There are several different ways to plan your estate. A will is the standard document that most people are familiar with. It designates where your property will go upon your death. Atrust has a similar function, but allows much more customization and control over property, as well as avoiding probate costs. Powers of attorney allow you to appoint persons to care for your body and property while you are living but unable to act for yourself. There are a few other documents available, most notably a beneficiary deed, which allows real estate to pass to someone without need for probate.
What is “probate”?
Probate is the legal process of passing title to a person’s property. If a person has property which is not passed through non-probate transfers, such as a trust, that property must go through a probate estate where a court handles the matter and passes legal title to the rightful recipients. Probate proceedings are a matter of public record. Probate also consumes a considerable amount of time and money through court proceedings, personal representative fees and attorney fees.
What are the probate fees?
Filing an estate in probate requires considerable fees, including court filing costs, publication costs, personal representative fees and attorney fees. Personal representative and attorney fees are the same amount and are set by Missouri Law. They are based on a scaled percentage of the amount of personal property administered and real estate sold within the estate. As an example, combined fees for an estate with $100,000 would total $7,215.00. Combined fees for an estate with $300,000 would total $18,175.00. Combined fees for a $600,000 estate would total $33,825.00. Combined fees for a $1,000,000 estate would total $53,825.00. As you see, it can be very helpful to avoid probate fees.
What happens if I do not have an estate plan?
If a person dies without an estate plan, then their property falls under intestacy laws. Intestacy laws are legal defaults for how property is divided. For a person with a spouse and lineal descendants (children, grandchildren, etc.), the property is generally divided between the spouse and the lineal descendants with certain nuances depending on the situation. A person with a spouse but no lineal descendants would have all property go to the spouse. A person with no spouse but lineal descendants would leave everything to the lineal descendants. A person with no spouse or lineal descendants would have their property divided equally between living parents and siblings. The order of descent continues on to more distantly related persons, and if no person within nine degrees of relation is living, the property is taken by the state.
What are POD and TOD designations?
POD (Payable on Death) and TOD (Transfer on Death) are designations made with the entity holding certain property for them to pay or transfer an account or other property to a designated beneficiary upon the death of the owner. Bank accounts, investment accounts, and vehicles are the most common applications.
What is the right type of estate plan for me?
This is not a question that can be answered without knowing the facts of your situation. A person might be able to have a fully successful estate plan with just POD or TOD designations. Then again, a person who thinks they have little property might be well advised to get a trust. As a rule of thumb, a trust would probably be beneficial in the long run, not only for probate cost savings but for ease of transition. We would be glad to speak with you about your options with a no-obligation free consultation.
A trust is a legal entity created when a person (the settlor) transfers legal title to property to a trustee, who then becomes responsible for managing the property. The trust is created for the benefit of certain persons, known as the beneficiaries. With a standard revocable trust, often the person creating the trust serves as the trustee and beneficiary while they are living.
What is the difference between revocable and irrevocable trusts?
A revocable trust is fully modifiable and amendable while the settlor is living, as well as revocable if the settlor no longer wants it. A revocable trust is disregarded for taxation purposes, and the settlor is generally able to go about their life as if there was no trust at all. An irrevocable trust means the property has been fully transferred and cannot be retrieved. Once an irrevocable trust is created, it cannot be amended or changed. For purposes of taxation though, an irrevocable trust is taxed as a separate entity and treated as a completed transfer or gift.
Is it expensive to establish or maintain a trust?
Depending on circumstances, it normally costs around $1,000 to establish a revocable trust. While it is cheaper to just get a will, the amount saved by avoiding probate fees makes a trust a substantially better option in the long run. Revocable trusts normally do not have any cost to maintain them during the settlor’s lifetime.
- Avoiding high probate fees
- Avoiding the public record of probate proceedings
- Avoiding the time length of probate
- Allowing instant turnover for management of businesses and property
- Allowing much more customizable dispositions of property
- More likely to avoid a will contest
- Avoids multi-state probate administration
- Unifies assets and allows more equitable distributions to beneficiaries
- Allows more control over property distribution, including age restrictions for heirs
Why do you recommend trusts for most people?
