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But I Already Have A Plan: When to Update Your Estate Plan

Unfortunately, you might have already formed an estate plan, but that doesn’t mean you’re done. At least once a year (often times more frequently), I check in with clients to make sure their plan has actually been implemented and that nothing needs to change. If you’ve already signed your estate planning documents here are a few times it might be worth calling your attorney to make sure nothing needs to be updated:

Assets – If you have had a large change in wealth or assets since you’ve first set up you estate plan, it’s probably time to review. A change in wealth could mean you need to re-evaluate your beneficiaries, trustees, distributions, along with any changing tax laws that may now apply. Even new assets may warrant a phone call to ensure they are planned for and, more importantly, titled properly.

Moving – This goes hand in hand with new assets, where a new home title should be reviewed to make sure it is done correctly and consistently within your plan. However, if changing states, an estate plan should also be review to make sure state laws don’t require different documents or in case a state estate tax might apply.

Time – Over the years, lives change and as they do it’s important to make sure an estate plan changes with them. If children grow up, distribution ages or events might need to be altered. Trustees or other people named in documents might not seem like a wise choice anymore.

Family Changes – Along the same lines, families change dramatically as well. Distribution ages, structures, amounts, etc. all need to be reviewed as family dynamics and life shifts over the years. Specifically, I would recommend a review for any of the following events.

Divorce – Unfortunately, this is a common family change. Provisions may need to be made or changed if a person needs to be removed from a plan or even if a new structure is necessary to prevent interference with a person’s wishes.

Death – Losing a loved one is often hard enough without thinking about the legal consequences, but eventually documents need to be updated to reflect the loss.

Births – While many documents provide for a later born child, I still recommend a review and an update when including new beneficiaries to avoid unnecessary complications later.

With that being said, my husband and I will be taking the time to review our own plan as we look forward to the birth of our first child in June. Have you recently looked at your documents or had a big life change? Take a moment to consider if you might need a review.

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Take Control Through Estate Planning

I recently had the pleasure of sitting down with Chris Finny from the Finney Law Office. As Chris was explaining how he helps individuals through difficult events in their lives (car accidents, getting hurt on the job, medical procedures gone wrong) I noticed a common theme. Yes, Chris’s clients have been injured in some form, but the bigger more lasting effect is that they have had control taken away from them. Maybe that’s control of their body, their ability to earn a living, or just the management of their finances. Unfortunately, as I learned from Chris, those who have gone through a personal injury case know how quickly they can lose the ability to make decisions. But through effective legal planning, some of that lose is preventable.

I want to suggest some basic documents everyone should think about, so that if you do experience an injury of that type, your wishes are still the ones that are being considered.

First is a medial power of attorney and health care directive. This allows you to set out your medical wishes if you aren’t able later to communicate or enforce them. It also gives you the power to choose who will help enforce those wishes.

There’s also another power of attorney to cover your financial and legal decisions. I truly consider this one of the most important documents of an estate plan and would highly recommend everyone of any age to have one. Again, in this document, you get to choose who handles your finances and makes decisions for you or your family if you’re not capable of making your own.

And of course, don’t forget about the will. While this is the document where you get to override state law and say where your possessions go, for parents it’s a lot more. This is the ONLY legal way to have a say in who will take care of your minor children.

But if you really want control, a trust really is the most effective and detailed way to do so. A trust gives you the ability to make detailed decisions over your finances and beneficiaries, even allowing you to make sure your beneficiaries cannot touch their inheritance until an age or event you decide.

Without these documents, those left to take care of you will have to go to court to earn those rights, and the court has the final say on who will be making decisions for you. So whether you’ve been involved in a personal injury case or just know it can happen to anyone, take some control now and consider your estate plan today.

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Trust vs. Will

At least once a week I’m asked the difference between a trust and a will. The main difference between a will and a trust is that (in order to be effective) a will must go through probate. A will tells the court what you want to happen to your assets and minor children after you pass, while a trust controls what happens to your death both before and after death. Now, I’m not going to dwell on probate, but if that’s a goal, a trust is going to be the preferable option. A trust also is easier to use than a power of attorney when a person becomes incapacitated.

However, in order for a trust to be effective, assets must be titled in the name of the trust. So your car, bank account, home, etc, must belong to the trust. After the assets are owned by the trust, you may only do with your assets what the trust says you may do. In most situations, a trust is written broadly enough that you may continue treating your assets the way you normally would. However, you can place limitations on how assets are used and when they may be distributed. This is not possible in the same way in a will.

