Planning your estate is a critical task, and unfortunately, one that is easy to put off. However, knowing that you’ve taken care of your loved ones by planning your estate effectively can provide so much comfort, and help you sleep at night. Proper estate planning involves the distribution of your entire life’s assets to your desired beneficiaries, which can provide financial security and continuity for your loved ones when you are no longer around.
Last Will and Testament
A ‘Last Will and Testament,’ often referred to simply as one’s ‘Will,’ is a legal document articulating an individual’s wishes regarding the distribution of their assets after death. It’s a vital component of estate planning, protecting the rights of the heirs and ensuring that assets are allocated according to the deceased’s wishes.
Wills come in all shapes and sizes, and can have unique features tailored to many different circumstances and types of estates. Just a few variations might include:
- Simple Will: The most basic functions of a Will are to name your beneficiaries, and name your “Personal Representative” who you wish to be in charge of your estate. If there are no other complicated provisions, such a Will would be a “Simple Will”.
- Will Nominating a Guardian and Conservator for your Minor Children: Additionally, if you have minor children, you can use your will to nominate a guardian and conservator for your minor children in the event of your death.
- Will with a Testamentary Trust: A testamentary trust establishes one or more trusts at or after your death. Adding a testamentary trust to your Last Will and Testament offers more control over the distribution of assets by allowing for the holding of assets for a beneficiary even after they become an adult at age eighteen (18).
- Joint Wills: Joint Wills are very rarely seen or used in Missouri. Theoretically, a Joint Will may be used by a married couple in order to dispose of jointly owned marital property upon the death of the surviving spouse. However, for numerous reasons, Joint Wills are rarely utilized in Missouri.
- Mirror Wills: Instead of a “Joint Will”, it is much more commonplace for spouses to each make their own respective Will, containing almost identical provisions, thus both of the Wills are said to “Mirror” each other. This is a common type of Will for a married person.
- Pour-Over Will: When creating a Revocable Living Trust, it is commonplace to also execute a “Pour Over Will” that essentially states that any property that is still titled in your name after you die, will be given to the Trustee of your Revocable Living Trust. This type of Will is essentially a safety net, or “Plan B”, in the event that any of your assets don’t get placed into your revocable trust as intended.
There are many other types of Wills, and special provisions or clauses that can be contained in a Last Will and Testament. Understanding the differences between various types of Wills can help individuals understand the options available to them, and make better decisions when planning their estates – thus ensuring that all assets are handled as desired after one’s death.
Role of a Will in Asset Distribution
Wills can be pivotal in determining how an individual’s assets are distributed after death. A Will can provide a legal platform to clearly articulate the deceased’s wishes, ensuring a fair and organized distribution of assets among named beneficiaries, administered by persons chosen by the Will maker.
A Will can distribute virtually any type of asset or type of property, including without limitation:
- Real Estate: This includes homes, rental properties, and vacant land. Real estate can be left to any named beneficiary, and specific sections of real estate (like a family home) can also be endowed separately.
- Personal Property: Tangible items like vehicles, furniture, artwork, jewelry, collectibles, and household items may be gifted by Will.
- Liquid Assets: Bank, savings, and checking accounts; stocks, bonds, and mutual funds; or any other type of financial accounts.
- Business Interests: If the deceased owned or had a stake in a business, the Will can determine who obtains control or ownership of the company upon death.
- Intellectual Property: This includes copyrights, patents, trademarks, and other types of intellectual property. These rights can be transferred upon death.
- Digital Property and Rights: Social Media profiles, online accounts including logins and passwords, digital accounts, photos, cryptocurrency, and other digital files.
These are just a few examples of the many assets that can be included in a Will. The objective is to ensure that one’s belongings are distributed in alignment with one’s wishes, providing peace of mind to both the Testator (the Will maker), beneficiaries, and other family members and loved ones.
Assets Not Governed by Wills
While Wills govern the distribution of many assets, it’s important to note that not all of an individual’s wealth will necessarily be dictated by a Last Will and Testament. A Will does not avoid Probate Court, and in fact, is only given effect in the setting of a Probate Court. Many people want to avoid Probate Court altogether, and successfully do so. Therefore, certain categories of assets do not pass under a Will, do not go through Probate, and are instead governed by other legal mechanisms.
Below are some examples of assets that often do not go through probate or under one’s Will:
- Retirement Accounts: These include IRAs, 401(k)s, and other retirement savings plans. Upon establishing these accounts, individuals usually name beneficiaries who will directly inherit the funds upon the account holder’s death, irrespective of instructions in a will. However, if one does not name a beneficiary on the account, a Will could distribute this type of account.
- Life Insurance Policies: Similar to retirement accounts, life insurance policies usually name a beneficiary, and are payable upon death to a beneficiary pre-designated by the policyholder, bypassing the will entirely. However, if one does not name a beneficiary on the policy, life insurance proceeds could end up in Probate and be distributed under the terms of a Will.
