When people say probate, what they are really referring to is Probate Court. People typically want to avoid Probate Court because it wastes time & money and takes what most people consider private and puts it in the public record.
3 ways to avoid probate in missouri
So how can you avoid probate? There are a number of legal strategies you
can use. Here are 3 of the most common strategies used to avoid probate in Missouri: 1. Joint Tenancy & Tenancy by the Entirety. Adding another person to your assets as a joint owner or “joint tenant with rights of survivorship” will allow your property to pass to them upon your death without going through probate. There are pitfalls to this strategy, however, to include subjecting such assets to any claims (such as lawsuits) against the co-owner and making them available to the co-owner’s creditors — all while you are still alive and planning on using the assets yourself. So this strategy can work but it also comes with risks. 2. Beneficiary Designations. Missouri allows Transfer on Death (TOD) or Pay on Death (POD) beneficiary designations to be added to bank accounts. Beneficiary designations like these are preferable to joint tenancy in that they allow you to transfer property only upon your death without giving away current ownership. One of the drawbacks, however, is that it can be
difficult to obtain an equitable distribution of property among your heirs by utilizing beneficiary designations. Additionally, understand that if you have beneficiaries listed on your assets, those assets will be distributed upon your death to the listed beneficiaries, even if your last Will and Testament states otherwise. 3. Revocable Living Trust. A Revocable Living Trust is a legal document that allows you to establish a separate entity (the trust) to “hold” legal title to your assets while you are alive, and to name Trustees to manage those assets according to the trust terms. Typically, you serve as the trustee while you are alive, managing your assets for your own benefit. Upon your disability or death, the trust terms appoint your successor trustee who then continues to manage- or distribute — the assets held in trust. A properly drafted trust can accomplish many goals, including guardianship and probate avoidance for your estate and bloodline, as well as creditor protection (including from divorce) for your children.
This afternoon I have a young client coming in. In fact, she just celebrated her 18th birthday. So you may be asking yourself, why would a young woman need to come see an estate planning and elder law attorney shortly after her 18th birthday?
The reason: because her deceased father didn’t do any estate planning, now his 18-year-old daughter has to handle getting his affairs in order. Perhaps that sentence is a little blunt, perhaps even harsh. Yet, it is also true.
An Estate Plan serves as a blue print for you and your family. It puts you in control. Yet, without it, you may leave a mess that your loved ones have to sort out.
As so often is the case, the father in this scenario didn’t have a great deal of wealth. By most economic standards, he would have been considered lower middle class. Yet, regardless of one’s wealth, there are a few foundational estate planning documents everyone needs: A Durable Power of Attorney, a Healthcare Directive, and some type of transfer instrument like a Will or Trust. By not having these, the little property he did pass on to his children created a legal mess… complete with underage beneficiaries, unintended beneficiaries, and completely unnecessary court costs and probate fees.
Planning is better – not only for you, but especially for your loved ones.
While trusts can be confusing at first to the lay person, trusts can be a valuable estate planning tool. Common types of trusts in Missouri include:
• Revocable Living Trusts. Becoming increasingly popular for Missouri residents because it allows families to avoid the court-supervised Probate procedure at death and provides for a faster and less-costly estate settlement at death. A Revocable Living Trust (RLT) can be extra beneficial if you own real estate in other states allowing your family to avoid multiple probates.
• Trusts for Minors. If there’s a chance your minor child or minor grandchild will inherit assets from you, then you need to make sure those assets will be placed in trust so the courts won’t need to supervise the minor’s assets and so that the minor will be protected from squandering the assets when he or she reaches the age of 18.
• Trusts to Minimize Estate Tax. Not as popular now since the estate tax exemption has increased from $600,000 to $5,490,000, but if estate taxes are a concern, you need to consider these irrevocable trusts.
• Special Needs Trusts. If you have a child or loved one with special needs, make sure any inheritance you leave that child is placed in a Special Needs Trust. This will help the child continue to receive government benefits (Medicaid and/or Medicare) while using the funds you put in their Special Needs Trust to supplement their care.
• Trusts for Blended Families. These are especially popular when a spouse has children from a prior marriage. A trust for a blended family is a way to make your assets available for your spouse after you die, but when your spouse later dies, the trust assets will revert back to your heirs, not your spouse’s heirs.
• Charitable Trust. A vehicle which allows you to transfer appreciated assets to a charity, have them sold with no tax consequences, receive an income off those assets for your lifetime, and at your death the remaining trust assets are passed along to your favorite charity or charities.
