Oct

29

Do It Yourself Estate Planning

Posted in Estate Planning Wills & Trusts | October 29, 2009 | 3 Comments

Do It Yourself Estate Planning

By Greg Jones
You are bound to have seen a number of companies with software and self-help online products allowing you to create your own Will. First, let us thank these companies for highlighting that nearly every adult should have a Will — and, possibly, other estate planning documents. We agree! We also admit that the initial cost of using a “do-it-yourself” piece of software or an online service is less than the initial cost of utilizing the services of a licensed attorney — though usually not as much as they might lead you to believe. With a background in economics, I understand that attorneys better add value to the process to justify the price difference. I believe we do this in a number of ways:

1)   We are here in your community. Discussion with one of us, someone who will come to know and care about you and your family, is only a phone call (or short drive) away.

2)   We have a full understanding of the terminology used in Wills, Trusts and Powers of Attorney, and we can explain the implications of including and excluding certain provisions. After learning more about your family and your goals, we advise you on what we believe are the right choices for your family. The do-it-yourself software and services are very clear in their disclaimers that they are “not a substitute for an attorney,” and that they are further “prohibited from providing any kind of advice, explanation, opinion, or recommendation to a consumer about possible legal rights, remedies, defenses, options, selection of forms or strategies.” (Click here for an example of where competent legal advice could have made a huge difference.)

3)   While no family is the same, we have likely dealt with family situations similar to yours. Provisions that sound good while you are creating your own documents might have serious complications down the road—including family conflict, accidental disinheritance of a loved one, taxes unnecessarily being incurred, and friends & relatives contesting the validity of your Will. Often times we can suggest alternative ways to help you accomplish your estate planning goals, yet avoid the potentially negative consequences.

4)   We drive the process to completion. Many people buy estate planning software or intend to complete the online Wills, but get intimidated by the process or put it off until “tomorrow,” and it never gets done. And, in those situations where the completion of your estate plan is an urgent matter due to an upcoming trip or surgery, we can often hold the meeting to sign your documents within a few days of our initial meeting.

5)   When/if something happens to you, we will already know your estate plan and be able to help your surviving spouse or other loved ones in carrying out the plan.

6)   We are constantly monitoring the changes in the law that could impact your estate planning, and we are available to answer any questions that you have as those laws or your personal/financial situation changes.

7)   We are with you at the time you sign the documents to ensure that all requisite formalities are followed. These vary from state to state.

8)   We are accountable. As the do-it-yourself services state, you are on your own when you use them. If you make an error in creating your documents that results in an unintended consequence, you and/or your loved ones will have no recourse against them—or anyone.

At Jones & Watkins, we offer an initial one hour consultation at no cost to discuss and assess your situation and advise you on your options. At the end of that session, we will quote you a flat fee to draft and implement an estate plan that is appropriate for you. We believe that the value we add to the process is well worth it.

Call us at 573.234.1130 or use our Contact Form to make an appointment or get our complimentary informational packet.

Aug

20

Informal Estate Planning

Posted in Estate Planning Wills & Trusts | August 20, 2009 | 10 Comments

Informal Estate Planning

With few exceptions, almost everyone we meet with to discuss estate planning has one overriding goal if they should pass away unexpectedly – to make sure their children will be cared for. Oftentimes, we hear how people have taken their own “informal” measures to accomplish this goal. Unfortunately, such informal” measures can have unwanted and unexpected consequences.

One example is when a parent with young children names a sibling or other relative as the beneficiary of a life insurance policy, with the expectation that he or she will use the money to take care of the children. The reason for doing this is valid – children are not able to manage their own finances, particularly the large sums of money that are usually paid out under life insurance policies. However, although the intent is good, there are all kinds of reasons not to do this type of planning. Here are just a few examples:

1. There is no assurance that the life insurance beneficiary (the relative) will use the money for the child’s benefit in the manner that the parents envisioned. In fact, there is nothing to prevent the sibling from keeping the money all for himself or herself – he or she has no legal obligation to spend it on the child. If the relative wants to go blow it all at the gambling boat, there’s nothing to stop him.

2. The funds are subject to the debts and liabilities of the relative. If he or she has significant debts or gets sued for some reason, then the life insurance money could all be lost.

3. Since the funds are legally the property of the relative, the income that is generated from the funds (assuming they are invested) is taxable income to the relative, and could potentially push the relative into a higher tax bracket.

