Simplicity and thoroughness are always the most important considerations when considering needed changes to estate planning documents. Where possible, an amendment to an existing document may be the simplest way to make needed changes—which is often the case for a Will or Trust. Other times, a new document is the best approach—which is quite frequently the case for power of attorney documents. When meeting with a client that needs a change to their estate planning documents (due to life changes, family changes, changed goals, etc.), my commitment is always to implement changes efficiently and in the most cost-effective manner. Of course, being thorough and accurate are also central priorities. In the end, a careful review of existing documents and a thorough understanding of needed changes provide the framework for how best to revise an estate plan.
A beneficiary deed transfers real estate to a named beneficiary upon the death of the property owner. In other words, when a property owner dies, their real estate can go to a desired family member (or someone else) without going through probate. A beneficiary deed can be a particularly desirable tool because it is relatively inexpensive to put in place, it feels “simple” and it does not need to be connected to a Will or Trust. While every situation varies, preparing and recording a beneficiary deed often makes the most sense when real estate is the main asset owned or when there is only one intended beneficiary. Of course, there are instances where a beneficiary deed is not advisable. Often, this might be in a situation with numerous intended beneficiaries or where the property owner ultimately desires the property to simply be sold.
A Will is one of the most basic elements of estate planning. In a word, yes—you do indeed need a Will. Good estate planning often involves much more than that (think powers of attorney, beneficiary designations, perhaps a living trust) but a Will is nearly always a basic and central part of an effective estate plan. A Will directs where your property goes when you die—while also including administrative designations, procedural directions and other important legal provisions. Additionally, for a parent of a minor child, a Will typically includes a nomination of someone to serve as a successor guardian. Of course, every situation is different and every person is different—and every estate plan is different. However, in nearly every instance, you do need a Will.
Every state in the country (including Missouri) allows a business owner to create a limited liability company (LLC). So what’s the point? Why operate your business as an LLC? An LLC, along with other forms of business entities, provide two key benefits. First, an LLC (when properly organized and properly maintained and operated) provides liability protection to its owners. In other words, liabilities of the company remain only liabilities of the company, while the owner(s) is not financially at risk beyond their investment/ownership in the company itself. There are important limitations to this, but it is a tremendous benefit and protection to a business owner. Second, an LLC allows for what is called “pass through taxation.” This means that the company itself is not liable for income taxes. Rather, income tax liability simply passes through to the LLC owners. This stands in contrast to some types of corporations that require a sort of ‘double taxation’ where both the business itself and the owners are taxed. Every business is different, but for many business owners, an LLC is an valuable tool—for the smallest one-person business to large international companies.
Cost is an important consideration for anyone planning to put in place an estate plan. It is worth noting that the court processes that result from not having any type of estate plan generally dwarf the cost of proactive planning. However, cost remains an important component of making the right decisions. Every individual’s situation is different and every family’s situation is different, so it makes sense that good estate planning is carefully crafted to the needs, goals and plans of each person. Accordingly, there are always some unknowns in cost planning until we are able to sit down and talk about these sorts of particulars (and in turn what type of planning will be most effective). As an experienced estate planner, my goal is always to create the most efficient yet comprehensive estate plan to meet the needs of my client. Minimizing cost is a central goal and is always front of mind as we talk through the possibilities of various tools and documents to create the best plan. With that in mind, a fair range of cost for a single person wanting to put in place a Will, a General Durable Power of Attorney, a Health Care Power of Attorney and an Advance Health Care Directive would be about $700-900. The same documents for a couple (two individuals) or family will often fall in the range of $850-$950 (total). A plan including those same documents but adding a revocable living trust will usually add about $1,000 (total) to the cost. Of course, fees can vary a bit depending on needs, goals and complexity but we commit to a fixed fee after our first meeting—which remains constant no matter how many changes, meetings, questions of drafts end up occurring along the way. And my initial meeting/consultation is always completely free of charge!
An operating agreement is an agreement among the owners (called “members”) of an LLC, defining their ownership, management and other determinations. It would generally be in writing.
All sizes of companies need an operating agreement. From the smallest 1-member LLC to a large multi-member LLC, an operating agreement is a critically important document. While detail and complexity will vary dramatically between a small, simple company and a large company, the core components of an operating agreement are important for any type of business. An LLC operating agreement provides legally-binding details of how a company is operated, who owns it, how decisions are made, how additional owners are added (or removed), how profits are to be shared, how ownership interests can (or cannot) be transferred, and so on. Missouri law requires each LLC to have an operating agreement and while it is possible to maintain a “oral” operating agreement, such are inherently problematic and generally ill-advised. In many instances, a thorough written operating agreement can be simple and straightforward.
When you create a trust, you typically name yourself (or perhaps you and your spouse) as the trustee(s) of your trust. The trustee manages the trust assets and makes determinations about investments and distributions. Of course, when you pass away, you will no longer be the trustee of your trust. So, who manages trust assets? Who makes determination regarding investments and distributions? A well-drafted trust agreement will provide detail and direction on these fronts, but someone must still be in charge (the trustee). When determining who to nominate for this central role, the following characteristics are important to consider:
Financial Competence. Skill at managing trust assets, keeping accurate records and properly handling finances will go a long way toward smooth and proper trust administration.
Strong Communication. The trustee will be interacting with beneficiaries. A strong ability to be clear, friendly and accurate is important.
Local. All things the same, a trustee based locally is generally better than one located out of town. Of course, this can vary depending on individual circumstances.
Familiarity. Familiarity with your goals and wishes can be helpful in situations where the trustee has some discretion in distributions.
The selection of the right trustee can make a major difference in the smooth and competent administration of a trust. While there is no perfect formula for selecting the right person (or trust company), ample consideration given to these qualities can be a good starting point.
Nearly any type of business venture (no matter how big or small) should be accompanied by the creation of a business entity. The term “business entity” refers to a limited liability company (LLC), a limited liability partnership (LLP), a corporation or other similar organization. In many cases, an LLC is the easiest and most flexible type of business form. So why is this so important? Operating as a unique business entity (as opposed to running a business in your own name) generally offers protection from personal liability. In other words, if the company faces some type of liability (contract, lawsuit, etc.) that liability does not extend to the individual owners of the company. The owner will not be personally liable for the debts and liabilities of the company. Of course, there are numerous important legal and procedural nuances to comply with to assure the viability of such limited liability. Additionally, a number of important tax issues interplay with any decision regarding a business entity. However, in the end, some type of business entity is nearly always strongly recommended for any type of business.
Determining which documents and tools best fit your goals and needs is central to having an effective estate plan. Do I need a trust? What’s the difference between a will and trust? Do I need both? Do I need either one? These are common questions. While there are deeper layers of detail and nuance that of course merit consideration, a simple explanation could go as follows:
A Will designates where your property goes but has to go through probate to do so. Probate is often costly and time-consuming. A Will does not offer much in the way of control and direction as to how property and money is used after you die. However, a Will is effective at making basic designations about property and in some circumstances, it is really all that is needed.
A trust avoids probate altogether and gives you wide-ranging control over how trust property is used. It is effective at addressing unknown variables in the future. It can be an especially effective tool when named beneficiaries are young or you do not want them to get their whole share of the trust at one time. A trust is also tremendously effective in planning for education, living expenses and other needs of beneficiaries. A trust’s administration after you die is also very private, is not generally intertwined with any type of court proceeding and it is usually a much more streamlined process when compared to probate.
Ultimately, the determination of what documents would make up an effective estate plan is highly dependent on your unique personal and family circumstances together with your goals and concerns.