In this episode of Absolute Trust Talk, host Kirsten Howe welcomes back accomplished estate planning attorney and litigation expert Ruth Kohler Burke for part two of their deep dive into community vs. separate property in estate planning. Together, they unravel the complexities of property characterization and highlight how proper planning can save you from expensive, stressful situations. From intestacy horror stories to blended family challenges, Ruth shares real-world examples and valuable insights gained from her 25+ years of experience, including representing Fortune 500 companies. Whether you’re managing family dynamics, navigating divorce, or ensuring your legacy, this episode provides actionable advice to help you avoid estate planning pitfalls.
Time-stamped Show Notes:
0:00 Introduction
1:10 Welcome back, Ruth Kohler Burke! We’re kicking off the conversation with why property characterization matters when someone dies without an estate plan.
2:31 Why is differentiating separate and community property from each other so critical? Understanding this distinction is key to effective estate planning.
5:09 What happens when a minor inherits property? Let’s dive into the complications and the role of guardianship.
6:20 Horror story: Avoid this estate planning nightmare! Listen as Kirsten and Ruth talk about an example of intestacy gone wrong and how it could have been prevented
7:50 Sometimes, separate and community property isn’t a simple black-and-white matter. Here’s what you need to know.
10:32 Key takeaway: Don’t die intestate—the essential advice to avoid unnecessary complications for your loved ones.
11:40 We hope you enjoyed this episode with our special guest, Ruth Koller Burke!
Get in Touch with Ruth!
Koller Herlihy LLP
Email: rkoller@khtrustlaw.com
Phone: (925) 954-1268
Transcript:
Hello, and welcome to Absolute Trust Talk. I’m Kirsten Howe, and this is our live-streaming podcast at Absolute Trust Counsel. Today, we will pick up where we left off in our last episode, discussing community and separate property.
In the last episode, we laid out some of the basics and what we look at when planning. Today, we’re going to share some horror stories—things that went wrong—in the realm of community property and separate property in estate planning and what we did to fix the situation. There’s almost always some kind of a fix.
Joining me for this really fun conversation is my colleague, Ruth Koller Burke. She is also an estate planning attorney. Her company is Koller Herlihy LLP, and they’re in Walnut Creek. Ruth’s work is similar to ours—probates, trust administrations, estate planning—but she brings a lot of litigation experience to her practice, which is particularly helpful when we have families that aren’t exactly getting along. That happens from time to time, believe it or not.
Ruth, welcome back, and thank you so much for being here. I’m really looking forward to talking to you about this.
Great, thanks for having me. You are most welcome.
Last time, we talked about the issue of character. That is separate property versus community property. We call that the character of the property. We talked about some of our planning techniques and some of the things we think about. Today, we’re going to talk about a few examples of poor or nonexistent planning and what you can do when those kinds of things happen. Ruth, do you want to get us started?
Sure. If someone dies without an estate plan, it’s called intestacy. Who gets things? Where does everything go? The state of California has laid it all out in the probate code. There are different rules for distribution depending on whether the property is characterized as community property or separate property. Because of those different rules, we can have results that people didn’t contemplate. If they had taken the time to do planning, they probably would have done differently.
The basic rule is that if you die intestate and you have community property, your surviving spouse gets the community property. If you die intestate and you have separate property, your surviving spouse may get the separate property, but not if you have children who survive you. Then, they are going to get a share of your separate property if you have a deceased child but a grandchild, the same thing.
The complexity, the challenge is that if you die intestate, your spouse may not inherit all of the separate property, and that’s oftentimes not what people would have wanted in either direction. Sometimes they wouldn’t want the spouse to have gotten anything; they wanted family money to go just straight down to their children.
Exactly. If the decedent had one child, the surviving spouse would get 50%, and the child would get 50%. If the decedent had two children, the surviving spouse would get a third, and two-thirds would be split equally amongst the children or issue of a predeceased child.
Right, and that’s the split, no matter how many children the decedent had. If the decedent had seven children, it’s still a two-thirds split among the children. The point is that the children are going to get some, and the spouse is going to get some. Maybe that’s what you wanted, or maybe it’s not.
I think it’s probably almost never what they want. You either want your spouse to get it, or you want your kids to get it. Very rarely does someone say, “Oh, you know, I think I want my kids to get two-thirds.”
Exactly. Then there’s the whole—because they didn’t do an estate plan— how do you make these transfers and distributions? That’s a whole other layer as well.
If it’s just community property or if everything is going to the surviving spouse, there’s a spousal property petition. But if there’s a component going to the children that’s separate property, that’s going to require a probate.
You’re going to have to do a probate because it’s not a spouse. That’s yet another reason not to do that—not die intestate, especially if you’ve got separate property. That is a very good point.
Do you have a horror story that you want to share?
Well, a couple. I’ll start with one that’s not much of a horror story. It’s just practical. If there is a probate open to distribute separate property, if the children of the decedent are minors, or if the grandkid of the decedent is a minor, then it starts the issue too of who’s representing them in the court proceeding. That adds a whole other layer to the cost of expense. They may need to get a guardian ad litem appointed.
