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Distributing personal property with your estate plan

Family Fighting Over Inheritance

 

 

 

 

 

Distributing Personal Property with your Estate Plan

One thing that I discuss with each of my estate planning clients is distribution personal property in their estate plan.

If you’re like me, over time you have collected a lot of “stuff”.  Furniture, clothing, sporting goods, jewelry, photographs, books, and on and on.  A good estate plan not only has a plan for your cash, your house and your accounts, but also your stuff.

Generally speaking, you can divide your personal property any way you like.  You can state in your will or your trust that important items are to go to certain people, or you can generally divide everything the same way as your cash and home.  So if you have three kids and they are each to receive a 1/3 of your inheritance then you can provide that each of them get 1/3 of your personal property.

A caveat, however:  The dividing of personal property is often highly contentious.  You might even have experienced this in your own family.  When a relative dies, it is common for an organized or unorganized looting of their personal property at their home to take place.  It’s during these lootings that a lot of old wounds can re-open.

As a young associate attorney in New Jersey, I can very clearly remember being asked to be the referee at a home of a deceased person.  There were two brothers who lived out of state and one sister, who lived with Mom (the decedent) and took care of her until she passed away.  So Mom rewarded the caretaking by giving her a slightly larger inheritance in her will.  The two brothers ganged up on sister and made the distribution of Mom’s estate a nightmare.  The division of personal property was as intense as any skirmish in the Hatfield and McCoy saga.  In any case, I ended up having to roughly guestimate the value of various knick knacks, antiques, souvenirs, heirlooms and photo albums collected, as we all do, over the course of this woman’s lifetime.

So how can you avoid this happening among your children or family when you are gone?  By a letter specifically stating who is to get what.  I called it a Personal Property Letter.  And it will usually be referenced in the will or trust.  It’s a simple document.  It gives the beneficiary’s name and a specific description of the item.  When you are gone, the executor divides everything by that list and it provides evidence of your intent, so no one has to guess.  It’s a simple solution to what can be a real problem.

Our firm makes the Personal Property Letter a part of every estate plan, large or small, simple or complex.

What happens if I don’t have a will in Missouri?

What happens if I don’t have a will in Missouri?

When you execute a will, you are deciding who gets your stuff when you pass away.  You get to name a person called an executor (in Missouri we call them a “personal representative”) who is going to make sure the stuff you want to go to certain people actually gets there.

Now, if you don’t have a will, the state of Missouri has what are know as intestacy statutes (to die “intestate” means to die without a will) and those statutes determine who gets your stuff, since you never made a will and wrote that down yourself.  Problem is, in not having a will you are allowing the state to dictate who gets your things and that may not be the same people that you want to have those things.

That is exactly why you want to have a will.  They sound fancy but in reality they really aren’t.

Another key aspect of a will for parents with minor children is that they can name guardians for their children in case they passed away.

What is the difference between a living will and a will in Missouri?

People often get confused with the differences between a living will and a will in Missouri.  As explained above, wills primarily deal with who gets your stuff when you pass away.   Living wills deal with end of life situations and what treatments you want withheld if a doctor determines that those treatments cannot heal you.  The purpose of a living will is to give instruction to your family as to what treatments you do or do not want done if you are near death, persistently unconscious or have a terminal illness.  And they have nothing to do with who gets your stuff!  However, they are two of the documents you need to have a complete estate plan.

last will and testament

If you die without a will in Missouri what happens?

If you die without a will in Missouri, this is called dying intestate and your estate is divided according to Missouri law.

Here’s an example of why it’s important to have a will:

H and W are married in 2005.  H has two grown children from a prior marriage.  When H and W get married, they move into H’s house, which is a nice home and paid off.  But it’s also in H’s name.  H gets sick and dies.  W still lives at the house.  Under Missouri law, W inherits only half of the house and the other half is split equally between H’s children, who are unrelated to W.  W now must deal with H’s children.  Hopefully they get along.  If not, W may have to deal with a situation where they want the house also.  Since it’s 50/50, that could result in litigation.

