What Estate Planning Involves

Red Flag!

Question: The deed to Dick and Jane’s home reads: “Dick Smith and Jane Smith, husband and wife”. Dick’s Last Will and Testament says at his death that one-half of everything he owns goes to Jane and the other one-half goes to his children. Dick dies. What happens to the house?

Answer: The house passes to Jane alone as the surviving spouse named on the deed.

Lesson: When you title an asset, knowingly or unknowingly you are doing estate planning with respect to that asset. Make sure the titling of your assets is coordinated with your estate planning documents, like Wills and Living Trusts.

Estate planning is not just what happens to your assets after you pass away. Quality estate planning deals with issues that are a part of life: from death and disability to Medicaid and potential nursing home care.

Effective estate planning addresses the desires and concerns common to most people:

  • I want to control my property while I am alive and well.
  • I want to provide for my loved ones and myself if I become disabled.
  • When I die, I want to give what I have to whom I want, when I want and in the way I want.
  • I want the passing of assets at my death to be as simple and as inexpensive as possible.
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Getting Started

Begin by thinking about your family and your circumstances. Focus on "people issues", not legal technical terms you may have heard. Ask yourself these questions:

Who should inherit my assets?

  • Should everything go to my spouse or should assets be available to my spouse but protected in the event of remarriage?
  • Should my children share equally in my estate?
  • Do I want to do something for grandchildren or other beneficiaries?
  • Do I want to leave any assets to charity?
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Which assets should they inherit?

  • Are there specific items I want to go to certain people?
  • Should the family business pass only to the children who are active in the business?

When and how should they inherit assets?

  • Does the age or financial immaturity of a beneficiary prevent them from receiving an inheritance outright?
  • Am I concerned about protecting a beneficiary from creditors or a bad marriage?
Addressing these questions is part of crafting a plan that is tailored to your family's needs and wishes. Remember: An estate planning attorney knows about trusts, wills, and other legal tools. But he shapes and applies those tools to specific situations: your goals and concerns about your family. Give careful thought to this and do not hesitate to voice your wishes, concerns and questions when meeting with an estate planning attorney.

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Avoiding Probate

Everyone, it seems, wants to avoid probate. But what is probate and what are they avoiding? Probate is a process where assets of a decedent are gathered, applied to pay debts, taxes and expenses of administration, and then distributed to those named as beneficiaries in a Last Will and Testament. A probate court confirms the Will as the decedent’s final dispositive statement and confirms the appointment of the person named in the Will to administer the estate. That administrator (called a Personal Representative) is accountable to follow the laws of Missouri and the language of the Will. Probate generally takes 8-12 months or longer, but beneficiaries do not always have to wait until the end of that time to receive assets. Partial distributions quite often can be made during the period of administration. The Personal Representative is entitled to be paid, as is the attorney assisting the Personal Representative. There are also probate court costs.

Avoiding Probate In short, probate provides for an orderly method of cleaning up the financial affairs of a decedent and distributing assets according to a decedent’s wishes. The method works. The objection most people have to probate is the time and expense involved.

There are a number of ways Missouri residents can avoid probate. That is both a blessing and a curse. Some methods are used without knowledge of the risks they pose to the owner or the financial consequences to the recipient. Transferring assets at death by TOD (“Transfer on Death”) designation, POD (“Pay on Death”) designation or by Beneficiary Deed is simple and efficient. Our office recommends those methods for some clients and some assets. However, a Revocable Living Trust is better suited to transfer assets at death outside of the probate court.

A Living Trust acts as a will substitute, providing instructions for the management of your assets on your death. It also directs the management of your assets for your benefit during your life if you become disabled and cannot manage your financial affairs.

A Living Trust provides much more flexibility in planning than TODs, PODs or Beneficiary Deeds. It can describe how assets are to be used if a beneficiary is too young or financially immature to receive them outright. It can give detailed instructions on certain “what if” situations: who inherits the asset if a named beneficiary is not then living?

A Living Trust mimics one benefit of the probate process: it provides for an orderly method of cleaning up the financial affairs of a decedent. By publishing notice according to law, a Trustee of the Living Trust becomes aware of legitimate debts and taxes. Untimely or disputed debts are eliminated once and for all.

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Powers of Attorney for Health Care & Finances

Powers of Attorney for Health Care and Finances
Durable Power of Attorney for Finances and Property

Alert!

