Estate planning is the process we use to help you develop a strategy for the management of your personal and financial affairs if you become disabled or at your death. If you take the time to make a plan, your financial affairs will be handled by the people you choose in the manner you want them to be handled.
If you do not make a plan, the law provides one for you. If you are disabled, the law provides the Conservatorship process supervised by the Probate Court. At your death, the law provides the Probate process and the distribution of your property in accordance with the Intestate Succession statute. Conservatorship and Probate are not desirable because they are costly, time consuming and may not distribute your property the way you want it distributed.
For example, if a married person with children and without an estate plan dies, any property titled in his or her name alone would be distributed through Probate under the Intestate Succession statute as follows: the first $20,000 will be distributed to the surviving spouse and the remainder will be distributed one-half to the surviving spouse and one-half equally among the children. Most married persons leave all of their property to the surviving spouse and then, only after the surviving spouse dies, do they leave any property to their children.
We believe that everyone should have an estate plan.
What is Estate Planning?
What is Probate?
Starting the Estate Planning Process
Finding a Good Lawyer
The Revocable Living Trust
The Last Will and Testament
The Power of Attorney
Medical Directive (Living Will)
Health Care Power of Attorney
Will I Have to Pay Estate Taxes?
Probate is a legal process for winding up your financial affairs at your death. The Probate Court makes sure that your Personal Representative (Executor) pays your bills before your property is distributed to your heirs. The Probate process normally takes at least eleven months to complete (from the date of death) and can take many years, depending upon your financial circumstances.
The Probate process does not subject your property to any taxes, but it does provide for the payment of fees to the Personal Representative (Executor) and the attorney handling the estate. These fees are set by statute and amount to a percentage of the estate. For example, the total fees payable on a $300,000 estate is in excess of $22,000 (½ to the Personal Representative and ½ to the attorney).
Probate only arises when the legal owner of property dies, leaving no joint owner or beneficiary. For example, you own a bank account in your name alone. You have not set up any “pay on death” (POD) beneficiaries. That account would be subject to Probate at your death. If you had set up a POD, that account would not be subject to Probate, but would be distributed to the person(s) you set up as POD beneficiaries.
So, how do you avoid Probate? Set up your estate so that there is no property in your name alone at the time of your death without a named beneficiary. Probate avoidance is part of the Estate Planning process.
The first step in the planning process is to organize your information. Make a list of all your financial accounts, including your bank accounts, savings accounts, savings bonds, brokerage accounts, retirement accounts, life insurance policies, and annuities. Make a list of all of your real estate, including your residence, time-shares, vacation homes, and investment property. Make a list of all of your debts, including your mortgage, second mortgage, credit cards, and business loans. Make a list of the names, addresses, telephone numbers and email addresses of all of your family members and any other people or charities you want to benefit at your death. It is important to have this information readily available to you as we work our way through the process together.
Next, think about who you would want to handle your finances if you were unable to do so for yourself. Most spouses designate each other as their first choice. But you have to dig deeper. Your spouse may not be able to handle your finances, and therefore you should think of at least two other people, in succession, for this position.
Keep in mind that whoever you select for this position will either be taking care of you (if you are disabled) or handling the distribution of your property to your beneficiaries at your death. Consequently, this should be someone you trust absolutely and can depend upon to handle your money with the utmost integrity. You can select one person to act by himself or herself, or you can select two or more people to act together. Sometimes it makes sense to appoint a bank or trust company to handle your finances. Keep in mind, however, that a bank or trust company will charge a fee for their services.
Next, think about whom you would want to make medical decisions for you if you can’t make such decisions for yourself. Again, most married people designate their spouses, and then name people with whom they they would be most confortable handling such personal decisions for them. In many cases selecting a family member who has medical training is a good choice. Otherwise, it makes sense to select a person who is most likely to make the same health care decisions you would make in various circumstances, including in the event you are dying and there is no likelihood you are going to recover.
Next, if you have minor children, think about whom you would want to serve as their guardian and conservator if both you and your spouse died. Have in mind one or two successors in case your primary person is unable or unwilling to serve.
Finally, give some thought to how you want your property distributed at your death. Many married couples with children leave their property to each other first, and then split it equally among their children. Single people often leave their property to parents, brothers and sisters. Grandparents sometimes leave property in trust to support the education of their grandchildren. Some people leave a portion of their property to their church or another charity. There is no right or wrong answer here. The idea is to decide upon a distribution plan with which you are comfortable. And remember -- it’s your property. You can do whatever you want with it when you die.
Once you are organized, you need to select a lawyer to help you put your plan in place. In selecting an attorney, keep in mind that different lawyers handle different kinds of legal matters. Personal injury and trial lawyers generally do not handle estate planning cases. The lawyer you are looking for should be knowledgeable about wills, trusts, powers of attorney, medical directives, healthcare powers of attorney, HIPAA Releases, estate taxes, income taxes, charitable giving, and retirement plans, among other things.
Selecting a lawyer who will meet your legal needs is not – and should not be – an easy decision. The wrong estate plan can have a negative impact on your life for years to come. Thus, you should carefully select a knowledgeable attorney who will represent you effectively and efficiently.
The best way to find a good lawyer is to ask questions of people you trust: family, friends, doctors, or others whose advice you consider worthy. Have they had experience with a particular estate planning lawyer or law firm? Were they satisfied with the way the lawyer handled their estate plan? Was the lawyer responsive to their questions? A lawyer’s reputation for effectiveness and trust often speaks volumes about his or her character – something of vital concern to you as you work with him or her in addressing your estate plan
Once you have identified a prospective estate planning attorney, call and make an appointment for an initial consultation. Many estate planning attorneys are willing to meet prospective clients for an initial consultation free of charge.
