mburkhardt@burkhardtlaw.com | (314) 518-1581

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Online Access

I was at my parents’ house the other day and attempting to access one of their online accounts (by their request). However, my mother didn’t know the password and my father uses his own system to store online information. After much searching, I found the account information, but if I had to do this for all his accounts, it would be a nightmare. After that experience, I worry if something happened to my parents how easy it would be to access all their online accounts they have set up. Shortly after that experience, I received an email from LastPass regarding my password management system informing me I could add an emergency online access.

Now, I know I’ve mentioned online accounts before, but the combination of these events really made me want to write about it again. So much of our lives are done online now that it dramatically changes the practical aspect of how families manage and access assets when something does happen. In the past, it was much easier to go through a loved one’s files to determine what bills to pay and what assets existed. However, when you pay bills online or have account statements emailed, the paper trail no longer exists. As such, it’s extremely important to either keep a list of bills and assets OR give someone online access.

As you might have guessed, I’m a big fan of LastPass or other online encrypted password management systems. I think they are extremely easy to use (open the website, login, and it automatically saves/updates your password) and convenient. I can’t speak to the technical encryption and safety, but when my IT company (CMIT Solutions) suggests it, I personally, feel very safe trusting it.

However, if you’re a bit more wary of online systems (like some of my family), at least form a list of your own of accounts.

Some sites are even updating their settings to allow online access (including facebook and google) if something happens to you. Take advantage of this!

No matter your personal opinions on online security and account access, make sure you have a way for a trusted loved one to determine what accounts and bills you have, (Dad).

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Save Heartache & Money

This week I gave a presentation to a group of professionals I work with on a regular basis. After the meeting, several came up to me concerned that their plans wouldn’t accomplish what they thought it would. So, in the hopes of saving your family heartache and money, I thought I would the main point of that presentation.

When clients hire me to do an estate plan, my job is to avoid probate in the most cost efficient manner with as little conflict as possible. There’s two situations where probate is possible. First, is when a person is no longer able to make decisions for themselves.

If incapacitated and a person does not have any documents in place, the probate court gets involved in a guardianship or conservatorship. In these cases, the court appoints someone to make financial and medical decisions for you. That person must get court approval for any purchases and must make annual reports. Generally, in a time when they must already take care of a loved one, the court is the last thing they need to be dealing with.

This is very easy to avoid through a power of attorney or a trust. Either document may control if you’re incapacitated, but there are two main differences. First, a power of attorney will only control what is in your individual name, while a trust will only control what is in the trusts name. Also, a power of attorney ends upon death, while a trust may also control what happens after you pass.

The other side of planning is what most people think of: when someone passes. Without a will, assets go through intestate law and must go through probate. Even with a will, assets go through probate.

As such, I normally recommend non-probate transfers to be used to avoid probate upon death. This is a fancy term for joint titling, beneficiaries, or a trust. There are different benefits to each one, but generally a trust is the “best” option, while beneficiaries are “better”, and a will is “good.”

A trust is the “best” option because it allows for control over the assets while avoiding probate. Trusts are also very adaptable, permitting one to only change the trust document instead of beneficiary designations when life changes (i.e. changing beneficiaries, beneficiary percentages, and any restrictions on assets). It also can set up different layers of contingencies for beneficiaries and often provides the least amount of conflict between family members. It’s great for complicated families or when minors are involved. I also recommend it when real estate is involved, because in Missouri, if a person or people own real estate their spouses must also sign off on any transaction involving real estate. So, for families with multiple children, it’s a good way to limit the amount of people involved in any decision regarding that property.

Beneficiaries are the “better” choice because they avoid probate. But I generally only recommend them, with liquid assets, limited family members, and responsible beneficiaries.

A will is the “good” option because it goes through probate. This is necessary for families who do not want intestate law to apply and for minor guardianship. But because it goes through probate, there will be court and attorney fees and I rarely recommend it by itself.

So, in the holiday spirit save heartache and money for your family by checking the beneficiaries on your assets with this checklist!

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What Controls?

One of the most misunderstood topics of estate planning is what documents control a situation.  I often have people calling asking for a power of attorney, when they truly need to update how an asset is titled, or someone calls asking for a will when they really need to update a trust.  So, hopefully this month I can clarify what documents actually control a situation.  It all really depends on who legally owns the asset.

Titling always controls first.  If there are two people on the asset, then they have access to that asset.  Both signatures might be required, but often times (unless dealing with real estate or vehicles) one person may act without the other.