There are different types of powers of attorney to address particular situations. A durable power of attorney that allows for Medicaid planning is not the same as a general durable power of attorney. An owner of a business may use a durable power of attorney that is specifically designed for business purposes. There is not such thing as a durable power of attorney form that fits every circumstance.

Durable Power of Attorney for Health Care and Health Care Directive

A durable power of attorney for health care authorizes a trusted person (or persons) to make health care decisions for you in the event you are unable to make them. These decisions may include, but are not limited to, decisions to withhold or withdraw life-prolonging procedures.

Usually a health care directive is included with the document that contains your durable power of attorney for health care. A health care directive is what some people refer to as a "living will". It is a document that allows you to state in advance your wishes regarding the use of life-prolonging procedures. It is broader than a "living will", as a living will technically applies only when you are expected to die within a short period of time. Your health care directive may be relied upon when you are unable to communicate your decisions. It is comforting guidance or binding direction upon the trust ed person named in your durable power of attorney for health care.
A power of attorney is a document where you appoint someone as an agent or "attorney-in-fact" and give them authority to act for you. A special power of attorney gives limited and quite specific authority for an attorney-in-fact to act for you in a particular situation. A general power of attorney grants broad, general authority to your attorney-in-fact to act for you.

Powers of attorney are usually designated "durable", meaning the authority conferred on your attorney-in-fact will continue and not be affected by your incapacity or disability.

Typically, durable powers of attorney are effective immediately upon execution. At times, however, a person is reluctant to delegate broad powers to anyone while he or she is still competent. Such a person may execute what is called a "springing durable power of attorney"; a power of attorney that becomes effective only upon the person’s disability and not before. Springing durable powers of attorney can cause problems because of the need to prove disability.

A durable power of attorney can be a lifesaver for you and your family in the event of your disability. If you became disabled and had no such document, someone would have to hire a lawyer to go to the Probate Court to obtain authority to sign for you and deal with assets titled in your name. The Probate Court would name that person as the Conservator of your assets, have the Conservator file a bond, and require the Conservator to file annual accountings thereafter with the Court. All that time and expense can be avoided by a properly drafted durable power of attorney.

The solution to this dilemma is the Supplemental Needs or Special Needs Trust (SNT). Such a trust preserves government benefit eligibility and distributes assets that will meet the supplemental needs of a person with a disability; needs that go beyond food and shelter and the medical and long term support and services of MO HealthNet. A SNT is designed specifically to supplement, not supplant, government benefits. It is drafted in such a way as to give the Trustee complete discretion whether and when to make distributions to the beneficiary. In carrying out the terms of the trust, the Trustee pays third parties directly for goods and services to be used by the person with a disability.
  • Out-of-pocket medical and dental expenses
  • Eyeglasses
  • Annual independent medical check-ups
  • Transportation (including vehicle purchase)
  • Maintenance of vehicles
  • Insurance (including payment of premiums)
  • Rehabilitation
  • Purchase of materials for hobbies or recreational activities
  • Purchase of computer or electronic equipment
  • Pay for trips or vacations
  • Pay for entertainment such as movies, ballgame, concerts, etc.
  • Purchase of goods and services that add pleasure and quality to life such as videos, furniture or a television
  • Athletic training or competitions
  • Personal care attendant or escort
  • Items that improve the quality of life of the disabled person
  • Health insurance premiums, if available
Learn more about Health Care Durable Powers of Attorney and Directives by attending our free seminar. Attendees can fill out and sign these documents at the conclusion of the seminar.

When and How Is a Special Needs Trust Set Up?

Parents may consider setting up a SNT when they do their own estate planning. Such a trust may be included in the parents' wills or living trusts, or it may be a separate document. If their child with a disability will likely have long-term medical or support needs, the SNT can be a vehicle to supply the funding to provide lifetime quality care. Where a child's diagnosis and future needs are uncertain, the SNT can be drafted with appropriate flexibilities.

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Probate and Trust Administration

Planning for Beneficiaries With Disabilities - The Special Needs Trust Administering the estate of a decedent or disabled person is a foreign process to most people. If you have to go to the Probate Court, we can help. We know the deadlines, filings and accountings you are required by law to do.

If you are the Successor Trustee of a Living Trust you do not need to go through a probate process to administer assets titled in the name of the Trust. However, your activity as Trustee is governed by the Missouri Uniform Trust Code. You must give notice to beneficiaries of the trust and meet time deadlines. You should obtain a tax identification number and publish notice of your administration to creditors. We can instruct you on your duties as Successor Trustee and help you where you need it.

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