Those without a will (like Prince) may leave family members at odds over their estates.Prince Rogers Nelson, an American music legend better known simply as Prince, died unexpectedly April 21 at his home near Minneapolis. The cause of Prince’s death is still unknown, but that mystery is not the one gaining most of the headlines these days. Instead, more attention is being focused on Prince’s estate.

Prince died apparently without having prepared a will or doing any other formal estate planning. For someone of Prince’s wealth and fame, you might think he was delirious to leave things this way. But it isn’t unusual. Other famous individuals who left their estates in a similar predicament include Pablo Picasso, Martin Luther King Jr., Howard Hughes, Jimi Hendrix and even Abraham Lincoln. They are not a limited group: Some studies estimate more than half of the people in the U.S. do not have wills prepared.

When someone dies without a will, the state basically has a “default” estate plan prepared for the decedent, known as intestacy. The state’s intestacy laws determine who will receive the decedent’s property. That most often will be the surviving spouse and children, if any, or otherwise family members such as parents and siblings. In some cases, like Prince’s, that can include half-siblings.

For many people, this default plan may not match their actual wishes as to whom, and in what portions, their property should be distributed upon death. Formally declaring those wishes through a will is one of the best ways to achieve them.

A will allows you to choose someone you trust to serve as personal representative of the estate and handle its administration, and it can even designate your choice of guardian for any minor children. Perhaps more importantly though, a will can provide more direction over who gets specific items of your property, rather than leaving it up to your loved ones to figure out who gets the little red Corvette. Doing so can help avoid, or at least minimize, family squabbling.

A common (and often undesirable) side effect of intestacy is that it not only can lead to arguments among family members over the division of property, but it also forces them to do so in a public forum and therefore lose privacy over family affairs. If privacy is a preference, you may even consider leaving everything in your will to a separate trust created by you. The terms of the trust, and how it disposes of your assets, will generally not be public information.

Preparing for death is not an easy thing, which may explain why such a large number of people are in a similar situation to Prince. Consider talking to an estate planning attorney to discuss other advantages to formalizing your estate plan. Not doing so may unintentionally leave some doves crying and others partying like it’s 1999. 

Most people think once they have signed their trust, they are done with the estate planning process. However, an estate plan is not complete until the trust has been funded. Many of the goals behind creating a trust (probate avoidance, privacy, management of assets upon death or incapacity, asset protection) are only achieved to the extent a trust has been funded.

The key to trust funding involves the transfer of assets into the trust by either retitling assets into the trust now or designating the trust as the beneficiary of the asset upon death. Depending on the type of assets a person owns, different trust funding options are available.

  • Checking accounts, savings accounts, investment accounts and certificates of deposit, as well as securities such as bonds and stocks, can be retitled into a trust currently. Some clients prefer to keep a small checking account for everyday expenses in their own name individually. If this is done, the trust can be designated as the transfer on death beneficiary of the account.
  • Life insurance policies can remain in the individual name of the owner, but the trust should be named as the beneficiary of the trust proceeds.
  • Real estate can be transferred into a trust currently through the use of a general warranty deed, although this may also be done at death with a beneficiary deed naming the trust as the beneficiary.
  • Tangible personal property (e.g. artwork, collectibles, furniture, etc.) can be transferred to the trust currently with an assignment of personal property. However, vehicles can be transferred at death by naming the trust as the transfer on death beneficiary.

Because of the potential tax consequences involved in naming a trust as the beneficiary of a retirement account (such as an IRA, 401(k) plan, etc.), that topic is outside the scope of this post.

If you would like to discuss whether your assets are properly titled to achieve your estate plan objectives, please contact the attorneys in our Trusts & Estates group.

Parents will never stop worrying about their children, and when it comes to the people your children date, emotions always run high. Thankfully, there is something you can do to protect your hard-earned money from your children’s spouses, or potential ex-spouses. 

If you die and leave assets to a child outright (not to a trust), then he or she may do anything with those assets. The child can give them away, spend them inappropriately or leave them to anyone they want at death.

However, if you leave your assets to the child in a specially designed trust, called a “lifetime trust,” then you can protect against all of these things. The trust can prevent gifting to non-family members or inappropriate spending and can protect against divorce. Under Missouri law, if you die and leave an inheritance to a child in a trust with very specific provisions, then the trust assets are not marital property for divorce purposes — which means a divorce court cannot give the trust assets to the other spouse.

If you are worried about protecting a child from bad decisions, a controlling spouse or just a potentially rocky marriage, then consider updating your estate plan to leave your assets to the child in a lifetime trust to provide maximum protection. 