Often times, I have someone ask me about a power of attorney, but they actually mean another person is on their bank account or asset with them.  In that situation, the solution involves changing how the bank account is titled, not changing the power of attorney.

A power of attorney is when someone has an asset in their name, but a second person uses the document to access the first person’s asset.  The power of attorney may only be used when the person is still alive.  The most common time a power of attorney is used is when an individual is no longer able to make decisions and another needs access to his/her retirement accounts to provide for him/her.

However, if the asset is titled in the name of the trust (not in the name of the original owner), the trust controls.  If the original creator of the trust is not able to make decisions any longer the successor trustee takes over.  The successor trustee will have access to make decisions on the asset.  A power of attorney cannot apply in this situation because the person is not the owner the trust is.

When we start talking about when people pass, there are generally a few different ways for the property to be controlled.  First, again is who is titled on the asset.  If there is more than one name on the asset, the remaining name may be entitled to the asset alone.  It depends on exactly how the asset is titled. Generally, if the asset is owned by (and titled to) a married couple, the asset will automatically pass to the other.  If the owners are not married, it must state the asset is owned by joint tenants with right of survivorship for the asset to pass automatically to the other.

The title might again be in the name of the trust, and again, if that is the case, the trust document controls.  The successor trustee would take control of the assets and distribute or hold them as the trust document dictates.

If the asset does not have another person on the title as a current owner or is not in a trust, a beneficiary designation will control.  This might be a beneficiary deed on the house, a “TOD” or Transfer on Death on a vehicle, or a “POD” on a bank account, but if there is any form of a beneficiary listed, that beneficiary gets the asset.

It is only when there is no trust, other person, or beneficiary listed on the title that the asset would go through probate.  At that point, if there is a will the will would control, and if there is no will intestate law would apply.

While it can be confusing, the first step is always looking at the title.  A trustee will always control if it’s owned by a trust, a joint owner may be control, and only after that a power of attorney, beneficiary, or will.

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Better Late Than Never… Especially Estate Planning

Hopefully, you noticed my blog didn’t appear at the beginning of the month. Life happened… clients called, an amazing new nephew was born, and of course a three month old just needed his mom. Time flies away and we don’t know where it goes. I’m sure it happens to us all, but I am guilty of it this month. I kept intending to take the hour to sit down and write, but it just kept getting moved to the bottom of the list. I hear this on a regular basis about estate planning.

Everyone knows estate planning in some form is important. But it’s not often urgent, so it gets put behind the things that are. The unfortunately thing is that once it becomes urgent, it’s often too late.

I’ve received several phone calls over the last few years when a loved one goes into the hospital. The person hospitalized never took the time and then the family is frantically trying to get assets titled so probate won’t be necessary. Often it’s just not possible.

Even if you’ve formed your estate plan, is it up to date? Have you funded your trust? Accurately listed your beneficiaries?

So, consider this your reminder. Don’t make your loved ones rush around when they don’t have the time. Make the time now and put it at the top of your priority list. In the grand scheme, it doesn’t take long and once done is just another thing you can cross off your list.

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Do You Need a Will?

Many times a potential client calls asking about a will and when we sit down for a consultation, they’re shocked to find out a will doesn’t accomplish what they want. Because this happens on such a regular basis, I thought I would go over what a will does and doesn’t do and when you might need a will or when you might need something more.

First, a will does not avoid probate. In order for a will to be effective, the court must verify the will and give all potential heirs an opportunity to contest the will. As such, assets passing through a will must go through court and may take months to years before they can be accessed. If your goals are to avoid court and hassle, then a will alone will not do this and you want to consider non-probate transfers.

But, maybe most importantly, if you have minor children you need a will. This is because a will is the only place to tell the court who you want to be guardians for your minor children.

However, even if you do not have minor children, I often recommend a will for a few different reasons. While the will may not be your main device to leave money to your beneficiaries, it is a very important back up. If you forget to put a beneficiary on an asset or put an asset in a trust, it will go through probate and a will can make that process easier a few different ways. First, if your beneficiaries differ from intestate law, if will ensure your assets go where you wish. Secondly, no matter whom your beneficiaries are, it can allow probate to proceed more quickly by allowing independent administration and waiving a bond. A will also allows you to choose who is in charge of handling your assets and acting for your beneficiaries as the personal representative or executor.

So while there are a few situations where you need a will, there are many more where you may not need one, but it would be beneficial.

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A New Perspective to Estate Planning – Parenthood

My husband and I just welcomed our first child into the world on June 16th. As I was thinking of what to discuss this month, I thought I’d simply share how my new parenthood has made me reconsider our estate plan and the documents I create for my clients on a regular basis.

