Estate Planning
Wills
Under our system of laws, we have the right to own property and, at our death, to pass that property on to those whom we select as our beneficiaries. However,
this right is not absolute. We can only pass property to our loved ones by following certain formal requirements. These formal requirements are met by the execution of a proper Will,
prepared and signed in accordance with State law. (Each state has its own law about Wills.) A Will does not avoid the necessity of probate. All Wills go through probate. If you die without
a Will, the State has prepared one for you--your property passes to those persons whom the law has designated to receive your property. This may or may not be what you want. Although
anyone can legally write a Will, there are many pitfalls. If proper language is not used, the entire Will, or certain bequests in the Will, may be unenforceable.
Non-Probate Transfers
 Probate can be avoided by
transferring each type of property that you own via a "non-probate transfer." Bank accounts can be titled "POD" (Pay on Death) to a specific person or persons. Real
estate can be conveyed outside of probate by a Beneficiary Deed which takes effect only on your death. Stocks, bonds and vehicle titles can be made payable "TOD" (Transfer on
Death) to whomever you choose. Every type of property has a method by which it can be passed outside of probate. A lawyer will need to advise you on how to pass specific types of property
in this manner. All property transferred via non-probate transfers is simply "dumped" to the named beneficiaries at the moment of your death. Although non-probate transfers avoid
probate, you are not able to establish the same types of personal protections for your beneficiaries which you are able to establish for them in a Living Trust.
Durable Powers of Attorney
A Power of Attorney is a document by which you appoint another person to act as your authorized agent (also known as your "attorney-in-fact"). You may
not be aware that a Power of Attorney which you give to someone is revoked automatically if you become mentally incapacitated. Under Missouri and Illinois law, a properly prepared Power of
Attorney can be made "durable." This means that your attorney-in-fact may continue to act on your behalf whether or not you are mentally incapacitated. This will allow your agent
to pay your bills, contract for nursing home services, and make basic health care decisions for you. This type of Power of Attorney is useful both before and after incapacity, but it must
be executed prior to becoming mentally incapacitated. Powers of Attorney can be revoked at any time.
Health Care Powers of Attorney
You are legally entitled to appoint some person as your health care attorney-in-fact, which allows that person, in the event that you are comatose or otherwise
unable to participate in your health care decisions, to make your health care decisions for you. In this document, you can ensure that the treatment you receive is the treatment that you
desire, and no more. This document can reduce the likelihood of a doctor, hospital, or court requiring you to be "plugged in" interminably on life support systems, if you do not
desire to be kept alive in that manner.
Living Wills
You can also sign a brief statement indicating your desire that certain medical treatments be either withheld or withdrawn under certain circumstances. Both
Missouri and Illinois law allows treatment, including intravenous feeding, to be withheld or withdrawn upon your written statement. This statement is only binding on health care providers
if you have a terminal condition and are unable to participate in decisions regarding your medical treatment. In that case you can direct the physicians to withhold or withdraw medical
procedures that merely prolong the dying process and are not necessary to your comfort or to alleviate pain. You cannot, in Missouri or Illinois, authorize affirmative or deliberate acts
or omissions to shorten your life; instead you may only permit the natural process of dying.
Living Trust Information
Living trust-based estate plans have many advantages. First, they avoid probate. This means that your assets can transfer quickly and efficiently at your death,
without the delay, attorneys fees, and unnecessary expense of probate. In addition, living trusts ensure absolute privacy for your financial matters. Since trusts are not filed in the
Probate Court, "inquiring minds" do not have an opportunity to see an inventory or valuation of your assets, or to find out how much you are leaving to your beneficiaries.
Living trusts are very flexible--they can be changed any time by the Trustmaker. They allow you to retain absolute control of the terms of the trust--you
continue to buy, sell, spend, invest and make gifts of trust property just the way you do now. No gift is made when the Trustmaker transfers assets into the trust, and no separate tax
returns are required to be filed by the trust during your lifetime.
Even people who have smaller estates can benefit by doing living trust planning. This is especially true for people who are either married or have children or
have an estate in excess of two hundred thousand dollars. Re-marriage protection for a surviving spouse is typically a serious concern with most families. A trust which incorporates
personal protections for the surviving spouse can keep him or her from being preyed upon financially by third parties or by a subsequent spouse. A trust with strong personal protections
can insure that your money goes to your children and not to a new spouse or the family of a new spouse.
Similarly, personal protections in a trust can provide divorce-proofing strategies for children's inheritance. Trusts can be readily designed to protect
children and beneficiaries from other types of creditors and predators as well, including the IRS.
Personal protections incorporated within trusts are also an excellent tool to preserve assets from "impulse spending." Research indicates that most
inherited money is spent within 17 months of receipt. (Surprisingly, the figures are not radically different if the money is inherited by wealthier and more sophisticated beneficiaries.)
It is generally undesirable to simply "dump" money on children at any age -- it is more important to pass "value" to one's family, not merely money.
"Value" includes protecting the beneficiaries from our very human tendency to quickly dissipate "windfall" funds. This "value" can only be obtained through
family-oriented trust planning.
 When properly designed, trusts
can be a valuable adjunct to retirement planning. It is important to synchronize the estate plan with the retirement plan payout options. The advent of the stretch IRA makes qualified
funds an extremely powerful investing tool. Qualified retirement plans have always been a superb investment while the account owner or spouse is alive. However, very little of those funds
may survive to the next generation. (Retirement plan money is frequently decimated by taxes at the death of the roll-over spouse, resulting in a loss of 76-89% percent of the entire
account!) The stretch IRA has changed that. Now it is possible to not only pass the entire fund whole and untouched by taxes at death, but to pass it in the same type of tax-deferred
vehicle which allowed the account owner to accelerate growth in those funds during his or her life. Because of the potential of these investments to produce huge amounts of asset growth
and income over the life expectancy of the next generation, it is extremely unwise to attempt stretch IRA planning unaccompanied by trust protections.
A personally designed living trust is the only planning device which allows people to design their own disability plan. Anyone who is interested in receiving
home health care (rather than being left in a nursing home) should design a disability plan inside a living trust. In addition, those who want to avoid having a guardian appointed for
them, or who are concerned about making sure that their family members can access funds if the breadwinner should become disabled, need a well-designed living trust.
There are tax law changes scheduled every year between now and 2011. Clients need a reliable and inexpensive system in place to update the plan as necessary to
comply with these many scheduled changes.
Conscientious planners are now recommending to clients that they implement a formal estate planning update system. This planning method makes great sense in
light of the many tax law changes brought on by Congress' passage of EGTRRA in June 2001. A formal updating program can be designed at a very small cost to ensure that the estate plan will
not become obsolete and that the investment in the plan will not be wasted.
Specialist Designations: the States of Missouri and Illinois do not recognize legal specialties. Neither the Missouri Bar Association nor the Supreme Court of Missouri, nor the
Illinois Bar Association nor the Supreme Court of Illinois reviews or approves certifying organizations or specialist designations. Advertising materials: commercial solicitations are
permitted by the Missouri and Illinois Rules of Professional Conduct but are neither submitted to nor approved by the Missouri or Illinois Bar or the Supreme Courts of Missouri or
Illinois.
©2006 Joseph D. Welch
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