03/20/2020
Yesterday I wrote an article about the legal planning process for sickness or disability. I promised a second article about legal planning for the possible death of someone in the family. It’s hard to think about losing a family member. Like you, it’s not something I like to think about or talk about. Taking control and having a plan in place can be therapeutic though, and I generally find that clients feel better about themselves and their families once they put a plan in place. Following are some tidbits of knowledge that I generally share with my estate planning clients when we meet to talk about an estate plan
1. Do I need a will?
This is the #1 most common question that I get asked. The answer is “Maybe. If you do it’s probably not for the reason you think.” Most people want to make sure there is a plan in place that takes care of their property and assets so that it’s available to provide for their family and loved ones. A will is a very inefficient and expensive way to accomplish this.
A will, by itself, doesn’t transfer ownership of your property. Instead, a will is essentially a set of instructions to the probate court. For a will to be used, it has to be submitted to the county court in a probate proceeding. 99% of the time you want to avoid probate. Probate is a long, drawn out, expensive, public proceeding that takes about a year to transfer what you own to your children or other loved ones. We almost always want to avoid it. As a result, we usually try to plan for the transfer of assets on your death without ever using the will.
So why would I write a will? There are three main reasons to write a will. They may or may not apply to you. First, for parents with minor children in Missouri, the will is the document where we nominate who is to become the guardian of our minor children if we pass away. If you have children under the age of 18, and you want to choose who will be the guardian to take care of your children, then it’s necessary to write a will. The second reason for a will is as a backup document to have in place as a safety measure. The third reason is to allow you to attach a list of “tangible personal property.” This is described in more detail towards the end of this article.
2. How do I plan without using a will?
If you’re fortunate enough to live in Missouri, you live in just one of the handful of states that have enacted the full provisions of the Uniform Transfer on Death Act. This act allows anyone in the state to take simple steps to set up a transfer of your assets to your children or other loved ones without the use of a will or going through probate. And remember, we want to avoid probate if at all possible. So what do we do?
Generally, we’re primarily concerned about things you own with official legal titles. These generally fall into three different categories:
A. Vehicles – vehicles have a title who lists who the legal owner is. In Missouri, you can go to the license bureau and have a “Transfer on Death” (TOD) added to your car title. Your TOD beneficiary will automatically own your vehicle on your death without probate. I generally recommend you add a TOD to a vehicle title at the time your license plates expire. The state will want a new safety inspection and license fee, so it makes sense to add a TOD when you’re already paying for this when your plates expire. You don’t have to wait and can do this any time, but you will still need a new inspection to get a new title with the TOD on it.
B. Financial Accounts – Everyone has a checking or savings account. This account has an owner listed with your bank. To make sure this account goes to the kids (or whomever you want it to go to) without probate, you simply add a “Pay on Death” (POD) to the account. The bank will want to collect the information on your POD beneficiary, and usually collects their names, birth dates, and social security numbers. Then they have you sign a form to add them as POD beneficiaries. It’s a simple process, but maybe a little more complicated in March of 2020 with most local banks closing their lobbies and only using drive-through services. My recommendation is to call your bank and explain that you want to add a POD to your account. They may schedule a special appointment where you can go into the bank, or they may prepare the documents ahead of time and have you sign them at the drive through.
C. Real Estate – Setting up your home or other real estate to transfer to your children is also fairly easy, but it is an area where you might need help from an attorney. We do this by signing and recording a “Beneficiary Deed” with the county recorder. The beneficiary deed basically says that if you still own the piece of property when you pass away, it automatically transfers to the people you list in the deed without going through probate. You may need the help of a lawyer to prepare the beneficiary deed. Other attorneys will have their own prices, but I charge $100 to prepare a beneficiary deed, with the recording fee included in that cost (usually $27 or $30 depending on the number of pages).
What about stuff without legal titles? We refer to this other “stuff” as “Tangible Personal Property” (TPP). This includes the microwave in the kitchen, great-grandma’s wedding ring, the teacup collection in the hall cabinet, guns, tools, and all the other stuff in the house and garage. If you want certain items of TPP to go to certain individuals, Missouri law allows you to just make a list of those items showing who it goes to, and then sign and date the list. However, and this is a key point, it MUST be attached or kept with your will or trust to be legally enforceable. This is the third reason for having a will. If you care about certain items of tangible personal property and who receives them, you need a valid will to attach your list to.
A final point to this very long post – there are other ways to handle estate planning, most notably using trust planning. A living trust is a more complex approach to estate planning that provides wealth management, asset protection, sickness/disability planning, and more control over distributions to your children. A discussion is well beyond the scope of this article. I normally budget an hour and a half to two hours to meet and discuss trust planning. A trust, however, is the most flexible and strongest way to approach estate planning.
If you’ve made it this far, stay safe out there. I wish the best for you and your family. And because the State Bar of Missouri will consider this an “advertisement,” I have to add the following legal disclaimer: “The choice of a lawyer is an important decision and should not be based solely upon advertisements.”
