In Memoriam: Crash Course in Legal Protections

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00:00 - 00:37

Hello, listeners. Today we are rereleasing an episode that I recorded several years ago featuring a beloved member of our Bernstein family, Andi Kushner. Andi passed away last week, and we want to honor her legacy as a brilliant colleague and uniquely gifted attorney. Andi was a much sought-after speaker at estate and tax planning conferences all over the country. She was about to be honored by the California State Bar as the recipient of the Judson Klein Award for Mid-career tax attorneys and will receive the Lifetime Achievement Award from the California Lawyers Association in November.

00:37 - 01:02

Her ability to relate to our clients most personal matters made her the quintessential advisor, somebody who possess the rare combination of intelligence, deep subject matter, expertise, and empathy. Andi was also hilarious and a great friend. She was a mother, a sister, and a friend to so many of us. She left an indelible mark on our business, our culture, and the lives of everyone who knew her.

01:03 - 01:06

May her memory forever be a blessing.

01:13 - 01:42

In today's litigious society, you don't need to be a legal eagle to realize you need some basic protections. Today, we're going to tackle the most common legal exposures women face. Welcome to Bernstein's Women and Wealth, where we aim to educate, inspire, and empower women to make the right choices with their wealth. I'm Beata Kirr, and today, I'm joined by Andi Kushner from our Wealth Strategies team in Los Angeles. Thanks for joining us today, Andi.

01:43 - 01:45

Beata, thanks for having me. It's great to be here.

01:45 - 01:50

Fabulous. So first, tell us what you do here at Bernstein and what you did before you joined us.

01:51 - 02:14

Well, before joining Bernstein, I was an attorney in private practice, and I practiced first in the family law space and then as a trust in a state attorney. And now at Bernstein, I'm part of our Wealth Strategies team that does a lot of the planning and analysis work for our clients. And I make sure that our investment strategies align with the legal strategies that our clients are undertaking.

02:15 - 02:44

Perfect. Well, you were the right person then to have here today as we start to talk about this crash course in legal protections. And the reason that this is called a crash course is because we know that we could probably do a podcast on each of these sub topics and that in the legal profession detail really matters. But we're just going to give that kind of high level seminar class, if you will. And we're continuing along in our sub series of thinking about the financial basics.

02:44 - 03:15

So we talked about expect the unexpected on one of our prior podcasts, and that was about financial protections and insurance. And in a lot of ways, the legal aspects are frankly a continuation of unfortunately expecting the unexpected and anticipating some of those potential legal potholes, if you will, that can come down the road. So it's a really broad topic, but let's start to narrow it a little bit and talk about your experience in thinking about those exposures.

03:16 - 03:45

Well, absolutely, Beata. We work with a wide range of female clients, women who work outside of the home stay at home moms, single women, divorced women, widowed women. But in my experience, there are essentially four main areas where women need to think about legal protections, no matter what stage of life they're in. And I would say divorce is a key one. Their careers, health care and then assets are the four. I really see.

03:46 - 04:12

Okay, so let's take those in turn. Let us start with arguably one of the most unpleasant, if you will, getting the worst part out of the way. But a lot of this is unpleasant, frankly. But let's talk about the concept of divorce and some tips that you have learned in your experience. You know, maybe the right question to ask here is that things that divorced clients of ours wished they knew about in advance before that occurred.

04:13 - 04:38

Sure. Well, I think a key one that women don't always think about is establishing their own financial identity. Especially if a woman isn't a primary breadwinner or has taken some time out of career and isn't working out of the home. It can be difficult to establish credit. So it's very important to maintain that credit while you're married, so you have your own separate financial identity.

04:39 - 04:55

Okay, that's good advice and seemingly not too difficult to execute on. You had said something to me about community property assets and what does that mean? And it being difficult for women to actually secure some of their own assets. Can you elaborate on that?

04:56 - 05:35

Sure. Well, I think a related point to all of that or the broader picture is knowing how assets are titled and that's going to be governed where the state you are, where you live. I'm in California, which is a community property state, which means that both spouses are entitled to the joint marital or community assets. Most states, though, are separate property states where there's a tendency for an asset to be awarded to the spouse that earned it. And so knowing where you are and how assets are titled are also going to drive your rights down the line and your ability to generate income and get financing and all those good things that we talked about.