Do you have an irrevocable trust and now wish you could change its terms? Maybe you want to provide more asset protection to the beneficiaries or loosen rigid distribution standards. It’s possible to reach those goals, as well as others that might benefit you and your beneficiaries.

Historically, settlors, trustees, beneficiaries, trust attorneys and even courts have viewed irrevocable trusts, to a great extent, as unchangeable. Over the past 15 to 20 years nationally, and over the past 10 years in Missouri, this understanding, at least among trust attorneys, has changed dramatically. There are now multiple methods available for changing the terms of irrevocable trusts, with or without court involvement. Because trust law is governed by the states, the methods available for implementing changes can vary widely from state to state.

In Missouri, certain irrevocable trusts may be modified or terminated by an agreement among the creator of the trust and the beneficiaries, even if the modification or termination is inconsistent with a material purpose of the trust. Also, the administrative terms of irrevocable trusts may be modified by an agreement among “interested persons,” which is often understood to mean the trustees and the beneficiaries.

The newest method for changing the terms of an irrevocable trust is commonly referred to as “decanting.” In essence, decanting is the exercise of a trustee’s power to distribute assets from one trust to another trust, perhaps with different terms.

While there are many methods for changing the terms of an irrevocable trust under state law, keep in mind that there are potential income and transfer tax consequences to making any such change.

Read a more detailed summary of these methods here. For more information on irrevocable trusts or any estate planning matter, please contact the attorneys in our Trusts & Estates group.

Your mobile phone rings showing a number from Washington, D.C. You answer and the voice on the other end says: “This is Mr. James, agent number 5706 with the Internal Revenue Service. You owe a significant amount in back taxes. We are preparing to bring criminal charges against you that may result in jail time unless you pay immediately. How would you like to pay? Credit card, prepaid card or wire transfer …”

How do you respond?

The Treasury Inspector General for Tax Administration reports it has received reports of more than 1 million contacts like this since October 2013. Unfortunately, over 5,500 victims have collectively paid nearly $29 million as a result of this scam.

These scammers are constantly developing different methods to continue the scam. Some, trying to look official, go so far as to provide an actual IRS address where they tell the victim to mail a receipt for the payment they make, or use emails that contain a fake IRS document with a phone number or an email address for a reply. They even use official IRS letterhead in emails or regular mail they send to their victims.

The primary modus operandi of these scammers is to try to scare their victims using intimidation and bullying to force the victim into paying. They may even threaten to arrest, deport or revoke the driver’s license of the victim if they don’t get the money.

At the IRS Tax Tip site on scam phone calls found here, you will find more details on the methods the scammers are using and what the IRS does or doesn’t do when contacting taxpayers, as well as who to contact should you become a victim of such a scam.  

However, the bottom line is that if you receive an unexpected phone call from someone claiming to be from the IRS who uses the threat of legal action if you do not pay immediately, that is a sign that it is not the IRS calling.

Hang up!

Feel free to contact the attorneys in our Trusts & Estates group should you receive any correspondence you think is questionable. We can help you determine whether it is something legitimate that requires action or is just another scam.     

An Alabama probate judge entered an order recently sealing the probate court file, including the will, of Harper Lee, the famed author of “To Kill a Mockingbird.” Attorneys for the estate successfully argued public access should be restricted, in part, because the author would not have wanted her private financial information to be a matter of public discussion. Interestingly, despite being a notoriously private person, Lee chose to direct the disposition of her estate through a last will and testament, a historically public process.

In Missouri, the courts have established a strong common law right of access to judicial records, so many courts are reluctant to restrict public access to court files, particularly in the probate division. Given that fact, how can you ensure your financial affairs and personal decisions about who should inherit your estate are not accessible to the public? The answer for most individuals is to establish a revocable trust during life, transfer all assets to the trust prior to death, and sign a “pour-over” will that directs any property not already in the trust to be added to the trust upon your death.

While your will must still be filed with the court, its terms will disclose only that your probate assets (those owned in your name alone and not by your trust) should be transferred to your trust. There will be no information in the court records about who your beneficiaries are or what you gave to each. More importantly, if you properly fund your trust before death (you transfer ownership of all of your assets to your trust before you died), there will be no probate assets to disclose to the court. As a result, there will be no information in the public records about your financial affairs at all.

Harper Lee’s probate case is a highly unusual one given her fame, which likely made the judge much more amenable to sealing the file. For the less famous among us, a judge may not believe restricting public access is appropriate, so why leave it to chance?