Determining what estate planning documents are needed involves far more than people usually realize. The first step is understanding the differences between Wills and Trusts.
Last Will and Testament
In Missouri, your Last Will and Testament must be probated within one year of your death to be effective. Many people do not know this and may even think that having a Will avoids probate, which is actually the exact opposite of what happens. In order to enforce the terms set forth in a Last Will and Testament, it must be admitted to probate prior to the one-year anniversary of a person’s death. Simply filing or presenting the Will with the probate court is not enough; it must actually be admitted to probate.
Trusts are one of the most talked about estate planning tools. There are multiple types of trusts used for various reasons, but the best known and most utilized by the average client is the standard Revocable Living Trust. With a trust, you can make complex distributions to beneficiaries including spreading out payments to beneficiaries over time or holding funds in trust to be used for the care of minors. Another benefit of having a trust is that it avoids probate because trusts are administered outside of probate court. However, you have to own your assets in your trust or list your trust as the named beneficiary upon death in order for all of your assets to completely avoid probate. A trust should always be accompanied by a “pour over Will” which means a Will that grants everything to your trust upon your death. If one or more of your assets were not properly owned in your trust or otherwise did not list your trust as a designated beneficiary, then the Will can be probated making the trust “inherit” everything. Of course, the best approach is to properly transfer your assets into your trust to avoid probate altogether.
Do you have to give your financial institution a copy of your trust?
Any financial institution where you are naming a trust as the owner or beneficiary on death of an account will ask you for a copy of your trust. You may refuse to give them a copy of the full trust, but you will still have to furnish the main terms of the trust document by providing a Certification of Trust based on requirements set forth in Section 456.10-1013 of the Revised Statutes of the State of Missouri. An attorney can assist with drafting a proper Certification of Trust.
How to avoid probate.
Trusts are often the best way to avoid probate. Since a trust is administered outside of the court, it does not require the opening of a probate estate. The next best way to avoid probate is through non-probate transfers and proper titling of assets. These transfers to avoid probate are done by naming beneficiaries to receive an asset automatically upon death. For real estate, this can be accomplished by using a Beneficiary Deed. For other assets, exactly how it is accomplished depends on the type of asset, but it is usually done by naming a transfer on death (TOD) or pay on death (POD) beneficiary on the title or ownership of the asset. If an asset is jointly owned, as long as the ownership is considered to be one allowing a right of survivorship, then the other owner will automatically own the asset upon the death of the other joint owner. Trusts offer more flexibility since you can create multiple contingency plans for when beneficiaries predecease you, stretch distributions of money over time, and can leave money for the benefit of minors. However, if those advantages are not necessary for your estate plan, traditional naming of beneficiaries and ownership techniques may meet your goals. Either way, it is essential to have a Last Will and Testament as a back-up plan in the event any assets “slip through the cracks” or if money is acquired after your death due to settlements from lawsuits.