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When You Don’t Avoid Probate (Pt. 2) – Your Options

So as I mentioned last month, I have been doing a lot of probate work recently.  And there I discussed what is needed to begin probate.  This month I want to discuss what the different probate options are.

The simplest option is the small estate affidavit.  The limitation is that you can only use a small estate affidavit if the total assets are under $40,000.  You also have to have proof of the assets and will not be an executor or personal representative. This means if you don’t know the assets, you cannot use a small estate. But if you know all the assets and they’re under $40,000, a small estate affidavit will result in a court order giving access to those assets. It’s a great option.

Another “easy” option is the determination of heirship. However,  this is only available a year after a person has died. It also requires a court hearing. And because a will has to be admitted into probate within a year of the death, you cannot use a will. The assets can only pass intestate.  At the end of the hearing, there is a court order showing who the heirs are who get the assets. So again, there will not be a personal representative to get access to unknown assets,  but it’s another simple option to get to assets.

However,  if the assets are over $40,000, you can’t wait a year, or if there’s an unknown and you need to gather information,  the only option is a full probate proceeding. A full probate process is what most people want to avoid with a proper estate plan for a few reasons.  First, it opens the assets to creditors and challenges.  Secondly, you’re paying attorney to handle it all.  And finally, in a simple case, it won’t be resolved for over six months and normally will take over a year to complete.  So while, it’s sometimes the only option, it’s the proceeding most people think of and want to avoid.

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When You Don’t Avoid Probate (Pt. 1) – What You Need

As I help clients form an estate plan, the main goal is normally to avoid probate.  There are different ways to do that, beneficiary designations or a trust, but sometimes it simply doesn’t happen.  More and more recently I have been hired to clean up those times when a person hasn’t properly planned.

When a new probate client comes in, there’s a few things that we need to figure out to determine how probate will work:

The assets – Only assets that do not have a beneficiary or owner will go through probate.  So, if a life insurance policy has a beneficiary, it does not need to go through probate.  Or if a bank account has another person listed as an owner (but please don’t DIY plan this way), it does not need to go through probate.  So the first step, is to figure out which assets need to go through probate and the approximate value.

The heirs/devisees – I also need to know about the family left behind.  The court will need to know who the heirs are and if there was a will, who was entitled under the will.  For all these people, I need legal names, addresses, dates of birth, and, if possible, social security numbers.

The death certificate – Where a person lived and when they passed determine which court and which probate process will be used.

As you can see, it’s not a long list of things of things that I need.  However, gathering the information can be difficult.  Even just getting an approximate value of the assets can be hard, because when a person passes most companies will not give out that information until probate has begun.   But this is just the first step to beginning the probate process, next month I’ll explain those processes and how they each work.  From there, I’ll tell you the drawbacks to each and why it’s just best to avoid probate from the start!

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A New Year’s Resolution – Don’t Wait to Plan

A New Year’s Resolution – Don’t Wait

We have had the wonderful privilege of being extremely busy since I have returned from maternity leave.  I feel extremely lucky and blessed that my clients and those who refer me trust me enough that we had a great 2018 and are looking forward to a full and eventful 2019.  So, thank you to all who read this for your continued faith and trust in me.

However, I do have a bit of a request.  As we enter 2019, if you hear someone talking about a will or power of attorney, any estate plan, with the phrase “We’ve been meaning to do that…” or anything similar, please interrupt.  Now, estate planning is my business, so of course, it’s a bit self-serving.  But that really isn’t the reason.  I’ve had many acquaintances over the years who haven’t used me for one reason or another, and I understand when that happens.  A person can be too close.  But even when I’ve been told a potential client has had their plan done elsewhere, I thank them for getting it done.  Because it can be too late to plan.

I’ve helped a lot of families form a plan to avoid probate, but this year we’ve also helped many loved ones grieving sort through when a plan wasn’t in place.  And I’ll be honest, I prefer the planning in advance.  Many times, probate is simple, a few months, everyone getting along, and a magic court order that gives easy access.  I try to help it work this way any opportunity I can.  That, of course, isn’t all the time.  If there are people who need access to funds immediately, families that are more complicated, or just small assets spread everywhere, it can make probate a nightmare.  Unfortunately, I also have had to tell many families that with the amount of work (and legal fees) involved, probate just wouldn’t be worth it.

