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Burkhardt Law

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New Real Estate? Don’t Forget About your Estate Plan

During the Pandemic, many people changed the way they work and those changes may have made them rethink where their real estate.  Some businesses changed to a work from home model or a hybrid model of working from home some days and from the office some days.  These changes meant for some they could move further away from their office since they were going to work from home anyway.  Or maybe they were working from home a few days a week.  And some with school age children had to have their children learn virtually from home.

Last year my children went back and forth at different times of the year between all virtual, hybrid, and in-person learning.  My husband began working entirely from home and I was working a hybrid model of a few days at home.  Having 4 people in the house trying to be on phone calls or zoom calls at the same time could be loud and distracting.  My family had been living in a 3 bedroom home, my children’s bedrooms were too small to add a desk, my “office” was set up in our master bedroom, and my husband’s “office” was in the basement but was in an open space with no door to close.

We decided we needed more space in our real estate.  We needed to be able have separate work spaces where we didn’t have to hear each other’s calls and could have quiet to concentrate on our work.  Like many people, who were suddenly spending more time at home, we decided if we were spending so much time at home, we needed more space.  We decided to move into a larger home where I now get my own home office that is not in my bedroom.  I can close the door from the distractions.  My husband also is now able to have his own office as well with a door he can close. My husband spends the majority of his days on phone calls and prior to us moving he constantly had to tell the kids to be quiet.

If you have also moved recently or plan on doing so soon, don’t forget to think about your existing estate plan.  If you have a Trust you may want your Trust to own your real estate.  If you already purchased your home and it was not put in the name of your Trust you should think about calling an attorney who can prepare a Special Warranty Deed, to transfer the ownership of the home from you to your Trust.

If you haven’t already moved but plan to soon and have a Trust, the closing company preparing your new deed should be able to do this.  Just make sure you inform them when completing the closing paperwork.  Some mortgage companies will not allow you to put the deed in the name of the trust at closing.  If this is the case, an attorney should be contacted to transfer the property after the mortgage closing.  If you don’t have a trust and your estate plan consists of putting beneficiary designations on all your assets to avoid probate upon your death, you should contact an attorney after closing to prepare a beneficiary deed for your real estate.  This will allow your real estate to pass to the beneficiaries of your choosing and avoid the need for Probate.

-Lisa Villareal

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My dad just left a few small assets. Do I have to go through Probate?

If a person passes away leaving assets without beneficiary designations, there is a court process called Probate. Probate allows for a personal representative to be appointed by the court to access those assets and distribute them to those entitled to them.  Who is entitled to those assets will be determined by the deceased individual’s will.  If the deceased individual did not have a will, who is entitled to those assets is determined by the intestacy laws of the state where the deceased person resided at the time of their death.

In Missouri, whether the deceased person had a will or not, if the assets are less then $40,000.00 you may be able to avoid the longer, more costly probate process.  You may be able to file a small estate affidavit with the court.  This process is faster and less expensive then if a full probate is required.

For example, assume your dad had a retirement plan, life insurance policy, bank account, and a car when he passed.  If the retirement plan and life insurance policy had beneficiaries, the retirement account and life insurance would not need to go through probate.  Assets that have beneficiary designations can avoid probate.  However, your dad forgot to add beneficiaries when he got a new car and opened a new bank account.   If the car’s value and bank account total less than $40,000.00, you may be able to use a Small Estate Affidavit to access the bank account and car.

In addition, to the Small Estate Affidavit, the court may require additional information as well.  If there was a will you will need to provide the court with the original will.  You will also need a copy of the death certificate, information about the heirs and those named in the will if there is a will (may need full legal name, address, social security number, date of birth, and date of death if applicable), and proof of values of the assets.  For the car, the car title would be needed that would include the vehicle identification number and for the bank, a bank statement showing the account number and balance of account would be needed.

Different states have different laws and even different counties may have different rules and procedures, so it is always a good idea to meet with an attorney.  The attorney can help you determine what court procedure is needed in your situation and can help you navigate the process.  My husband’s uncle recently reached out to me because his father passed away and he was trying to fill out court documents that he had found online and had a few questions for me.  I don’t practice law in the state where his father passed away but just from asking him a few questions, I was able to determine he was trying to fill out forms for the wrong county and also had forms for the wrong court process.  I suggested that he contact a Probate attorney in the city where his father had passed.  Losing a loved one is stressful enough, an experienced attorney can help you navigate the legal process.