That’s a very good point because a minor child can not legally inherit. They have to have a guardian to do that, and surprisingly, that person has to be appointed by the court. You don’t get just to stand up and say, “I’m their parent.” So that is a good point.
In terms of horror stories, the one I’ve seen a couple of times recently is, there’s no estate plan, there’s community property and separate property, someone has filed for a divorce, the divorce judgment is not entered, and the rules we talked about—the intestate rules—are what it’s going to apply to distribution.
The marriage is not over yet. What we just talked about—separate property, community property—still applies, even though you’re trying to get rid of this person by filing for a divorce. That is a great example.
Even if the marital settlement agreement spins blind, it’s the judgment, so it has to be complete. It’s surprising how many people die during this process, or maybe those cases just make their way to our crazy world, I don’t know.
They say divorce is very stressful. You can imagine the decedent did not want his community property for the soon-to-be ex to take 100% of the community property in that. That’s the classic example of a horror story, like, oh, that is definitely not what this decedent would have wanted.
I had one where—this a little, another little twist on it—Husband and wife had been married for 15, 20 years, quite a long time. And they had purchased the home they lived in during their marriage. They purchased it together, and they made all the payments out of their wages and community property.
But at the time they purchased it, the wife—No, I’m trying to remember—the husband had very poor credit. The mortgage broker said, if you just put the wife, the person with the good credit, on the title, you’re going to get a much better rate, all these good things. They did that so the home was owned as the separate property of of the wife. That’s what it said. Even though, all throughout the marriage, they basically paid for it together. It really clearly was community property. Here we have this deed that says, no, it’s separate property.
We had to go and do a spousal property petition. We had to do all the stuff and we had to explain to the judge why this should be considered community property. Fortunately, it went through. Nobody on the deceased spouse’s side objected to it. They were all willing to go along with it. But that could be a really bad situation if there were survivors on the deceased spouse’s side who said, “Hey, wait a minute, that’s separate property. I get my two-thirds or my half, whatever.
I think any time you have to go get court a spousal property petition or some sort of instruction, you’re opening the door for if a family has that maybe never care if it’s the blended family situation, you’re just sort of opening the door. You’re inviting someone to object because they have to get notice of the court proceedings. So you hold your breath.
That’s exactly right. We really weren’t sure because there hadn’t been much communication with the other side of the family about it. We knew who we had to serve it upon, and we just crossed those fingers and hoped for the best. It worked out fine. It’s a lot of extra work, too, to have to do all of that and jump through those hoops.
Any other stories that you want to share at this point or tips?
Don’t die intestate.
Don’t die intestate and make sure you have everything buttoned up as to the character of the property and revisit it regularly. Those two things: Don’t die intestate, and keep your plan up to date. There’s nothing more important than those two things in our world.
The amount of time, energy, and expense that goes into clarifying things after somebody is passed far exceeds getting things done during your lifetime.
That is so true.
It’s always so much easier and cheaper, even though it doesn’t feel that way when you’re in the middle of it, to do it while you’re alive ahead of time than to clean up the mess afterward. That is always more of a hassle and more expensive.
Good advice. Thank you, Ruth, so much. This was fun. It’s fun to talk to someone who does what I do and just kind of trade stories. Thank you so much, and thank you all for joining us today. I hope you got a lot out of it, and I look forward to connecting with you next time.
Resources Related to This Episode:
- Absolute Trust Talk Episode 161: What’s Yours, Mine, and Ours? Untangling Community vs. Separate Property in Estate Planning
- Absolute Trust Talk Episode 135: Character Matters Part 2: Estate Planning for Community Property vs. Separate Property https://absolutetrustcounsel.com/135-character-matters-part-2-estate-planning-for-community-property-vs-separate-property/
- Absolute Trust Talk Episode 134: Character Matters Part 1: Understanding Community Property in Divorce and Estate Planning https://absolutetrustcounsel.com/134-character-matters-part-1-understanding-community-property-in-divorce-and-estate-planning/
- A Will is Not Enough – Securing Your Legacy with Estate Planning Life can change in an instant. A will is not enough to be prepared. Get free access to our actionable E-book Guidebook #1 and start protecting your legacy today. https://absolutetrustcounsel.com/guidebooks/
- Learn how to comfortably define gray areas and assess your own unique needs to effortlessly build a secure future now. Check out Guidebook #2, Estate Planning Beyond the Basics, here > https://absolutetrustcounsel.com/guidebooks/
- Get our free introductory guide to the most used estate planning tool, family trusts, and understand how we plan to help protect your family. Guidebook #3: https://absolutetrustcounsel.com/guidebooks/
- Absolute Trust Counsel would love to offer access to our Incapacity Planning resource page: https://AbsoluteTrustCounsel.com/Incapacity-Planning/. We’ve collected our top planning information all in one place so listeners can find videos, guidebooks, blog posts, and a host of information with tips and strategies on implementing, planning, and protecting themselves and their loved ones.
- We’re pleased to provide a library of e-books to address common estate planning questions and concerns in practical, easy-to-understand language. https://AbsoluteTrustCounsel.com/Resources/.
- ASK KIRSTEN: If you’d like Kirsten to answer your question on the air, please email her at Info@AbsoluteTrustCounsel.com.
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