Finally, a trust allows one person to control. With a will, one person controls, but if you use non-probate transfers in conjunction with a will, all owners of non-liquid assets must sign off on the sale of an item. For example, if you TOD your car to your three children, all three children must sign off on the sale of the car. Whereas if the car is owned by the trust, only the trustee has to sign on the sale of the car. This is normally a much larger concern with houses where beneficiaries may not agree or where arranging everyone to sign off at the same time in the same place may be difficult.

So, the next question that follows this discussion is whether a trust or a will is right for you. Well, the only way I can truly answer that question is to sit down and do a free consultation with someone. However, these questions are good indicators:

Do you have minor children?
Are your beneficiaries likely to argue with each other?
Are your beneficiaries in town?
Do any of the beneficiaries have financial, medical, or relationship problems?
Is it likely they will contest your wishes?
Are your assets easily dividable?
Do you own a business?

If you answered any of these questions (or especially more than one) “yes”, then a trust might be the best option for you. If you or someone you know are wondering if a will or trust is better for you and your family, I strongly recommend consulting an attorney. The Burkhardt Law Firm offers free no obligation consultations and would love to help you answer these questions.

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What Now? What to Do When a Loved One Dies

Unfortunately, this month I’ve heard of several people passing. While I normally focus on planning, there are so many questions when a loved one dies.

First, while there are timeframes involved (which we’ll get to later), take time to grieve. There is plenty to do, but generally speaking, there is also plenty of time to do it.

Second, before moving any assets, taking any checks, ESPECIALLY retirement accounts, it’s extremely important to talk to an accountant or financial advisor. There are wrong ways to take money that could cause large tax liabilities that cannot be fixed.

Third, determine what assets are involved and if there are any bills that must continue being paid. Back in December, I mentioned making a list of your assets and how they’re titled. If your loved one does not have a list already prepared, use this one as a starting point.   If you’re not planning on selling a home or car that has a loan, keep paying the loan. If you don’t have access to a bank account or other liquid assets of the deceased to make the payments, keep clear records of any money of your own you contribute to the deceased assets.

Finally, you will need to consult an attorney. In Missouri, an attorney is required to handle probate. But more importantly, if there is a will it must be ADMITTED into probate within ONE YEAR of the date of death in order for the will to be valid. It’s important to make sure the will has been admitted, not just filed. I’ve had clients come to me a year and a half after the parent has passed, thinking that because the will had been filed with the court, the will would control. Unfortunately, because it had only been filed and not admitted, more work had to be done and more people had to sign off on the court filings.

While there are important things that need to be done after some a loved one passes, very little is actually urgent (I promise the probate court won’t treat it as urgently as you imagine it) and most decision should be made with some extra time and thought. I’d much rather help people plan in advance when they’re able to think rationally, rather than after when they’re thinking emotionally. Either way, it’s a difficult time with much that needs to be done, but these few things are a place to start.

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Hey, That’s Not What I Wanted?!

Ever been to a restaurant where you ordered something, then when it was brought out, found out that what you ordered wasn’t what you thought it was?  That’s similar to how Missouri intestate law works.

Before explaining what the law says, let me define intestate.  Intestate just means without a will.  So, intestate law is what Missouri says happens to your stuff when you die if you don’t have a will or beneficiaries on assets.

Well that’s fine, but that just means it goes to my spouse who will use it to take care of my kids, right? Nope, and unfortunately, it’s not a simple answer.

Really, it all depends on the structure of your family.  Married? Kids? Kids from a prior relationship?  Here’s a quick chart I came up with to help:

Chart

The people who receive your assets under intestate law are called heirs (instead of devisee, beneficiary, or legatee if under a will or trust).

It’s important to note, that this only provides for biological or legal relationships.  Have a step-child who you consider your own? Not adopted? No heir.  Have a friend who you would like to include?  Too bad.  Have a significant other whom you didn’t marry? Out of luck.

So if this chart shows your assets going to a person or people going where you didn’t expect or don’t want… Well, it might be time to talk about a will.

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Who Has the Power?

First of all, happy Fourth of July!  In honor of the holidays and those who have made it possible, especially our troops, I want to focus on power of attorneys.  Now I understand the connection between the armed forces and a power of attorney may not be completely obvious, but let me explain.  When out of the country for any reason, most people want to have their estate planning documents for understandable reasons.  But when you’re going overseas unsure of when you’re going to return and without easy communication, it’s a different story.  You need someone with authority over your bank accounts, insurance, maybe even your house.  This is where the power of attorney comes in.