If you are interested in learning more about planning options for you and you loved ones, I’m happy to help. You can reach me at my law office in Cape Girardeau at 573-334-5125.
Last week we held 2 estate planning workshops – one in Cape Girardeau and one in Jackson. The major purpose of these workshops is to educate individuals about what happens with no planning and the difference planning can make. I have yet to have someone attend the workshop and tell me that they didn’t learn something of benefit to them.
At the most recent workshop we covered topics that we often get questions about:
What happens to me and my property if I can’t manage it anymore?
What is probate?
I’ve got a Last Will & Testament. I’m fine, right?
What is a trust and why are they so popular?
How can I protect my property from the nursing home?
Our next workshop will be in April. If you would like to attend, call our office at 573-334-5125 or send us an email at firstname.lastname@example.org.
Missouri is a common sense state and most of our laws reflect that. Missouri has a whole chapter of laws dedicated to non-probate transfers. These are ways that individuals can name or designate a beneficiary and thereby avoiding probate. One of the areas I see this most often relates to vehicles owned by a deceased individual.
This week I had a gentleman call. His father had passed away and had left an old boat and trailer. The total value of the boat and trailer were approximately $500. Yet, because the father had not designated a beneficiary, the boat and trailer were still in his name. The son was calling to find out how much it would cost to have a small estate opened in probate court so he could get the boat and trailer retitled in his name.
At $500, the question became whether the son thought it was worth the cost to do the small estate. The son decided it was and we were able to help him file a small estate. Yet, this headache could have been prevented with a little planning. The father could have simply added a Transfer on Death (TOD) to the title of both the boat and the trailer.
What is a TOD?
TOD stands for Transfer on Death. It is a simple way to transfer ownership of your vehicle, trailer, or equipment to another at the death of the owner. It is a very easy and cost effective way to avoid probate.
How do I add a TOD?
Fill out a Fill out Application for Missouri Title and License (Form 108). In most instances, you can simply go to the license bureau and they will fill out this form for you, you will complete the “TOD Beneficiaries, If Applicable” box, sign, have it notarized, pay the fee ($11.00 total – $8.50 title fee; $2.50 processing fee) and you are done.
What to do after Death?
Return to the license bureau. Again, usually they are very helpful. They will help you obtain a title in the beneficiary’s name. The new title will cost $11.00.
A Power of Attorney is a legal document that allows one individual to act on another’s behalf. The person granting the powers is called the principal. The person authorized to act on the principal’s behalf is called the agent or attorney in fact.
The Power of Attorney document spells out the powers that you are giving to your agent. If your agent acts within the authority granted to him or her in the Power of Attorney, those actions are legally binding on you. I’ll repeat that again in slightly different words, as it is critically important to understand. Your agent’s actions, so long as they are authorized by the power of attorney document, are legally binding on you. For this reason, before signing a Power of Attorney you should do 2 things:
Ensure you understand what powers you are granting your agent. Are they broad or narrow? Does your Power of Attorney allow them to sell real estate? Access your bank accounts? Access your digital accounts including your personal e-mail?
Ensure that you trust your agent. If you don’t trust them, the answer is simple, don’t make them your agent.
What does it mean for a power of attorney to be “durable”?
The agent’s authority under an ordinary power of attorney only exists so long as the principal is of clear mind. If the principal becomes incapacitated, the agent’s authority ends.
Clients often trust family members to continue to act for them even if they are disabled. As such, Missouri law allows individuals to sign a durable power of attorney. Under a durable power of attorney, the agent’s authority continues whether the principal is of clear mind or incapacitated. The durable power of attorney should include the following language:
THIS IS A DURABLE POWER OF ATTORNEY AND THE AUTHORITY OF MY ATTORNEY IN FACT SHALL NOT TERMINATE IF I BECOME DISABLED OR INCAPACITATED OR IN THE EVENT OF LATER UNCERTAINTY AS TO WHETHER I AM DEAD OR ALIVE.
Powers of attorney are powerful estate planning tools. They can be used in the following ways:
Physical Limitations. Example: an older gentleman has a hard time getting out of the house. Going to the bank becomes a chore that takes all of his energy. He can execute a power of attorney and name his daughter as his agent. Most banks will honor this and allow the daughter to conduct business on behalf of her father.
Mental Limitations. Example: A mother is diagnosed with dementia or Alzheimer’s disease. Recognizing that her mental functions may diminish with time, she executes a power of attorney allowing her son to pay bills, manage her finances, and take care of her.