4. Even if the relative fully intends to spend the money on the children, he/she would have complete discretion as to how and when the money is spent, and this may not be what the parents would want. What’s to prevent the relative from buying the child a Ferrari when he turns 16, rather than spending it on college?

5. What if the relative has his own children? He may think it unfair that he be expected to spend the money on your children, but not his children. And of course, there’s nothing to stop him from spending it on his own family.

6. What if the relative gets a divorce? The insurance funds might be deemed marital property and end up in the hands of the ex-husband or ex-wife.

What’s A Better Solution?

As you can see, this kind of “informal” planning can lead to all kinds of unintended problems. Fortunately, there is a fairly simple way to accomplish your goal of making sure that the insurance funds are held for your kids benefit without all of the problems listed above – CREATE A TRUST AND MAKE IT THE BENEFICIARY OF YOUR LIFE INSURANCE.

You can create a trust for the benefit of your kids, which contains specific instructions as to how the trust funds will be managed and spent. You have practically unlimited say in how you want the money spent. Upon your death, your life insurance proceeds will be paid to the trust, and the trustee (whomever you designate to manage the trust) will have a fiduciary duty to the beneficiaries (your children) and will be legally obligated to follow the terms of the trust. Furthermore, if properly drafted, then as long as those funds are held in the trust, they will be protected from your children’s creditors.

Apr

15

Charitable Giving

Posted in Wills & Trusts | April 15, 2009 | 13 Comments

Incorporating Charitable Giving into Your Estate Plan

By Greg Jones

About 70-80% of people give to charitable causes during their lifetime; however, only 7-8% include a provision for charity in their estate plans. Why is this? Frankly, I don’t believe the idea of supporting charity is often prompted by the attorney during the estate planning process. Lawyers generally have the goal of helping their client pass “as much as possible” to the next generation, and while there are tax incentives associated with making gifts to qualifying charities, you are almost never better off financially after making a gift to charity – the bite against your assets has just been lessened.

Many clients do want to maximize the amount given to children and grandchildren, but if you have supported a charitable cause during your life, don’t hesitate to tell your estate planning attorney that you want to provide for it in the event of your death, as well.

One simple way to give. For those who do want to make an estate gift to a charity, they often initially request just putting a flat dollar figure in their Last Will and Testament. STOP! There may be a better way. First, if you ever want to change this gift, you will have to go through the legal formalities & expense of creating and executing a codicil (or amendment) to your Will. This will require drafting the codicil, lining up witnesses and a notary, and signing the codicil in the same manner prescribed by Missouri law for signing a Will. The second reason to consider an alternative to making a charitable bequest in your Will is that there may a more tax-efficient way to do so.

Retirement assets are some of the most heavily-taxed assets when they are passed to the next generation. Consider, instead, naming your favored tax-exempt charity as the beneficiary of part or all of your retirement assets. Since these organizations will not pay taxes on the receipt of assets, they get the full value of your gift. In addition, if you have a change of heart about the charity, or if you wish to leave more or less to it, it is usually much easier to simply change the beneficiary designation on these retirement assets than it is to amend your Will.

If you would like a complimentary consultation on making charitable gifts in your estate planning – or on your estate planning, in general – please call one of the attorneys at Jones & Watkins at (573) 234-1130 or email us through our Contact Form.

Apr

13

Pet Trusts

Posted in Wills & Trusts | April 13, 2009 | 2 Comments

PET TRUSTS

By Greg Jones

Research abounds about the positive health benefits that are afforded by pet ownership—not just to the owner, but also to the animal. In particular, the Research Center for Human-Animal Interaction at the University of Missouri is doing amazing work in this area.

Some of the individuals who benefit the most from human-animal interaction are seniors. However, many of the seniors that I have encountered are reluctant to get pets. They fear that they will outlive their beloved companion and that nobody will be there to adopt the animal and care for it in the manner to which they believe the pet deserves. Sadly, those fears are well-founded. In fact, it is estimated that approximately 500,000 pets per year are euthanized when their owners predecease them. There is a legal solution to this, however.

In 2004, Missouri became one of nearly 40 states which specifically authorizes the creation of a trust for the care of an animal, see Mo. Rev. Stat. §456.4-408. While it was always possible to create a trust to accomplish this, this statute provides a simplified answer to what is a very important concern for many people. Of benefit, as well, it has generated greater awareness of pet trusts among the animal-owning public and the legal profession.

