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Burkhardt Law

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End of Year: Time to Review your Estate Planning Documents

With the holidays quickly approaching and the year coming to an end, it is a good time for reflection.  Many of us take some time at the end of the year to reflect on the prior year and evaluate goals we set out for ourselves the prior year and goals we hope to accomplish next year.  This is a great time to pull out your Estate Planning Documents and give them a review.  Do your documents still meet your estate planning goals or have your goals changed?

Look at who you have named as decision makers in your estate planning documents.  If you have a Trust, this would be the individuals you named as Trustees.  If you have a Will, this would be those individuals you named as Personal Representatives.  If you have a Financial Power of Attorney, this would be those individuals you named as your attorneys in fact.  If you have a medical power of attorney, this would be those individuals you named as your agents. Are you still comfortable with those people as your decisionmakers?

Perhaps your estate planning documents were drafted many years ago and you named a brother or a sister who have since developed medical or mental health issues that might affect their ability to make decisions for you and you would like to appoint a different person to make decisions.  Or maybe when you drafted your documents your children were minors so they were not named as decision makers, and now they are older, you trust them, and you would like them to make decisions now instead of those other relatives.  Perhaps you named a son-in-law as a decision maker and now your daughter and son-in-law have gotten divorced.  Perhaps you yourself have gotten divorced.  Perhaps there has been a death in the family.  A review will let you reflect on if you are still happy with the decision makers you chose or if maybe its time a change is needed.

Next, I would take a look at your Beneficiaries.  Take a look at your Trust or Will and make sure your beneficiaries named are still the people you want to inherit from your estate when you are gone and that those beneficiaries will inherit in the way you intend.  Perhaps there has been a birth.  If you now have grandchildren that you hadn’t provided for and now wish to do so, you may need to make changes to your estate planning documents to include them.  Perhaps you have had a falling out with a beneficiary and you no longer wish for them to inherit anything.

You may want to keep the named beneficiaries the same as they are, but maybe you want to change how and when they inherit their share.  Maybe your adult child has had relationship issues and you now feel like you need to protect them from themselves or a divorce.  Maybe now instead of them receiving their share outright upon your death, you want it to be held in trust and only distributed to them in small amounts over time.

Once you have determined who the intended beneficiaries are it is important to review your assets.  If you have a trust, you will want to be sure the trust is funded with your assets.  Review bank accounts, brokerage accounts, insurance policies, etc. to be sure the trust is the owner or beneficiary on those accounts.  Make sure you have a TOD (transfer on death) to the Trust on any vehicles.  If you have purchased a new home or refinanced, are you sure your home is still titled to your trust?  If you have a Will, you will be relying on beneficiary designations on your assets to avoid those assets going through probate.  Be sure to review all assets to be sure they have beneficiary designations and that those designations are still what you want.  Vehicles should have a TOD, bank accounts should have a POD (payable on death), and all assets should have beneficiaries named.  If you have purchased a new home, be sure that a beneficiary deed is executed for the new real estate.

If a review of your estate planning documents indicates to you that changes are needed to your documents, you should contact an Estate Planning Attorney who can discuss those changes with you and assist you in making those changes.  An attorney may also suggest additional changes to your documents based on new laws.

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Refinancing with a Trust

Several times in the last year, we’ve had a lot of clients asking about refinancing a property that is held in Trust.  Although mortgage rates have increased from where they were a year ago, rates are still near historic lows and some borrowers may be able to save money by refinancing their mortgage. If you have an estate plan that includes a trust, it also probably includes a special warranty deed that transferred your property to your trust.  You may be wondering if you can refinance your mortgage on property that is owned by your trust.

Real estate held in a revocable trust often can be refinanced.  If the trust gives the trustee the power to mortgage the property, the trustee may be able to sign for the loan.  However, a lender may not be willing to refinance the property held in trust.  If this is the case, the lender may require that the property be taken out of the trust before refinancing.  They may have you sign a new deed transferring property from your Trust back to yourself.

But now comes the important part to ensure your trust is protecting the assets and avoid probate.  If you refinance be sure to review the deed prepared and recorded during that transaction.  If your home is no longer owned by the Trust after the transaction, it is important to contact an attorney who can prepare another Special Warranty Deed transferring it back to your Trust.  If this is not done and you pass away, your property will end up in probate, which is what you were trying to avoid when creating the Trust in the first place.  If you have any doubt at all, how the property was transferred after your refinance closed, an attorney can review to be sure it is still owned by the trust and if not assist you in preparing the deed to transfer title back to the Trust and avoid probate of your property upon your death.

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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.

Burkhardt Law Firm

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