The person making those decisions is called the agent or attorney and fact and the person actually making the document is sometimes referred to as the principal.   Now, power of attorneys come in many different forms and for many different decisions.

There are two types of power of attorneys that are important for most families’ estate plans: a springing power of attorney and a durable power of attorney.  A springing power of attorney only grants the agent the power to act for the person when a certain event occurs.  Hence the springing.  Generally, this occurs when two doctors certify that the person is unable to make decisions for themselves.  This is how I write the majority of the power of attorneys because most families do not need another person able to make decisions over their money and assets.  It also avoids problems when there are conflicting instructions between a person completely capable of making decisions and their agent.  Now, if you are going out of the country and someone needs to be able to access and make decisions for your account, you do NOT want a springing power of attorney.  However, that’s a more detail analysis an attorney can help you make on an individual basis.

The durable power of attorney allows the agent to act for a person if they are incapacitated or if it is unsure whether they are dead or alive.  Because many people execute these forms to plan in case of incapacitation, it’s extremely important to make sure the document has the “magic” language of a durable power of attorney.  As I said before, I generally help my clients with a springing power of attorney.  But I also include the magic durable power of attorney language.

Most people need a financial/legal power of attorney AND a medical power of attorney.  They do not need to be separate documents, but normally are because some people want different friends/family making financial decisions and medical decisions.  Whether it’s one document or two, it’s important they are reviewed to cover most situations, ranging from banking to insurance to health care choices.  A power of attorney may be drafted for almost any specific decision to give another the power to make that decision.  I’ve reviewed documents to allow one sibling to sell a car for the other 6 siblings (much easier than 7 signatures).

What every power of attorney has in common though it’s no longer effective after death.  Therefore the other estate planning documents (wills, trusts, etc) are extremely important.  Also, without a power of attorney designating someone to make decisions, a person must go through the probate court to have someone appointed to make those decisions.  A power of attorney is much easier and cheaper.

On a final note, people ask me when an estate plan is needed, and while many young people do not have enough assets to truly NEED a will, they certainly have the potential for medical issues and absolutely need a power of attorney no matter the age.  Many clients even choose to execute a power of attorney for their minor children’s health care decisions so a grandmother or other trusted caretaker can act in the event of an emergency where the parent is not available.  A great idea if the parents are extremely inaccessible (out of the country, etc).

So if you don’t have a power of attorney or have any questions, give me a call.  Or at a minimum, take the time to execute a free medical power of attorney from the Missouri Bar (found here).

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Have You Taken Care of Your Children?

Most of my clients contact me because they want to make their children’s lives easier.  Several call after they have lost a parent and dealt with the mess of someone who wasn’t prepared.  Often I hear the sentiment they never want to make their children go through what they’ve had to do.  So, with this in mind, I thought we’d talk about preparing for your kids, specifically minor kids.

There are two distinct areas of planning when you’re talking about your children and estate planning.  And they really apply to everyone with minor children.  First is guardianship.  If something happens to both parents, who will take care of the children?  Most people know maybe have even told someone.  But have they made it legal?  Having a conversation with a desired guardian or other friend is great and definitely recommended, but doesn’t mean your child will go to that person.  A will is the ONLY way to state your wishes for guardianship.  If you do not state your wishes there, the court will make that decision without your input, and most likely choose an older sibling.
So, now that you know how to legally choose a guardian, who should you choose?  There’s a long list of considerations and each person is going to have a different level of importance with each factor, but in my mind the first qualification is trust.  For instance, one of my best friends chose my husband Scott and me to be the guardian for her son.  Now, we’re about 500 miles away from her and her son, so we don’t get to see him that often and if we do end up being his guardian, he’ll be coming to us.  Honestly, not the perfect situation.  However, she doesn’t think her family will raise him with her values in mind.  She trusts us to make those decisions for him.  In addition, she trusts us to say no if it’s not the right decision at the time.

Hopefully, you’re in a position where several of those people come to mind.  No matter your initial thoughts, I would strongly recommend taking the time to fill out a Guardianship Worksheet.  You can find one at the end of this article.

The next consideration is financial.  Even if you don’t have enough to provide for your children for the rest of their lives, you’ll probably be leaving them something.  If you leave more than $10,000 to a minor without a custodian, the court will appoint one.  Again, this takes away your ability to choose who controls your children’s money.  Essentially, this means you don’t want to leave more than $10,000 directly to a minor.  However, if you give that money to another person without legally specifying it is for the benefit of the child, they have no legal obligation to use the money for the child.

