Avoiding Probate

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Update: The Estate of Prince, Two Years Later…

Update: The Estate of Prince, Two Years Later…

 

UPDATE:  THE ESTATE OF PRINCE, TWO YEARS LATER

The world mourned the death of Prince on April 21, 2016.  After the initial shock of his death, apparently from a drug overdose, passed, his estate became a central issue with his surviving relatives.

Right after his death, I wrote that his probate estate would be a mess:

https://www.legacylawmissouri.com/prince-died-what-about-estate/

Unfortunately, I was right.

First, none of his heirs have received a dime from the probate estate.  That’s in part because Prince had not even created a will, which complicated things initially because hundreds of people came out of the woodwork claiming to be related to the singer.

Since then, it has been determined that his six surviving siblings will share equally in his estate.  However, there’s an ongoing issue:  The executor of his estate and the IRS cannot agree on what the estate is worth.  Until they do, nothing can be distributed to the siblings.

So who is getting paid from the estate?  The executor and their lawyers have collected $5.9 million in fees and expenses.  They’ve requested additional fees already and more are obviously expected after that.

A rich celebrity like Prince should have had a will at the very least.  That was either a failure of him to follow advice from what you can only imagine was a team of managers, lawyers and accountants or, less likely, the advice was never given to him by his team which would be incredible incompetence.

Had Prince created a will, the beneficiaries of that will would have been determined right away.   The process would definitely be further along and likely the will would have contained terms regarding the assets of his estate and directions to the executor.

Had Prince created a properly funded living trust St. Peters (or series of trusts more likely) he could have avoided probate all together and his estate would be resolved in private.  It would be a quicker process and a much cheaper one.

And likely his heirs would already be spending their inheritance.

AVOIDING PROBATE: IT’S NOT JUST ABOUT MONEY…

AVOIDING PROBATE: IT’S NOT JUST ABOUT MONEY…

As an estate planning attorney, a central goal that I preach is for my clients to avoid probate. Most of my clients associate probate with something akin to the plague and people like bankers, insurance agents, financial advisors, TV hosts and society at large have done a good job educating clients on the simple premise that they should avoid probate at all costs.

But why? Most people would guess the expense. That is certainly a legitimate reason. In Missouri, a probate administration can lead to costs to the court, big expenses being paid to your personal representative (also known as the executor) and, if you want the easy version of probate in Missouri, independent administration, the services of a knowledgeable and experienced probate attorney.

In a recent probate, an approximately $450,000 estate ended up costing about $1,000 in costs to the court for filing fees, inventory fees and various other expenses and approximately $31,000 in fees split equally between the personal representative and attorney .

That’s a lot of money and completely avoidable with estate planning. But to me the underrated reasons to avoid probate are:

1. Time

In Missouri, an estate cannot be closed for at least six months. Best case, therefore, you are looking at a 180 day process. In most cases, you can add at least a couple of months, if not more.  In some cases, the estate won’t be closed for at least a year, sometimes longer. So, not only have you lost a loved one, but now as a beneficiary or heir of an estate you have to wait a long time to get your inheritance!

2. Complexity

I work on probates every day and while I do a great job for my clients I have to say….I don’t like doing them.  St. Charles County has a terrific probate division but many of my probates are in St. Louis County and they are a nightmare to deal with.  Every county has a different set of procedural details that must constantly be adhered to, which is tough because those details seem to change by the month. Probates are comparable to getting your teeth pulled. The smallest details can delay them for days and even weeks.

3. Family Issues

Imagine with your family who would be more than a little bit anxious / conspiratorial about an inheritance owed to them. If someone makes out a will and then dies, unlike on TV, there is generally not a reading of the will. That is largely a Hollywood created fiction. In larger estates with a variety of distant relation family members or different beneficiaries (like people that don’t know each other), it might make sense to have a will reading. So people think that something is being hidden from them when the personal representative and the attorney for the estate don’t just cut them a check. Probates cause family tensions and in families where there is already tension, it can only aggravate things.

Conclusion

Here’s the silver lining: It is easier than ever to avoid probate with a living trust or even without a living trust under some circumstances. All you need to do first is sit down and meet with an estate planning lawyer to find out how. Heck, our office offers a free initial consultation. By the end of that meeting, you’ll know what you need and how much it costs…and how much avoiding probate will save you.

