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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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A Time to Plan – Burkhardt Law Firm

As I sit and reflect on the last year, brainstorming for helpful topics, I’m left with one main thought.  It’s time to plan.  We’ve spent the last year much more isolated from friends and family, and, for many of us, faced with loss of loved ones or the reality of health issues.

This year, Burkhardt Law Firm has helped many families form plans and many people navigate probate when there was not a plan or when things fell through the cracks.  I’m always so grateful that our clients trust us with their loved ones and something that is rarely fun to discuss.  That being said, I see so many families put off making an estate plan.

One of the saddest moments in my job is when we have a client pass.  I hate losing someone I’ve come to know and learn about their lives and loved ones.  We’ve lost a few clients this year and my heart is truly with their friends and family.  And while losing a client is the sad part of my job, often it’s also rewarding in seeing those friends and family navigate the loss with grace and knowing that I made a difficult time easier.

On the other hand, we also get calls from potential clients’ families when they never took action and moved forward with an estate plan. This is truly the worst part of my job.  Telling someone, who is already suffering a loss, that we didn’t help the person who was passed.  Then that someone has to figure out what to do next.  Often, this involves probate.  And while I appreciate the trust in guiding someone through probate, I so wish we could have made a hard time easier by having helped with an estate plan.

My days are generally filled with conversations getting to know people and their loved ones.  I truly love my job, my clients, and my co-workers and am thankful for a different, but still great year.  I sincerely look forward to more of these conversations in 2021.  My wish for your and your loved ones is for a very Happy New Year.  And perhaps as part of that New Year, an estate plan or a update to your estate plan.

 

 

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Trusts: Do you need a Trust?

Often times people know someone who have a trust and so they think they need one too.  Not every estate plan needs to have a trust.  Every family has different circumstances, so just because your friend has a trust doesn’t necessarily mean that you need a trust.

There are some benefits of having a trust in addition to a will.  Assets held in trust avoid probate.  However, a trust is not the only way to avoid probate.  Proper beneficiary designations on all assets can also avoid probate. Therefore, if you’re only creating a trust because you think you need one to avoid probate, you might reconsider.

However, if you want to control your money after you’re gone, a trust is the easiest way to do so.  If you don’t want your child to receive a big inheritance all at once, a trust can be set up to distribute the inheritance over time, at ages that you decide.  You might choose to leave a certain amount upon the child’ s graduation from college, and then give a certain percentage of the inheritance when they are 25, or 30, or whatever age you feel appropriate.  If there are drug or alcohol abuse issues, a trust can help control how money is spent for a beneficiary.  A trust may help protect assets from a divorce. If you have a child with special needs, a trust is a good tool to provide for your child.

If you have young children a trust can help provide for them and can avoid probate for a conservatorship.  A minor can’t just be given all the assets, so by creating a trust, a trustee will be able to distribute money for the child until they are old enough to handle the money themselves.

It generally costs more to set up a trust.  If your circumstances warrant having a trust the extra cost shouldn’t deter you.  However, if there isn’t as much of a reason to control the assets, and you properly title all assets with beneficiaries, the cost maybe an unnecessary expense.

It is a good idea to speak with an attorney who can ask questions about your family circumstances to help you determine whether or not a trust would be needed to meet your needs and wishes.  They will be able to help you understand the pros and cons of implementing different estate planning tools.

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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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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.

 

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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!

Burkhardt Law Firm

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