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What Happens To My Joint Trust If I Get Divorced?

What Happens To My Joint Trust If I Get Divorced?

 

 

What Happens To My Joint Trust If I Get A Divorce?

What Happens To My Joint Trust If I Get Divorced?

              Going through a divorce can be an extremely painful, stressful and seemingly unending process.  It affects so many different aspects of your life.  This article discusses just one of the effects, which is your estate planning, including your living trust, will and power of attorney documents.

What happens to my estate plan when I get divorced?

This is a great question and one that a qualified estate planning lawyer Dardenne Prairie can assist you with.  In Missouri, a divorce essentially treats any distributions intended for your ex-spouse as void.  In other words,  you have a will, it says that when you pass everything goes to your ex-spouse, but upon finalization of the divorce, that provision for your now ex-spouse is treated as if they have predeceased you and therefore the distribution would pass to your contingent beneficiaries, which would usually be your children.

What happens if I have assets that will avoid probate, such as a life insurance policy?

The Missouri law treating the ex-spouse as a voided beneficiary only covers assets in probate.  If you had a life insurance policy that left your soon to be ex-spouse as the primary beneficiary, you would need to change that after divorce, because if you pass away, your ex-spouse would inherit.  This happens all the time, unfortunately, and that’s why it’s important to have a game plan to review your estate plan (or establish one) after your divorce is final.

The second thing to note is that any distribution to your ex-spouse upon your passing is only void if the divorce is final.  If you expect your divorce to be extended for a period of time, it’s important to meet with an estate planning attorney to make changes anyway.  Under Missouri law, you can adjust your estate plan to cut out your soon to be ex-spouse.  You can’t completely cut them out (unless you have a prenuptial agreement or postnuptial agreement), but you can ensure that they will not inherit everything, which would be the case if you did nothing and passed before your divorce was finalized.

What happens if I have a trust and am getting divorced?

That depends on the type of joint trust you have.  An irrevocable trust attorney O’Fallon, Missouri  can explain in more detail, but the terms of this type of trust cannot be changed after the trust is created, regardless of divorce.  This type of joint trust, however, is usually created by spouses to benefit their children.

If, on the other hand, you have a revocable joint trust, both spouses can retain control over the assets.  Of course, this assumes you would want to do that.  Most of the time, spouses want to dissolve their trust and distribute assets as agreed in their marital settlement agreement.  From there, you can take the safest step and create a new estate plan with your own trust, a new will and new powers of attorney.  You’d probably want to do that anyway, since your now ex-spouse is usually listed as your principal in your healthcare power of attorney and durable power of attorney documents.

Do you really want your ex-spouse making healthcare calls for you at the end of life?  Me neither.

As you can see, the best practice, at a minimum, when you are going through a divorce is to sit down and review your estate plan with an experienced estate planning attorney.

 

 

Aretha Franklin Didn’t Have An Estate Plan…

Aretha Franklin Didn’t Have An Estate Plan…

ARETHA FRANKLIN DIDN’T HAVE AN ESTATE PLAN

               Legendary singer Aretha Franklin died on August 16, 2018.  She was 76 years old and apparently died without an estate plan.

As an estate plan lawyer O’Fallon, I am surprised that Franklin, worth an estimated $80 million at her death, did not have her affairs in order.  Federal estate taxes will likely be incurred and the IRS will likely audit the estate because of the value.

The estates of celebrities can often result in years long court battles in the state where they died, among family members and non-family members alike.  I previously wrote about this type of mess with the estate of Prince, who passed away in April 2016.   His $200 million estate, over two years later, is still not settled and has been described simply as “a mess”.

https://www.legacylawmissouri.com/update-estate-prince-two-years-later/

Franklin died intestate (without a will) in Michigan, so the laws of that state will control.  She was survived by four sons, all between the ages of 48 and 63.  Under Michigan law, each of her sons should received a ¼ interest in her estate, or about $20 million.  However, these figures are subject to reduction as creditors come out of the woodwork to make claims against her estate.  Whether these claims are legitimate have to be resolved by the probate court and probate attorneys near me.  This can result in attorney fees growing and growing, as well as the basis costs of litigating these claims eating up the value of the estate.