There’s also the call I get on a regular basis, where a loved one wants to help get a person a power of attorney, but there’s a question of capacity.  Sometimes, we’re able to proceed, but more often then not, it’s too late.  In that situation, the only way to access accounts would be to go to the court and petition for a conservatorship.

I hate those calls where I am the one breaking the news that court is the only way and often not a practical way because of the legal fees.  It’s terrible for me, and I’m not the one dealing with the situation.  So, do me a favor this year, and if you hear anyone making a resolution to get their estate plan encourage them not to wait!

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Don’t Forget…. To Title Your Assets!

I meet with most of my estate planning clients three times and in each of those meetings I (try to) emphasize that an estate plan is truly controlled by how assets are titled. Of course the legal documents are important, I wouldn’t have a job if they weren’t. But the documents I create don’t mean anything unless we know how the assets are titled.

This is because it is really how an asset is titled that determines where the asset goes and if it will have to go through probate.

If there is a co-owner with a right of survivorship (this is generally called Joint Tenants with Right of Survivorship or JTWROS), then the property passes to the co-owner. This is also where trusts fall. In order for the trust to control, the title must be in the name of the trust and the trust must be the owner. The new owner under this ownership will have control and ownership completely outside of probate.

If there isn’t a trust as the owner or there isn’t a co-owner, then you look to see if there are beneficiaries. If there are beneficiaries, then they then own the property. And when I say beneficiaries, I also include Transfers on Death (TODs) and Payable on Death (PODs) designations. Again, these beneficiaries take ownership without probate.

It is only after ownership or beneficiaries that a will would control. If there are no co-owners and no beneficiaries, then whomever would get the property under the will is the new owner. However, a will must go through probate to transfer the property to the new owner.

And finally, if there are no co-owners, no beneficiaries, and no will, then intestate law controls and heirs get the asset. But again, the heirs would have to go through probate to gain access to the asset.

So, do me a favor, if you or a loved one has assets you’re worried about going through probate, CHECK HOW THEY’RE TITLED!

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Managing the Loss of a Loved One: Legal Steps to Consider

After the loss of a loved one, there’s so many things to manage: emotions, family, expenses. It can be absolutely overwhelming just knowing where to start.

While the loss can be overwhelming, there’s very few things that need to happen quickly. The more important aspect is to handle things efficiently and take the time to grieve. When ready these tips are good items to begin with:

1 – Don’t Touch Money without Knowing the Consequence

Most inheritances do not have a tax consequence. But do you know which do? There could be a tax consequence (especially with the potential tax reforms) you aren’t sure about. So, before you take money out of an account, it’s really important to know if there will be a tax consequence. I would strongly recommend talking to a licensed financial advisor before moving money around. Specifically, retirement money can have tax consequences and those should always be determined before moving it.

2 – Don’t Pay Unnecessary Bills (unless you want to)

In most circumstances, you are not responsible for the debts of a person who has passed. So, unless you want to (and some people do), it’s not necessary to pay all of your loved one’s bills. However, any assets that you will be keeping (house, car, etc.), you should continue to pay. This would include loans, utilities, and insurance among others. Also, if your name is on the debt, credit cards for instance, you will be personal responsible for the bill and you should pay that debt.

3 – Tax Filings and Advice

There will often be an income tax return to file and could be money from retirement accounts that will require tax advice. Because there are strict deadlines with tax filings and the transfer of taxable money, a licensed CPA should be a priority in those first few weeks.

4 – Accessing Assets

Before knowing how to access a specific account or asset, you must know they exist. So the first step is making a list of all the assets. A bank statement is a great place to start. It will show any incoming money and outgoing expenses which may provide insight on where assets are. Any type of statements you can find are going to be very helpful.

The next question then is how do you access these accounts and assets. The simple answer is the holding company will tell you. Hopefully, it’s as simple as a death certificate. More often it’s a court order. If you are told you need a small estate affidavit, letters of administration, or letters of testamentary, it’s time for probate and if you’re in St. Louis County that means starting with an attorney.