The first thing that occurred to me is how important a medical power of attorney really is. This was my first experience being hospitalized; while I did not have to use my power of attorney, it was extremely comforting to me to know my husband would be able to make medical decisions if I was unable.

It also made me re-evaluate our trust and trustees. We completed our trust years ago and with the birth of our first born, my husband and I have set aside some time to review our trust and make sure the decisions we made then still are applicable to our new family.

But the most important thing I have realized is how hard it is to choose a guardian. I have always helped my clients sort through the options and generally act as a third party perspective with objective reasons why someone may or may not be a good fit. Well, I now understand on a very personal level why it is so hard. It’s so difficult to find someone who will raise your child the way you want to raise him. Everyone we’ve considered has positive and negative characteristics and it’s so easy to rule someone out because they’re not perfect. As I’ve told my clients in the past, no one can replace them, they’re only able to choose the best option in the worst circumstance.

Parenthood has given me a new perspective and while I’m proud of that third party, objective view, I hope it’s given me an opportunity to better understand the families I work with and the difficult decisions they must face when forming an estate plan.

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Who Has the Power: Attorneys-in-Fact, Personal Representatives, Guardians, and Trustees

Estate planning can be complicated. In addition to different ways to structure a plan, multiple people can be involved. Most of the time, the people making decisions within the different documents are the same person. However, they don’t have to be. As such, it’s important to understand what the different positions and documents require.

Attorneys-in-Fact – This person can also be called an Agent, but it’s the person acting through a Power of Attorney. Their power either begins immediately or when a person is no longer able to make decisions for themselves. However, this power ends with the person creating the document (also known as the principal) dies. The attorney-in-fact can have many different responsibilities, but I generally divide it into two categories. The first being responsibility over the principal’s assets which remain in the principal’s name and legal decisions. The best example of this is generally making decisions over insurance policies or retirement accounts. They must use these assets for the principal’s benefits. The second category is medical decisions. The attorney-in-fact has the power of what treatments the principal should receive, may sign off on medical waivers, and will make the final decision on end of life treatment.

Personal Representative – Previously called an executor or executrix, this is the person acting under an individual’s will. When acting as a personal representative (or PR), that person will have to locate the will and deliver it to the probate court. They will then be responsible to the court to determine what assets must pass through probate with an inventory and accounting of those assets. The PR will have to determine what to do with assets, pay any creditor claims, and is responsible for all filings submitted to the court. At the end of the probate matter, the PR will also be the one who divides the estate to any beneficiaries.

Guardians – For many families, this is the most important role. This is specified in the will and is vital for determining who is responsible for minor or incompetent children. The court has the final decision on who a guardian will be, but a parent’s will and wishes are often respected.

Trustees – A trustee is the person responsible for enforcing the terms of the trust.   Essentially this means that when the principal is no longer able to make decisions (or chooses not to), the trustee will take control of any assets held in the trust’s name. At that point they will use the assets for the person who created the trust. When the principal passes, the trustee will be responsible for either distributing the remaining assets to the beneficiaries or managing the assets for the beneficiaries. This position can last for multiple years and generations.

All of these roles require a person to act in the best interests of the principal or the beneficiaries, but there can be very little oversight. A lot of responsibility and power comes with attorneys-in-fact, personal representatives, guardians, and trustees and there is definitely the ability to abuse the power. As such, it’s extremely important to choose the right person for each role and most importantly choose someone who can be trusted.

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Questions to Ask Your Estate Planning Attorney

This week I had the benefit of sitting through four hours of information regarding the taxation of IRAs. I call it a benefit very intentionally. It’s a benefit for me and a benefit for my clients. Now, I am not a tax attorney or a CPA, but taxes and knowing IRS law and regulations directly affect how I draft documents and advise my clients to list their beneficiaries. Those decisions are extremely individualized and often is a discussion with the client and their tax or financial advisor, so unfortunately, you’ll never see a discussion of those issues here. However, it made me ask what the estate planning attorney you are working should know. As such, here are some questions to ask your estate planning attorney before working with her:

  • How do you charge? What other fees should I expect?
  • Will you work with my other financial professional? Are there additional fees for doing so?
  • Do you fund a trust for me or help me change beneficiaries?
    • I always send my clients away with homework, whether there is a trust involved or a just a will, my clients often will need to update a title or beneficiary. Some attorneys will do this for their clients (generally for an additional fee). If you know you will not do these things, I strongly recommend finding an attorney who will do this. However, if you are cost conscious, then an attorney who doesn’t do this may not be important.   No matter what, I would still recommend hiring an attorney who will advise you on titling and beneficiaries; as well as one who will follow up to ensure you have changed appropriate titles and beneficiaries.
  • How often will you contact me?
    • Tax laws (among others) change every year and you don’t want to be the one responsible for knowing if those laws change and if they affect your plan. I would recommend an attorney who will at least talk with you once a year to determine if an update to your plan is necessary.
  • How often and how many wills/trusts/estate plans do you complete a year? How do you stay current on tax law?
    • The number of plans an attorney completes a year directly relates to their incentive to stay current on law affecting those plans. So while an attorney may have done hundreds, if they only do a few year, are they really knowledgeable of the current law? I know many older attorneys who do not advise beneficiary designations in the most advisable way because the law has changed since they last actively practiced.

You should be comfortable working with whomever you hire and this needs to include communication, knowledge level, and expectations. Know what you and your professional expect from one another at the beginning and your estate plan is much more likely to be what you expect and want. Hopefully, these have made you think of your own questions for any attorney or any financial professional you are looking to hire. In the end, remember, the decision is your and you are the client.

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Planning for Minor Children

Starting in Spring I begin getting phone calls as parents plan vacations away from their minor kids. Understandable, parents want to make sure that if something happens to them while they’re on a trip, their kids will be protected. I’ve talked before about planning for minor children, but I thought it was time for a refresher.

I’ll quickly mention again there’s actually two sides to planning for minor children: the physical and the financial. For minors, the court requires a legal competent adult to be in charge of the welfare of the minor child. This is done through guardianship. The court will hold a proceeding to determine who this adult will be. The only way the court will consider the parents’ wishes is through a will. If there is no will, the court will determine on its own who should be in charge of your children. Probably a scary thought if you have differing values from some of your family (or at least it should be).

It can be hard choosing the person who would raise your children if you cannot, but I find this worksheet to be a helpful place to start.

The other side of planning for minor children is financial. If you place more than $10,000 of assets in a minor child’s name, Missouri requires the probate court to be involved. If you have a will, this might specify who is in charge of the assets, but it must still go through the probate court to be valid.

A lot of the clients I see try and avoid this through placing an adult’s name on the assets instead of the child’s. I hope needless to say, this is a very bad idea. First of all, that person then has no legal obligation to use that money for the benefit of the child. Even beyond this, the money is then at risk to any creditors or liabilities they have. But the largest drawback I see with this is that the assets are then subject to that adult’s estate plan (or lack thereof). If that adult becomes incapacitated and unable to access the money themselves, there is no way to legally use the assets for the child. Worse, if that adult passes without an estate plan taking this into account, the money most likely will not go to the child.

I also have some prospective clients who have a testamentary trust. This means the trust is established in their will not by a standalone trust document.  There are two major drawbacks with this type of trust. First, the will must go through the probate court in order for the trust to exist. Secondly, because the trust does not exist until after death it can be difficult to properly title assets to avoid probate.

The other hesitation for many parents is that this plan is only necessary if both parents pass. While this is true, you cannot unfortunately plan on the circumstances surrounding estate planning. It’s much easier to plan in advance than clean up the mess left behind. Planning is much less expensive done proactively and work does not need to be done twice if a plan is established beforehand.

This is why for most young families, even when I get asked about wills, I strongly recommend a trust in addition to the wills.

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Will You Have Access to Your Children’s Medical Information?

You’ve probably considered your own plans, perhaps even your parents. But have you thought about your children’s plans? You might think they’re young enough they don’t need a plan, but for your benefit, here’s why they might.

First, in the situation of older adult children you might be hoping to leave them an inheritance. Depending on how they receive that inheritance, their own estate plan might come into effect. Because of that, if you have a strong opinion on where you’d like the money to go, you first might to reconsider your own plan, but also ask your kids what their plan looks like.

Second, in the situation of younger adult children (18+) you are no longer their legal guardian. Which means you no longer have legal rights to their medical or financial information. This is a scary thought for most parents with children in college. If there’s a medical emergency you may not have access to your child’s medical information.

Finally, with younger children, legal guardians have the right to make decisions for their children, but what happens if all of the legal guardians are out of town and inaccessible? Before leaving town, you might consider putting in place a power of attorney to allow someone else to make important and time sensitive medical considerations for your kids.

So when considering your own plans, don’t forget to think about your children’s decisions as well!

Burkhardt Law Firm

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