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The SECURE Act: Your Retirement and Estate Plan

One of the major places many of my clients save is in retirement accounts.  This may be in a 401k, IRA, 401a, or 403b, among others.  Unless set up as a Roth account, when money is taken out of these accounts, income tax will have to be paid.  Because this is one of the largest tax implications my clients will see in their estate plans, it’s an important subject.

I’m writing about this now because the Setting Every Community Up for Retirement Enhancement Act of 2019, otherwise known as the SECURE ACT, went into effect January 1, 2020.  This act brings many changes for retirement plans and if you have a significant amount of money in retirement accounts, it will affect your estate plan.

If you inherited a retirement account prior to January 1, 2020, you were able to rollover the inherited money into your own Inherited IRA.  However, every year the IRS requires you to take out a small amount of money from the account which you would pay taxes on.  The benefit here is that it is based on your age and could be taken over your lifetime.  Thus “stretching” the money and taking out a smaller amount each year, and ultimately paying less on taxes.

However, under the new law, retirement accounts inherited after January 1, 2020 will now have to distribute entire account within 10 years of the year of death of the owner of the account.  There are some exceptions to this new rule, but the important aspect of this law is that it is a major tax change.  Because it is such a large change, we sent out letters to our clients letting them know about this change.

Even before this law went into effect, we often recommended clients keep retirement money away from trusts, which are taxed at higher rates.  Every client we see gets a personalized recommendation on how to list beneficiaries on retirement accounts.  Now, with this tax change, we are recommending all our trust clients to review how their retirement account beneficiaries are listed.  In addition, for our clients that list their trust as the beneficiary on retirement accounts, we are recommending updating their trusts to account for these changes.

So, do you know how you have your beneficiaries listed on your retirement accounts?

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But Chances Are So Small – Estate Planning – Burkhardt Law Firm

The number one reason I hear for why people they don’t think they need an estate plan is: “Well, my spouse is named as a co-owner on everything I own or is a beneficiary on everything I own and the chances of us dying at the same time is small.”  Well, even if you are right and you and your spouse don’t pass at the same time and your beneficiary designations avoid probate, there are reasons why you still need an estate plan.

Things can fall through the cracks, and you may forget to put a beneficiary designation on a new asset, or there may be other unforeseeable assets that don’t have a beneficiary designation and will therefore go through Probate.  A will is a good way in those circumstances to be able to tell the Probate court what to do with those assets.  A will can waive bond and ask for independent administration which can reduce the cost and time if assets have to go through Probate.

A good estate plan does not only plan for death, it is also a plan for when you are living but incapacitated.  An estate plan may include both a medical power of attorney/heath care directive and a financial power of attorney.  These documents are utilized while you are still alive.

If you have retirement accounts, your spouse cannot be an owner of your account.  They can be a beneficiary, but that beneficiary designation does not give them any rights to access your account or funds from the account until you have passed away. If you to need to access money from your retirement account and are not capable of making financial decisions the only way to do that is through a financial power of attorney.  A financial power of attorney will allow someone of your choosing to make financial decisions and access funds when you are not capable.  If you do no not have a financial power of attorney, there may be a delay and added cost if someone has to go through the court system for conservatorship in order to access the funds. This is just one of many reasons a financial power of attorney is an important document to make part of your estate plan.

The other document utilized as part of an estate plan during your life is the medical power of attorney/heath care directive.  If you are not capable of making medical decisions for yourself a medical power of attorney will allow a person of your choosing to make medical decisions on your behalf.  Do you have specific wishes for end of life? Would you want treatments like feeding tubes to be removed if the doctor did not believe you would have significant recovery?  It is important to make your wishes known and this can be done through a medical power of attorney/heath care directive.

Even if you are not concerned about assets passing through Probate, I strongly suggest considering an estate plan so that you can have access to funds when needed through a financial power of attorney and to make your end of life wishes known through a medical power of attorney/heath care directive.