05:35 - 06:08

It also can be an issue when you're dealing with illiquid assets. I've worked with clients that are wealthy but have a highly illiquid estate, think like, you know, big real estate investors. Yeah. And when a divorce happens, the cash flow is cut and all of a sudden you have a very wealthy person whose income has been significantly reduced and they weren't prepared for that. So knowing how things are titled and where they are can help mitigate to a degree that uncertainty and the angst that goes with that.

06:08 - 06:24

And so is it enough to just know or is there some sense of direction around a better way to title or to understand your risks if, let's say, the House is held in your spouse's name and not in your name? Does that make it necessarily bad?

06:24 - 07:07

It's not necessarily bad as long as you're informed. And again, this is driven by the state where you're in. For example, in California, just because a house is titled in the spouse's sole name doesn't mean it's necessarily the spouse's. What drives it are the funds that were used to buy it. But it could be the sort of thing where if you agree to change a jointly owned asset to your spouse's separate property, maybe to get a mortgage and you signed an agreement to that effect and then you get a divorce, in that case, you could have waive significant rights to that asset. So being informed and understanding the rules are critical to protecting yourself financially down the road.

07:08 - 07:26

Okay. So I think that's really useful advice in terms of anticipating if you find yourself in this situation and just being ready for that, understanding the consequences. And what about post-divorce? What have you seen in terms of legal ramifications of divorce that surprised people? Unfortunately.

07:27 - 08:14

The biggest goof that I've seen people make after a divorce is not remembering to change their beneficiary designations for their tournament plans and their insurance. It doesn't happen automatically. And I've seen situations one in particular from when I was in private practice where a woman had named her stepchildren as beneficiaries of an insurance policy. She got divorced and then she passed away and her children came to me and said, There's no way Mom would have wanted those stepkids to benefit from this policy. But because she hadn't changed it, there was nothing we could do. So making sure that you are mindful of those designations so that things pass the way you intend is critical.

08:15 - 08:35

Absolutely. I mean, and I think that goes part and parcel with one of our later topics in terms of it's related to estate planning and one of the critical to do items every once in a while is certainly to check those beneficiaries. Thankfully, it's not too difficult to make change and it's pretty quick to look up. So that's really good advice.

08:35 - 08:43

You mentioned something to me also with health care coverage and divorce, is there a particular angle there that women should be aware of?

08:44 - 09:34

Absolutely. Especially for women who are covered under their husband's health insurance. If husband is the primary breadwinner and the wife isn't. And so the family is covered through husband's health insurance when a divorce occurs, the wife in that situation wouldn't be entitled to that health insurance anymore. She would be entitled to COBRA coverage. But there are time limits during which you've got to elect it or it lapses. And I have. A client who wasn't aware of these rules and didn't elect into the COBRA coverage in time and was left uninsured and had a very difficult time getting replacement health insurance because of some health issues that she had. So knowing where the insurance is and being mindful of the deadlines is really important.

09:34 - 10:07

Right. I mean, so there's no doubt about it. That is a very life changing event to go through divorce and it involves a lot of important details. And like we said, we know we could dedicate an entire podcast to that topic. But I think these are the really big picture items both in advance. And then following that from a legal documentation perspective are really critical. So let's let's move forward with our other areas where we have seen women most exposed and will transition to the concept of working women. And the best advice here is what, Andi?

10:09 - 10:54

I would say the best advice in this area is have an employment attorney in your network and make sure that you know them and are comfortable with them before you even need one. Because often when you're faced with an issue of severing your employment and are presented with an agreement or there are issues that come to pass with your employer at that point scrambling to find an employment attorney who you trust, you're late in the game. It's not impossible, but it's much better to be prepared and know someone. So if something occurs, you can call them immediately and they know you and they know what's important to you and the things that are relevant in your career and your profession.

10:54 - 11:23

Right. And that makes total sense. And I think a lot of women are so busy, right. Obviously with their daily responsibilities both at home and at work in this setting. And then if they're networking, they're often networking to the extent that they are advancing their careers. But a lot of times the thought around networking to find the team that needs to surround them to ensure that they're making good decisions, including an employment attorney, isn't top of the list. And we would argue that it really should be.

11:23 - 11:54

And I would add to this point that it's not only for leaving a position, right, but moving into a new position to have an attorney by your side so that you can work more closely on the negotiation. And I think it goes without saying deferred comp, the payment of commissions or bonuses, non-compete, non solicitation agreements, all of those things are really part of a negotiation, both when trying to start a new job as well as potentially leaving that job under whatever circumstances.

