Protect Your Assets from Creditors and the Costs of Long-Term Care
If you are going through a process with any of the 4D’s – Divorce, Disability, and Death, assets come into play. There is really no guarantee on any type of asset protection. When it ends up in court, you never know what is going to happen. Understand that there is no assurance, but you can build in layers of protection.
Today, with our guest Atty. John Ceci, we are going to talk about divorce, asset protection that you can get ahead of time and use legal strategies that you can shield yourself with.
In this episode, you’ll learn…
- Chris’ positive focus for the week
- Things that you can do proactively with asset protection
- Types of Trusts to protect your beneficiaries
- How Castle Trust can protect your assets from creditors and the costs of long-term care
- Hot assets, real estate, and LLC
- Divorce statistics
- John’s guide to simple divorce
- Basic ways to get your divorce completed
- Completing a Verified Financial Form to reveal everything
- Effects of commingling assets
- Protecting inheritances
- Beneficiary designations
- Keeping the money on the bloodline
- Legacy inheritance language
Connect with our Guest, Atty. John Ceci:
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This is the Chris Berry Show, expert information on wealth, estate, and tax planning for the second half of life, information that you can understand. Here’s your host, Chris Berry.
Welcome to the show. This is Chris Berry and, of course, the Chris Berry Show. Of course, it would be me. We start the show each week with a positive focus, which I know right now can be difficult with everything going on in the world, but I think it’s important to focus on the positives, the silver linings. For me, this past weekend, my wife and I went out with some friends actually for really the first time since this quarantine has started. We’d practice all of our social distancing and all of that, but we ate outside and even took a walk and got some ice cream.
It’s good to see some friends that we haven’t been able to see in person in quite a while. It makes us appreciate the things, appreciate the things that we had prior to the pandemic, and makes us appreciate them even more now. That’s my positive focus. Hopefully, something good happened for you this past week. On the show this week, we’re going to focus on asset protection. Then in our second and third segments, we’re going to bring on attorney John Ceci. He’s going to talk to us about family law, and some of the issues that go along with that.
For the first segment, I thought we talked about protection, asset protection because that’s one of the things that as you go through if you were to go through a divorce, and I certainly hope you don’t or I hope no one in your family or children have to go through that process. But of course, assets come into play. What we’re going to do is talk about some of the positive things that you can do ahead of time to try to protect against, say, a divorce, disability, all those horrible D words, the D-word, death and disability, and divorce.
We’re going to talk about asset protection. Really, I look at asset protection in two ways. First of all, understand that there’s nothing that’s foolproof. There’s always what we call bad fact cases. Understand that if anyone’s guaranteeing any type of asset protection when things end up in court, you never know what’s going to happen. Understand there are no guarantees, but you can build in layers of protection. There are certain things, legal strategies that you can use to try to shield yourself.
A lot of times, it involves setting up trusts or companies, LLCs typically. LLC is a limited liability company. Then certain types of trusts can offer asset protection for you as well as asset protection for your beneficiaries. It’s important to understand the distinctions between the types of trust because not all trusts are created equal. Here’s what’s called a living trust, a revocable living trust. That avoids probate and controls where things go when you pass away. In that revocable living trust, you can build on language to protect your beneficiaries.
But unfortunately, most of the trusts that we’ve reviewed say that it goes right to the kids at age 25, 30, 35. The problem with that is if you’re leaving it to your daughter, and she gets divorced at 36, well, guess what, and John will talk about this more in the second and third segment, some of those assets will not be staying in the bloodline because they’re going to an ex-spouse. Instead of that, with a lot of the trust that we create, we build in what we call legacy inheritance trust language.
We build in language inside of the revocable living trusts that say that if you’re leaving it to a loved one, like a beneficiary or child, whatever you leave to them, they can choose to keep it in the trust where it can remain protected from divorces, from lawsuits, from creditors, from bankruptcy. Whatever they decide to keep in the trust would be protected. They could control it. They could decide how it invested. They could receive the income from it. But as long as they keep it inside of the trust, it’d be protected from one of those horrible D words, the divorce word.
That’s the way that you can protect your children. If you do want to look at protecting your children, you might want to look at having legacy inheritance trust language inside of that revocable living trust. Now, there’s another type of trust though, and this is a trust that protects you. It’s called a castle trust. It’s a form of asset protection trust, where as soon as you move the assets into the trust, immediately, they’re going to be protected from creditors.
If you’re not yet married, it almost acts like a prenup, where whatever is inside of the trust could be protected from a subsequent divorce, but what a lot of my clients utilize it for is because it protects them from that nursing home or Medicaid spend-down. It protects them from the devastating cost of long-term care. By moving the assets into a castle trust, immediately, they’re protected from creditors, which appeals to a lot of our business owners or physicians. Then also, what it does is it starts a five-year clock, where if you can make it five years without needing a nursing home, then everything inside of that trust would be protected from that nursing home or Medicaid spend-down.