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When Does a Power of Attorney Start? Springing POA vs. Non-Springing POA – Burkhardt Law Firm

People always have a lot of questions regarding powers of attorneys (POA).  It makes a lot of sense.  Powers of attorneys are so important because they give access to decisions when otherwise your loved ones may be stuck without access! One of the big questions we always get is the different types of powers of attorney.  Specifically, durable powers of attorney and springing powers of attorney.  Today we’re picking on springing powers of attorneys and why you may or may not want a power of attorney that’s springing.

To start with we’re talking about a financial POA.  This is just a POA that gives someone you choose the power to make financial decisions for you.  That power can be springing or non-springing.  If the power is non-springing, then the person you choose has the powers you grant them immediately upon the power of attorney document being signed.  This means that even if you are capable of signing for yourself the person you choose could sign for you immediately.

If the POA is springing, the person you choose to make financial decisions for you will act only if you become disabled or incapacitated.  A medical doctor would need to certify in writing your mental and/or physical condition is impaired to the extent that you can no longer personally make financial decisions for yourself.  Only after a doctor certifies you are no longer capable can the person you choose begin using the powers given in your financial POA.

Some people just aren’t comfortable with the idea of someone else signing for them when they are still capable and may prefer a springing POA.  However, if the power is springing, and then there is a need for your chosen agent to act, there could be a delay while they try to get a doctor to certify that you are no longer capable.  A non-springing power of attorney may be preferred by some people for convenience.  If your traveling or just otherwise busy, your agent could sign for you if they are given the power to act immediately.

Many married people will choose their spouse to act for them and are comfortable with their spouse signing for them immediately.  The thing to keep in mind if you choose a non-springing power of attorney is that if you choose a successor agent, someone to act for you if your first choice is unable or unwilling, and your spouse becomes unable or unwilling to act, then your successor agent will then have the power to act immediately as well.  Therefore, if you execute a non-springing POA, you need to be comfortable with all successor agents acting immediately and not just the first named agent. However, there is some protection in the fact that that a successor agent would have to prove that the prior named agent was unable to act before they could act on your behalf.  Regardless of whether you choose to execute a springing or a non-springing power of attorney, you should select an agent that you trust will act in your best interest.

Having a springing or non-springing power of attorney is a big choice and one we spend a lot of time discussing with our clients. So if you’re wondering which is best for you and your loved ones, the best idea is to contact an attorney and figure out your estate plan.

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Stop Waiting – Burkhardt Law Firm

I joined Burkhardt Law about 5 months ago, and since joining the firm I have had an opportunity to shadow Martha. I have learned a lot from her in these 5 months.  One of the things I have seen while shadowing her is people who wait until it is too late to create an estate plan.  Did you know that for a will to be valid you have to have mental capacity when signing?  In the time that I have been at Burkhardt Law I have seen Martha have to turn away potential clients because they no longer had mental capacity to execute an estate plan.

Has a loved one recently been diagnosed with an illness that may affect their mental capacity? Their illness may progress faster then you think and it could become too late to execute an estate plan.  If your loved one doesn’t have capacity to execute an estate plan and does not have a power of attorney, it may become difficult to access funds they need.  If a power of attorney is not in place, a loved one may only be able to access accounts by going to the court and petitioning for a conservatorship.  This can take time and there is the added issue of court costs.

I have also unfortunately seen clients come in when they are sick but still have mental capacity to sign, however, they have passed away before coming back in to sign and execute their documents. That is just heart breaking. Don’t wait until it is too late.  Benjamin Franklin once said, “Don’t put off until tomorrow what you can do today.” This is excellent advice especially when it comes to creating an estate plan. You never know what tomorrow will bring so be prepared today.

 

— Lisa Villareal

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One of the Most Important Documents – A Financial Power of Attorney

A lot of people have questions regarding wills and trusts.  Those documents do make up a part of a complete plan, but one of the most important documents is a financial power of attorney.

For families without minor children, my first priority is ensuring my clients are taken care of if they cannot take care of themselves.  Now, the medical power of attorney is important to make sure the correct person can make health care decisions.  However, often times, I find medical professionals will follow instructions even without a medical power of attorney.  Now, that may not always be true, so a medical power of attorney is necessary.

However, I can guarantee a bank or financial institution will not allow someone who is not listed on an account to sign.  This is a major concern for those who have the majority of their money in retirement accounts.  On retirement accounts, only one person is listed as an owner for tax purposes.  There may be beneficiary designations, but those don’t go into effect until death.  So, without a power of attorney, if the owner cannot sign, no one can.  This can present a huge problem for married couples who rely on each other’s retirement money.