11:54 - 12:21

And we have found more often than not that women don't have you know, they may have a lawyer, they may have an accountant, but they don't know an employment attorney. And then speaking to the employment attorneys, we know they're pretty busy getting those calls with really short notice. And we'll prioritize relationships where they have already had exposure. And so I think that says a lot about just the opportunity to really branch out there. Do you have anything else to add on that front in those risks?

12:22 - 12:56

No, I think that's a great point, especially the time constraints. Often there are short windows to review and respond to these types of agreements. And so to your point, having someone that you know and you trust from the start, it just further ensures that you're getting good advice in a timely way. You also have to bear in mind that it can be a stressful process. And so knowing someone going through it beyond looking at your legal protections also can help you manage that stress as well.

12:56 - 13:07

Yes, I think that people we know that our employment attorneys often act as half employment attorney, half psychiatrist. Yes. But then one could say the same, probably about family law attorneys, divorce attorneys, interest.

13:07 - 13:08

In the state attorneys do.

13:08 - 13:12

Yeah. So do you have a degree in psychiatry as well, A&E or just law?

13:12 - 13:13

An unofficial one.

13:14 - 13:24

Right. Right. So that's you know, that covers really the risks and legal protections in terms of divorce that we think are most critical and in terms of employment.

13:24 - 13:48

So let's move on to our third topic, which is the topic that we spent a lot of time talking about in this series, that we know women are living longer and have very unique financial and legal needs as a result. So we really wanted to focus on the risks around women's health care. What are the legal protections that are most critical given that set of facts?

13:48 - 14:27

And I think having a living will, which is a broad term, it's term differently in different states. Sometimes it's known as a power of attorney for health care or an advanced health care directive. What the document does in a broader sense is it gives someone the power to make health care decisions for you if you don't have capacity to make those decisions for yourself. So really important. If you were in a catastrophic accident or were ill and couldn't make decisions in an informed way, it gives somebody that you select who you trust the ability to make those decisions for you.

14:28 - 14:34

And who do you see? Women choosing most often for that very important role.

14:34 - 15:08

I think there's no one size fits all or one right answer. I've seen siblings or other family members for folks who aren't as close as their family or don't have family members close by. I've seen close friends. Sometimes I've had clients who, if they're old enough, name their children. Mm hmm. So there's no one right answer. What's really important is that it be someone who you trust, who you feel comfortable, will look out for your best interests, and have the ability to make tough choices if it comes down to that.

15:09 - 15:19

That's really a double edged sword, right? Being named in that document, because, as you said, these are really catastrophic situations and very difficult.

15:19 - 15:30

And so do you have any other advice in terms of the document? And have you seen any examples where, for example, the document wasn't clear and there was question about what that authority meant?

15:31 - 16:27

Sure. I mean, I had a client where actually I represented his wife at the point when she came to me, he was already incapacitated, but it was very important for him. He never wanted to be on a ventilator. His mother had passed away after being on a ventilator for an extended period of time. And for a lot of reasons, it was something that was just untenable to him. But he became incapacitated before they finished their estate planning documents, and he was put on a ventilator against the family's wishes. This was many years ago. And I think that standards of care and input from the family has evolved. But that being said, that was one of those situations where had the family had a clear document that enumerated his wishes that he didn't want that sort of treatment, they could have avoided some heartache and medical treatment that they knew he didn't want.

16:28 - 16:35

And how often do you think it is in your experience that people just don't even have this document because they don't want to tackle this really tough conversation?

16:36 - 17:18

I think it's fairly often that they don't have it either because they don't want to tackle the conversation or because they're not even aware. I was shocked in talking to some of my friends when we were all having babies, when they would go into the hospital, I would say, Do you have an advanced health care directive? That's the California equivalent. The hospital should really make you aware of this if you don't have one. And I would say about seven out of ten of those women had no idea what I was talking about. Again, this was many years ago. And I think that people are more informed than they were then, but they certainly are not informed to the level that they should be.

17:19 - 17:49

Mm hmm. I mean, I think there's good reason why people don't make the decision to do it right. They get just very difficult topics to talk about. And I think people really wrestle with the magnitude of a decision like that. And it's no different, actually, for our last topic in terms of legal protections, which is the notion of asset transfer. I mean, they are all very tough topics or topics about our ultimate demise, whether that is in somebody else's decision making capacity or our own.

