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Burkhardt Law

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What Type of Estate Plan Do You Need? Choosing the Right Estate Plan

When I work with clients, I see so many different family types and not everyone has the same needs. There are some generalities that I use to guide what plans the different type of families need. For instance, I think most families with minor children need a trust. However, even then, not all clients fall into those generalities. That’s why it’s so important to evaluate each family’s need individually through a consultation. However, even at the end of the consultation, I think it’s extremely important for a client to understand and choose their own estate plan. Part of this is understanding the documents and how they work, which I’ve explained many times. But another large part of choosing the right estate plan is knowing the different considerations that go into the plan.

One of my first questions when sitting with a new client is always about their family and who we’re planning for. The more complicated a family is (i.e. step-children, half-siblings, etc) the more likely a trust or a more complicated plan will be needed to ensure things go where they are intended. Missouri law only provides for a very traditional family and even then isn’t often what clients would want. Thus, legal documents are needed to change these “default” laws and the more certainty a client needs of where assets will go, the more complicated the documents get. It’s also important to know if there is anyone who would potentially challenge a plan.

But the biggest question and concern for me is if there is a need for control. This normally applies because there are minor children who cannot legally handle money for themselves. However, if there’s a beneficiary who just makes bad financial decisions or has a substance abuse problem a trust might also be necessary. There’s also a limited ability to keep spouses or in-laws away from a plan if they could potentially cause problems through a divorce or other issues.

Finally, assets also are an important part of deciding a plan. If there are extremely limited resources, it’s hard to justify the expense of a more complicated plan, but it might also be worth it if any of the above are concerns. However, the type and location of assets also may make a trust worth it or not. For instance, with real estate anyone listed on a beneficiary deed plus their current spouse must sign on any sale of that real estate. That can cause major problems if there are multiple people involved and not all work together. The need for one person to make decisions on real estate may be enough to justify a trust. However, on the other hand, if most of the assets are liquid (retirement money, bank accounts, etc.) and it’s simply a matter of dividing money, then a trust might be overly complicated.

There are so many factors that go into what kind of plan fits a family. However, the more you know about the process and why a particular plan might be right, the better decision you can make for your loved ones.

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Being a Parent: Planning for Children

When I first began my law firm, I started estate planning thinking of my brothers and sisters, nieces and nephews. Then when I had my first born almost three years ago, my perspective changed dramatically. Now as we prepare for our second child, I thought I would take a moment and reflect on how our estate plan has (and hasn’t changed) since children have come along.

The benefit of drafting your own legal documents is you can think ahead and prepare them for changes in the future. So, our documents from five years ago included provisions for future children. However, anytime a new addition is added to the family, the estate plan needs to be reconsidered.

This might mean a completely new structure. Going from a will to a trust. But it also means updating children’s names and very simple updates to make sure everyone is included.

It’s also an opportunity to make sure the people handling money and in charge of the children’s well-being are still appropriate. We had the trustee and guardian decided before Duncan arrived, but it’s amazing how the logically decision became so much harder once my son was actually here. In the end, I believe we made the right decision and we have not changed it. However, it’s mainly because I realize there is no right answer and no one can truly take our place if we aren’t here to parent. We can only choose and hope the transition would be as easy as possible.

Finally, it’s also a great time to review assets and make sure all assets will avoid probate and are included in your plan. If you’ve never talked to a financial advisor, it’s a great time to review life insurance as well as planning for the children’s future with 529s or other investments.

Now, I know many of my clients have children that are all grown up. However, those grownup children might have to start thinking about their own children. So, even if you’re not preparing for your own minor children anymore, it’s worth mentioning to your children for your grandchildren.

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Decisions, Decisions – Burkhardt Law Firm

When forming an estate plan there are several important decisions necessary. The first is simply, what type of plan do I need? What documents are appropriate? This is a decision I would recommend discussing with an attorney, but anyone over the age of 18 needs a power of attorney. Then it’s important to look at how you will avoid probate and if you need a will or a trust. But no matter the type of plan or documents there are some basic decisions you might need to make.

Who will be making medical decisions for you if you cannot? Do you have a backup?

What medical decisions would you want for yourself? Anything specific that you would want communicated?

Who will be making financial decisions for you if you cannot? Do you have a backup?

Do you want the person making financial decisions to have immediate decision making power? Or do they need a doctor to verify you can’t act for yourself?