If your estate passes through your will, you may add a provision giving a person control of your child’s assets (either called a conservator or a trustee).  However, if you want to avoid probate and plan to use beneficiary designations or other non-probate transfer (pay on death, transfer on death, etc) you cannot just list another person as the beneficiary and expect them to use it for the child.  The easiest way to avoid probate and to designate an adult to control the money is to set up a trust.  This person is called a trustee and must use the money for the child’s benefit.

As you consider choosing a conservator or trustee, keep in mind, this does not need to be the same person as the guardian.  Doing so will make the guardian’s life easier, but if your chosen guardian is not great with money or just needs some oversight, a separate trustee can provide that.  I’ve also seen parents who want to involve both sides of the family and will choose someone from the mother’s side for the guardian and someone from the father’s side for the trustee.  No matter the arrangement, having two different people as guardian and trustee make the
situation more complicated and the two people must be able to communicate well.  This structure should only be used after much consideration.

Finally, unless specified, a minor will be entitled to their money when they turn 18. Will your children be responsible enough to control their money at 18?  If you’re not sure, or doubt it, you can set up a trust (along with a will containing a trust) with specific ages or life stages (i.e. graduating college) when they can access their money.  A trust also allows additional controls on how the money can be used (school, cars, vacations, etc).

As you can probably tell, for most families with minor children, I recommend a will (stating guardianship) and a trust (controlling the assets).  It doesn’t take much, only $10,000, before naming a trustee has its benefits.  But no matter the documents used, whether will or trust, there’s a lot to be considered when planning for your children.  This gives you a place to start, but a lawyer will help you finish the process.

GuardianshipWorksheet

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Trust Me

On a regular basis I get a phone call from a client wanting to do a will. After sitting down with the client and learning more about their life, asset, and goals they generally decide to do a revocable trust. So, in this mind set and because I’m regularly asked about when a trust is worth it, my top reasons for the average person to do a trust:

1 – PROBATE. Think about your assets. House, car, bank accounts, brokerage accounts, anything without a beneficiary. Total their equity. More than $40,000? You’re going through probate. Probate is a long, expensive, public process, most people want to avoid. A trust can do exactly that. The important issue here is that assets must be in the trust in order to avoid probate.

2 – CONTROL. Now think about your beneficiaries and look at that total you had before. Trust your beneficiaries with that money outright? No? Then a trust can implement controls where your assets are only used in ways you specify or at time when you think your beneficiaries will be responsible with those assets. This directly applies to minors and children. At times, the court will appoint a person to control a minor’s assets. This means they will most likely gain access to those assets when they reach the age of 18. Will the beneficiary really be conscientious enough at 18 years old to use those assets in their best interest? In addition, will the court appoint the same person you would choose to handle your money?

3 – COMPLICATED FAMILIES. This is a bit unfair, as I admit, we all have complicated families. However, I really mean families with step-children and step-parents or families where disinheritance is a reality. General beneficiary schemes do not account for these “non-traditional” families and it’s often important to use a trust to guarantee the people you wish have access and control over assets.

4 – MULTIPLE BENFICIARIES. If your assets are over that $40,000 mark and you still want to avoid probate, it is possible to list beneficiaries on most assets. However, when you have 6 beneficiaries (especially when a few of them are married) it makes it complicated when they try and sell an asset. In most cases, all of their signatures (and perhaps their spouses) will be required for a sale. Beyond the problems and delay actually gathering all of the signatures, it also can create problems when one person disagrees on what to do with the house or a car. In a trust, they all can benefit from assets, but only one (or maybe two) people make the decision and sign off on that decision.

5 – CONTINGENCIES. In the same aspect, if you are worried about probate, beneficiaries on most forms are limited. There are only spaces for limited beneficiaries and in addition to the number of contingencies, they limit how complicated the beneficiary scheme can be. For example, you have two beneficiaries. Something happens to the one and you’d like their share to go to their children instead of to the other beneficiary. Most beneficiary forms do not allow for this level of detail. It either all goes to one level or the other. A trust can consider your beneficiaries and family as a whole.

6 – PROBATE. So, you’ve seen this once, but it deserves another mention. As you’ve probably gathered at this point, there are other ways to avoid probate. With a small and “traditional” family without minors or other needs for control, those other forms work great. However, in reality those situations rarely exist. That is why after I sit down with most clients they no longer want just a simple will; they want a trust.

