Tag Archives: probate

Should I Amend My Current Estate Plan? Or Do I Need All New Documents?

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.

What is a Beneficiary Deed and When Should I Use It?

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.   

Do I Need a Will?

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.

What’s the point of an LLC?

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. 

How Much Does A Will, Trust or Power of Attorney Cost?

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!

How Do I Avoid Probate?

How Do I Avoid Probate?

With proper advance planning, probate can be readily and entirely avoided.  Several methods of asset transfer and titling can remove an individual’s property from the probate estate.  Typically, a combination of these methods can be implemented to prepare a plan that (i) meets the needs of the individual/family, (ii) addresses other goals and intentions of their family legacy or gifting plan and (iii) wholly avoids probate administration.  The following represent the major methods of probate avoidance:

1. Trust Formation. By forming a revocable living trust, the transfer of assets can avoid probate.  When a trust is formed, most assets are transferred to the trustee of the trust (which is in most cases the owner/individual) for the benefit of that same owner/ individual during their lifetime.  However, the key benefit of a trust is what occurs upon the death of the individual establishing the trust—namely, that the trustee’s rights and responsibilities are transferred to a new pre-determined individual (appointed by the initial owner) and the assets of the trust are distributed (or retained for the benefit of successor beneficiaries) in whatever fashion has been laid out in the trust document by the owner. In short, because the owner’s property was held by the trust, probate is entirely avoided.

2.  Joint Ownership / Right of Survivorship. Certain assets (particularly real estate) can be held as “joint” property whether between spouses or other individuals.  When such is the case, when one of the joint-owners dies, the property would typically be transferred, in whole, automatically to the surviving owner.  No probate would be required.  However, if both joint-owners die, with no additional joint-owner, then the property becomes subject to probate with all other property.

3.  Beneficiary Designations.  Certain assets can be transferred by a “beneficiary designation.”  Such assets typically include life insurance policies, independent retirement accounts (IRAs) and employee benefit plans (401k plans, etc.) as well as some financial accounts. Similarly, real estate can be transferred by a “beneficiary deed” which transfers the property to the named recipient automatically upon the death of the owner. By utilizing this type of planning, ownership will be transferred automatically to a named beneficiary.  This process is relatively simple, and although not as comprehensive as some other planning, can be a great approach for some people.

4.  Corporate Entities.  Assets owned by a corporation or an LLC are not subject to probate.  Understandably, the business entity does not “die,” but rather its ownership or control is  transferred pursuant to the company’s operating documents.  However, it must be noted that instruments representing company ownership interests (i.e. stock, LLC membership interest) can indeed be subject to probate and such matters should be addressed by other probate-avoidance mechanisms.

5.  Life Insurance.  Life insurance proceeds are typically not subject to probate administration.  Naming a beneficiary of life insurance proceeds will result in the proceeds being transferred to such individual directly, completely bypassing the probate process.  However, if a named beneficiary dies first or the policy is payable to naming “the estate of” a named person, the proceeds will indeed become part of the probate estate.

6.  Very Small Estates are Subject to Minimized Probate.  Very small estates can generally bypass the lengthy probate process.  If the total assets of the decedent do not exceed $40,000, an “affidavit of small estate” is filed with the probate court, much of probate’s formality is dispensed and the process is typically shorter and less costly.

Why Should I Try to Avoid Probate?

Probate is both costly and time-consuming and often presents a difficult procedural headache for surviving family members.  In some limited instances probate may be preferable—but these are very much the exception.  On the whole, it is typically advisable to take the necessary steps to avoid probate altogether, but the following represent the advantages and disadvantages of probate:

Length: typically 7-12 months from death to discharge of the estate and many times longer.              In most cases, probate simply cannot be administered in less than 7 months.

Cost: between legal fees, courts costs, notice and publication fees, probate often costs                     between 4% and 10% of the gross estate

Hassle: length/cost (as mentioned above) but the inherent court procedure, potential     hearings and court filings require ongoing attention for several months

Privacy: probate is public record, accessible to any and all

 

While in some exceptional circumstances probate may be desired, we typically plan to avoid it completely.  At Schleiffarth Law Firm, LLC we work with each client to create an estate plan that matches their goals and avoids the time, cost and headache of probate.

What Types of Property Must Go Through Probate?

What property goes through probate?

As a general rule, all property owned by a decedent at his/her time of death is part of the “probate estate.” This means that (unless some prior planning has occurred), in order to be legally transferred to a new owner, property must be administered through the court.  This includes all of the following items:

1.  All property transferred by a valid will (please note: simply having a will does notavoid            probate)

2.  All property not indicated in a will

3.  All proceeds from accounts or insurance policies transferred to “the estate of” or to                  beneficiaries that have died prior to the decedent

4.  All types of property (real estate, bank accounts, personal tangible property, stock, investments, etc., etc.)

 

Probate is an entirely avoidable event. The process is typically undesirable due its time, expense and administrative requirements.  Proper planning, through various methods, can remove all assets from the probate estate, allow for a smooth transfer of a decedent’s property and assure that family goals and intentions are squarely met.

What is Probate?

Probate is, stated simply, the court-supervised process for transferring property to its intended recipients, following the death of the owner. The goal of probate is to transfer a decedent’s (someone who has died) property to his or her heirs or other intended recipients. This would occur after paying debts owed to creditors. The probate process typically involves the following general steps:

1. Hiring of an attorney
2. Opening of the estate with the probate court (filing various documents)
3. Submission of the will (if there is one) to the court
4. Appointment, by the court, of a personal representative of the estate
5. Taking and reporting of the inventory of assets of the estate
6. Payment of debts of the estate and settlement of similar matters
7. Providing legally required notices to the public and to certain individual
8. Distribution of the assets of the estate to intended or legally entitled recipients
9. Order of discharge from the court; closing of the estate

While in some exceptional circumstances probate may be desired, we typically plan to avoid it completely. At Schleiffarth Law Firm, LLC we work with each client to create an estate plan that matches their goals and avoids the time, cost and headache of probate.