not an easy run into court situation, right? No. I mean, if it's an emergency situation, they're going to pull the plug tomorrow. Yeah. You could probably get into court in a day or two and get an emergency order. You know, but you have to find a lawyer. You have to hire a lawyer. They have to write the paperwork. They have to file the paperwork. The court has to decide whether to hear it on an emergency basis or not. And, you have to go to court. You have to argue it. The other side's entitled to write a response, you know, and the normal course of things, it can take a month. And, you know, if you have some sort of, you know, emergency situation and the court decides it's not an emergency sufficient to have ex parte, an ex parte hearing, which means like the next day, you could be waiting a couple of weeks, and in the meantime, there's no rulings, there's no orders. The person with the power of attorney could continue making decisions and it could turn into a really bad situation. Yeah. Yeah. Just between the time that you decide to go into court and the time that the court decides to hear what's going on. Yeah. Even if the court grants you orders, you've got a good, got at least a couple of weeks. And we're running into probate court. This isn't the family law court. Family law doesn't have any jurisdiction over this particular issue. It's probate. So if you're in, in the middle of a divorce, that case is in the family court. Right? Right. But these issues we're talking about, the jurisdiction is the probate court. Right. Whole different set of law, whole different set of rules. Whole different, whole different set of lawyers. Your family lawyer is not going to go into probate court. You pointed out something that's interesting and it's something that, I like to do in the mediation scenario, and that is when couples come in to mediate their divorce and it's super common that there's a family business and it's also very common that one spouse does not work in the family business. Yeah, I hear the dog crunching his bone in the background. I'm just hoping that's a bone. That's our studio dog Bean. Anyway, so, so when there's a business and one spouse is, as far as the business is concerned, we call them the in spouse. They're in control of the business, they're running the business, and they're going to go, and now they're starting a divorce process. We will often in mediation discuss should something happen to the in spouse who's running the business during the divorce process. Who do we agree is going to be in charge of making the business decisions and we'll mediate and negotiate a new power of attorney for the business only. Can you speak to that? The difference between a business power of attorney for financial and operational reasons versus, a standard personal power of attorney just for overall personal affairs and the duties that the agent, in fact, the person who all of a sudden becomes in charge of this business if it's not the spouse while they're going through a divorce, Who does that person owe the duties to do? Do they owe the spouse any duties, do they owe generally if there's a couple of partners, the duties? So that was a few questions. Okay. The first question is, yes, you can have multiple powers of attorney for different things. So if you want to carve your, powers of attorney up between like your personal finances and your business, you can have just a business power of attorney and say, appoint a key man in your business to run the business rather than say your spouse who would be in charge of the bank accounts. Yes, you can do that. The second question is, what is the attorney in fact's fiduciary duties? Who does he owe the duties to? Okay, so he's stepping into your shoes. He's acting on your behalf. So he has the same fiduciary duties that you have when you are acting. So if you have a business that's community property, you owe your spouse certain duties during the divorce. Duties of full disclosure, duties of running the business in good faith and in the normal course, things like that. So whatever your duties were before you got hurt, your attorney in fact, has the same duties afterwards. It's just like he's you. Let me throw a twist on this one. No thank you. Well, you're used to it. No twist. No twist. So we have an interesting tool in family law called the stipulation and order. And the stipulation and order is a document that basically, we, we use primarily during the beginning of a divorce case until the end of the divorce case. And we have a series of temporary orders. And a lot of them, when they're by agreement, are under a form called a stipulation and order. So that means we've written out the agreement. Everybody signs yes is this is the deal and the court, there's a line, signature line for the judge. And the judge says, "Yes, I agree, and we'll make this agreement of the parties. All these terms are now the court's order," so it turns it into an order. So we get stipulations and orders on all kinds of issues, and there is the ability to say, in the event, I'm incapacitated while this divorce is going on, we agree that, spouse will now be in charge, or we agree that this person in the business will now be in charge and we can write in reporting duties and all those things like that. So that's a, that's a, a control issue over the business that the family law court can put into place. I don't know how that butts up though, against a financial power of attorney for the business. You would just need to make sure that the stip and order has language in it, stating that it's superseding that portion of the financial power of attorney. The main thing that you don't want are conflicting orders, A power of attorney over here saying the spouse is in control of the business and a stip in order over here saying that the key business person is... okay, that's a conflict, and you'd have to go to court to have that resolved. Usually, probably the judge would say whichever's later in time would control, but it's an inherent conflict. And so you don't want to have one document that says one person has the authority to do something, and another document saying another person has the same authority. Right. So the way to avoid that is to have the subsequent document, the new stip and order, say that the power of attorney dated previously is superseded to the following extent. Right. But I think for me, at least, my comfort zone from an a practitioner's point of view is really to have those kinds of agreements be done through a financial power of attorney and on the business issue alone versus over in the family law court under a loose stipulation order. And the reason I prefer to do it this other way that's under the auspices of, of probate court, even though it would be more convenient to keep it in one court if a dispute arises right in family court, is because now when we're under the financial powers of attorney and, and the powers for financial and business management, right, there are different requirements. Now we're under the probate code in California, and I suspect in many other states we're under the probate code, whatever your local probate code is. That's my preference because I think that the protections are stronger there because of the duties, but I'm just curious about your thoughts on that. I don't know that the duties are stronger because the duties of a spouse running a business are the same as the duties that a, a primary shareholder owes to a minority shareholder. Right? But what I'm getting at is what if we say, because a lot of times, a couple doesn't want to designate one or the