Avoiding Probate: It’s Not Just About Money…

Avoiding Probate: It’s Not Just About Money…

 

AVOIDING PROBATE:  IT’S NOT JUST ABOUT MONEY

               As an estate planning attorney, a central goal that I preach is for my clients to avoid probate.  Most of my clients associate probate with something akin to the plague and people like bankers, insurance agents, financial advisors, TV hosts and society at large have done a good job educating clients on the simple premise that they should avoid probate at all costs.

But why?

Most people would guess the expense.  That is certainly a legitimate reason.  In Missouri, a probate administration can lead to costs to the court, big expenses being paid to your personal representative (also known as the executor) and, if you want the easy version of probate in Missouri, independent administration, the services of a knowledgeable and experienced probate attorney.  In a recent probate, an approximately $450,000 estate ended up costing about $1,000 in costs to the court for filing fees, inventory fees and various other expenses and approximately $31,000 in fees split equally between  the personal representative and attorney .

Think about that for a second…that represents almost a 7% loss in the value of your probate estate due to costs and fees, or one more percent than you pay to sell a home!  But here’s a big difference…real estate commissions are unavoidable.  Probates costs and fees are not.

But forget about money and costs for a second, because there are three other huge reasons to avoid probate, that are largely overlooked.

Those are:

  1.   Time: In Missouri, you have to wait 10 days after death before you can file in most cases and then the estate cannot be closed for at least six months.  Best case, therefore, you are looking at a 190 day process.  In most cases, you can add at least a couple of months.  In some cases, the estate won’t be closed for at least a year, sometimes longer.  So, not only have you lost a loved one, but now as a beneficiary or heir of an estate you have to wait a long time to get your inheritance!
  1.  Complexity:  I work on probates every day and while I do a great job for my clients I have to say….I don’t like doing them.   Absolutely cannot stand them.   St. Charles County has a terrific probate division but many of my probates are in St. Louis County and they are a nightmare to deal with.  If you can get through to someone, you will get two different answers from two different people.  Every county has a different set of procedural details that must constantly be adhered to, which is tough because those details seem to change by the month.   Probates are comparable to getting your teeth pulled.  The smallest details can delay them for days and even weeks.
  1. Family Issues / Strife:  Imagine with your family who would be more than a little bit anxious / conspiratorial about an inheritance owed to them.  If someone makes out a will and then dies, unlike on TV, there is generally not a reading of the will.  That is largely a Hollywood created fiction.  In larger estates with a variety of distant relation family members or different beneficiaries (like people that don’t know each other), it might make sense to have a will reading.  So people think that something is being hidden from them when the personal representative and the attorney for the estate don’t just cut them a check.  Probates cause family tensions and in families where there is already tension, it can only aggravate things.  As I noted above, you have to wait at least 190 days in most probates before the estate can be distributed and closed and that’s because creditors have a right to make a claim against the estate.  I very rarely authorize early disbursement of an estate for this reason.  Who knows who is out there claiming they are owed money.  If the money in the estate is immediately distributed, how are you going to get it back if a creditor shows up out of the blue in the last month making a huge claim against the estate?

Half of my estate planning clients are meeting with me because they know they need to.  The other half are meeting with me because they just had some terrible disaster happen in there family or watch it affect someone they know, so now they want to avoid it.

Here’s the silver lining:  It is easier than ever to avoid probate with a living trust or even without a living trust under some circumstances.  In less than an hour Legacy Law Center can sit down with you, figure out what your particular circumstances are, what you need based on those circumstances, tell you what it costs and give you a accurate timeline of when it will be completed, signed and in your hands protecting you and your family.

 

Own Property in Missouri? Get A Beneficiary Deed

Own Property in Missouri? Get A Beneficiary Deed

OWN PROPERTY IN MISSOURI?  GET A BENEFICIARY DEED

If you are a landowner / homeowner in Missouri, part of getting your affairs in order should include having a beneficiary deed drafted and recorded for your property.  Unlike a quitclaim deed or warranty deed which evidences your current ownership of property, a beneficiary deed is not a present transfer of ownership.  This type of deed merely states that when you pass away, if you own that property that it should pass to the beneficiaries you name in the beneficiary deed.

The biggest advantage of recording a beneficiary deed is that doing so will ensure that your property avoids probate when you pass away.  This is because the recording of one of these types of deeds is what is referred to as a non-probate transfer.   Considering that the costs of probate for a $300,000 home will probably be around $8,000 – $10,000, having a beneficiary deed drafted and recorded for roughly $250 (our fee at Legacy Law Center) is a terrific investment.

