Estate planning is the process of legally planning for two of the most important things in your life: everyone you love and everything you own. It involves developing a plan for your care and the care of your assets during your life both while you are well and during any periods of incapacity.

Estate planning also involves developing a plan for the inevitable: when you pass away. The process of estate planning provides answers for family members and the court system during life’s most challenging moments, including:

1. Who should be responsible for looking after my children if I become incapacitated or die?
2. Who do I want to make decisions about my medical care if I can’t make those decisions for myself?
3. Who do I want to look after my financial affairs if I can no longer do so for myself?
4. Who would I like to inherit my stuff, and how would I like them to inherit it?
5. Do I want to give anything to charity when I die? 
6. How can I make sure that my belongings pass to my family and not to the government through taxes?
7. What can I do to help my children thrive even after I am no longer around to guide them?
8. How can I preserve the wealth my family has managed to build across generations?

The answers to these questions are memorialized in some of life’s most important legal documents, like wills, trusts, powers of attorney, beneficiary designations, and living wills, to name a few.

Definition: A Will is a written document which states an individual’s wishes as to how he or she wants his/her property to be disposed of at death. A Will therefore specifies who gets what, and in some cases, who does not.

A Pour Over Will is the same as a Will. However, in a Pour Over Will you make your Trust the beneficiary of all of your assets. When you set up a Trust, you will transfer title of your assets to the name of the Trust, but if there are any assets that were not properly transferred, the Pour Over Will will make sure they are transferred upon your passing.

Benefits:

1. A will is completely revocable (changeable) during your lifetime, but it becomes irrevocable (not able to be changed) at the moment of death.
2. You get to control who gets your property upon your death and you get to name who is responsible for carrying out your wishes (Your Executor).

Limitations:

1. In Missouri, even if you have a will, your executor may still have to go through some form of probate. The cost of going through probate will be paid by your estate.
2. Upon your death, your executor (or his/her attorney) will file your will with the probate court, and it then becomes public record. The publicity of probating a will is one of the reasons some people elect to use a trust, which are private proceedings outside the public eye. Although unlikely, a publicly probated will may open up the floodgates for disgruntled family members or creditors to dispute the will. Your estate will have to defend the will and the legal costs will likely be paid from your estate, lowering the amount that you can leave for your beneficiaries.
3. Your will only takes effect after you pass away and does not control any property if you become incapacitated.

Definition: A Revocable Living Trust (RLT) is a trust created by the grantor during his or her lifetime, in which, during his lifetime, the grantor retains the absolute right to totally revoke the trust, change its terms to any degree, and/or regain total possession of the property in the trust.

Put simply, it is an agreement where you (the grantor) get to appoint an agent (the trustee) to control how your property is managed and distributed throughout all phases of your life.

Benefits:

1. Control over your assets (that you put into the revocable trust) while you are alive and well, if you become incapacitated, and after you pass away.
2. Privacy in the handling and administration of your assets during your lifetime and upon your death.
3. Reduce legal expenses by planning ahead and being able to avoid the probate process through a private trust administration.

Definition: A Durable Power of Attorney or Financial Power of Attorney is a written agreement (or document) that enables an individual (referred to as the principal) to designate another person or persons as his or her “attorney-in-fact.” The attorney-in-fact is authorized to exercise all financial rights listed in the document.

Benefits:

1. The scope of the Durable Power of Attorney can be limited (such as “Only to pay my mortgage”) or very broad (“Any and all of the legal powers I have including but not limited to…”)
2. A “Durable” power of attorney remains in effect during incapacity but terminates upon death.
3. You can choose to have your power of attorney take effect immediately or take effect only upon your incapacity or a certain date (referred to as a Springing Power of Attorney).

Definition: A Health Care Power of Attorney is a written document that enables an individual (referred to as the principal) to designate another person or persons as his “attorney-in-fact.” The attorney-in-fact acts on the principal’s behalf for health care decisions.

Benefits:

1. You can choose who you would like to make your health care decisions on your behalf if you were to become incapacitated.
2. You can make decisions for your end of life care, such as the choice to prolong life or not to prolong life.
3. You can elect to donate organs or tissues for transplantation or research purposes(or elect not to donate any organs or tissues).
4. You can choose to have your power of attorney take effect immediately or take effect only upon your incapacity.

Definition of Probate: In its most narrow sense, probate means to prove that the will was the last will and testament of the decedent. In its broader sense, probate refers to the entire process of administering the decedent’s will, including gathering the decedent’s assets, paying the decedent’s taxes and debts, and distributing the remaining assets to the proper beneficiaries.