5 – The Will

If there is a will, the will must be admitted into court within one year of the date of death. This means it really isn’t something that needs to be addressed quickly. However, if you have not found yourself in need of probate within the first several months, it should be a priority to admit it into probate court within that first year. If the will is not admitted, even if it is “filed” with the court, within that first year, it will no longer control.

Hopefully this list is a helpful place to get started. Remember, very few things take priority over mourning and family and loss, but we’re here to help as you need it.

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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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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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Ensure Your Estate Plan Avoids The Headache of Probate

Every year attorneys have the pleasure to updating their knowledge through continuing education. So this week it was my pleasure to sit through two days of extreme detail about probate court. I’m certain you are not reading this because you want to learn all about probate. However, what I want to communicate is that there was two days of material for an attorney (and there could have been more) demonstrating how complicated probate can be.

Even when it is not complicated, it is an administrative headache. An attorney is often required which is frequently the major expense of probate. But the expense is not the only problem. Probate also has many time constraints. Publication and notices are required unless the estate is under $15,000. Which introduces at least one month, if not over six months, of waiting. Opening a probate estate also creates an easy place for challenges and creditors. All great reasons to avoid probate.

Procedures and laws surrounding probate also affect how you plan to avoid probate. One of the laws mishandled frequently is that a spouse is entitled to at least 1/3 of the assets. This is extremely important in blended families when the spouses do not intend to leave all the assets to the spouse. In order to effectively do this a prenuptial or postnuptial agreement is necessary.

The other important provision regarding probate is that minors may not receive more than $15,000 without involving the probate court. Essentially, this means a trust is required to avoid probate when leaving money to minors.

If this sounds like something you want to avoid, then learn more about avoiding probate here.

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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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Avoidable: 4 Ways to Avoid Probate

I dwell a lot on probate because while it can go smoothly, it’s generally expensive, time consuming, and most importantly easy to avoid. So let’s talk about how to avoid it.

First, what most people don’t think about is that probate can also include when a person is incapacitated. If a person is physically or mentally unable to make his or her own decisions the court gets involved and appoints a person to do so (along with a long list of necessary steps). This part is extremely easy to avoid through a durable power of attorney. A durable power of attorney allows someone you choose to take control of your financial, medical, and legal matters. A very simple solution and legal document to prevent the need for court.

But of course, more people think of losing a loved one when they talk about probate. Any assets remaining in a deceased person’s name alone will need to go to court and through probate (even if there is a will). But there are a few ways to avoid probate:

Gifting – If there is an asset a person is no longer using or is comfortable no longer having control of, simply giving it away and re-titling the asset is an option. Depending on the type and amount of the gift, there can be tax consequences, so I always suggest talking to an accountant before gifting property.

Joint Titling – By putting another persons’ name on an asset, that person may automatically get the asset when the other passes. This is often times why a wife may not need to go through probate when her husband passes. However, there are multiple forms of joint ownership in Missouri and if the correct one is not used, then probate may still be necessary. And because putting another person’s name on an asset can also be a gift there may be tax consequences as well.

Because of the potential pitfalls with the other two, I rarely recommend them. Instead I focus on two different options:

Beneficiaries – Almost any asset can have a beneficiary. Retirement plans and life insurance ask you very directly, but you can do the same with vehicles, bank accounts, and homes. They might be referred to as “Payable on Death” (POD), “Transfer on Death” (TOD), or a beneficiary deed (real estate). Essentially, all of these allow someone to get any asset upon a person’s death without needing probate court. There are some limitations as well on beneficiaries. This could be a problem with a beneficiary passing first, incomplete or lost forms, or putting a minor as a beneficiary.

Trusts – When beneficiaries are not enough, trusts can also avoid probate. Again though, this comes down to titling. It’s so important once a trust document has been signed that the assets are actually put in the name of the trust. A trust allows more control over how or when the assets can be used. They work well for minors or for preserving assets across generations. But most importantly, a trust implemented correctly can be the easiest way to avoid probate.

Whether through a trust or another method, probate should be completely avoidable for most families. It’s something I advise my clients on every free estate planning consultation and it’s something you should consider as well.

Burkhardt Law Firm

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