other, right? So if wife's running a business. And we're talking in mediation about this. And, it's not uncommon for people to have been separated for over a year or two. I mean, sometimes people just put off dealing with the divorce situation and so things have really changed. And that spouse, like that wife says, if I become incapacitated, I don't want you over here now in charge. You've had nothing to do with my business for the last two years. Yes, I know that it's all community property except for what I've done in the last two years since we've been separated because it was all started during marriage. So I want, you know, Charlie, the VP to be in charge. Well, that's why I'm saying she should have changed her power of attorney at the beginning. You know, she changed it at that point. Right? But, but hear, but hear me out on this, this example. So in that scenario, when we're not putting a spouse in, we're putting some third party in. Mm-hmm. And family law gets a little complicated because if we want full control of that situation, we do a stip and order really to have judicial control. That person needs to be brought in as a party to the divorce. Do you see what I'm saying? So if there's an order that so-and-so's going to be in control and we'll report back to the court, blah, da da, da, da. If they're not brought in as a party. Who are you? Who's the court talking to? My point is I would rather, even though we're creating two court issues, if there's a problem with it, right? We're going to, we've got two courts now. We've got family court and we've got probate court if we have to go try to get whoever this third party is booted out as the agent in fact. I would rather, in my personal preference, see that we have to go into probate court because okay, don't take this wrong to those who are listening, who are friends, family, and judiciary. But what we know for sure is our judiciary, at least in our neck of the woods, we're understaffed. We don't have enough bench officers. And so there's a, a pretty constant rotation of family law judges on our bench, and they are often not, and understandably, well-versed in these complicated types of issues, right? The question is, do I have authority as the court, as the judge, over this third person if they're not joined as a party to the divorce? Is it an issue of an enforcing a financial power of attorney, then yes, your probate court judge is going to be more familiar with that because powers of attorney, such as medical powers of attorney, financial powers of attorney, they're normally part of an estate plan and they would normally fall within the purview of the probate court. The key would be to have the power of attorney. And have the same attorney in fact as the person who is authorized in the stip and order in the family law court to run the business. That way you don't have a conflict. Yeah. Yeah. So, okay. One of the last couple of points here, so one, what if you don't have a trust? And you don't have anything. You're starting into a divorce and you have nothing at all. When it comes to a medical and a financial power of attorney. Can they only be done in the context of a trust? No, you can do them independently. Let's assume they have separate property. Okay? Let's just make that assumption. Separate property in, in family law means something you either brought into the marriage or maybe an inheritance that you received, that you kept separate. Or that you, earned after the date of separation. Right. So let's say you have separate property, then there's no reason why you can't set up a trust and a will with your separate property, because it's not part of the divorce. Now there could be a dispute over what is separate property. That's a different question. But if you have something that is your separate property and you know, unequivocally your separate property, you can put that in a will. Right? And you can start a trust and just not fund it. So that's the other thing. And then you have your whole package started. You do your powers of attorney, you do all your, your other disclosure and everything all at the same time. And then when the divorce is finalized and you know who gets what, then you fund what you got at from the divorce into your trust. Right. So a big caveat on this though is when we start divorce cases, and this is the thing that most everybody hates this part of a divorce, and that's the financial disclosures. At the very beginning, everybody has to complete all these financial disclosures. Right? I have to write down all the property that I know that you have, that I have, and that we have. Meaning if I think it's your separate property, if I think I've got something that's my separate property, I have to list all that and note, right, whose property this is, separate or community and then the community property. Until the court makes that judicial determination, it's at issue. So let's say, I've got an old jalopy that my dad gave me when I was 16 years old, and I've had it forever. And then we get married and we've been married for almost 40 years. Can you believe we're that old? Anyway and something goes wrong and we decide to get a divorce? No one's going to argue unless we put a lot of money into this jalopy that this thing that I've had sitting in a garage for 40 some years or more, that my dad gave me is separate property. However, until a court determines all of this stuff - is that separate - that's community - it's technically at issue. So what we like to see is that the parties agree, yes, that's separate property. And have the court sign off on that on a stipulation and order and then go ahead and put it into the new trust. But I think, at least for me, the comfort level is more about doing a trust for anything that's new until the divorce... That's why I said unequivocally.. Okay, See, I covered myself. By using that fancy lawyer word. Good lawyer move. Yeah. But yeah, the short answer though was yes, you can do the powers of attorney. If you don't have anything, yes, you can do them for the first time. You can revise the ones you already have that, that's fine. And we strongly recommend that you do it. Hey, before we get back to the show, would you like me to serve as your personal mediator? You know, where I help you and your spouse or your soon-to-be ex navigate some pretty important family law issues, deciding things about your kids, how to split up your assets, your debts, all outside the chaos of the court. How do we do that? We do it faster, way more economically, and with absolute civility and confidentiality. If you wanna know more, go ahead and hit that link below, and you'll find out how you can connect with me, and we can talk about what's most important to you and your future. Now, back to the show. So if you're thinking about getting a divorce, Mr. Bennett, when should you take a second look at your powers of attorney? Before, right, before the ATROS are in place. The restraining orders. Because once those ATROS are in place, you are basically frozen in time except for the powers of attorney. But anything else, you're pretty much frozen. Yeah. You have to get the other side's permission or a court order and that's what the whole divorce is about, you know? Not being able to get the other side's permission. Except for the powers of attorney, you can change those. Yes. Powers of attorney are fine. So do those right away. Right, Right. Okay. Alright. Well, very helpful as always. I love having you on Mr. Bennett. You're welcome. And I affectionately call him my groom. Okay. Well, that's who I am. All right. Well that'll be a wrap.