Now, understand that not all trusts do that. If you have a revocable living trust that you did five, 10 years ago, guess what, you’re probably missing, a, the asset protection for you, and then b, missing the protections for your beneficiaries, because it’s probably saying that it’s just going outright to those beneficiaries. If you want someone to take a look at that, give our office a call at 844-885-4200. All we’ll need to do is see a copy of your estate plan, and we can do what we can call an estate planning audit, where we walk through basically a 10-point checklist of issues to see if your estate plan is addressing each one of these issues.
Again, understand that not all trusts are created equal. In fact, I’d say 95% of the trust that I review are missing that legacy inheritance language protecting the children, so whatever you do leave them could end up getting lost in a divorce. We talked about two types of trust. Then also, I wanted to bring up limited liability companies. These can provide a layer of asset protection as well. Typically, what we use LLCs for is to limit the liability, hence limited liability company, caused by a hot asset, a hot asset, an asset that could cause concern, or it could cause additional liability.
For example, the property up north that’s on a lake, if someone has a slip and fall hits their head on the dock, all of a sudden, because of that hot asset, that property on the lake, now they could come after your own personal accounts. They could come after your investments and things like that. We use LLC, a limited liability company, almost like a container or a box where we put that hot asset in that box. Now because it’s contained within that LLC, if there are a slip and fall, they can only go after what’s inside of that LLC.
They can’t come after your own assets, what’s in your personal name. It’s a way to shield that hot asset from getting into your personal accounts or personal affairs. I might be asking, “Well, which one should I do? Should I do asset protection trust or should I do LLC?” Well, the answer is I’m going to have to give you that lawyer type answer of it depends. It depends on what your goals are because understand that liability can flow in one of two directions.
For example, if you just did an LLC, and it’s in your name, and you own that LLC if you were to do something stupid like getting in a car wreck, they could come after your LLC because it’s in your name because you own it. It’d be no different than owning Coca-Cola stock. It’s in your name. They can come after it. You might not want that LLC in your name. Then you might be asking, “Well, whose name or what should I put it in?” Well, a lot of times, what we do is we create an asset protection trust, and put the LLC in the asset protection trust.
Now, you have protected against liability from both directions. You’re protected where if you were to get in a car accident, or if you were to need nursing home care, whatever’s inside of the trust is protected. Then also, you have protection the other way, because if you just put that rental north into your trust, because it’s a hot asset, something could happen, and now they could come after the additional assets in the trust. That’s why we still would want an LLC for any type of hot assets like rental properties.
If you have a rental property in your name, understand even if you have insurance, insurances just like Sandbags, it doesn’t provide full protection. They can still come after you over and above whatever the insurance would pay. But if you have it inside of the LLC, again, that builds a wall, where now it’s insulated. Again, there are no perfect asset protection answers out there. All we’re doing is building additional layers. But in my experience, the trusts and the LLCs have held up.
Again, when you’re looking at asset protection, understand that it’s not just caused by you like you get in a car accident or you need nursing home care. You also need to think that there are some assets that just by their very nature are a little bit dangerous to hold in your name, so it makes sense to put an LLC or a limited liability wrapper around some of those hot assets like property up north, a second house. Now, you would not want to put your primary residence inside of LLC because that would screw it up for tax purposes.
You have what’s called a homestead exemption. We’ve had some interesting cases where without naming any clients, let’s say you have an apple orchard. It’s on your primary residence, but you have people coming to the orchard all the time. You can’t put that property in an LLC, otherwise, you’re going to lose that homestead exemption. In that situation, we set up a special trust just for that one piece of property. Now, a common question is, are LLCs expensive, or is there a lot of ongoing maintenance with an LLC or even a trust? I get that question.
With trust, there are no ongoing costs. It’s not like you have to pay a fee to the lawyer every year or anything like that, so you don’t have to worry about it. LLC in Michigan is not too difficult to set up. The ongoing costs, I want to say it’s only about 25 or maybe $50 every February. You just have to basically re-certify your limited liability company. We do a lot of LLCs strictly for real estate. Again, it’s second piece of property. If you have multiple pieces of property, you might also want to think about separate LLCs for each one of those properties.
Understand that that real estate, that’s a hard asset. If you were to stick, say, five pieces of property into one LLC, and there are a slip and fall on one of those pieces of property, they could come after everything else in the LLC. It may make sense, depending on the size of the assets, to have separate LLCs for each property. I have some client, well, fictional clients who when the Flint water crisis happened, they ended up buying a lot of lots up in Flint, and they weren’t very valuable like, 10, 15, 20, $30,000 per property.
It would take maybe five of those into one LLC. Once the value gets to about $100,000, then we would set up a separate LLC. Then all of those would be owned by the trust. Understand that it’s a little bit of a shell game, but there are things that you can do to protect everything that you’ve accumulated. It’s important to understand that as you move into retirement, you’re moving into a new phase of life, where while you’re working hard, it’s all about accumulation, accumulation, accumulation.
Then now, it’s all about preservation and distribution. If you are sitting there and you’ve said, “You know what, I’ve accumulated quite a bit, and I’m a little bit concerned with everything going on out there and want to look at protecting my assets and make sure that if my kids were to get a divorce, which of course we don’t want to wish upon anyone, that I don’t want my money going to that ex-spouse. I don’t want my money going to the ex-in-law, who we call an outlaw. Then maybe you want to explore some of these asset protection strategies of, say, a castle trust, which again is a type of trust that can protect your assets from creditors and nursing home costs.