Who will be making decision over any businesses you own?

Who will be taking care of the welfare of any minor children?

Who will be taking care of the financial decisions for any minor children?

Do any of your beneficiaries need age or income limits for when or how much money they will receive? If so, what ages or how much is appropriate?

The list could go on and on regarding the decisions you’ll find yourself making when forming an estate plan, but these are a great place to focus and give shape to your plan.

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Who Cares? Why You Care About an Estate Plan – Burkhardt Law Firm

If you’re reading this, I hope I have given you insight on why an estate plan is important. However, I’ve been dealing more and more with probate and cases where there was no plan. Each time, I’ve had to be the person giving bad news. Normally, that bad news takes one or two forms. Often times, it actually involves both.

The first round of bad news, generally is that the assets will have to go through probate. One of the main problems with probate is that there are costs that will have to be paid for before the assets can be accessed. So, the person eventually receiving the money probably will have to find at least $500 before probate can even filed. This includes attorney fees, court filing fees, and often a bond.

In addition to having out of pocket expenses, the probate process normally takes months. Depending on the type of probate proceeding, this can range from a few months to several months and often times I tell clients to plan on at least a year. At some point during those months, some money may distributed from the estate, but generally its months before any money leaves probate.

Also, another huge complication with probate is if there are creditors of the person who passed. If there are creditors, opening a probate estate gives them access to any money they can prove they are owed. This may not present a problem, but may allow creditors to take all the assets before the heirs receive any money.

Finally, one of the last problems with probate is that all heirs will be involved. This can cause major problems if the heirs were not intended to be involved. The heirs will at least have to be notified and the court likely will also require their signatures on many of the filings.

Having that many people involved can cause more problems and time delays, but it’s an even bigger issue if the assets are not going where expected. If the house was supposed to go to one child, then must be divided between all five it can be a large shock and loss. Because a will may only be submitted within a year of a person’s death, if the will disinherits people or gives a specific asset to one person and it is not admitted into court within that year, the asset will not to go the intended person.

It’s also common for a person to list one person as a beneficiary on an asset with the intention that beneficiary distribute that asset to multiple people. Beyond potential tax consequences, the beneficiary also has no legal obligation to distribute that asset as intended. I’m sure you can imagine the emotional and financial problems that can cause.

To properly ensure probate will be avoided and assets go where intended, it’s so important to set up a proper estate plan. If you (or someone you know) isn’t sure they are avoiding probate and assets will be going where intended, it’s time to check on your estate plan!

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What Do You Want? Medical Powers of Attorney and Health Care Directives

I talk about estate plans on a daily basis, which natural involves talk of loss and dying, but there’s still one conversation I find hard: medical wishes. The end of life medical decisions have to be the most emotional and difficult to make. However, because of that I believe it’s one of the most important conversations to have and an important document to execute.

In Missouri, most legal practitioners offer an advance medical directive with a medical power of attorney in one document (the Missouri Bar even offers a free version here). The medical directive, similar to the living will, states what a person’s wishes are if they cannot make medical decisions for themselves. While there is a standard form most people choose, please realize there are options out there. In St. Louis, I see a lot of Catholic clients and there are different medical decisions people make based on faith. If that or another aspect of medical choices are important to you, then this is a document you should put serious consideration into.

The power of attorney portion, gives another person the ability to make these medical decisions. Most times, the power of attorney will have the ability to over-ride or to choose to follow the instructions in the medical directive. Because of this, it’s so important to choose someone who would make decisions in a way you would respect or ask. I often refer to this person as your medical advocate, because they will be the person making sure your medical wishes are followed.

Another very important part of these documents is the HIPAA authorization. If you’ve regularly visited the doctor before, you’ve probably heard of this, but the HIPAA authorization is what allows the person of your choice to access your medical information. Obviously, this is vital for whomever is making medical decisions for you. However, you can also specific certain people, which is so important if you do not have a traditional family structure and you want partners, step-children, friends, etc., to know what is happening medically.

Now, all of these documents are extremely important to make sure the right people have access. However, these documents only give access and don’t guarantee the decisions you want. Conversations with loved ones are the best way to make sure people understand the choices and can walk away from the experience feeling like they helped, rather than feeling guilty.