The same would be true of a couple with a house in joint names.  If the home would need to be sold to provide for them or just to downsize, both would need to sign.  However, if one can’t, the home cannot be sold without court intervention.

A financial power of attorney is an easy solution.  By completing a power of attorney, you can decide who can access financial accounts for you and what powers they have.  So, tell me, who do you trust with your power of attorney?

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Not Just One – Using One Beneficiary, Instead of Multiple

In the past month, I’ve talk to two different clients who have listed one person as a beneficiary on an asset when the asset is meant to go to multiple people or another person entirely.  If you have done this, please stop reading, and go change it right now!

Now the most common place I see this is for minor children.  Parents will put the person who is supposed to use the money for the child as the beneficiary on life insurance.  Now, I really dislike this for two major reasons.  First, that person is the legal owner of the money and does not have a legal obligation to use it for the child.  Well, if you trust that person enough with the money, hopefully that’s a non-issue.  But even if that’s not an issue, what happens if that person inherits the money then dies?  Chances are it will not go back to the children, but rather a spouse or that person’s children.  Just best to avoid by planning properly for minor children.

The other time I see people do this is for real estate.  They want to avoid a beneficiary deed where all the beneficiaries (and their spouses) must sign and make decisions together; instead they put one person on the beneficiary deed and tell them their wishes.  But the problem is that person has no legal obligation to share the money as instructed.  Further, while there may not be a tax consequence, there are likely extra tax returns that should be filed (which probably won’t be).  In the end, it causes a bigger mess than just creating a proper estate plan with a trust.

Finally, the biggest asset this is a problem with is traditional retirement money.  Instead of listing all the beneficiaries on an IRA, I had a client only list one sibling and ask them to share that money among all eight siblings.  Again, this person has no legal obligation to share, which makes me wary, but even more importantly there is likely to be a tax problem here.  Traditional retirement money has not had income tax taken out of it yet and so when the account is liquidated, income tax is paid at that time.  So, if a person inherits the retirement money, then liquidates it to divide it, that person will be paying a lump sum of taxes.  Instead, by listing all intended beneficiaries, each beneficiary will have the option to retain the retirement money as an inherited IRA, and only pay taxes in small amounts each year.  A much more tax efficient option.

So, if you have set up your plan listing one person instead of all the intended beneficiaries, you might want to reconsider your plan and even start thinking about a trust.

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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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Trust versus Beneficiary Designations

At least three times a week I am asked the difference between a will and a trust.  There are a few differences, but first I always like to point out that a will requires probate to be effective.  So, when planning for a client, I don’t often like to compare a will and trust, but rather a trust and beneficiary designations.

You can use both beneficiary designations and a trust to avoid probate, but the main reason a people choose a trust is control.  To me, control is the best reason to plan with a trust.  Legally, a trust is an entity that separates the control of assets from the use or benefit of those assets.

For families with minor children, I almost always recommend a trust.  Without a trust, even using beneficiary designations, you cannot avoid probate.  Minors cannot be in control of their own money, so a trust allows a legally responsible adult to make decisions over the assets for the benefit of the children.  It then sets up ages or life events when the children get the money.

Another common reason I recommend trusts are when there is real estate involved.  In Missouri, if a person has their name on real estate, their spouse also must sign off on any real estate transactions even if the spouse is not on the real estate.  So, if a person leaves real estate to someone through a beneficiary deed (the way to put beneficiaries on real estate), everyone on the deed plus their spouses will need to sign for the property when it is inherited.  Often, my clients would rather not involve the spouses or even have all beneficiaries make decision on the property.  Instead, they do a trust where one person makes decisions on the real estate and multiple people have the use or receive the proceeds.

One of the final reasons clients use a trust is to control how the money is paid out.  If a beneficiary is not responsible enough or has an addiction where the money would be harmful if the beneficiary had full access to the money.  In those situations, the trust can allow another person to use the money for the beneficiary or to give out money in regular installments like an allowance.

There are, of course, other reasons I consider trusts.  Family dynamics, contingencies, real estate.  However, when it comes down to it, the reason my clients choose a trust over a will or, more appropriately, beneficiary designations is it gives them control over how the money will be left.

 

Burkhardt Law Firm

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