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Seven Reasons To Change Your Revocable Trust…

Seven Reasons To Change Your Revocable Trust…

SEVEN REASONS TO CHANGE YOUR REVOCABLE TRUST

               Creating a revocable trust is one part of proper estate planning for the protection of your family.  However, even after creating a revocable trust, there may still be reasons to change, or amend it.

As a revocable trust lawyer Wentzville, Missouri, much of my time is not only spent with clients creating new documents but changing their existing documents.

This article discusses seven reasons to change your trust:

You Want New Beneficiaries:      Every trust must have beneficiaries to receive your stuff when you pass away.  You may want to change those beneficiaries over time.  Perhaps you want to keep the same beneficiaries, but change the distribution percentages.  Either way, you’ll need to change the trust to do so.

You’ve Moved To Another State:  If you move to a new state, your trust needs to be amended to reflect this fact and usually to change the governing law provision.  A Missouri living trust is governed by Missouri law and will state this in the document itself.  If you move to Michigan, you’ll need to change the governing law provision so that Michigan law controls.

You Had Another Child:  Having another child is a classic example of when you need to update your revocable trust.  They should be included in the document so that it’s clear they are to receive part of the trust estate when you pass.  A quick amendment can resolve this issue.

You’re Getting Divorced:  Perhaps an obvious example of when to change your trust document is when you have divorced since it was created.  Most trusts these days are joint revocable trusts created by both you and your spouse.  Since you likely left everything to the other spouse, you’ll need to amend your documents, or more likely, completely re-do them once you’re divorced.

You’re Getting Married:  On a more positive note, if you’re divorcing someone but marrying instead, you’ll likely want to update your trust so that your new spouse is at least a partial beneficiary of your revocable living trust.

You’ve Married And Now Have Stepchildren:  If you have stepchildren, they will not receive property out of your trust generally unless you have adopted them, or, otherwise, you have provided for them in your trust.  The safest bet is to amend your trust and include them in the document if that’s what you intent.

Change In Law:  New laws are created and old laws are repealed or changed all the time.  Some of these situations can greatly affect your estate planning, including your revocable trust.  Consult with an attorney to make sure that any change in laws is reflected positively in your documents.

Amending your trust in Missouri is not all that complicated.   You’ll meet with an estate planning lawyer Wentzville to discuss the changes, he or she will draft the amended documents and you’ll sign them, just as with your original documents.  The new documents will supersede the old and you’ll have an estate plan that fits your current circumstances.

 

Estate Planning Disasters: The Form Beneficiary Deed

Estate Planning Disasters: The Form Beneficiary Deed

ESTATE PLANNING DISASTERS:  THE FORM BENEFICIARY DEED

Whether people fail to create an estate plan or sometimes even when they do, there a host of reasons why the plan or lack thereof can be a disaster.  This article will provide an example of an actual estate planning disaster.  As a beneficiary deed lawyer St. Peters, Missouri, I have seen plenty of them.

STORY

Aunt has a piece of property in a historic part of St. Charles County.  She has no children and is a widow.  She does however have a grown niece and a grown nephew and she loves both of them.  Aunt and their mother were super close as sisters and Aunt especially doted on niece and nephew as they were growing up.

In 2002, Aunt finds a form beneficiary deed at an office supply store.  The form automatically includes the language per stirpes typed in after the people listed to inherit the property after her death.  She writes in that she wants her nephew and niece to inherit the property equally when she dies and, as listed on the deed already, per stirpes.  The deed is correctly recorded.

In 2012, niece passes away.  Aunt is now in her late 80’s and unable to create a new beneficiary deed because she is not competent.  In the intervening ten years, niece’s son, her only child has grown from a well adjusted ten year old to a 20 year old with an awful drug addiction and several arrests for theft and burglary.

Aunt passes away in 2015.  Nephew is referred to my office for help, since he lives on the West Coast.  He wants to know how to put the property just in his name since his sister passed away.  After review of the 2002 beneficiary deed, I have to tell nephew that he is only entitled to one-half of the property and, unfortunately, has to share the property with niece’s son (his nephew).  Nephew immediately tells me that his Aunt said many times that she only wanted niece or nephew to inherit the property because she knew they would take care of it.  However, her intent as indicated by nephew is not displayed on the form beneficiary deed.

Meanwhile, soon after Aunt’s death, niece’s son, has already broken into the house and taken almost everything of value, including rare jewelry and antiques.  He has also stripped all of the copper and apparently looking for hidden items, tore up the flooring throughout the first floor and the vents in the basement.