Then when you pass away, they can have that legacy inheritance trust type provision in there, so whatever you’re leaving to the next generation can be protected from the divorces, the lawsuits, creditors, bankruptcies, et cetera. Then if you do have, say, rental properties or some type of hot assets or property up north, you might want to explore an LLC as a way to protect that hot asset. Again, that LLC probably shouldn’t be in your name. You might want to have it assigned to your asset protection trust, so you’re protecting against both forms of liability.
If you were to do something silly, get in a car accident, you’re protected. Likewise, if there were a slip and fall on one of the rentals or something like that, then whatever inside of the LLC wouldn’t spill over onto your assets. If you want to learn more about this, give our office a call at 844-885-4200. Again, 844-885-4200, or you can visit us on the web at castlewealthlegal.com. Again, that’s castlewealthlegal.com.
Stick with us as we bring in John Ceci. He’s going to talk to us about some of the family law issues. We don’t want to wish this on anyone but understand that sometimes these things happen. He’s going to talk about protecting assets in a divorce. What accounts are protected? He’s going to talk about commingling assets. If you’re to leave money to beneficiaries, and they commingle assets, he’s going to talk about what effect that may happen or have.
We’ll also talk a little bit about how trusts may make sense in terms of a way to protect those inheritances. Again, when we were doing in-person workshops, we’d get this issue or question all the time of, “How do I leave things to my kids, and make sure that it stays in their name versus going to the in-laws and the outlaws?” Relying on beneficiary designations, that will get the asset to them. But once it touches them, then it could be, as John will get into commingled, then it’s going to be part of the divorce argument if they were to go through a divorce.
The idea is to keep the money in the bloodline. Make sure the in-laws or the outlaws don’t get their hands on what you work so hard to do. Again, so we’re talking about asset protection. Think about things like a castle trust, which provides asset protection for you. Think about a legacy inheritance trust type provision to protect what you’re leaving to your children to make sure it stays in the family. Then think about if you do have hot assets like real estate rental properties, property up north. Think about an LLC, a limited liability company.
Then it should be structured in such a way to provide maximum protection. If you do have questions on asset protection, give our office a call at 844-885-4200, or you can visit us on the web at castlewealthlegal.com. Stick with me. As we continue this conversation, we’ll bring in my good friend, John Ceci. He’s going to go over some things to think about as it relates to family law and grandparenting time and that type of thing. Join me as we continue this conversation.
Hi, we’re Madison and Ryan Berry.
Our dad is Chris Berry from the Castle Wealth Group.
The Castle Wealth Group used to be the Elder Care Firm, but dad wanted the company to be broader in its scope of services.
To not only protect and preserve assets but to help people grow their assets to prepare for retirement.
As a certified elder law attorney and fiduciary financial advisor, our dad and his team at Castle Wealth Group can help you with lots of important things.
To tell you more, here’s our dad, Chris Berry.
Thanks, Maddie and Ryan. Here at the Castle Wealth Group, we can help you put together an estate plan to avoid probate, work with you on a tax plan to keep more money for your family, and less for Uncle Sam, and protect you against the devastating cost of long-term care. Our team is here for your family. I invite you to learn more about the Castle Wealth Group at our next free workshop where you will learn the three steps to create a legal, financial, and tax plan for the second half of life. Call us today to register at 844-885-4200.
The Castle Wealth Group, formerly the Elder Care Firm.
Learn more at the castlewealthgroup.com today.
Welcome to the Chris Berry Show, very excited to have John Ceci with us. He’s a fellow attorney. John, how long have we known each other now? It’s been a couple of…
Four years, five.
You invited me to lunch a few years back. You invited me to lunch a few years back, which just came out of the blue, but it was a good thing because I’m here today.
There we go. There we go. Two lawyers talking, it sounds like the beginning of a bar joke. Two lawyers walk into a bar.
What made you want to go to law school?
As I think back upon it, I think when I was very young and naive, if you’d asked me that in high school, I’d probably said I like to argue and I like to win.
As I got a little older, I thought more about maybe using it as a springboard into politics, but that hasn’t happened. Now, I’m, I think, more of a problem solver is what I approach. I have a YouTube channel, and one of the videos I put on there is just titled, “What Do Attorneys Do?” My answer to that question is we try to help people solve problems, legal problems.
Of course. What area are you focusing on?
At the moment, I have a few different practice areas. What I know the best is estate planning, estate administration. I also know appeals pretty well in bankruptcy and family law. I should say almost anything in probate court, whether that’s a guardianship, a conservatorship. There are mental competency hearings and child protection proceedings.
Sure. With everything going on in the crazy world out there, are things moving through the court system right now, or are they stalled with all the shutdowns and closings?
Yes and no. The court’s shutdown except for whatever they termed emergency hearings. I believe our Supreme Court put some orders out in March. Courts are open in different phases in different places. I actually have a couple of new cases I need to file here in Livingston County this week, and I’m told I can actually go into the courthouse and file them in person aside from mailing and emailing. Some courts are now accepting faxes, but I think Wayne County is emergencies only…
I’m sorry, emergency pleadings can be filed may be in person, but everything else is faxed or emailed. Oakland County, the same thing. County by county, really, you need to look it up.
