It’s never too early to start your estate planning, and there’s never a better time to start than now. An estate plan is the blueprint for where you want your property to go after you die. An estate plan is also the instructions for the person you choose to manage your affairs if you die or become disabled.
Most of us would rather not think of the implications of an estate plan, but preparing for incapacity or death is an obligation that you have to your family. Arranging your affairs beforehand can ease the strain on your grieving family, minimize expenses and delay, and help reduce the tax burden on your estate. If you’re a business owner, you can arrange whether your business will be sold or stay in the family—and if so, who will run it. A good estate plan can save your heirs money by reducing probate costs, minimizing executor fees, and cutting down on legal fees.
Costs of Not Planning
Chances are you have read or been told by someone that you should ‘avoid probate at all costs.’ This is especially true if you have a relatively sizable estate, which includes at least one house and some savings and/or investments in a portfolio.
There are many factors that go into the probate cost process. At first, an executor has to marshal the deceased’s assets and debts. If an estate is large and complicated, that can take some time, particularly if the deceased was not organized and had substantial holdings. The services of an accountant or attorney may be required, adding to time and expense. Then there is a period of mourning as the deceased is buried or cremated with attendant memorial services. After that, special pleadings have to be filed with the Probate Court in order to open up the probate procedure. That will usually require the services of an attorney, which will involve a retainer agreement. Then there is the court filing fees to open up a probate. In Missouri the filing fee varies from county to county.
Usually, there is an initial court hearing to appoint the administrator of the estate. If complications arise, then there can be multiple court hearings over many months. That will involve considerable attorney time.
Among the complications that a Probate might face which will add to costs are:
Ambiguities in the will
Difficulty locating assets
Lawsuits against the estate
Difficulty finding beneficiaries
Complicated tax issues
A challenge to the will of some kind or a challenge to the choice and/or behavior of an executor.
Other cost factors can include bond, accounting fees, appraisal costs, personal representative fees, and other court costs.
Taken in its entirety, the cost of a probate can be considerable. If there is a will dispute that is not quickly settled, lengthy litigation costs will start to soar.
Further, there is another type of ‘cost.’ When a person does not have a will, their estate will go by ‘intestate succession’, or the inheritance rules of the Missouri Probate Code. That could mean, for example, that long since out-of-touch and estranged relatives may inherit a deceased’s estate. That may not be the intent of the deceased. That kind of cost is hard to calculate.
It is usually a wise idea to consult with an experienced estate-planning attorney to discuss probate and go into detail as to all the factors that make up probate costs as one is contemplating the future planning of their estate.
Estate Planning Techniques
Death is the only sure thing in life. Yet death is often the least planned for event. Everyone should formally prepare their estates for their death using one or a combination of various estate planning tools, from the basic standard will and testament to the complexity of a trust tailored to unique circumstances.
Planning what happens to your assets and your estate when you die is complicated. There is a lot of information and misinformation on the Internet regarding probate. It is wise to consult an experienced estate-planning attorney to discuss all of the above concepts and other issues related to your particular situation. Each estate is different and may require professional individual attention. There is no ‘one size fits all’ approach.
Consider having a Living Trust made. One can put real property and an asset into a living trust when they are alive and direct what happens to that property after they die. You have to transfer ownership or ‘title’ of assets into the name of the trust so your trust is properly ‘funded.’ When you die, your trustee will distribute your assets according to your written instructions in the trust without court procedure or court costs. A trust is also a private document and is not public record.
Joint Tenancy/Joint Ownership:
Persons can choose to hold title to real property or assets in ‘joint tenancy.’ Joint tenancy means that two persons can own something and when one dies, the other joint owner will then own the asset 100% outright as a matter of law with no court procedure necessary. Other assets such as bank accounts, vehicles or other valuable property can also be owned in joint tenancy.
In Missouri you can ask your bank to designate another person to receive a bank account or certificate of deposit after you die. This is commonly referred to as a ‘Payable on Death’ designation. Stocks and bonds and other securities can also be designated ‘Transfer on Death’ with a TOD classification. In Missouri, there is also a TOD form available from the Department of Motor Vehicles for your car if you die. Another person can automatically inherit the vehicle.
If a person has a financial asset or other monetary instruments with a named beneficiary, for example a life insurance policy or a IRA or 401K, those assets will pass outside of probate or court procedure to the named beneficiary after death.
Sometimes people think that they can put all their assets in joint tenancy or create TOD and POD designations for all their financial accounts to avoid formal estate planning and/or probate. This is a strategy, however, that should be discussed at length with an experienced estate-planning attorney. Depending on your situation, it may not be strategically wise for you to have a joint tenant arrangement with certain property or assets.
Further, sometimes a ‘non-probate asset’ can come back into one’s estate. For example, if you have a beneficiary designation on a life insurance policy and the beneficiary predeceases you and you fail to designate an alternative beneficiary, those assets might come back into your estate. If there are no other estate documents, a probate may then be necessary to allocate that asset. Designating an alternate beneficiary may be prudent.