Benefit:

• You are able to save money while you are alive by not having a trust drafted.

Downside:

• Time: It is not uncommon for a probate case to last from 1-2 years.
• Expense: While you do save money while you are alive, the cost of going through probate generally far outweighs the cost of setting up a living trust.
• Public Records: Probate is a public process and your estate will lose the privilege of privacy.

Funding a Trust: Funding of a revocable living trust should occur at the establishment and then again as assets are added to your estate over time. It is incredibly important to have a fully funded living trust, because a partially funded (or unfunded) trusts is not able to avoid probate.

As part of the funding process, you will change the ownership title of your assets into the name of your trust.

It is important to consult with an estate planning attorney to determine exactly what assets should be titled under the trust, and which should be left out of the trust. Here are a list of some assets to consider:

1. Cash Accounts
2. Investment Accounts
3. Stocks and Bonds not held in investment accounts
4. Stock Options
5. Personal Effects
6. Retirement Plan Assets
7. 529 Plans (Qualified Tuition Plans)
8. Life Insurance Policies and Annuities
9. Notes, Mortgages, and Other Receivables
10. Partnership Interests
11. Corporate Business or Professional Interests
12. Sole Proprietorship Business Interests
13. Oil, Gas, and Mineral Interests
14. Real Property

As part of the funding process, it is also important to update any applicable beneficiary designations to coordinate with provisions of the revocable trust.

Missouri Death Tax: While tax laws change relatively frequently, there is currently no estate / death tax imposed by the state of Missouri.

Federal Death Tax: In 2020, as an individual, if your gross estate is valued under $11,580,000, then you will not owe any estate taxes. If you are married, then that amount can be multiplied by two (one for each spouse). This means that a married couple’s estate will not be taxed if it is under $23,160,000. IRS Website.

What is an Executor/Personal Representative: When a person dies, the law in Missouri requires that his/her property must be accounted for and collected. Once the debts, taxes, and expenses are paid, then the remaining assets are distributed to whomever is legally entitled to that property. That distribution is determined by the person’s will, or if there is no valid will (or to the extent a will is partially invalid), by the intestate laws of Missouri.

It is the Executor’s (often referred to as the administrator or personal representative) responsibility to collect and safeguard the decedent’s assets, pay any estate taxes, debts, and expenses of the decedent, and to make the appropriate distribution of any remaining assets.

Probate

The entire process by which these tasks are accomplished (with the supervision and guidance of the court system) is called Probate.

Definition of a Trustee: A trustee is the person who has been appointed to manage a trust. In Missouri, a trustee has a legal obligation to care for the trusts assets in the best interest of the beneficiary or the beneficiaries. Some common trustee duties are:

• Managing rental properties
• Investing funds
• Paying income to beneficiaries
• Closing down accounts
• Accounting to beneficiaries

A trustee should posses business judgment (even if there is no business), honesty, and integrity. The trustee must be able and willing to exercise a high degree of care over trust property and avoid (however tempting) investments or acts that are likely to result in losses.

A trustee must have legal capacity to contract. This precludes the appointment of someone under the age of 18 or an incapacitated adult. It is sometimes a good idea to try and find a trustee who is local so that they can handle the day to day business of administering the trust, though institutional trustees (banks and investment brokers) may also be advisable.

Investment skill is usually necessary. Under the “Prudent Person” rule, a trustee will be liable to the beneficiary for losses unless he/she exercises the same care and skill that a person of ordinary prudence would exercise in dealing with his/her own property.

Because a trustee must examine and review the trust periodically, administrative and legal skills and knowledge are important. Accounting must be made to the client and eventually to the other beneficiaries. All parties must be advised accurately on the tax and other legal effects. Provisions in the trust must be interpreted from time to time.

Definition of Beneficiary: A beneficiary is the person who is legally entitled to receive the assets from a trust or a will. A beneficiary can be a person or an organization (such as a charity).

Although nearly everyone can benefit from at least some form of estate plan, the following types of people most commonly have special estate planning needs:

1. Parents who have minor children;
2. Blended Families (e.g., families with children from prior marriages)
3. Individuals and families who own a home
4. Individuals and families who own investment real estate, particularly if such property is owned in multiple states
5. Individuals and families who have digital assets
6. Young Adults and Young Families planning for medical emergencies
7. If you feel your estate is disorganized
8. Business Owners planning for succession
9. If you are interested in protecting your wealth from creditors and predators
10. Professional Service Providers