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Different Probate Options

When I work with clients, my goal is often very simple: Avoiding probate. However, I believe it’s also important to have a backup plan that includes providing for probate in the most efficient way possible. In order to do this, having an understanding of the different probate cases is important.

For adults unable to make their own decisions or for minors, the court may appoint someone to be in charge of their money through a conservatorship. The court may also appoint someone to be in charge of their physical well-being through a guardianship. These proceedings are only avoidable if an adult had the mental capacity and executed a power of attorney in advance. For minors or adults with special needs, a conservatorship or guardianship will be required. For these situations, a will is the only place to legally designate a future guardian and conservator.

On the other side of probate is when a person passes with assets left in their name alone and without beneficiaries. In these situations, there are a few different proceedings in Missouri.

After a year has passed since a person’s death, the heirs may also file a determination of heirship. Another simplified proceeding, this simply produces a court order effectively giving title to the legal heirs. Because fewer documents are required than other proceedings, this can give access quicker and generally less expensively. Unfortunately, the major downside to this probate process is the assets are given to the legal heirs under intestate law which may not have been the intention. In addition, the court requires a list of all assets going through the determination of heirship and would not give access to unknown assets.

Another option is the small estate affidavit. For estates under $40,000.00, this includes subtracting debt, the court may issue a certificate based on this affidavit. This allows the person signing the small estate to collect the listed assets. While this is a simplified option giving access to assets often within a few months, you must know and have statements for the assets. Because there are normally fewer documents require, it again is often also much less expensive than other probate proceedings. In addition, some counties will allow an individual to file these affidavits without an attorney. Unfortunately, St. Louis County does require an attorney.

Finally, the last option is a full probate proceeding. If a company says you need “Letters” this is what they are referring to.   The proceeding begins by issuing the Personal Representative (or Executor) Letters of Administration or Letters of Testamentary. These Letters allow the Personal Representative to call companies to gather information and assets for the heirs or devisees of a will. Generally, these proceedings will take a minimum of 7 months and can take years. It also gives an open court case for creditors. It is most likely to be the most expensive, but if the assets exceed $40,000, it has been less than a year since the death, or there are unknown assets, this is the only option.

So, how does this effect an estate plan? For small estate affidavits and a full probate proceedings wills can be admitted. However, a will can actually (nominally) increase the court fees. But a will can also waive bond (another expense) which may not always be done otherwise.   If a specific person should be appointed Personal Representative or intestate law is not the desired outcome, a will is always going to be necessary. But knowing the different methods of probate and potential fees should also help decide a backup to the main estate plan.

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Blended Families – Accidental Disinheritance – Burkhardt Law Firm

This week I presented at a personal finance college class and a topic that always seems to engage the students is what I refer to as accidental disinheritance. Unfortunately, I’ve seen this come up in several instances, but the most common occurs in blended families.

Husband and Wife both had children before they were married. Because they’re married, they’ve set up all of their assets jointly or have their spouse as the beneficiary on their individual assets. This is normal for most families, but the outcome isn’t always as expected.

When Husband passes, everything passes to Wife as intended, but it’s when Wife passes, that the family realizes things weren’t set up as intended. When Wife received the assets, Wife did not include H’s children as beneficiaries or did not put down beneficiaries at all. In either situation the outcome is the same, Husband’s children are not included. According to Missouri law, a widow’s assets go to her children alone, step-children are not included in intestate law. So, Husband’s children don’t even have a legal right to challenge Wife’s estate unless they were included in her will. And even if they are in the will, if she listed her children as the only beneficiaries, the beneficiary designations control over the will.

I like to believe in these situations that if Wife were informed, she would do everything correctly and Husband’s family wouldn’t have need to call me. But, of course, I get the phone call after the fact, and Wife has passed accidentally disinheriting Husband’s family. Or in some situations, Husband and Wife have met with an attorney and have set up their plan, but because they don’t fully understand the mechanics of the documents things go wrong.

For this reason, it’s extremely important that clients understand their documents and how they work. Especially in blended families, where when things go wrong, accidental disinheritance can happen.

 

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Don’t forget Fido! Planning for Pets

I grew up in a St. Louis County with about 17 pets. I’ve always loved animals and have almost always had a dog. About 8 years ago, I adopted a second dog, Brooke. She’s a beautiful, intelligent, high energy cattle dog mix. Brooke also is what I refer to as my special needs puppy. She has extreme anxiety which causes her to attack other dogs. Now, this is a major problem when you have two dogs. So when Brooke is around our other dog, Morgan, she has to wear a muzzle. She’s also on Zoloft.

