What Everyone Ought to Know About a Missouri Affidavit of Heirship

February 2, 2017

It’s common for individuals who own real estate to procrastinate estate planning. Too frequently, individuals procrastinate too long and end up passing away with no plan in place for their real estate. The result: legal confusion.

One family comes to mind. The wife had real estate that was only in her name. When she passed away, her husband desired to continue living on the property, but he ran into issues with his step-children who wanted to sell the property and collect a nice check for their share. The dispute escalated, lawyers were hired, and filings were made with the probate court. This was going to turn into an expensive, time-consuming, and messing legal fight.

Yet, there was an alternative to probate that none of the heirs knew about called an Affidavit of Heirship. A Missouri Affidavit of Heirship can be used to transfer property from a deceased individual to that individual’s heirs (as defined by Missouri law), without going to probate court. In order to use a Missouri Affidavit of Heirship, all of the heirs will need to agree on how to divide the property. Missouri law is clear on intestate succession so typically the parties will agree to follow the letter of the law.

If you have questions about how to handle real estate that is still titled into a deceased person’s name, after their own death, follow this checklist to see if an Affidavit or Heirship is right for you. Missouri Affidavit of Heirships can be powerful tools to avoid having property stuck in the name of a deceased loved one.

  • 1. Was the real estate only in the name of the deceased individual?
  • 2. Has the deceased individual been dead more than 1 year?
  • 3. No will has been admitted to probate?
  • 4. Did the deceased individual leave a last will and testament?
  • 5. All of the legal heirs are in agreement and willing to cooperate?

A Missouri Affidavit of Heirship needs to be properly drafted, signed, notarized and filed with the county recorder’s office. Once complete, the heirs can receive clear title on the land. This is important so if the heirs decide to sell the land, they can get full fair market value since the potential buyer can obtain title insurance.

If you have property title in a deceased individuals name and need help getting it transferred to living heirs or getting it sold, contact Mark McMullin, a Missouri attorney with experience you can trust.

What Happens when Co-owners of Land can’t agree? Missouri Laws on Partitioning.

February 2, 2017

Recently a past client of mine called. She had inherited several pieces of farm land that had been owned by her great-grandparents. The result, is that while the great-grandparents owned 100% of the land, at their death it was divided up equally among their children. The children then divided it among their children and so on until it got to my client who owned about 3% of a large farm. The great-grandchildren had finally come to a point where they no longer wanted to own the farm together. My client was calling because she wanted to know what her options were? What could she do with her 3%?

The answer is she could have the property “partitioned”.

When two or more people own land together we say that they are co-owners or that they own the property jointly. When any owner of the land no longer wishes to own the property together, that owner has the right to have the land “partitioned”. Partitioning the land means dividing the property.

Often “partitioning” the land happens voluntarily. If it was between two siblings, they can usually work out a way to divide the land equally. This is called a “partition in kind” where the land is physically divided to carve out a separate piece for each owner.

Keeping it simple: “partition in kind” means the land is physically divided with each owner retaining some portion of the land.

Sometimes, the land cannot be “partitioned in kind” or the parties are opposed to the land being “partitioned in kind”. The result is that the land has to be “partitioned by sale” with the proceeds divided proportional to the ownership of the land. Again, this often occurs voluntarily where siblings will decide to sell the family land. Yet, sometimes family members cannot agree or there is a need for judicial oversight. In these instances, a court-of-law supervises the process.

Keeping it simple: “partition by sale” is accomplished by selling the entire property and dividing the proceeds among the owners.

Proper estate planning can reduce the likelihood or need for partitioning in the future. Especially when it comes to farm land, it’s important to think ahead so that the farmland you have worked so hard to acquire or maintain, can stay in your family, rather than be sold on the courthouse steps.

Missouri Supreme Court Rule number 96 addresses “Partition of Real and Personal Property” and can be found here: http://www.courts.mo.gov/page.jsp?id=1019.

How Can Owners of Rental Properties Limit Liability?

February 2, 2017

A significant number of my clients have rental properties. Many are casual landlords with just a few rental properties. Others have dozens of rental properties. In both scenarios, the owner of the rental properties can take some common sense steps to limit liability and protect their assets.

