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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.

 

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.

WHAT IS ESTATE PLANNING?

WHAT IS ESTATE PLANNING?

WHAT IS ESTATE PLANNING?

               As an experienced estate planning lawyer St. Charles, I spend much of my time explaining to clients what estate planning is and how it works.  Estate planning is the use of legal documents to not only distribute your assets when you pass away, but to name people to make decisions for you if you become disabled and/or incapacitated.

Overview of Estate Planning Documents

Common estate planning documents include a living trust, last will and testament, medical power of attorney, healthcare directive and financial power of attorney.

A living trust can help you avoid probate and provide rules about when your beneficiaries receive their inheritance.  An example would be creating a provision where your beneficiary only receives their inheritance when they reach a certain age.  That age is up to you and depends on your specific situation.

As one of the top estate planning lawyer St. Charles, you can count on me to also review the purpose of having a last will and testament, which is another document which can distribute property when you pass away.  If you have a living trust, the will usually leaves the property to the trust, not directly to a beneficiary.

Power of attorney documents allow you to name a spouse to make financial and healthcare decisions for you if you become incapacitated.  An example would be naming your adult children to do banking for you if you had dementia.  A medical power of attorney could name the same adult child to work with doctors if the dementia advanced to a point where you were considered mentally incapacitated by a doctor.

Choosing the Right Estate Planning Lawyer

You should feel comfort with the skill level and personality of any lawyer you meet with.  Many attorneys practice in too many areas of law, which reduces their effectiveness in all areas of law that they practice.  Therefore, you should focus on choosing a lawyer that practices almost exclusively in this area.

Making estate planning decisions is intensely personal due to everyone having different family dynamics, levels of wealth and health and concerns about the ability of children to make smart decisions if they inherit your nest egg.  There are many different components to determining how your estate plan is created and it’s important that we discuss all of the aspects that help you identify these components.

An initial meeting to discuss your situation will include who should be in charge of distributing your inheritance, who your beneficiaries are and specifics about their personality and what assets you have.  Our focus is always on identifying client concerns and worries, client goals and educating clients on how the documents we are drafting resolve their concerns and accomplish their goals.  If you’re in need of an estate planning lawyer St. Charles, contact Legacy Law Center today.

 

Keep Your Original Will In A Safe Place…

Keep Your Original Will In A Safe Place…

Keep Your Original Will In A Safe Place…

I recently had a case where the aunt of a client had passed away but we could only find a copy of her will.  With some research, we were able to discover that the original will, drafted in 1985, was kept by the Nevada attorney after it was drafted and signed by the aunt.  That was apparently his office policy and some attorneys do have this policy (my firm does not).  When the Nevada attorney retired a few years ago, he apparently sent the original will to the decedent aunt by mail, with a note explaining he was retiring and to keep the original will in a safe place.

However, the original will was either never received by the aunt, or, more likely, at some point, got thrown out.   In the copy of the will, my client was listed as the alternate beneficiary and alternate executor after her uncle and her mother, who had both predeceased the aunt.  Accordingly, when aunt died my client was to be the executor and to receive everything in the estate.  Luckily, most everything in the estate had been placed into a trust and my client was named the alternate trustee of that trust.

The only asset left out of the trust, and thus part of the probate estate was a pesky bank account, having a value of just under $15,000.

Since the probate court requires an original will and we could not locate it, we had to file an affidavit from the client explaining the circumstances of when and how the original will was lost, what steps were taken to try to locate the original, who else assisted in this process and the circumstances of the Nevada attorney sending the will and it never being found.

We also filed a Petition to Admit a Copy of a Will in St. Charles County Probate Division and had to set the matter for hearing.  It’s a somewhat uncommon issue, so there was a little confusion between the court staff about what needed to be filed.  We ultimately filed everything that was needed and were able to secure a hearing date after a few months.

There was a bit of pressure on both my client and myself.  If the will was not admitted, then the aunt would have been deemed to have died intestate (without a will).  Under Missouri law, my client and each of her many cousins would be entitled to an equal share of the bank account.

At the hearing, my client was put on the stand and had to give testimony related to the lost will, including the facts related to the last few months of her aunt’s life, when she had moved to and lived in St. Charles County.  My client was very close to her aunt and this was upsetting for her having to recite these things in open court, including the care she took of her aunt around the time of her passing.

Happily, based on our filings and my client’s testimony, the court correctly found there was sufficient evidence to admit the copy of the will as the original and the proceeds of the account were, pursuant to the terms of the will, distributed solely to my client.

Now that this matter is behind us, I figured this story would make for a good example of the importance of keeping your original will, and all of your original estate planning documents, in a safe place.

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.