If husband had a will, he could leave the house to his wife.  Even easier, he could have created a beneficiary deed naming wife beneficiary of the house when he passed away and the house would not only have passed to wife completely but would have avoided probate.

Having a will is not just a sales pitch.  It’s vitally important.  The illustration above is just one example of why.

The true costs of probate: money / time / sanity…

A primary goal of almost all of my estate planning clients is to avoid probate.

Probate is the process by which the assets of a decedent are administered through the courts.  Most of my clients know for sure they want to avoid probate but they are not exactly sure why.

The purpose of this article is to explain why probate in Missouri should be avoided. There are three primary reasons:  money, time and sanity.

I mention money first because probate in Missouri is expensive.  Probate fees can include executor fees, attorney fees, court costs, bond costs and miscellaneous.  Executor and attorney fees are set by statute and are based on a percentage of the estate.  The larger the estate the higher the fees.  Court costs are relatively static but add up and can include filing fees, publication fees and service costs.  Here are rough cost ranges for different size estates:  $150,000 = $5,300 – $10,000; $300,000 = $9,400 – $18,200; $750,000 = $21,100 – $41,400; $1,000,000 = $28,600 – $55,100. In a word, probate is expensive.

Time is another component of the probate process and if you ask most people that have endured the probate process they will tell you it takes a long time.   First, a probate cannot be filed until at least ten days after someone has passed away.  Once a probate is filed, the estate must be left open for at least six (6) months to allow creditors of the decedent to makes claims against the estate. Practically speaking, however, most estates take much longer than six months and 10 days to close and that’s because the process can be extremely complex.  For one thing, the executor has to figure out what the decedent owned.  In some cases, the executor (and the attorney for the estate) will spend several months trying to track down all the assets and liabilities of the deceased.

The probate process is very detailed and often involves a lot of phone calls and lots of small steps that are time consuming.  That is why I mentioned the “sanity” aspect of probate, as in losing your sanity.  The complexity and detailed nature of probate drives people crazy.  Add anxious family members waiting on an inheritance and you can see why avoiding the process all together is the best investment of time and money and peace of mind a person can make.

So how can people avoid probate in Missouri? The best and most effective way is to establish a living trust.  Probate is necessary because when a person dies, the assets are in their name.  The probate process ensures that the assets of the decedent go to the persons named in their will or as decided by state law if they didn’t have a will.  It also ensures that the debts of the decedent are paid, to the extent they can be. But the easiest concept to understand a living trust and how it avoids probate is to imagine a box.  The living trust is the box which you place all of your assets during life so that when you pass away there is nothing owned by you as an individual.  It’s owned by the trust and those trust assets are distributed according to the trust terms.  The debts of the decedent are paid out of trust assets, but not through probate.  Again, since the trust owns everything, there is no need for probate.

Trusts are a bit more expensive to create than wills on the front end.  But as we saw above, the back end costs of a will (in probate) are enormous.  Depending on the needs of the client, a trust is a terrific way to save your estate money, time and sanity.

Estate Planning 101: Difference between an Executor and a Personal Representative

Estate Planning 101: Difference between an Executor and a Personal Representative

An executor  is a person named in a will and appointed by the Probate Court to manage and distribute the estate of a person who has passed away, in accordance with the terms of their will.  If the person named in the will is a male, he is technically called an executor and if they are a female they are referred to as an executrix.  Practically speaking the person named is universally referred to as an executor and the male / female distinction is largely irrelevant.

A few years back, Missouri started using the term personal representative instead of executor.  The name is different, the duties are exactly the same.  Other states often use the term personal representative also.

If a person dies without a will, or the will does not name an executor, or in some cases, the executor cannot serve or has been removed by the Probate Court, a person must be appointed to manage and distribute the estate and they are called an administrator in Missouri.  Again, the duties are the same as that of a personal representative, the difference being that the estate is distributed by a personal representative according to the will and if there is no will with an administrator appointed, then the estate is distributed by the laws of intestacy.