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How Much Do You Know

When I sit down with clients, there’s a varying level of knowledge about estate planning, the different documents, and just what everything means. As such, my job is often to make sure people know how the law works and what happens in different situations so my clients can make the best decisions themselves with advice from me where they want it. So, for this month, I thought I’d start with the basics:

  • pic_06What is probate?
  • What is a will?
  • What is a trust?
  • What is a power of attorney?
  • What is an advance health care directive?

Probate is the court process a person’s property goes through when they die to transfer the property out of the deceased’s name. Wills must go through probate (though it took Esq. behind my name for my mother to believe me on that). You can avoid through non-probate transfers, such as transfer-on-death (“TOD”s), payable-on-death (“POD”s), trusts, joint titling, and other methods. Probate is time consuming and can be very expensive. Because of this many people specifically form an estate plan to avoid probate. If you’re worried about your beneficiaries being unable to access quickly or wasting resources on court, talk to an attorney. There are many methods to avoid probate and not all are appropriate for everyone.

Trusts, however, are the main way to avoid probate. A properly funded trust effectively re-titles property from a person’s name to the trust. The person then decides who benefits from the trust assets and who controls those assets until they pass or are no longer competent to make decisions. Generally, the person setting up the trust may benefit and control the assets. This allows a person who becomes incapacitated to continue to benefit from their property, but gives a different, competent person the ability to make decisions regarding that property.

It’s very important to note the “properly funded” part. If property is not actually transferred to a trust (normally by renaming the asset in the name of the trust), then the property cannot be transferred through the trust documents and must still go through probate and a will or state inheritance law.

So, every estate plan (whether a trust is involved or not) should include a will. Wills set out a person’s wishes upon their death for guardianship of minor children and any property not transferred through non-probate transfers. This means that anything with a beneficiary (i.e. life insurance, retirement plans), TOD, POD, jointly titled, etc. are not given away according to the will.

Along the same lines, every estate plan needs a Power of Attorney. Powers of Attorneys come in many different types, but generally should cover legal, financial, and medical decisions. The document gives another person the power to make decisions for the person. The types of decisions can be limited and the document can be drafted so it only goes into effect when a person becomes incompetent.

Finally, a Health Care Directive establishes a person’s desires regarding specific medical situations. It covers circumstances where a person is unable to make decisions regarding their wishes, but can be used outside of terminal conditions (unlike a Living Will).

A full estate plan covers all of these areas and uses each document to make sure you are completely protected. Hopefully, this has explained the basics for you, but please if you have any questions email me or contact me here.

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Even The Simpsons Worry About Guardianship… Do You?

This week when I turned on the television to watch two of my favorite shows, I got caught thinking about work. Maybe it was a theme within FOX, but both The Simpsons and Bones revolved around issues of estate planning.

The episode of The Simpsons didn’t involve any big discussions or much deep thought (though I know that comes as a surprise). The whole episode shows Marge and Homer Simpson trying to find guardians for their children. While their problem is finding anyone who wants their kids (see the clip below) most people face the harder decision of finding someone they trust to care for their kids.

Bones took the issue more seriously (again, big surprise), it also presented the subject with much needed humor. As I discuss this subject on a daily-basis, I very much appreciated a popular media tackling the matter and presenting it in (as much as possible) a positive light.

As I watched, the lawyer in me laughed at the two extremes Booth and Bones presented. A good will does not need to be 312 pages, but in turn should also not be hand-written on a sticky note. Further, when you have a complicated family or sizeable assets or just want to avoid the courts, a will probably will not accomplish your goals. Revocable trusts are a great option for most families (even if you’re not a genius scientist with best selling books).

However, I winced at the proposition Booth presented of leaving his girlfriend assets and trusting her to be fair to his son. This is something I advise people on a regular basis. Never create any legal document expecting everyone’s best behavior. If you could do that, then why create the legal document to begin? If you want to leave something to your children, leave it to the children, not another person. If you leave it to the guardian/parent/partner, that person has no legal obligation to use it for the children.

In reality I probably winced at the majority of Booth’s sentiments. Especially, that preparing for death is inviting it. Unfortunately, death is a fact of life and can be extremely difficult on those who are left behind. When someone isn’t prepared in advanced, they also leave behind a tangle of assets that the court has to sort out. This leaves their loved ones not only in with emotional grief, but very likely legal grief as well.

Even if I disagreed with some of the characters throughout Bones and wouldn’t recommend Homer & Marge’s style of picking guardians (finding random strangers), I appreciated FOX and both shows tackling a hard subject. In doing so it raised some important questions and hopefully will get some families talking. It’s at least gotten me to do so.

Burkhardt Law Firm

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