Have you done any of the Zoom court proceedings?
Probably half a dozen or so so far. I got some on Thursday morning coming up. I actually have a trial scheduled mid-October. When we had our status conference on Zoom, I had told the judge that I was willing to come into court. I’m fine with it-
… to do my presentation of the case, but as you saw when I walked in here, I’m limping, and I got a walker. I’m not as mobile as I was a month or so ago. Now, I’m thinking Zoom, “Hey, that may save me the hassle of having to drive an hour down to Monroe, because it’s Monroe.”
We’ve done a lot of client meetings and interactions over Zoom, but I had an issue where someone passed away, and then the family started fighting. I was actually called in as a witness. My wife and my kids were like, “Why are you putting on a tie?” I don’t know about you. I’ve been wearing a suit and tie since this started. I was like, “Well, I’m going to be “in court,” so I gotta look appropriate.”
Most courts’ guidelines say, “This is a court proceeding. You need to present yourself and conduct yourself accordingly.”
Right. It’s my first time putting on a suit and ties in probably a month. It seems like the world’s going more to Zoom, so it’d be interesting to see if courts are going to continue that even as things open up.
I think that it’s going to happen, but I’m not sure to what level. I think pretrial hearings are great. Certainly, what we call a status conference, where you’re just talking to the judge about where the case stands, and you’re not going into argue extensive things. Although I have handled a couple of motion hearings through Zoom as well, it was limited to one specific issue in a family law case as opposed to a full-blown trial. My gut feeling is I don’t know that I want to do a trial by Zoom.
I may have no choice in October depending on my leg.
It just feels like something off about that that I just don’t like, but anything… But I can tell you this, I know that the bankruptcy court in Detroit is now dealing with what they call the creditor’s exams, the 341 hearings, which is where a person who’s filed for bankruptcy has to get some testimonial growth.
They’re now doing those by Zoom. I think for bankrupt… That’s the only court hearing normally in a bankruptcy. If you’re a bankruptcy practitioner, I’m thinking the practice may get a little easier, especially for someone like me, for example. If I don’t have to drive to Detroit for a 10-minute hearing, that’d be great.
You mentioned that you’re focusing on family law. We talked a lot about estate planning on the show and investments and retirement. When you say family law, what is family law?
I look at it as two basic things. One is the process of getting divorced, and all that goes along with the divorce, and then usually the things that happen afterwards, so it’s like a 1A and a 1B. Then the other side of family law is anything related to generally children, custody of children, time with children, maybe child support, whether you’re married or not married-
… because as we know in society now, people don’t always get married right away. They have kids when they’re not married.
Sometimes, they don’t get along. You gotta go into court and argue, “I should have custody. She should have custody. How much do I have to pay for child support or not? When do I get to see my child?” All those sorts of things.
What drew you to family law as an area?
I think when you’re a general practitioner, you just fall into it. Historically from what I understand, I think attorneys used to probably do family law, estate planning, criminal defense and maybe even personal injury law. Now as laws have changed, especially for example the changes to personal injury law, I don’t practice that. A lot of attorneys I know suggest, “Don’t dabble in it. Either do it or don’t do it, because of the way the Michigan legislature has changed those laws,” but people just get divorced all the time.
Family issues happen all the time. I think the divorce rate from first marriages is, what, 40%, 50%. It’s fairly high.
I think one in two marriages typically end up in divorce.
Roughly something like that, and some percentage of course of second or third and beyond. You have these issues you have to deal with. Especially in a first marriage where you’re far more likely to have minor children, you have to sort through all these issues. It’s a source of work is really what it is.
Just like with criminal law, I don’t personally do criminal law right now. I have handled a few in the past, but the reality is people commit crimes all the time. We all know what our criminal justice system is broadly speaking.
Well, I was finishing up law school. I spent one summer at the Wayne County prosecutor’s office.
Oh, you saw plenty.
I was like, “This is not for me.” Unlike you, I can’t take the stress of it all. Do you find it stressful handling these issues with families?
It can be. I think part of it is when you’re a brand new attorney, and you’re just trying to figure out your way as being an attorney, everything’s a challenge. Now with… Oh gosh, I was sworn in in 2002, so November of 2002. I guess that means almost 18 years now. Plus, I had a couple years as a law clerk before that, so roughly 20 years in the legal profession now. You learn. You find your rhythm. You find your comfort level, and you learn what you like and what you don’t.
That’s part of why, for example, I mentioned at the beginning, I have handled child welfare cases, but I don’t do them anymore or very little. I get appointed to handle and appeal now and then, but I don’t do that much in the trial court, more because of the pay scale, but…
Sure. They joked around about this as shutdown and quarantine happen, but have you seen an uptick in divorce, or do you think there’s going to be uptick based on spouses having to be together 24/7?