Apparently Franklin had been advised many times by her lawyers to create an estate plan, but never did so.  “She never told me “No, I don’t want to do one.  She understood the need.  It just didn’t seem to be something she got around to” said Don Wilson, a Franklin lawyer for almost three decades.

This lack of follow through with creating a will is not uncommon.  As a will trust lawyer St. Peters, I often meet with people who state that they knew that they needed to get their affairs in order, but can’t explain what took so long.

My opinion has always been that because it’s not pleasant to think about, many people put off getting an estate plan together as long as possible.  Others are the exact opposite.  I’ve found that younger people, particularly new parents are very proactive about creating powers of attorney, naming guardians in their wills, a trust for young children and other documents to protect their family.

The other phenomenon I see though is that people learn from the mistakes of their own family.  The loss of a parent or a sibling and the mess that ensued with their estate can be a huge influence in someone getting their affairs together to avoid the same headache for their children.

 

Help! My Trustee Is A Fraud!

Help! My Trustee Is A Fraud!

 

HELP!  MY TRUSTEE IS A FRAUD! 

               Trustee’s should be trusted, but are not always trustworthy.  In fact, it’s unfortunately not uncommon for a chosen trustee of a trust to be acting fraudulently or in a manner which is not in line with their powers and duties as trustee.  As an inheritance attorney St. Peters, I often get frantic calls from beneficiaries in this situation.

If I believe there is malfeasance by a Missouri trustee, I will either file litigation or send a demand letter seeking information related to the trust.

I’m A Trust Beneficiary, What Rights Do I Have?

Remember, if you are a beneficiary, you are entitled first and foremost to a copy of the trust.

Second, you are entitled as a beneficiary to an accounting or reporting of trust activities from the trustee.  How often depends on the terms of the trust, but this is a common area where trustees engage in improper behavior:  they don’t keep beneficiaries informed of what’s going on with the trust assets.

I’m often surprised at how long clients will endure the lack of information from a trustee.  In some cases in can be months, but it’s just as often years.  Years of excuses or non-responses from a trustee.

In these cases, you must take action.  You must hire an experienced inheritance attorney, St. Peters, Missouri to decide the best course of action.  In some cases, it’s best just to file litigation right away, assuming there is a colorable claim of malfeasance by the trustee.  Examples would be not responding to communications from a beneficiary, not providing the accounting, or misappropriation of trust funds or some combination or all of these things.

If your trustee is supposed to be sending you money every month and suddenly is jetsetting around the world, there’s almost definitely something wrong.

Okay, I’ve Got A Lawyer, What’s Next?

If there’s misconduct by the trustee, the course of action is usually to file litigation, often in an expedited procedure called an injunction hearing.  The idea with an injunction hearing is you have enough information of bad conduct that your attorney can show a likelihood of success in the pending lawsuit, but you need immediate action to stop any bad conduct.  From there, the court can demand that the trustee account within a certain amount of time, temporarily remove the trustee and appoint someone else or take other action.  The point here is that you have to show an emergent situation.

Ultimately, the goal would be to permanently remove a bad acting trustee, obtain a damage award for misconduct, save assets from being wasted and track down where trust funds went.

Can I Get My Attorney’s Fees Paid For?

This is a common question from beneficiaries in this situation and I’m completely sympathetic to it.

The answer is it depends.

The court has discretion to award fees, and often will if the beneficiary is successful.  Now, the problem from where do those funds get paid back?  Well, bad acting trustees usually don’t take money from a trust because they want to invest it in gold.  They usually have blown through at least part of the money and getting money back after a judgment is obtained is a completely new ball of wax.

Conclusion

In lieu of that, or often in addition, the beneficiary can usually be paid for out of the trust proceeds, if there are adequate funds left.  This would almost certainly be the case where there are other beneficiaries who have benefitted from the litigation.  In that case, the judge might apportion the fees to be paid on a pro rata basis among the beneficiaries, most likely from their portion of the trust.

A final piece of advice:  It’s 2018.  Most attorneys practice in a couple of practice areas.  Some still practice in many.  This situation, however, requires a specialist in probate litigation.  Knowledge of the judges, special procedures in particular probate divisions in different counties and the law, most importantly, is really an advantage.  A divorce lawyer who just happens to be a nice guy and your friend shouldn’t be your counsel in this type of case.  Hire someone with experience and make sure that they can back up their experience when you meet with them.

 

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.