Ask Liz Weston

Get smart with your money

Couples & Money

Q&A: California is a community property state. How that affects your and your spouse’s need for a will

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Dear Liz: Does a spouse automatically inherit everything if the other passes away without a will?

Answer: Not necessarily.

Anything that has a beneficiary designation, such as retirement accounts and life insurance, would typically pass to the person named as beneficiary even if that’s not the surviving spouse. Bank and investment accounts also may have “transfer on death” or “pay on death” beneficiaries. In many states, cars and even homes can be passed with beneficiary designations. In addition, jointly owned assets would pass to the other owner.

Other assets would pass to the deceased spouse’s survivors according to state law if there is no will or living trust. You can look up those laws by searching for the state’s name and the words “intestate succession.” If there are no children, the surviving spouse may inherit everything or may have to share with the deceased’s parents or siblings. If there are children, the surviving spouse inherits a portion of the estate with the children getting the remainder.

For example, in California — a community property state — the spouse would inherit all the community property and one half of the separate property if there is one child, and the child would inherit the rest. With two or more children, the spouse gets all of the community property and one-third of the separate property, with the children sharing the rest.

Q&A: Death and document retention

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Dear Liz: After a spouse’s death, I am wondering if there is some guidance on how long to keep items such as a driver’s license, Social Security card, Medicare and health plan card, passport, veteran’s information and so on. I haven’t seen this addressed in your column.

Answer: Guidance about what to keep and discard after a death can vary widely, so you may want to ask your estate attorney for help. In general, though, you can begin to dispose of many documents three years after the estate is settled, said Jennifer Sawday, an estate planning attorney in Long Beach.

In some cases, you can shred them sooner. Social Security numbers are often printed on the death certificate, so the card can be shredded once you verify the number on the certificate is accurate, Sawday said. You also may wish to shred the passport as soon as possible to avoid it falling into the hands of an identity thief. Another option is to mark the passport “void” and keep it as a family history item, she says.

The driver’s license is another possible family history item — and boon to an identity thief — but it can be discarded at the three-year point, Sawday said. Veteran’s information can be kept for family history purposes or discarded three years after any death VA benefits are claimed.

Medicare and health plan cards should be kept in case any medical billing issues arise and then discarded when those issues, if any, are resolved, she said.

Q&A: What happens when your unmarried life partner dies without a will?

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Dear Liz: A close friend recently lost her partner of many decades. The partner left no will or trust or anything in writing. The partner owned many properties and had a huge IRA and lots of money in the bank, but all in the partner’s name alone. My friend asked an estate lawyer and the lawyer said she had no legal right to anything, even the home she has lived in for many years. Can anything be done?

Answer: The lawyer is probably correct. Without estate documents, beneficiary designations or some kind of written agreement, unmarried partners typically can’t inherit, said Jennifer Sawday, an estate planning attorney in Long Beach.

But your friend should consider talking to a family law attorney to see if she has any recourse, Sawday said.

In California, for example, she may be able to make a “Marvin” claim against the estate. (Marvin claims stem from a 1976 California Supreme Court case between Michelle and Lee Marvin, which established that unwed partners could sue each other over property divisions after a relationship ended.)

Q&A: This spouse wants to keep an inheritance secret from the other spouse. Here’s a better idea

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Dear Liz: A good friend is leaving me money from her IRA after she dies. I have asked that the gift be designated as “sole and separate property” to me. As I am married and file joint state and federal taxes, can this money be kept separate for my use only? I prefer that my spouse not be made aware of this as they have different ideas about how to use our money.

Answer: Inheritances can be kept as separate property even in community property states where other assets acquired during marriage are considered jointly owned. Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

An inherited IRA, however, would be tough to keep secret if you file taxes jointly with your spouse. You’ll be required to take yearly minimum distributions to empty the account within 10 years, and those withdrawals will be taxed as income.

Few couples are entirely on the same page about money, but keeping financial secrets from each other generally isn’t the best way to cope with these differences. Instead, many people find it helpful to have some “no questions asked” money that they can spend as they please without consulting their partner.

Q&A: How to kick your ex off the credit cards

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Dear Liz: My divorce was final in 2016. My ex and I divided our credit cards as part of the settlement. I have several joint credit cards with high credit limits and zero balances. I have used them once a year to keep them in active status. Do I consider canceling them or do I risk lowering my credit score if I do?

Answer: If these truly are joint credit cards, then your ex potentially could run up a balance and default, damaging your credit. Obviously, that’s not ideal. With joint cards, neither party can be removed by the other, so the best option may be shutting down the account.

But joint credit cards are increasingly rare. Most cards used by couples have a primary cardholder and an authorized user. The authorized user is not responsible for paying the bill and can be removed at any time.

Contact the issuers to find out your status on each card: Are you a joint account holder? Primary or authorized user?

If you’re the primary holder on a card and your ex is still an authorized user, ask that your ex be removed. If the account truly is joint or if you’re the authorized user, consider opening one or two cards in your own name before taking any further action.

Your credit scores may still take a hit when you close accounts or get removed as an authorized user, but the additional lines of credit may limit the damage and ensure you still have access to credit.

Q&A: Couples and their accounts

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Dear Liz: You’ve been writing about things people should do after a spouse dies. May I recommend that before your spouse dies, be sure every account is in both your names.

It took six months to cancel my landline phone after my husband died and I moved out of our home. Apparently when we moved in 30 years ago, the service was in just my husband’s name. (I finally reached someone who said, “I don’t know why you’re having so much trouble with this!” and fixed it.)

Also, it took 1½ years, plus hundreds in lawyer fees, to get access to the safe deposit box that he’d had with his parents. This is despite a trust and will leaving everything to me. I was told that “banks don’t care about wills.”

Answer: That’s an excellent suggestion. It’s a lot easier to add a spouse to an account while you’re both alive. It’s a good idea to review all your accounts periodically to make sure the right people are on them, either as joint account holders or as beneficiaries.

Not every account can or should be in both spouses’ names, of course.

Modern credit card accounts, for example, typically aren’t jointly held but instead have a primary cardholder and an authorized user. Also, retirement accounts are in one person’s name alone, although the spouse typically is the beneficiary.

Banks aren’t the only entities that can ignore wills. Typically a payable-on-death account will go to the beneficiary, regardless of what a will or trust says. And speaking of estates, sometimes accounts will be held separately for estate planning purposes.

If you have an estate planning attorney, check with that person before changing how accounts are held.