That’s what I’ve read, and we expect it to happen in bankruptcies at some point too. However, the flip side of that is as some people have started to receive the extra unemployment benefits, there’s money coming in at least to help a family for a period of time. There may be a little bit of a disincentive, because if you split up, and somebody’s receiving those… Now, they’re done, of course, unless Congress extends it, but for that period of time, that may have helped some people.
We don’t know. I have picked up, I think, one new divorce case since things started. I haven’t heard of a significant uptick yet, but it’s entirely possible because if you think about it practically, when you’re married and you work outside the house, there’s a period of time you don’t see each other. Now, you are seeing each other, and you just stuck in that, may not be frustration in the beginning, but it’s frustrating to not be able to live your normal life. That’s what it is.
I think that that’s true for any married couples out there. My wife and I, it was probably… It’s funny. When this all started, she’s never cut my hair before. I’ve always went to a saloon. She’s like, “Your hair’s getting long.” I was like, “I know. Hold your horses, honey. Maybe give it a week. Then we’ll be through all this.” Then finally, she wore me down, but now, she’s cutting my hair.
After the first haircut, we were borderline for a second, but now she’s doing a pretty good job. There’s adjustments that, I think, we’re all making with quarantine, especially with married couples.
Let me ask you this, what do you see? Especially when we’re talking about people who’ve been married for 25 years or more, what is the process if they are struggling?
As far as just getting a divorce process started, you mean?
The divorce process is fairly… It is roughly the same for everybody. Where you get bogged down is in the details. For example, there’s a big difference between a four-year marriage with no kids, and the people don’t own any real estate, and maybe they have small retirement accounts vs. we’ve been together for 30 years. Maybe we’ve got a couple of teenagers and one young adult child in college. In a stereotypical situation, if the husband’s been the breadwinner and the wife has stayed home, he may have a retirement account with a few hundred grand, and she may have 30 or 40 from a job she had whenever.
Then they may have a home that’s worth something that they’ve mortgaged or maybe one of them own. You get into these other issues, and then as I said, the biggest issues become what happens with children. If you don’t have children, your divorce can, in theory, be easier, but I had a divorce trial last year, probably five different days, seven-year marriage with no kids, just because of the assets involved. Anyways, the process though is basically the same. One person sues the other for divorce. It’s no different than any other civil case. You have a plaintiff, and you have a defendant.
Once that’s happened, whoever the plaintiff is, they or their attorney need to serve the documents on a defendant. The defendant should file an answer, and then the case is now in the court system, and the court process takes over. Pre-trial hearings get scheduled. Status conference hearings get scheduled. Tentative trial dates get scheduled. Discovery dates are established, and so the divorce process just comes into play. If you’re an experienced divorce attorney, you know what that is, or you’ll learn it real fast.
I can about any of those specifically, but that’s a real overview.
Are divorces going right now with the quarantine, or is that not an emergency?
Well, they’re not an emergency.
Well, for the people involved, they probably are.
No, I’d say it this way. It depends. I mean, if there was violence, domestic violence would certainly be an emergency situation that you might be having to go into court and asking a judge to remove somebody from a home, but to just file a divorce in and of itself, it was not considered an emergency when the courthouse was closed. You could still file it by mail or email, so the processing time took longer, but you can still file them. You can still get divorced.
Now, I know, actually, a week or two, about a month ago, a local attorney sent just a blast email to a bunch of us local attorneys saying that he had this one particular case. They’d have gone through mediation a few times. It was ready for trial. He didn’t think it could be resolved. Then he got a notification from the court that because they shut down in March or really slow down in March, and now we’re ramping back up, the cases that take priority over divorce cases had stacked up to the point that I couldn’t get to a divorce case.
One thing that people may not realize is our state court administrative office, or maybe it’s our supreme court, one of the entities overseeing our state courts, it’s a combination of the state court administrative office and the Supreme Court. They assign priority to certain cases. Criminal cases have to be handled before a divorce case would. A child welfare case has to be handled before a divorce or a typical civil case. Because those cases have been backed up, that’s going to affect everybody else.
There’s a backlog of things right now for sure.
Sure. Going through the divorce process, people are always concerned about the asset, the nature of the assets. Are things like retirement accounts protected, or you’re-
Yes and no.
That’s a good attorney answer.
It is. The most likely answer to many legal questions is maybe. It depends on the facts.
There’s some variation thereof. The answer is two things. There is a concept in the divorce of separate property, which means something you own before the marriage may still be yours if you get divorced if you can prove it. Then the other concept is anything that is accumulated during the marriage or acquired during the marriage is generally marital property and has to be split equitably. Just to give a concrete example, on the day you get married, if you have 100 grand in your retirement account, and on the day you get divorced, it’s got 500 grand.
If you can make the case that the 100 grand is separate property, then you’re going to get 100 grand off the top, and the other 400 will be left to split up. If a judge was to split that equally in that example, you could have the person who owns the account gets 300, and the other person gets 200, and that could be found equitable.
Now, and maybe I’m misusing the term. What about community property, or is Michigan a community property state?
No, that’s California. I’m not sure what that means. Actually, I don’t even remember learning that in law school, or I forgot.
The idea is that you have your separate property stuff that’s yours, or maybe stuff prior to your marriage. Then your joint property would be stuff that-
… you’ve accumulated since.