17:50 - 18:29

And unfortunately, you're right, we have all kinds of stories. I mean, there's been some very public stories with very big celebrities recently that have passed away with sizable estates and no estate planning documents. Right. Am I mistaken that I think Prince died without a clear direction on where the assets were going and Aretha Franklin might have been in the same boat. So. So let's not beat ourselves up too much if we don't have all this buttoned up. Right. We do know what happens, but it is our job to really alert us of the risks of not being mindful of really kind of dotting the I's, crossing the T's in terms of legal protection.

18:29 - 18:40

And so let's talk about this last topic of of assets. How do I protect the assets in my estate? What are the basics that I need to know to start to consider that?

18:41 - 19:36

Well, I think what's critical is having an estate plan that whether it's a will or a will and a trust, I think a mistaken notion in the world is that you need to have an estate the size of Prince's or Aretha Franklin's before you need an estate plan. And that's not true. Size isn't really the best litmus test. What's really important is making sure that you have a plan in place that directs how you want your assets to be distributed or maybe held for minor children. Or minor errors before it's distributed out to them. So it's really critical in this case to it's state driven. All states are a little bit different in how the state laws work. So it's important to find a lawyer in your state to help you walk through that process and determine the best way for you to approach it, given your wishes and desires.

19:36 - 20:00

Yeah. And so what you're saying is it's important to have that plan, even if let's just define some things here today. At the time that we record this, write the current law for federal estate tax means that you can pass on $11.4 million as an individual free of federal estate tax. Is that right? That's the right number.

20:00 - 20:01

That is the right number.

20:01 - 20:23

Okay. And so as a couple, you're talking about 22.8 million right before you are paying any federal estate tax. Right. So, yes, you are saying what I think you're saying is even if you are listening to this and you do not have $22.8 million in your combined name, right. Under one household, you still need an estate plan.

20:23 - 20:47

Absolutely. Because even estate tax isn't the only driving factor in planning. In fact, for most people, it's not a factor at all. The goal of an estate plan is truly to make sure that your assets are distributed to the people who you want to benefit and in the way you want them to benefit. And so you need a written plan in place to achieve those objectives.

20:48 - 20:54

Mm hmm. Tell us about what does it mean to avoid probate, Right. What is the point of going through this process?

20:55 - 21:47

Well, the probate process, in its simplest form, is the is a court supervised process to change the title of assets from the name of a dead person to the name of a living people. In some states, it's not. It can be very streamlined process. And so having to go through the probate court to have things confirmed is fairly straightforward. In other states like my home state, it takes a while and can be expensive and complicated. The benefit of having a plan in place is you are deciding how you want things distributed. It's not pursuant to a court or maybe a statute. So that's number one. The second benefit of having a plan in place is depending on the structure that you choose, you may be able to avoid the probate process altogether and have the assets dealt with privately.

21:48 - 22:09

So there's incentives around the anonymous nature of the estate. Yes, there's incentives around the financial improvement. Right. In terms of minimizing the federal estate taxes or in some states, the state taxes. And then there is it sounds like what you're saying is there's incentives around timeliness and distribution of estate. Is that a fair summary?

22:09 - 22:16

That is a fair summary, yes. Those are all important considerations. And why having a plan in place makes good sense.

22:16 - 22:51

And I think it's important at this time, too, to also reiterate that we do not do estate plans on behalf of our clients. While we obviously have people like yourselves to opine on the various mechanics and the ways to optimize estate plans. Everybody has to go out and seek out their own attorney to really fulfill their objectives and get that done in a way that's customized to them. And although there are some blanket rules that apply broadly, it is a very customized process. And thinking about the timing of distribution and the nature in which assets should distribute.

22:51 - 23:02

So are there any stories here in particular with women where, you know, things didn't work out the way that they would have liked it to because of the lack of those key documents?

23:03 - 23:49

Definitely. I had a client when I was in private practice who had been talking through her estate plan but was having a hard time making decisions of how she wanted things to be distributed. And she had one child who had been difficult, who she wanted to provide for, but not to the same level as her other children. She passed away before we could finalize an estate plan, and so her estate passed by a statutory framework in California. But that's customary in all states when someone dies without a will or without a trust. And the net result is this child who she wanted to limit the distributions to that child. That child ended up getting a much larger share than she would have wanted.

