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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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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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Save Heartache & Money

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

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

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

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

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

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

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

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

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

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

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What Controls?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Still You: What Happens if Your Incapacitated

For those who don’t know me, I read.  A lot.  I’m in two book clubs and average probably a book a week.  Last year I read a wonderful book called “Still Alice” by Lisa Genova.  It’s a book written from the point of view of a woman with early onset Alzheimer’s disease.  It was well written and an interesting story, but it also focuses on something that is all too common, the inability of a loved one to make decisions for themselves.  The book doesn’t touch on the legal complications that can arise with incapacitation, but I, of course, will.

When a person no longer is able to remember where they live, generally, they are not in a position where they can remember their medications, decide if they should be living in their house, or determine if they should take money out of their IRA. This means someone else must make these decisions for them and hopefully make the decisions that person would have made for themselves.  But who makes those choices for them if they’re not capable?

In the best case scenario, they’ve already made arrangements for someone to take over in a power of attorney or have set up a trust. In which case a person they’re decided upon simply begins to act for them with the legal document.  However, many people don’t have these documents.

Without them, a person must go to probate court and file for a guardianship or conservatorship over the incapacitated or disabled person.  Guardianship is the process where a person is given control over the care and custody of another, whereas conservatorship is the process where a person is given control over another’s finances.  In both types of cases, the information needed for filing is extensive, including a full report of the person’s assets/income and an assessment by a doctor.

After filing, an attorney (the guardian ad litem) must be appointed for the disabled/incapacitated person.  This attorney is completely separate from any attorney hired by the family or loved ones to file the legal documents.  What this means is often two attorneys are involved, which of course means two sets of legal fees.

Next, a hearing is schedule where the court will hear evidence on why the incapacitated/disabled person needs a guardian/conservator.  Generally, this occurs a week or two after the petition has been filed.  The judge overseeing the hearing will eventually make the decision on what powers the guardian/conservator will be granted and will only grant that person the powers necessary for the incapacitated/disabled person’s wellbeing.  These powers are issued through the letters of guardianship/conservatorship.

However, that does not end the probate court’s supervision.  After a conservator is appointed, that person must then inventory the disabled person’s assets.  If property must be sold or leased, the conservator must also petition the court before taking action. The conservator/guardian must also file an annual report with the probate court detailing the actions of the guardian/conservator over the year.  For a conservator this includes a detailed accounting of the incapacitated person’s assets.

Without the proper estate planning, an already difficult situation of an incapacitated loved one, becomes a lot more complicated and expensive, including legal proceedings, multiple attorneys, and continuing court supervision.  Essentially, while the disabled/incapacitated person is alive (and perhaps well after depending on their other estate planning) the probate court will be involved.  Hopefully, we never find ourselves or a loved one disabled or incapacitated, but planning for it will make it that much easier if it does happen.

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A New Year: Why Estate Planning is Important

Happy New Year! At the start of the New Year, I always have families coming to me wanting to set up an estate plan. It’s something many people put off and I suppose they use the New Year to make a resolution to get it done. So, for this New Years instead of explaining the process and different legal aspects, I simply wanted to explain why I think estate planning is so important (which I hope you agree with if you’re reading this).

I don’t have a personal horror story of how things went wrong or anything along those lines. But I do have (for another few weeks until 2 more are added) 5 nieces and a nephew. I hope that their parents never need their estate plan. However, because their parents have planned for them, I know it’ll be a little bit less difficult if they do.

The only major loss I’ve experienced was my grandmother and I truly cannot tell you how hard that was for me and my family. When it happened, I helped plan the funereal, clean out her house, and do many of the things that just needed to get done. Things went by very quickly and in a haze. It was already a difficult time and I cannot imagine trying to deal with the court and additional legal matters during that time. Because my grandmother had thoroughly planned, we didn’t have to. She made it that much easier for us.

Unfortunately, death is a certainty of life, and in most situations, that’s a very hard truth. A good estate plan can take away a lot of legal complications that occur when a loved one passes. I encourage everyone to make it that much easier for those left behind by creating an estate plan. Much of an estate plan is for your loved ones.

But there’s a whole other aspect of estate planning that is both for you and your family. The probate court doesn’t just get involved at death, it also has authority over adults who can’t make decisions for themselves. When a person becomes incapacitated they no longer can make legal, financial, or perhaps even medical decisions. If they haven’t planned properly, whomever is taking care of them must go to the probate court to get permission to access accounts, sell houses, etc.

When a loved one is already incapacitated much of their loved ones energy is already spent on that person, having to go to court and sort out bank accounts, cars, homes, etc. is just another obligation requiring time and energy that could be spent in other ways.

Essentially, an estate plan makes a hard time easier. There are still legal issues that must be taken care of when a person passes or cannot make their own decisions, but at time that’s already difficult, a bit easier is very helpful.

Burkhardt Law Firm

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