Then a judge would look at those two things differently, right?
Yes. There is a way for a person to what we call invade the separate property. You have to prove a need or a contribution to it. For example, if one person owned a house, and then that’s where the married couple lived, that had value on the day they started living together or the day they got married. Then it’s going to have a value on the day they get divorced. Depending on how the marriage played out, it might be possible for the person who moved ineffectively to get some of that premarital value because they’ve contributed to it. They may not, though.
What about when It’s going onto a second or third divorce? Is that different than, say, a first divorce?
Normally, yeah, depending on the ages, but let’s just say you got married in your mid-20s, and that marriage lasted for 20, 25 years. There’s a good chance it’ll be different in the sense that you may not have kids the second time around would be one thing. You probably have fewer assets to split up. If you had to give your ex, say, half the value of the prior house, you may have moved out of that house. You may have a different house, so…
Stick with us as we continue the conversation with attorney John Ceci as we go over family law issues and especially those family law issues that might affect retirees as well as potentially their children. Stick with us after the break as we continue the conversation with attorney John Ceci.
Hi, Madison and Ryan Berry here from the Castle Wealth Group, formerly the Elder Care Firm.
Our dad is Chris Berry.
He’s an attorney and fiduciary financial advisor, which means he helps families plan, protects, and preserve their assets.
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Welcome back. We’re here with John Ceci as we’re talking about family law issues. As we’re going into the last break, we want to talk about the difference between, say, a first marriage that ends in divorce versus a second or third marriage that ends in divorce. What differences do you see?
I think the most likely thing that is going to happen… I didn’t think to look up statistics before we’re recording today, but I’m going to guess most first marriages probably last longer than second. You’re far more likely to have kids. I mean, certainly, because once you get into your 40s and 50s, having kids usually isn’t something you’re certainly not actively trying to do it. It might happen, but certainly when your 20s or 30s, that is often the case.
You may or may not have fewer assets. It’s really going to depend on where your career path has taken you. I would say first marriages are probably more likely to be divorced with minor children, whereas second and third marriages are more or less likely to divorce without, which is important in terms of the legal process because those are classified as two different things. The state administrative office’s case codes for every single legal case in the system, divorces with kids are a DM. A divorce without is a DO.
The difference between them is that in a divorce with children, generally speaking, you cannot have a judgment of divorce signed until six months after the date of filing. Usually, unless the people actually agree to everything, it’s pretty tough to actually get to that point anyway, so…
How long does a divorce proceeding typically last?
I have found nine months to a year.
Right now, it’s probably running a little bit longer. A lot of it really depends. I’ll come back to that in just a quick second. I just was going to say for divorces without children, you can actually have those judgments of divorce, meaning you’re really divorced, signed 60 days after filing, but the answer to both things really to that question for both types of divorces is it really depends on the people and the attorneys. If you choose to argue about every last little thing under the sun, your case will take longer. You will spend way more money on attorney fees than you probably wanted to or hope to, but that’s what will happen.
The real answer to how long does it take is partly that. Also, it does depend on the nature of your case and your assets. Maybe a better answer would be on my website, one of the pages I have is, I think, titled Simple Divorce or something related to simple divorce because I used to get a lot of calls for this. I feel like I don’t get that many anymore, and maybe it’s because I put this webpage there. People would call and say they had a simple divorce, and then I’d start talking to them.
It’s a 10-year marriage, and there’s a couple of kids. Well, he’s probably going to argue about that, and I don’t agree with this. I start to think to myself, “I don’t know where you’re coming up with simple divorce.” One of my guidelines for a simple divorce, you don’t have kids. Anytime there are kids, the divorce will be more complicated, and it will just take more time unless one of the parents just throws up their hands and says, “You know what, every other weekend’s okay with me. Whatever the child support formula that comes out for child support, I’ll just pay it. I’m not going to argue about it.”
They agree on spousal support. If you agree, your case moves along. If you don’t, you have to go through some level of process.
For people who don’t know, there are really four basic ways that your case is going to get resolved. Those are mediation, arbitration, a trial, or just plain old fashioned negotiation. Most cases are resolved through a combination of mediation and negotiation. I don’t know that I’ve ever handled a divorce where we just negotiated it completely. I’d have to go back and look at my files.
Sure. What’s the difference between those?
Arbitration is essentially a private legal proceeding where you pay a third party, some attorney basically, to basically be a private judge. You keep your case outside of the court system, but you have to pay for that privilege. Usually, it can move along a little quicker as an advantage of it. You also don’t have the public nature of the preceding. The main difference between that and just resolving it through the general court process or the usual court process, you have very limited appeal rights.
Mediation is essentially a third party, often an attorney who doesn’t have authority like an arbitrator, who… Arbitrators have the authority to make decisions just like a judge would. Mediators are basically persuaders. If we were doing a divorce mediation, if you and I were opposing counsel, we’d probably go to the courthouse or to the mediator’s office. They’d have a couple of rooms set up for us, might have a joint meeting with everybody together to get started.