23:50 - 24:19

Mm hmm. So I can't overstate the importance of by having a plan in place. You are controlling how your estate is distributed rather than having that distribution scheme imposed on your family after you passed away. And sometimes it would be the same. But often, in my experience, it's not the same. And so. If you have very strong wishes and desires, it behooves you and your family to have all of that documented before you pass away.

24:20 - 24:20

Yep.

24:21 - 24:49

And coming back to the number, you made it very clear that it's much less about the number and it's much more about control and direction of asset flow. But it is important to talk about the number because it's in the press a lot, right? We think it's going to be a large part of the discussion as we go into the next presidential campaign. I mean, give us a sense of that $11.4 million per person in terms of being free of the estate tax. Is that high or is that low compared to history?

24:49 - 25:36

That's the highest it's ever been in historical terms. Right now, if there isn't further legislation, that amount is set to sunset at the end of 2025 and would be restored to the law that was on the books before, which was 5 million indexed for inflation. Still high, but not as high as it is right now. This number has fluctuated over history, and so it's another reason if you do have a significant estate, it's extra important to consult with estate attorneys who can help you navigate the potential changes in the law over time to make sure that you're you're planning factors that in and isn't going to be thrown amuck if there is a big change in the law.

25:37 - 26:15

Right. And what we're seeing here with the clients that I'm working with is given that high number today, a lot more clients that have very substantial estates are taking advantage of their ability to gift and really use up what we call this exclusion amount while they can, because I think there is a general sense that given it's the highest number it has been historically, the direction it will go potentially when it changes going forward is not up but down. Right. Giving them less flexibility in terms of passing on those assets. So it is a particularly valuable time to make decisions around optimizing that exclusion.

26:16 - 26:24

Anything else on the estate planning front in terms of documents or strategies that you think are important from a high level perspective for us to mention?

26:25 - 26:37

No, I think we covered it. I think the most important concept I would want people to come away with today is that no matter the size of your estate, it's important to have a plan and a plan that reflects your intentions.

26:38 - 27:01

Okay. And so just one last little kind of sub point. While we're talking about assets and protection of assets, we work with a number of people, for example, that are doctors or have a private business. Let's talk about what you've seen legally in terms of protections that those business owners have put into place for protecting their assets. Are there mechanisms they can use?

27:01 - 27:48

Sure. Well, one key one is just is an umbrella liability policy, which is just additional insurance beyond the normal stuff that you'd have that would cover the slip and fall or, you know, something out of the ordinary that isn't necessarily covered by the other policies that you have. But to your point, it's it's really important for someone who has a significant professional practice or significant real estate, significant assets of any sort, because having that significant asset base at times makes you a target for people wanting to make claims. And so making sure that you have that general umbrella policy is just another way of making sure that your assets are protected.

27:49 - 28:09

All right. Well, we're not stepping on Tom and Heather's toes and we expect the unexpected podcast. Our listeners can go back and reference a lot more detail on the notion of insurance. But this is really an area where there's a crossover between the legal risks and the insurance risks, that umbrella liability policy. So thank you so much, Andi, for being with me today.

28:09 - 29:08

I like this crash course into the legal protections that women face, especially. I think it was very helpful to look at it from this perspective. And we're going to summarize what we've said. I would say that there's four areas that women that we've found have been particularly exposed to legal risks, the first being divorce, the second being in their own careers, not surrounding themselves with good advice and therefore being ill equipped at the time that they need to make important decisions. The third being, unfortunately, around the situation of becoming incapacitated and not having the right documents to direct care. And the fourth being around control and direction of assets. And if you really look at all of these different segments, there's really one thing in common. It's about decision making, power and control, and taking the time to make sure that your wishes are being addressed in the way that you would like and doing what you can to ultimately protect yourself. Is there anything else you would like to add to that summary?

29:08 - 29:11

No, I think that's a beautifully said. I can't say it better.

29:12 - 29:12

Fabulous.

29:12 - 29:35

Well, thanks, everybody, for listening. If you want to learn more, please see the link in this episode's description. And as always, we look forward to hearing from you. So please email us with your thoughts, questions and feedback to insights at Bernstein.com. You can also find us on Twitter at @Bernsteinpwm and please rate us on iTunes or anywhere you listen to podcasts.