- Joint Tenancy Properties: In certain joint tenancy situations, property ownership automatically stays to the surviving co-owners upon an owner’s death, regardless of any contrary instructions in a will.
- Accounts with Named Beneficiaries. Any account that has a named beneficiary, transfer on death designee, or payable on death designee, will generally pass to the named beneficiary upon the death of the account owner, and will not be subject to Probate or the terms of a Will.
- Vehicles with Transfer on Death Designations. If you name a beneficiary on your vehicle by placing a Transfer on Death Designation on the Title, this should make the vehicle avoid probate upon your death.
After an individual’s passing, these ‘non-probate’ assets automatically pass to the named beneficiaries or stay with the surviving co-owners, bypassing the probate process altogether. For instance, the proceeds from a life insurance policy will be directly paid to the named beneficiary soon after the company is notified of the policyholder’s death.
In the case of retirement accounts, the funds are typically accessible to named beneficiaries once death certificates are produced. For jointly owned properties, the surviving co-owner(s) automatically assumes full ownership rights, often requiring only a simple legal formality to update property records.
It is crucial, therefore, that individuals are aware of these nuances while planning their estates. While wills are powerful tools, they do not govern all assets, underscoring the need for comprehensive estate planning.
The Probate Process
Probate Court becomes necessary when a person passes away while still owning certain assets titled into their name only, with no beneficiary designation having been established on that asset. If there is a Will, then the Will states who the beneficiaries of the probate estate are, and also nominates a Personal Representative to be in charge of administering the estate. If there is no Will, state law will determine the heirs of the probate assets, and it is unknown who will be in charge, with only certain people being allowed to apply.
In Missouri, the probate process can include providing or validating the Will, appointing a Personal Representative, inventorying the assets, notifying or negotiating with creditors, paying valid claims and taxes, and finally disbursing the remaining assets to rightful heirs, among many other things.
Trusts and Other Estate Planning Tools
Trusts, like wills, are commonly used legal instruments in the estate planning process. A trust is simply a legal arrangement in which the trust creator (the grantor) appoints a specific person (a Trustee) to hold certain assets for the benefit of another person (a beneficiary), under certain terms and conditions.
However, trusts differ from wills in several important ways. Wills become effective only after the individual’s death, whereas trusts can be effective immediately or upon death, depending on the type of trust. Certain trusts also have the added benefit of avoiding probate, which can save time, frustration, and court fees.
Some of the benefits of using a trust as part of your estate plan are:
- Privacy: Unlike wills, trusts are not public documents and can maintain the privacy of the grantor and beneficiary.
- Control: Trusts provide enhanced control over asset distribution, including when and under what conditions beneficiaries receive assets, without Court involvement.
- Avoiding Probate: As mentioned earlier, assets held in a trust bypass the probate process, which can be lengthy and expensive.
- Potential Tax Benefits: Depending on the type of trust, it may provide tax benefits or help preserve your estate for your heirs.
In addition to Wills and Trusts, other estate planning tools are often utilized:
- Power of Attorney: These documents allow an individual to appoint another persons to manage their financial or health care matters, often in the event they can no longer do so due to incapacity.
- Health Care Directive: Address end of life treatment decisions.
- Beneficiary Designations: Most assets, including bank or financial accounts, vehicles, life insurance policies, or retirement accounts allow beneficiary designations. The assets are passed directly to the beneficiaries upon the owner’s death, bypassing probate.
These tools are often part of a comprehensive estate plan that ensures your wishes are fulfilled and your loved ones are taken care of.
The Importance of Legal Guidance in Estate Planning
Proper estate planning can be a complex process involving delicate financial matters and intricate legal considerations. Hence, consulting a seasoned lawyer is crucial to ensure legality and make informed decisions that best serve your unique needs and circumstances.
At Affordable Legal Services, we understand that each individual’s estate planning needs are unique. Therefore, we offer personalized services catering to your needs, whether drafting a simple will, establishing a complex trust, or anything in between.
Our dedicated team can guide you through the entire process, ensuring your assets are protected and distributed as you wish. In the event you do not engage counsel to assist you with such concerns, and probate is required, we can also assist your loved ones navigate such processes.
Planning Your Estate Provides Peace of Mind
Planning your estate is more than preparing a will or trust – it’s about crafting a comprehensive strategy that ensures your assets are distributed according to your wishes, with consideration given to various rules governing different types of assets and situations. While Wills play a crucial role in this process, not all assets are controlled by your Will. Understanding the role of trusts, powers of attorney, and beneficiary designations is also important.
Due to the many complexities and nuances involved in estate planning, you are highly recommended to seek professional legal advice. In Missouri, Affordable Legal Services offers expert guidance to ensure a smooth and effective estate distribution, securing peace of mind for your family’s future. We offer many estate planning services or packages at a reasonable flat rate. Contact us anytime to inquire.
Estate planning might sound overwhelming, but every step taken today can save your loved ones significant stress and uncertainty in the future. Remember, it’s not just about distributing your assets—it’s about leaving a well-managed legacy.