Then you would go into one room with your client. I’d go into another one, and the mediator would go back and forth, shuttle diplomacy we call it, and would just say, “Okay, well, I’ve read your mediation summary.” You would have both prepared a mediation summary ahead of time. You would have told your mediator, “Here are what we think are the issues and where we’re having some disagreements.” The mediator might pick out, “Well, here’s another way where you two agree. Let see if we can hammer that out and work your way through the process.”
It’s up to the mediator really, but it’s an attempt to resolve your case with a third party who’s got experience in the divorce system, who can give you a sense of what a judge might look at that or certainly how an outsider views your case. The objective of it is, “Let’s resolve the case today.” You come up with, hopefully, something in writing that both people sign, and then the attorneys later turn into a judgment of divorce that goes to a judge who signs it.
A trial is, of course, just what you see on TV, the actual trial. It doesn’t happen much. I’ve had two divorce trials, I think, in my career. It’s a regular old trial. You go when you make an opening statement. You have to present evidence. You have to call witnesses. You have to file a trial brief. I actually have one of my second one, the one that just happened last year, the other side appealed it, so now I’m handling the appeal up in the court of appeals with my podcast partner, actually, who’s a very well known Michigan appeals attorney.
That’s all he does, his family law appeals, which is really great because as someone who handles appeals, it’s nice to be able to have somebody that I can lean on because he’s got 37 years of legal experience.
Sure. That’s great. Earlier, you mentioned information on your website. What’s your website and phone number?
The website is attorneyceci.com. My last name is C-E-C-I. Then my phone number is 810-299. That’s 299, not 229. If you lived in Brighton for a long time, you know 229 and 227, but no, this is a Vonage number, so it’s 299-2734. I mentioned that because for a while when I first got that Vonage number, a local guy used to call me every now and then and say he was getting messages from my clients. I feel bad for the guy.
We’re talking about second and third divorces. Do you see prenups done a lot?
I haven’t seen that many, but I do hear that they get done. A prenup would be one way if you really are worried about the financial effect of the divorce. You can set that up to dictate how our assets will be divided. As long as a court looks at that and has no reason to think another party was under duress, or stress, or those sorts of things, it’ll probably be upheld. Then that will settle all that if that marriage ends in a divorce.
Is there an issue of springing it at the last minute? I had a-
I’ve heard. I don’t have a lot of experience with it. I’ve handled just a handful of them, but I’ve heard that, and my view on it is if you’re going to have one, you really should talk about it as soon as you can ahead of time. You should both hire your own attorneys. I know people don’t like to pay attorney fees. I completely understand that. We’re not cheap, but we can help you with language and help you think about the things that you might need to consider.
One of the things that I sometimes have to address with my clients is just a mindset, and it’s a conversation with some people. They’ll get to a point where, “Well, I just want to get this over and done with.” My answer is usually, “Well, I do too because I understand you’re paying me. It costs… It’s time out of your life. It’s money that maybe you’re paying me. Maybe your parents are paying me,” because your listening audience, you’ve mentioned, maybe age 55 to 65 is a good portion of them.
Well, chances are if they have kids going through a divorce, there’s a good chance they’ve paid for attorneys retainer or maybe paying the whole bill.
I’m always sensitive to that, but the other side of that is you still have things to think about. The last thing I want for a client, especially with such a life-changing event, is they go through it to get it over with now. Then a year later, they are thinking, “Oh, I don’t know. I don’t like this.” Then there’s the risk, of course, for me. It comes back on me or whatever. Whatever it is, they’re not happy with the agreement they’ve made, and maybe even made a bad decision.
Once you’re a year or two out, there’s not much you can… You really can’t do anything about it, because you’re an adult and you’re allowed to make bad decisions to make bad agreements and make an agreement that’s against your attorney’s advice.
We were talking earlier about retirement accounts. Now, I think there’s confusion because our retirement account’s like 401Ks, IRA’s protected from bankruptcy.
They are to a certain extent. I think it’s 1.1 million, something like that. There is some other little stipulation. It has to be qualified, I think. I’ve never had a situation where I had one where I was like, “Is that not protected?” Those are protected under bankruptcy.
But not under divorce.
Not under divorce, no, no, no. It’s still divisible, but unless, of course, for the issue of separate property. It’s yes and nothing. It’s interesting for bankruptcy because sometimes people will have called me and say, “I’m thinking about taking money out of my 401k to take care of my debt.” A lot of times I’ll be thinking, “Well, I need to know more. I need to know what are the numbers and what are you dealing with, but that is not necessarily a good plan, just because of the fact that you can protect it in bankruptcy.” [crosstalk 00:44:56].
Do you see that in divorces, where people are taking money out of accounts or hiding money?
I’ve seen it a couple of times. It usually doesn’t seem to happen. One new change, one big change, or at least something different, I should say, starting at the beginning of this year, although because of the way the year has gone, I haven’t dealt with it a lot, because the Supreme Court started requiring people in divorces to complete what’s called a verified financial form. It’s something that you’re supposed to sign, I think, under oath, but it’s certainly something you have to complete and have to send to the other side.
You’re required to list your income and your assets and your bank accounts. There is case law that when you try to hide a bank account or an asset of any kind, it doesn’t have to be a bank account, that a judge can award that entire asset to another party. There’s potentially… It’s not automatic, but it’s a potential severe penalty. Yes, the short answer is you are required to reveal basically everything.
