Allowing your assets to go into probate is both arduous and expensive. For this reason, probate should be avoided at all costs. Missouri law allows for a myriad of ways to avoid probate, which include the living trust, Payable-on-death designation for bank accounts, beneficiary deeds and joint ownership. It will behoove you to inform yourself of all possible options before deciding on how you will protect your loved ones.
Why Not a Living Trust?
A living trust is the most common option, but what people fail to realize is that with a living trust a person will not be able to avoid the associated estate taxes. Under Missouri law, estates are not taxed on the state level, but estates valued at over $5.49 million are still taxed on the federal level. Although there is much debate in increasing the federal estate tax limit to $11 million, nothing has been decided. With so much uncertainty a person whose assets are valued over $5.49 million should consider other methods for avoiding probate. Another group of people who should consider alternative methods of probate are persons who aren’t quite sure what their assets will be worth at their time of death. It would be unfortunate to leave your newly rich family members with an incredible tax bill at your passing. Another group are those people who own property in multiple states and have a family business. The purpose of this article is to help you determine which alternative options would be best for you when the living trust is not quite the option for you.
Should I Open Payable-on-death designation for bank accounts?
A payable-on-death designation (POD) for bank accounts is the easiest option for avoiding probate. You would simply open a bank account that designates a certain person to collect what remains of the bank account upon your death. The downside of the POD account is that it will not protect your other assets from going into probate.
Should I Get a Beneficiary Deed?
A beneficiary deed allows an owner of real property to execute a deed that names a beneficiary who will obtain title to the property at the owner’s death without going to probate. A beneficiary deed must be executed in accordance with the law and recorded in the office of the county recorder of the county in which the property is located, prior to the death of the property owner. The benefit of the beneficiary deed is that it is fully revocable similar to the living trust. In addition, a beneficiary deed can be generated more quickly and less expensively than preparing a trust. Similar to the POD, the beneficiary deed allows you to maintain full control of the property during your lifetime, but is not subject to gift tax liability. In Missouri, the beneficiary deed is not subject to state estate tax law liability. However, the beneficiary deed would be subject to federal tax liability. So long as your assets do not exceed $5.49 million, the beneficiary deed would be the best alternative to avoid probate.
Should I Acquire Property in Joint Ownership?
If you own property with another person or persons in either joint tenancy or a tenancy of the entirety you will avoid probate. Joint Tenants are tenants who own equal shares in property and have the right of survivorship. Right of survivorship means that the surviving tenants acquire the interest of the deceased tenant. A tenancy of the entirety is the same as the joint tenant but is only available for married persons. Under both tenancy of the entirety and joint tenancy, the property will naturally transfer to the tenant living at the time of your death. The benefit of the joint tenancy and tenancy of the entirety arrangement is that the property is not limited to real estate property, but can extend to bank accounts, vehicles, and other valuable property. The disadvantage is that the living co-tenant will have full possession and control of the property while you are living. However, if this is not an issue for you, the Joint Tenancy arrange is a preferable alternative to avoiding probate.
The question of who you are going to leave your property to should not be taken lightly. You should discuss it with a licensed attorney. Schedule a free consultation with an experienced estate planning attorney at the Law Offices of Kenneth P. Carp today at 636-947-3600.