In a beneficiary deed, you are the grantor, the person granting the property to your beneficiary, who is the grantee.  If you have a living trust, your beneficiary might be your living trust rather than named individuals.  You will need to discuss this with the attorney that drafts the beneficiary deed for you, although in many cases our firm drafts beneficiary deeds as part of an estate plan that includes a living trust for a couple or an individual, so that discussion would be part of the larger discussion about all aspects of your estate plan.

The beneficiary deed is also an easy solution for those who live in one state but own property in Missouri.  We have drafted and recorded many beneficiary deeds for out of state clients who just wanted to ensure that their Missouri property will be protected when they are gone.

Beneficiary deeds are authorized specifically by Missouri law and Missouri is one of about twenty or so states in America that have them.  Keep in mind a few things about them, however.  First, unlike other deeds (such as a quitclaim deed) that can be recorded after your death, a beneficiary deed must be recorded before you pass away.  Another important thing to know is that a beneficiary deed can be revoked and a new beneficiary deed can be recorded in place of the old one.  So, for example, if you originally wanted to give your property to one of your children but changed your mind, you can record a new version granting the property to all of your children, so long as the document is recorded prior to your passing away.

A few other things to consider:  Whether you have a mortgage on the property or own it free and clear is irrelevant.  The beneficiary deed will not affect your ability to sell a property and if you do sell the property, the deed is obviously void.  Of course, if you sell one property and buy another, you’ll need to record a new document for the new property.

Here is the link to the statute authorizing beneficiary deeds: http://www.moga.mo.gov/mostatutes/stathtml/46100000251.html

Understanding deeds in Missouri…

Understanding deeds in Missouri…

UNDERSTANDING DEEDS

If you are the owner of a piece of property, you acquired the property by a deed, which gives you title and ownership of the property.  Are there different kinds of deeds?  Yes there are.

General Warranty Deed – This type of deed guarantees a clear title to the buyer of property, who is warranting to the seller that they own the property, have the right to sell the property, that the property has no encumbrances other than the ones stated, that the seller will defend title against all claims by all persons, including persons claiming ownership prior to the seller’s ownership.  This is the traditional form of deed in a transaction between two unrelated parties and the strongest form of deed that a buyer can obtain because of all the guarantees, including clear title prior to even the current seller’s ownership of the property.  Regardless, a buyer should always do their due diligence with respect to the property and perform a title search.

Special Warranty Deed – Similar to a General Warranty Deed but not as strong, because here the seller only guarantees the property is free of encumbrances except as noted but only warrants to defend title against persons making claims under the seller’s ownership, not prior to seller’s ownership.

Quitclaim Deed – This type of deed does not contain a guarantee of clear title to the grantee (the person receiving title to the property).  Transfer of ownership with this type of deed is most common between family members or spouses.  For example, husband owns a piece of property prior to marrying wife and wants to transfer part ownership to wife.  In that case, husband would be the grantor (the person transferring title) and husband and wife would be the grantees.  These deeds are often mistakenly referred to as “quick claim”.

Beneficiary Deed – This is a deed which transfers ownership of a property after the owner passes away.  Conceptually, it is similar to a beneficiary designation on an insurance policy.  However, unlike other deeds, it must be recorded prior to the death of the owner.  If so, the property will avoid probate.  Only about half of the states allow these types of deeds and luckily Missouri is one of them.  It is specifically authorized by statute (RSMo. §461.025).  These deeds are commonly used in an estate planning, since they accomplish the goal of avoiding probate with your home.   These deeds do not affect title and become void if you sell the property (i.e. you’ll need a new beneficiary deed if you buy a new home).

Deed of Trust – A deed of trust is the recorded document by which a lender takes a security interest in a property.  It gives the lender the right to foreclose on the property if the borrower does not make payments on the loan.  It is not exactly a mortgage but very similar, although the term “mortgage” is commonly used in Missouri when people are actually referring to a deed of trust.

Deed of Release – A lender records this deed once a deed of trust has been paid in full by a borrower.  In fact, under Missouri law, a lender has 15 days to record a deed of release from the borrower paying off the loan and making a formal request for one.  (RsMo. §443.130)

Deeds are recorded at the Recorder of Deeds office.  In St. Charles County, the Recorder of Deeds is located in Room 388 of 201 North Second Street in St. Charles, across the street from the courthouse and jail.