I was able to put the property in nephew and son of niece’s name, but I had to refer nephew to a civil litigation attorney to pursue damages against the son of niece.  Nephew received a judgment for thousands of dollars and eventually the share of the house belonging to niece’s son was used to collect on that judgment, but the actual damages to the house and the costs of filing suit severely reduced the value of the inheritance.

So how could all of this been avoided?

Hindsight is of course 20/20 but a consultation with an estate planning attorney would have allowed Aunt to be informed that her true intent, to give the property 50/50 to nephew and niece, per capita, would have resulted in the property passing only to nephew at Aunt’s death because niece had predeceased in 2012.

Bottomline:  Two Latin words, per stirpes, meant all the difference in this case. 

Per Stirpes vs. Per Capita Distribution…

Per Stirpes vs. Per Capita Distribution…

Per Stirpes vs. Per Capita Distribution in a Will

                One of the obvious benefits of having a will is you get to name the beneficiaries of your estate.  When I sit down as an estate planning lawyer St. Peters to meet people, they almost always have an idea of who is going to be their beneficiaries.

However, one thing that they often struggle to decide is how to divide their estate if one or more of their beneficiaries die before they do.

There are two options.  The first is called “per stirpes” distribution and it means that if a beneficiary predeceases, their share goes to their survivors equally.  The other option is called “per capita” distribution and it means that if a named beneficiary predeceases their share is then split only between the other name beneficiaries.

Let’s look at an example:

Sam and Sally have three children, Samuel, Sarah and Samantha.  They each create wills that leave everything to the other spouse and then to the children in equal 1/3 shares, per stirpes. Sam passes away and then Sarah passes away five years later.  Five years after that Sally dies.  Her will controls the distribution of her estate and because she chose per stirpes distribution, Samuel will get 1/3, Samantha will get 1/3 and Sarah’s two children, will each split Sarah’s 1/3 share and each will get 1/6.

With a per capita distribution scheme, under the same example Sarah’s 1/3 would be split between her brother Samuel and sister Samantha.  Sarah’s children would therefore receive nothing and Samuel and Samantha would each split the estate, ½ each.

You can see how the slightest change in one word (“stirpes” or “capita”) can result in a big change.  Therefore, when I counsel clients I discuss these different options thoroughly and ask about their relationship with grandchildren, the health of their children and any potential problems that could develop within the family (which we want to avoid) if one scheme is chosen over the others.

There’s not really a right or wrong way to choose which distribution you want in your will or living trust.  Based on my years of practice, I would say per stirpes is the choice of 90% of clients over per capita.  Most people think that’s the fairest way and are concerned about beneficiaries getting more due to someone else’s death.

On the other hand, per capita can be a better choice if we’re worried about a distribution to grandchildren going to an unpopular daughter or son-in-law.  That can happen when the distribution is made to the grandchild but taken improperly or used unnecessarily by their mother or father.  That’s something to consider if you find yourself with an in-law that you don’t like.

In the end, careful consideration of all circumstances and preferences has to be examined and peace of mind is ultimately the goal with any estate plan.

 

Trust Administration in Missouri…

Trust Administration in Missouri…

TRUST ADMINISTRATION IN MISSOURI

               Over the years, I have had the honor to serve as a trustee of a few living trusts, as my clients have requested.  It is an honor for these clients to choose me to help execute their estate plans and to work with their chosen trust beneficiaries in Missouri.

As a trust lawyer O’Fallon Missouri, it is interesting to see how things work in reality after a client has passed away.  I’ve always been pleasantly surprised at how much easier the process is than probate and a much less stressful process at that.

When a client passes away and I am the successor trustee, my job is to immediately secure all of the trust assets and to ascertain who are the beneficiaries of the trust.  It’s also my job to collect all the mail of the client to learn about any debts they may have.  This usually means having their mail forwarded to my office so that I can keep tabs on any amounts owed.

Because a revocable trust becomes irrevocable when the grantor (creator) dies, I have to obtain a tax identification number (TIN) from the IRS.  With the trust documents and the TIN in hand, I can visit the client’s bank of choice and access all funds held by the trust.  If the funds are payable on death to the trust, the process is a little different but I will still create a trust account to hold all the liquidated assets of the trust estate.