First, the landlord should obtain adequate insurance. Our main concern here is with liability insurance. Often my clients select policies that have liability insurance of at least $500,000.

Second, the landlord should form an LLC for the rental properties. In Missouri, LLCs are very cost effective ways to do what its name says, limit liability of the owner. Yet, too many individuals have LLC with sloppy or amateur Operating Agreements. Yet, when it comes to asset protection, having a carefully crafted Operating Agreement is the smart way to maximize the protection of your assets and minimize your personal liability.

In 2013, Missouri passed legislation allowing the creation of a new type of LLC, a Series LLC. Because it is new, there remain several unanswered questions about Series LLCs. Yet, the basic premise is promising for landlords. The Series LLC would allow the landlord to get the benefits of putting all of one’s rental properties in separate LLCs, while eliminating some of the cost of doing so. A Missouri Series LLC consists of an LLC with any number of series. This means a landlord could create one series, “My Rental Properties LLC” and then create 20 series of it, “My Rental Properties LLC, Series A”, “My rental Properties LLC, Series B,” and so on. Each Series is separate and distinct from the other Series. In order to get full asset protection and limited liability, each Series must maintain its own separate books and records. We’ll post more on Series LLCs in Missouri if/when they become more popular.

Third, owners of rental properties need to be strategic in how you title the rental units, as well as the ownership of the LLC. This is one area where we can use the asset protection provided by “Tenants by the Entirety” for married couples to provide additional protection for our clients.

If you own Rental Properties, we are happy to assist you in minimizing your liability, protecting your personal assets, and ensuring a smooth transition to the next generation.

How can Owners of Rental Properties limit liability?

March 11, 2016

A significant number of my clients have rental properties. Many are casual landlords with just a few rental properties. Others have dozens of rental properties. In both scenarios, the owner of the rental properties can take some common sense steps to limit liability and protect their assets.

First, the landlord should obtain adequate insurance. Our main concern here is with liability insurance. Often my clients select policies that have liability insurance of at least $500,000.

Second, the landlord should form an LLC for the rental properties. In Missouri, LLCs are very cost effective ways to do what its name says, limit liability of the owner. Yet, too many individuals have LLC with sloppy or amateur Operating Agreements. Yet, when it comes to asset protection, having a carefully crafted Operating Agreement is the smart way to maximize the protection of your assets and minimize your personal liability.

In 2013, Missouri passed legislation allowing the creation of a new type of LLC, a Series LLC. Because it is new, there remain several unanswered questions about Series LLCs. Yet, the basic premise is promising for landlords. The Series LLC would allow the landlord to get the benefits of putting all of one’s rental properties in separate LLCs, while eliminating some of the cost of doing so. A Missouri Series LLC consists of an LLC with any number of series. This means a landlord could create one series, “My Rental Properties LLC” and then create 20 series of it, “My Rental Properties LLC, Series A”, “My rental Properties LLC, Series B,” and so on. Each Series is separate and distinct from the other Series. In order to get full asset protection and limited liability, each Series must maintain its own separate books and records. We’ll post more on Series LLCs in Missouri if/when they become more popular.

Third, owners of rental properties need to be strategic in how you title the rental units, as well as the ownership of the LLC. This is one area where we can use the asset protection provided by “Tenants by the Entirety” for married couples to provide additional protection for our clients.

If you own Rental Properties, we are happy to assist you in minimizing your liability, protecting your personal assets, and ensuring a smooth transition to the next generation.

What is Tenancy by the Entirety?

February 17, 2016

Tenants by the Entirety is based on the longstanding idea that when a man and woman marry, they create a new entity, a marital unit. Thus, husband can own property, wife can own property, and the marital unit can own property as tenants by the entirety.

Tenants by the entirety is separate and distinct from tenants-in-common or joint tenants. In tenants by the entirety, husband and wife don’t own 50% but rather the marital unit owns 100% of the property. As a result, neither spouse can sell tenants by the entirety property without the consent of the other spouse.

So why hold property as tenants by the entirety? The big (actually it is huge!) advantage is asset protection. In Missouri, tenants by the entirety property cannot be subject to an individual spouse’s debts.