We strongly recommend trusts for most people because of the substantial aid it provides in dealing with a difficult situation; the death of a loved one. Trusts allow the successor trustee to instantly take over management of property without the need for court approval. They allow earlier distributions of property and more defined control of who gets what property and when. Most importantly, they avoid substantial probate costs. A trust is an investment made to help yourself and your loved ones through some of the most difficult times in life. We recommend them because they are worth it and provide a great benefit for their relatively low cost.
- Settlor – The person or persons who create the trust by placing property into it
- Trustee – The person responsible for managing the trust. Their duties include caring for property and making distributions to beneficiaries. A trustee is a fiduciary with legal obligations.
- Beneficiaries – The persons designated to receive property from the trust. Beneficiaries have a legally enforceable right to benefit from the property according to the terms of the trust.
- Corpus – The property held within the trust. Also known as the trust res or assets.
You may give property to anyone in a will, including children, spouses, relatives, friends and charities. As children under the age of 18 have limited legal rights of ownership, gifts to minors might result in a court appointed conservatorship. This result might be avoided by use of a trust.
What is a residuary clause?
A residuary clause is a broad language clause encompassing all the property you own not previously explicitly gifted in the will. It is very important as a will without a residuary clause might have property fall under intestacy laws.
Does it matter how I gift something in my will?
Yes. A person’s estate is liable for paying valid debts of the decedent. Importantly, when these debts are paid (as well as probate fees), there is a specific order they are paid from. Money is first taken from the residuary, then from gifts of money, then from gifts of money related to the sale of specific property, then from specific property. Making gifts or bequests of different types might result in one party paying more than a fair share of estate fees.
Can a will be revoked?
Yes, a will may be revoked. Tearing up or destroying a will will sufficiently revoke it, though it is a good idea to inform someone or otherwise record that it has been revoked.
Can a will be changed?
Yes, a will may be changed through an amendment known as a “codicil.” Importantly, a codicil must be executed with the same formalities as a full will. Simply marking out something on a will and writing in a new thing might have bad unintended consequences.
Can I designate someone to care for my children through my will?
Yes, you may nominate a guardian/conservator for your minor children through your will. Ultimately, the court must appoint the guardian, but a court strongly considers the parents’ wishes contained in a will.
How long does it take for a will to complete probate?
Depending on the circumstances it could take years. Most take between 12-15 months. Very small estates might be completed in a shorter period of time, but most estates require a minimum of 6 months.
Can I use a will to disinherit a spouse or child?
A spouse cannot be fully disniherited as a spouse has a statutory right to claim a share of the decedent’s estate, even if the will gives them nothing. A child may be disinherited through a will, although any property that is not passed through the will would fall under intestacy laws where the child might still receive an inheritence.
A power of attorney is a legal document where you authorize another person, known as the attorney in fact, to act on your behalf on specified matters. You will not lose the rights yourself, but you will have another person able to act for you.
What does “durable” mean?
Durable means the power of attorney will not stop working once you become incapacitated. It is very important that your power of attorney be durable, as it would otherwise stop working exactly when you need it to the most.
What are the different types of powers of attorney?
While there can be many different powers of attorney created, the general usage is for two purposes: power over property and power over your body/health care.
What powers can be given through a power of attorney?
Generally a power of attorney will allow your attorney in fact to take any legal action you could take. Certain powers must be specifically granted though, such as the power to create a trust for your property or the power to make gifts to themself.
Can I appoint a guardian for my children through a power of attorney?
Missouri law does allow a person to use a power of attorney to appoint a guardian for their minor children, although the appointment may only last up to one year. After that time, the guardian must apply for a full appointment through a court.
Will a power of attorney be effective for handling matters once I pass away?
No! A power of attorney is only good while you are living. The one exception is that it may be used to give someone the right of sepulchur, which is the right to determine the handling of earthly remains (burial, cremation, etc).