In the course of the initial meeting with the attorney, you should expect him or her to ask you questions about your family situation and your goals in creating an estate plan and to get to know you. Married or single? Children and their ages? Do any of them have disabilities? Approximate size of your estate? Have you previously created an estate plan? Do you own a business? If so, do you have a plan in place for the continued operation of your business in the event of your disability or death? Are you worried about Probate? Are you concerned about estate taxes? Have you been involved with a particularly difficult estate in the past?
Use your time in the meeting to ask questions and get to know the lawyer. How long has he or she been in the practice? How much of his or her work is devoted to estate planning? How does he or she charge for services? How long does he or she anticipate that it will take to put a plan in place? This is your chance to see if you would be comfortable working with this person as your attorney. If you aren’t comfortable, keep looking until you are.
One of the most basic estate planning tools is a revocable living trust. A revocable living trust is an amendable and terminable contract, entered into by a single person or married couple during their lifetime, to provide for the management of their financial affairs for the remainder of their life and beyond death.
There are generally five major parts to a revocable living trust. An introductory section in which the trust is declared to be created, your family is identified and the trust is funded. A section that addresses what happens during your lifetime. A section that addresses what happens at your death. A section that addresses matters relating to your Trustees. And, finally, a section that addresses general and administrative matters.
Revocable living trusts are frequently used to avoid probate and provide a means by which a person’s property can be managed in the event of his or her disability and upon death. Property owned by the trust is not subject to probate because it is not owned by you at your death. Property left to the trust by beneficiary designation is likewise not subject to probate because of the beneficiary designation. For high net worth clients (clients whose net worth is over $5.49 Million) a revocable living trust can also be used to eliminate or reduce estate taxes.
Think of a revocable living trust as an entity you create to manage your personal financial affairs. You are both the Trustmaker and the Trustee. As Trustmaker, you establish the rules pertaining to the operation of the Trust. As Trustee, you agree to follow those rules. You appoint others to serve as Successor Trustee if you become disabled and at your death. They agree to follow the same rules and carry out the purposes for which the Trust exists at that point in time. If you become disabled, the trust exists for the purpose of taking care of you. When you die, the trust exists for the purpose of paying your bills and carrying out the distribution of your property to your beneficiaries, much as you might have done in your Will.
While you are alive and well, you can do anything you want with property in your trust. You are in complete control. You can invest your money any manner you want. You can decide what bills to pay and which to contest or put off paying. You can amend the terms of the trust at any time and from time to time or revoke it altogether. The trust cannot be changed without your approval, but nothing is cut in stone until your death.
Revocable living trusts are often used in the estate plans of married couples with minor children; single persons and married couples with many beneficiaries, many parcels of real estate, or a closely held business. The primary reason for this is that the trust avoids probate and centralizes the management of your property in more complicated situations.
A Last Will and Testament (Will) is essentially a set of instructions for the Probate Court to follow to probate your estate. If your estate plan includes a revocable living trust, the Will is often referred to as a “Pour Over” Will. This is because the terms of the Will direct that all of the property in the probate estate be distributed (or poured over) to the decedent’s revocable living trust.
In estate plans that do not include a revocable living trust, the Will sets forth who you want to distribute your property to, and how you want it distributed. If you plan to distribute your property by Will, you are effectively deciding that you want all of your property to be probated.
A Power of Attorney is a document you use to appoint someone to handle your affairs for you if you become legally disabled. In those estate plans that do not include a revocable living trust, a General Durable Power of Attorney is often used. This document grants a person of your choice the power to do virtually anything that you yourself could do in virtually any situation. You cannot, however, give anyone authority to make a will for you or to vote in an election for a candidate.
In those estate plans that include a revocable living trust, we usually recommend using a “Special” Durable Power of Attorney. This document authorizes a person of your choice to handle a limited number of things that fall outside the authority of the Trustee of your trust. Those things include transferring property to the trust, managing life insurance and retirement plans, signing tax returns, applying for government benefits and obtaining medical information. If you have a trust, the day-to-day management of your finances and payment of your bills is handled by the Trustee under the authority granted him or her by the trust.
A Medical Directive (sometimes called an Advance Directive or Living Will) is a document that addresses whether you want to be kept alive using feeding tubes or respirators under circumstances where your attending physician and two other medical consultants believe you are going to die and there is no reasonable likelihood that you can recover from your illness or injury. Some Medical Directives include a Healthcare Power of Attorney in the same document.
A Healthcare Power of Attorney is a document you can use to appoint a person to make health care decisions for you when you are unable to make them for yourself. (If you are able to make and communicate health care decisions yourself, the law requires you to make them.) This document is designed to work in tandem with the Medical Directive when dealing with decisions concerning feeding tubes and respirators. Your healthcare power of attorney is authorized to make routine healthcare decisions for you as well as decisions about whether to put in a feeding tube or “pull the plug” on a respirator.
If you own less that $10 Million in assets (including life insurance and the assets held by your revocable living trust) at the time of your death and you live in the State of Missouri, you will not have to pay any estate taxes. So, for most people the answer is “no.” If you are one of the few whose assets would exceed $10 Million, there are ways to reduce or eliminate the amount of estate taxes you would have to pay using well-established estate tax planning strategies. A good estate planning attorney will walk you through the options available to you and your family to address these tax issues.