Child Away at College. Example: Child decides to attend college far away from parents. Yet, child’s car is registered in Missouri and he has other accounts in Missouri. Child can give his parents power of attorney to manage his affairs while he is out of the state at college.
Without a power of attorney, if something happens to you, and you need someone to manage your affairs, your family will likely end up in probate court asking the judge for a Guardianship and Conservatorship. This is an unnecessary waste of time, money, and stress.
Take control. Plan ahead. Choose someone you trust. Create a power of attorney.
At its heart, a revocable living trust is an agreement. Revocable means that the agreement is able to be revoked or amended during the Grantor’s life. Living means that the agreement is made while the individual is alive, as opposed to a testamentary trust which is made through a deceased individual’s Will.
The trust agreement has at least 3 parties:
The Grantor (aka Settlor, aka Trustor, aka Trust Maker): The Grantor is the person who creates the trust agreement. The Grantor is also typically the person who places assets (money, property, real estate) in the trust. In practice: When a husband and wife come in and ask for a trust, both husband and wife are typically Grantors.
The Trustee: The trustee is the person who actually holds the trust property and manages it. In designing the trust agreement, the Grantor decides who the initial and successor trustees will be. The most important qualification for a trustee is… someone that you trust! In practice: In the trust described above, typically both husband and wife are initial Trustees. Then they would name a child, children, or other trusted individual as successor trustees.
The Beneficiary: The beneficiary is the person, persons, or organizations that will receive the income and principal from the trust. In practice: In the trust described above, typically the surviving spouse is the first beneficiary, with the children named as beneficiaries upon the death of the surviving spouse. Distribution to the children can be tied to the child’s age, educational pursuits, or other criteria.
Creating the trust can be divided into 2 parts:
Part One consists of designing the trust agreement so it meets the Grantor’s goals. Some common goals include: avoiding probate, offering remarriage protection, offering creditor protection (spendthrift protection) to beneficiaries, providing for a child or grandchild’s education, making distributions at certain ages (rather than having a child receive a large lump sum at age 18, it is common to customize distributions to that children receive money periodically as they mature. For example: 1/3 at age 21, 1/3 at age 25, and 1/3 at age 30).
Part Two consists of ensuring that your property is transferred to your trust, a process we call funding the trust. Often you will want to transfer your real estate, vehicles, bank accounts, personal property, etc.. to your trust. Ensuring your trust is fully funded is the best way to ensure your loved ones can avoid the time and expenses of probate court.
The Missouri Bar advises clients that, “You should never sign a revocable living trust document without the advice of a Missouri attorney who practices in this field of law.” When choosing an attorney, ask them how much of their time they spend practicing estate planning. There are only a few of us in the Cape Girardeau area that practice primarily in estate planning.
In Missouri, there are 5 requirements for a will to be valid:
It must be in writing;
It must be signed by the testator (the person making the Will) or by someone by his direction and in his presence;
Testator must be over age 18;
Testator must be of sound mind; and
It must be witnessed or attested to by two or more competent witnesses who also sign the will in the presence of the testator,
Most Wills today are also self-proving. This means that the testator and the two witnesses appear before a notary public and state something substantially similar to:
The testator signed and executed the instrument as his last Will;
The testator willingly signed or willingly directed another to sign for him;
The testator executed it as his free and voluntary act for the purposes therein expressed;
That each of the witnesses, in the presence and hearing of the testator, signed the Will as witness; and
That to the best of the knowledge of each witness, the testator was at that time eighteen or more years of age, of sound mind, and under no constraint or undue influence. (see RSMO 474.337).
Having a self-proving will simplifies and expedites the probate process.
Clients sometimes ask how they can revoke a prior Will. Missouri statute 474.400 contains the answer:
“No will in writing, except in the cases herein mentioned, nor any part thereof, shall be revoked, except by a (1) subsequent will in writing, or by (2) burning, (3) cancelling, (4) tearing or (5) obliterating the same, by the testator, or in his presence, and by his consent and direction.”
Clients often contact me asking for an appointment to make a Will. While visiting together, it becomes clear that what they are really interested in is avoiding probate. Often, much to the client’s surprise, they learn that a Will does not avoid probate. I’ll repeat that again because it is so important: a Will, by itself, does not avoid probate. To avoid probate, consider a Revocable Living Trust and Beneficiary Designations.