For example, Husband and Wife own their house worth $250,000 as tenants by the entirety property. Husband goes through a mid-life crisis and buys a top-of-the-line Mercedes, a new Harley-Davidson motorcycle, and then takes a 30-day luxury vacation across the globe. All the while, wife continues her normal, responsible life. If (perhaps when…) Husband stops making payments on his new car, motorcycle, and vacation, his creditors will come after him for payment. They will likely end up suing him and receiving a court judgment against him. That judgment will allow his creditors to go after and collect from any of Husband’s separate property. But so long as Wife hasn’t co-signed on these debts, Husband’s creditors will not be able to collect against their marital assets, namely their home, since it is owned as tenants by the entirety.

Tenants by the Entirety is a very powerful tool. Especially for individuals in professions where there is a higher risk of being sued (doctors, pharmacists, lawyers, etc.) tenants by the entirety can help protect your assets. Consider how this could help provide asset protection to a doctor when faced with a medical malpractice lawsuit.

Further, in 2011 the Missouri Legislature created what is called a “Qualified Spousal Trust” (QST). A QST is able to hold tenants by the entirety property and preserve the asset protection features of tenancy by the entirety. This is especially important for clients who may have older estate plans, to consider updating their estate plan to take advantage of the new law.

The Benefits of Beneficiary Deeds in Missouri

February 10, 2016

One of the most common instruments I prepare for clients is a Beneficiary Deed.

What exactly is a Beneficiary Deed?
A Beneficiary Deed, allows an owner of real estate to execute a deed that names a beneficiary who will own the property after the death of the owner without going through probate.

During the owner’s lifetime, the owner retains full power and control over the property. The Beneficiary Deed must be recorded before the death of the owner to have effect. The property owner can make changes to a Beneficiary Deed at any time by recording a subsequent Beneficiary deed.

For example, John owns a primary residence in Missouri. John wants his son to inherit the residence if he dies. John signs and records a Beneficiary Deed, effective upon his death, naming the son as beneficiary. When John dies, assuming he still owns the home, the son has to only record a death certificate and the property is his. During John’s lifetime, the son has no rights to the property. John may sell the property without permission of his son.

greystone
Greystone Ridge prior to development. Cape Girardeau County, Missouri.

Benefits of using Beneficiary Deed:
The primary reason for using a Beneficiary Deed is to avoid Probate after the death of the owner. Probate is a court-supervised process and hence is complex, time consuming and expensive. The Probate process usually takes 6 months and costs much more than executing a Beneficiary Deed.

A Beneficiary Deed allows the owner to retain/enjoy full ownership of the property until death.

Revision or changes to a Beneficiary Deed can be made easily through revocation or subsequent filing.

There is no consideration needed when creating a Beneficiary Deed.

Beneficiary Deeds may reduce future tax burdens by taking advantage of a “step-up” in basis.
Why choose a Beneficiary Deed instead of a Joint Deed?
Some people file a Joint Deed to add heirs to the property. Doing so has a few pitfalls. For Example, Mary owns a property that she bought for $200,000 which is now worth $400,000. Mary adds her daughter on the deed as a joint tenant. Now the daughter owns a portion of the house. Mary can’t sell the property without the daughter’s consent/signature. If Mary had owned the house in her own name and sold the house there would be no income tax. Now since she owns the house jointly with her daughter, the daughter could also be liable to State/Federal taxes. Also if the daughter has any debt/bankruptcy, lawsuits, or judgments against her, the creditor can file a lien or force the sale of the house. This can be avoided by filing a Beneficiary Deed naming the daughter as the Beneficiary. The property transfers to the daughter only upon the death of the mother.
A Beneficiary Deed does not act as a cloud on title when selling the home to a third party.

Missouri is one of a handful of states in the country where a Beneficiary Deed can be executed and it has become an easy and convenient estate planning tool for clients. A beneficiary deed is an easy and cost effective way to avoid probate. So when utilized correctly Beneficiary Deeds offer the owner of real estate one of the easiest, most beneficial ways of transferring property to a specified beneficiary outside of probate or a trust.