WHAT IS ESTATE PLANNING?

By James ("Jay") Zych and Christine M. Zych on July 10, 2017

Estate planning.The good news is that everyone in Missouri has an estate plan.  The bad news is that, unless you have prepared it yourself, your estate plan was drafted by the Missouri legislature, in the form of the various statutes that address the disposition of your property in the event you leave no will, and in the guardianship statutes that appoint persons to manage your affairs if you become incapacitated.  Because these statutes are “one size fits all,” they can never adequately substitute for a full estate plan prepared in consultation with an attorney.

Of course, this begs the question:  What is an “estate plan?”  What are the most common documents involved in estate planning?

At the most fundamental level, an estate plan is nothing more than a written set of instructions to be followed in the event of your death or disability. These instructions override the default instructions provided in the Missouri statutes, and substitute your wishes for the structure enacted by the legislature.

A complete estate plan deals with your assets and your person.  With respect to your assets, your plan directs the disposition of all assets that you own in your own name upon your death.  With respect to your person, your estate plan names people you trust to manage your affairs, and provides those people with the legal power to make medical and financial decisions in the event that you are incapacitated.

Again, if you don’t put your own plan in place, the Missouri statutes will control.  This happens in the Probate Court, which in Missouri is a division of each county’s civil Circuit Court.  The Probate Court formally transfers your property to the appropriate persons, who are either named in your will or, if there is no will, are set out in the intestate succession statutes.  In addition, the Probate Court names guardians of your person to make decisions for you, and conservators of your estate, to manage your assets, in the event that you are incapacitated.

As you would expect, proceedings in Probate Court take time and are expensive.  Thus, one important function of an estate plan is to avoid the involvement of the Probate Court to the extent possible.

Planning for Death

The two most common documents involved in planning for your death are wills and trusts.

A will is a document that provides instructions to the Probate Court on how your assets are to be transferred upon your death, and names the individuals you wish to become Guardians for any minor children who survive you.  Without a Will (or Living Trust, as discussed below), assets that you hold in your name alone upon your death will be transferred according to the statutes of Missouri, rather than according to your wishes. If you have a will, and you pass away with assets in your own individual name, the Probate Court will distribute your assets as set forth in your will.  Thus, while a will ensures that you decide your beneficiaries and the distribution of your assets, will-based planning does not eliminate a timely and expensive probate process.

A living trust is an entity that acts as a will substitute, giving you the ability to own your assets during life and transfer such assets upon your death in a way that avoids the need for a probate administration.  A trust is an agreement between you - the “grantor”  - and another person - the trustee - whereby the trustee agrees to manage all of the assets of the trust.  During your lifetime, you act as both grantor, creating the trust, and as trustee, managing the trust, and you transfer your assets into the trust.  The trust instrument also names successor trustees to take over for you in the event of your death or disability.  Thus, upon your death or disability, there is no need for the involvement of the Probate Court, because all of your assets are owned by the trust, and the trust itself names a successor trustee to take over and manage the trust.  In addition, while the trust holds the assets for your benefit during your lifetime, you can name your own beneficiaries to receive the assets upon your death.

Planning for Disability

While wills and trusts are designed to address the disposition of your assets upon your death, powers of attorney are designed to manage your affairs in the event of your disability.
 
A Durable Power of Attorney for Financial Matters is a document that allows you to name agents to make financial decisions for you in the event you are unable to make such decisions for yourself.  This avoids the need for the Probate Court to appoint such an agent.

In your Medical Directive and Durable Power of Attorney for Health Care Decisions, you establish your intent as to life support and name agents to make medical decisions for you in the event you are unable to make such decisions for yourself. This avoids the need for the Probate Court to appoint such an agent.
 
In your HIPAA Privacy Authorization Forms, you authorize your health care providers to make your medical information available to trusted individuals named by you.

Non-Probate Transfers

Missouri, like most states, permits certain “non-probate transfers” of your assets.  These are typically contractual agreements between you and the institutions that hold your assets, whereby you direct the institution to transfer your assets to specific beneficiaries upon your death.  As long as these transfers follow the procedures set forth in the Missouri statutes, the transfer of assets will be recognized as legally binding upon your death without the need to involve the Probate Court.
The most common types of non-probate transfers are “transfer on death” (“TOD”) or “pay on death” (“POD”) transfers.  These can typically be used to add beneficiaries to bank accounts, brokerage accounts, and vehicles.  In addition, Missouri recognizes a “beneficiary deed,” that once recorded, will act as a non-probate transfer for real property.

It is important to note that non-probate transfers will supersede dispositions of assets owned in a will or a trust.  Thus, if your only asset is a bank account, and your will provides that your assets are to be distributed to your parents, but your bank account has a “pay on death” designation naming your son, your son will be the owner of the account.  Therefore, it is important to review the titling of your assets when preparing your estate plan, so that your beneficiary designations match the distributions made in your will or trust.

Next Steps

Once you've put these documents in place, you've addressed the basic planning requirements for your death and disability.  This is a good time to go through your assets and look at how they are titled, in order to make sure that your plan will work as intended.  It's also a good time to think about the non-legal aspects of legacy planning.  This would include drafting memorial instructions that let your loved ones know how you would like to be remembered; completing organ donation forms; and making sure that your loved ones know where you keep all of your important documents.

Putting in place an estate plan that reflects your goals may seem daunting, but keep in mind that a well crafted estate plan is the ultimate gift for your loved ones.  A small amount of work by you now can save a great deal of time and money for your survivors later.


About the Authors:

James ("Jay") & Christine Zych are both attorneys and together own Dovetail Estate Planning, P.C., the law firm they founded in 2013.  They focus their practice on assisting clients with their estate planning, probate, trust and estate administration needs, with a mission to bring clients from chaos to clarity in a caring, cost effective and efficient manner.