So, you may be wondering why I’m writing about a dog in my estate planning blog. Because of Brooke’s needs she cannot be kept with other dogs. And if something happened to my husband and I, while our son is the main beneficiary of our trust, we wanted to make sure Brooke would be taken care of.

Now, some are extremely skeptical of making provisions for pets in a plan, but when you have needy pets or your pets are that important to you, it can be an important part of a plan. Now there are multiple options (trusts, gifts, etc.), but I think the important aspect of planning for a pet, is just to consider your pet and if it’s appropriate to include them as part of your plan. Does your pet have a place to live? Do they have extra needs or expenses you would want to make sure were provided? If so, you might want to make sure you have a plan in place for your pet.

It doesn’t have to be your whole estate, and it certainly does not need to be a large amount of money, but some pets do need a plan.

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Right of Sepulcher – Final Arrangements – Burkhardt Law Firm

As we discuss wills, trusts, and other estate planning documents, many people have questions on their final arrangements. A lot of people are content to let their loved ones make arrangements, but many others have very specific wishes and ask to put these wishes in a will.

Unfortunately though, while you can place those wishes in a will (or better yet a power of attorney), Missouri does not have a legal document where one can place their wishes and require them to be followed. Instead, Missouri allows for the right of sepulcher.

The right of sepulcher is a power you give a person to allow them to make decisions over your final arrangements. This includes burial, cremation, etc. However, it does not require them to follow your specific wishes. Often times, I will include the right of sepulcher in the power of attorney and include the wishes. However, if the agent under the power of attorney chooses to disregard the wishes, they may.

Because this power is so general, I strongly recommend pre-arranging your funeral, cremation, burial, etc. While your agent would not be required to use those services, having the planning done (and perhaps already paid for) is the best way to ensure your wishes are followed.

Many local funeral homes would be happy to discuss your options and find a way to meet your wishes. If this is an important issue to you, I would strongly recommend beginning this process today and considering it as part of your estate plan.

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Awkward Discussions

Over the years I’ve had many people ask me how to approach the topics of wills, trusts, and difficult end of life decisions (medical, funeral, etc). Understandably it’s a topic normal people don’t sit around and discuss. Unless of course you’re an estate planning attorney. But I did say normal.

Either people don’t want to discuss the topic themselves or they feel intrusive and pushy bringing it up to loved ones. Even I have been in the uncomfortable position of being near someone I care about and worrying if they had properly protected themselves. So how do you start a discussion on estate planning with your parents or loved ones?

Well, if I had that answer, I might have already retired. But a few tips to begin the conversation and make it a bit easier:

Tell them about this great blog you read. Find a neutral topic to introduce the subject. Don’t just jump in with “you need a will.” Bring up an article or whatever has made you think about it in the past. Refer to your attorney friend or the recent celebrity who lost millions by the lack of planning. If they are open to the topic, then you can get more personal and really talk in detail. If they seem hesitant, don’t force the issues, but just mention it every once and a while without focusing on them.

Talk about yourself. So let me be clear. This is not about you. If you are talking about a plan for another, do not make it about yourself. However, people plan for their loved ones and so if you open up about your concerns, then you might get them to talk about their own concerns and plans.

Don’t focus on death. In my meetings, I rarely use the “D” word. There are a thousand ways to talk about it without using the word itself. Instead focus on love. The real concerns are either making sure wishes are followed or making sure the ones left can focus on the family.

Be honest. There is a reason you are reading this blog. You’ve either done your own planning or your thinking about someone’s plan. Chances are it’s not about you. You’re trying to make another’s life easier. Let that come through as you bring up the topic. Make it about the big picture concerns and why you’re trying to discuss it.

Truthfully, there’s just no magic conversation. However, with a bit of tact, compassion, and understanding there’s a way to bring it up and be respectful about a potentially uncomfortable subject. And don’t forget, I’m always a phone call or blog post away when those discussions lead to questions.

Burkhardt Law Firm

Phone: (314) 518-1581
Email: mburkhardt@burkhardtlaw.com
Address:
2333 Grissom Dr., Suite 107
St. Louis, MO 63146