Then with the type of planning that we do in our office, a lot of times, we’re talking about legacy planning and leaving things to the next generation. Can you talk about inheritances? Are inheritances protected or?
Generally speaking, they can be, especially if you’re going to stick it in a separate bank account and not commingle it or use it for marital expenses. If you do that, there’s a very good chance. I’d be comfortable making that argument. What sometimes I’ve seen happen, I think one of the cases I read because I needed to argue it, and the divorce that I’m handling on appeal, if I recall correctly, one person had gotten a workman’s comp award, which to a certain extent can be separate, but then they used it to buy a home that they both lived in.
The case law in divorce, broadly speaking, is the sharing and maintenance of a home, generally speaking, is going to make it a marital asset. But it can be done, but I think if it was a client of mine, I’d be saying, “You put that in an account with your own name on it, and you spend it on preferably nothing and wait.”
Right, or better yet, maybe a trust. Maybe the parents put together a trust to leave it to them.
Well, you’re talking about a kid.
Well, yeah. If a parent is leaving things to the next generation, instead of naming them outright, where now we have to worry about commingling and making sure that spouse doesn’t come after-
I see what you mean.
… maybe a better alternative would be looking at naming a trust as a beneficiary, and depending on how the trust is set up, it could protect that inheritance.
That could be one thing. The other thing would be the issue really is more once the person gets the money, what do they do with it? Certainly, I don’t think you could invade a trust to satisfy a divorce unless that trust regularly paid marital expenses. You might be able to find a lawyer willing to make that argument. It might be a good argument. But in terms of what you’re asking, I think that’d be a tough sell.
Right. That’s why it’s all matters what type of trust is set up. I see a lot of people that have trust. Let’s say it goes outright to the kids once they’re aged 25. Well, if it’s outright at age 25, and they get divorced, it’s-
Well, it depends on what they’ve done with it. If they-
Then you have to worry about the commingling and everything else, but if it’s a trust that builds in asset protection, then it would be protected.
Yeah. If you stretch it out, obviously, longer, that would be one way to do it. The problem is, of course, you just really can’t… There’s a point where I have to tell clients, “You can’t have that much control. You just can’t.”
Then what about… Not so many assets, but this is something that comes up. What about visitation and grandparents? Do they have any rights in Michigan to visit potential grandchildren?
They do. It’s not automatic, but there is a statute that was specifically written for that situation. The basics of it, I would say, are when we have two parents who are not married, two parents who got divorced, or one of them died. For whatever reason, you can’t seem to get any parenting time. Maybe it’s because… I’m thinking, what, in these scenarios, it’s usually your child has disappeared, and then the other parent just isn’t saying, “Okay, you just say no, sorry, I don’t want any involvement.”
There is a statute that allows you to go into court and ask the court to issue an order for grandparenting time. I’m not sure when Michigan passed it, but I believe it referenced, I want to say, the 2000 U.S. Supreme Court decision that Granville versus Troxel. That case, it came out of the Washington State where there was a statute in Washington that effectively allowed the court to overrule any parents’ decision, and just give grandparents parenting time, because parents will have constitutional rights, and so there’s a higher standard, I guess, is what I’m trying to say.
It’s a higher standard, and it certainly is going to help. You’re probably going to have to show that you’ve had some involvement and that this is going to harm the child to take this away. But there’s an avenue. Absolutely, there’s an avenue, and it’s always fact-specific. I’ve handled a couple so…
There’s no general rule that the grandparents can petition to gets every other weekend or something like that?
They can. In the end, it’s going to be whatever the judge is willing to do based on what facts you presented. No, the statute just gives you the ability to do it and lays out the circumstances when you can.
Is that something that should be part of, say, if we have grandparent, parent, and child, and grandchild, let’s say the parents’ estate plan, is that something that they should layout that they want their grandparents to have visitation if they were to pass away?
I’m thinking probably. I’ve never been asked to do that. What you would probably behave there, you’re probably talking about a situation where you have a guardian taking care of someone’s child.
Let’s say the parents are divorced. We’ll wrap up on this. Let’s say they’re divorced, and the parent wants to put together their estate plan and make sure that grandparents, they’ll have access if the child were to pass away.
I don’t think that can be done.
Okay, but at least there’s the avenue through the statute that grandparents can petition.
Yes, there is absolute.
John, thank you so much. Again, what’s that phone number and web address if people do have family law questions?
Sure. The web address is www.attorneyceci.com, the word attorney and then my last name C-E-C-I, phone number 810-299-2734.
Well, John, thank you so much. It’s been enlightening. No one hopes to go through a divorce or any of those things, but those things certainly happen, so it’s good to have a resource out there. Again, one more time, what is the phone number and website?
The number is 810-299-2734, and attorneyceci, C-E-C-I.com.
Thank you so much, everyone. Make it a great week. Take care.
Learn more about Chris Berry and how he can help your family by visiting online at thechrisberryshow.com. That’s thechrisberryshow.com. You can also call Chris Berry at 810-355-2584. That’s 810-355-2584.
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