Assets like houses and cars have to be accessed and determined whether they are to go directly to a beneficiary via the trust.  If so, I make arrangements to work with that beneficiary to transfer that asset to them.  In a recent case, there was a mortgage against the property but very little cash.  The house was very nice but needed some money put into it to get it on the market.  Finding the right balance for this kind of situation is part of the job of the trustee.  In this particular case, we opted to stage the house but not to do things like paint it – we figured we could sell potential buyers on the fact that they could get it painted the color they want.  It turned out to be a great strategy.

Communication with beneficiaries is an important part of being a trustee.  In addition to providing a copy of the trust document to all beneficiaries, it’s important for the trustee to be proactive in letting beneficiaries know what’s going on and when they can expect their distribution of funds (or property) from the trust estate.

Finally, most trust documents empower the trustee to hire just about anyone they need to administer trust business, including financial advisors, attorneys and accountants.  It’s important that the trustee not moonlight as they are a fiduciary responsible to maintain trust funds for the beneficiaries.  Any loss attributed to malfeasance (investing in penny stocks resulting in financial loss, for example) by the trustee can result in personal liability.

Trust administration is a very complex area of law and requires the expertise of a trust administration lawyer O’Fallon, Missouri.

 

Missouri Probate Steps: Inventory Filing…

Missouri Probate Steps: Inventory Filing…

MISSOURI PROBATE STEPS:  INVENTORY FILING

This blog article discusses the the Missouri probate step of filing an inventory.

So a person has passed away and either they had a will or did not have a will.  Either way, a probate may need to be opened in the county where the decedent died to determine who is entitled to the assets of the decedent.  This process is called probate.

The first step in probate is someone or several people file an Application for Probate and for Letters Testamentary (if there is a valid will) or for Letters of Administration (if there is no will).  It is these Letters that allow the person to act as the Personal Representative (same as executor) or the Administrator (same as executor but only in situation where there is no will) and to deal with the assets of the probate estate.

The next step is filing an Inventory within 30 days of the Letters being issued.  This process can be tedious because it is here that you are tracking down what the decedent had but what it’s approximately worth.  It’s a complicated process.  Hopefully you have an attorney helping you through it.  As a quick aside, in Missouri you can have a Supervised estate or an Unsupervised estate.  The Unsupervised estate, in the right situation, is the easiest way to get through probate because the court does not directly monitor all of the transactions of the estate.  The catch is you need to hire an attorney in order to be allowed to open an Unsupervised estate.   My advice?  Hire an attorney.

Back to the Inventory process.  This can vary widely by county.  In St. Louis County, the Inventory is checked over by an auditing department and that is primarily due there is much more probate fraud in St. Louis County than just about anywhere in the state.  St. Charles County has a terrific probate department and they are very helpful.  They take more of a hands off approach to Inventories that are filed and will usually call if something is missing or incorrectly filed.  Probate courts in Warren County, Lincoln County and Franklin County tend to have less estates filed and often do not have their own forms.  In such a case, it is usually okay to use the forms found on the St. Louis County website, although it is always best to call ahead.

Before you can even file a document called an Inventory, however, you have to know what is included in the estate.  A bank account in the decedent’s name only with no beneficiary named will be part of the estate and must be included in the inventory.  With the letters in hand, the executor can find out the account numbers and the value.  They should also be receiving account statements by mail or online by this time as well.  If an account has the decedent’s name and someone else’s name, it avoids probate and is owned by the surviving account holder.  If there are beneficiaries named on the account, it will also avoid probate.

This is pretty much the same as with all accounts, including IRAs, 401K, non-qualified investment accounts (i.e. a Scottrade or Edward Jones account) and life insurance.  Missouri allows decedents to transfer property after death to TOD beneficiaries.  Check the title of all vehicles, including cars, boats, motors and trailers.

What about a home?  If a house is titled in the decedent’s name alone then you need to see if a beneficiary deed was recorded prior to their death.  If so, the house will avoid probate and go to the beneficiaries named on the beneficiary deed document.  If not, the house will be part of the probate inventory and an appraisal may be necessary.  Some counties allow the tax assessment figure to suffice.

Finally, personal property, unless of some value and/or titled property does not usually need to be accounted for in the Inventory.  However, and this is a big however, it should ALWAYS be inventoried by the executor to avoid a fight among the beneficiaries / heirs.

In conclusion, the Inventory notifies the court what is included in the estate and notifies the beneficiaries or heirs of the estate as well since they are to receive a copy of the filed Inventory document.  Once the Inventory is filed, the next step is to deal with creditors and the debts of the decedent.  I will discuss this step in a future blog post.