As one considers the creation of a pet trust or the inclusion of a bequest in their Will to someone who has agreed to adopt their animal(s), there are a number of questions which should be addressed. These questions include:

Who will care for the pet? What if something happens to this person?
Should the caregiver be paid to provide such care?
Should a separate individual or company be named to manage the pet’s “trust fund”?
What is the appropriate standard of care for the animal?
How large should the gift or trust fund be to ensure the animal’s proper care? (While dogs live 10 to 15 years, parrots can live to be 100!)
How will trust funds be distributed to the caregiver? Monthly stipend? Only as expenses are incurred?
Who should receive any funds remaining in the trust after the pet’s death? (In general, this should NOT be the caregiver, but, perhaps, a charitable organization that works in the area of animal health.)

In summary, it is important to work with an attorney versed in this budding area of the law to create the right plan—a plan which will ensure the proper care of Fido or Fluffy long after the owner’s death or disability.
For more information on this subject, please listen to my interview about pet trusts on The Law in Your Life, The Missouri Bar’s podcast for the public.

Mar

15

Importance of Wills

Posted in Estate Planning Wills & Trusts | March 15, 2009 | 5 Comments

If You Die Without a Will

By Chris Watkins

Many people put off preparing a Will, or think they have no need for one, because they think they are not wealthy enough, or that their assets will ultimately end up in the right hands if they do nothing. The problem with this thinking is that such people are giving up the right to control what happens to their estate. As explained below in more detail, this can lead to unintended consequences.

When a person dies without having a Last Will and Testament, it is known as dying “intestate.” Every state has its own intestacy laws. Missouri’s intestacy laws are found in Chapter 474 of the Missouri Revised Statutes. What happens to the estate of a person who has died (this person is referred to as the “decedent”) depends upon whether there is a surviving spouse and/or children. The basic rule is as follows (it gets more complicated if, for example, the decedent had a child who died before the decedent, but left grandchildren):
The surviving spouse gets:

If there is a surviving spouse, but no surviving descendants (children, grandchildren, great-grandchildren, etc.), then the spouse receives the entire estate.
If there are surviving descendants of the decedent, and they are also descendants of the surviving spouse, then the spouse receives the first $20,000 of the estate, plus one-half of the rest of the estate.
If there are surviving descendants of the decedent who are not the surviving spouse’s descendants (for example, children from a prior marriage), then the surviving spouse receives one-half of the estate.

Whatever does not get distributed to the surviving spouse (or the entire estate if there is no surviving spouse) is distributed as follows:

To the decedent’s children (or their descendants), in equal parts.
If there are no surviving children (or other descendants), then the estate is divided equally among the decedent’s mother, father, brothers, and sisters.
If none of the above people survive the decedent, then the estate is divided equally among the decedent’s grandparents, uncles and aunts (or their descendants).
If none of the above people survive the decedent, then the estate goes to the decedent’s great-grandparents, and so on (obviously it is very rare to get this far).
Ultimately, if there is no one alive to inherit the estate, then it will go to the State.

Missouri’s intestacy laws may work fine for some people. But in a great many cases, the default rules are not what people would want. The problem most often encountered involves families with minor children. In the vast majority of cases, if a married couple has children, the desire is that if one of the spouses dies, then the other spouse would inherit the entire estate, and would then have those funds and other assets to take care of the children, as well as take care of him or herself. However, if there is no Will providing for this, then the Probate Court would be forced to distribute half of the estate to the children. If the children were minors, then a conservator would have to be appointed to receive the funds. This is rarely ideal. Furthermore, when the children reach age 18, then the funds would have to be distributed directly to the children. It is very rare for young adults to have the maturity or ability to handle large sums of money.

Another issue has to do with who would be appointed take care of the children in the event that both parents died. The Probate Court is responsible for appointing this person (known as a “Guardian”), and must follow the wishes of the child’s parents as set forth in their Will, unless the Court finds that the person(s) designated to serve as Guardian(s) are unfit to do so. In other words, if you do not have a Will designating who you would want to take care of your children, then the Probate Court will choose for you, and it may not be who you would want.

Summary:
In conclusion, do not assume you don’t need a Will just because you are not wealthy. As explained above, failing to have a Will can result in unexpected and undesirable consequences to your surviving family members.

If you would like a complimentary consultation on the benefits and importance of attorney representation in the creation of a Will or Trust and of Jones & Watkins LLC to serve as Legal Counsel for your Will or Trust call (573) 234-1130 or email us through our Contact Form.

Oct

29