There are several strategies to avoid probate in Missouri. One common approach is to establish a revocable living trust, which will allow you to transfer your assets into the trust during your lifetime and effectively bypass the probate process upon death. Additionally, you can set up a joint ownership arrangement that allows assets to pass directly to the co-owner without probate. Here’s a breakdown of the probate process in Missouri and a roundup of common strategies to avoid it. For more comprehensive estate planning advice, consider working with a financial advisor.
Importance of Avoiding Probate
Probate refers to the legal process that unfolds after a person’s death, wherein their estate is administered and distributed under the supervision of the court.
This process entails validating the deceased’s will, settling their debts, paying necessary taxes and ultimately distributing the remaining assets to the rightful beneficiaries.
The potential benefits of avoiding probate are significant, as it can result in substantial time and money savings. The process could last from a few months to several years, which can be a prolonged period of uncertainty for beneficiaries.
Moreover, probate may result in substantial legal fees, which are deducted from the estate, reducing the assets that the beneficiaries eventually receive. This is especially crucial in cases where the estate has a significant amount of debt, is complex or when there’s potential for family conflict over asset distribution.
Avoiding probate not only accelerates the transfer of property to beneficiaries but also ensures that personal family matters remain private. This is particularly beneficial in preserving family relationships and ensuring a smooth transition of assets.
Ways to Avoid Probate in Missouri
There are several ways to avoid probate in Missouri. Choosing the right method will depend on your assets and preferences. Here are four common ways to avoid probate in the Show-Me State:
1. Create a Trust
A trust is a legal agreement where one person (the trustee) holds property for the benefit of another person (the beneficiary). Trusts can be established during the trustor’s lifetime or upon their death via a will. In Missouri, the advantage of trusts is that the assets within them do not go through the probate process.
There are various types of trusts in Missouri that can help avoid probate. For instance, revocable living trusts can be altered during the trustor’s lifetime, offering flexibility. On the other hand, irrevocable trusts cannot be changed once established, providing certainty. Testamentary trusts, although created through a will and do not avoid probate, can offer a degree of asset management after the probate process.
2. Joint Ownership
Joint ownership is when two or more people own a property together. In Missouri, if a property is jointly owned with rights of survivorship, the property automatically transfers to the surviving owner(s) upon the death of one owner, thereby bypassing probate.
Missouri recognizes two primary forms of joint ownership. Joint tenancy with rights of survivorship gives each owner an equal interest in the property. Tenancy by the entirety, a unique ownership form for married couples, protects the property from the individual debts of one spouse. This can have implications on other areas of personal finance, including debt and asset protection.
3. Payable-on-Death Designations
Payable-on-death (POD) designations are a way for account or policy owners to specify who will receive the assets upon their death, and thereby avoiding probate. Let’s say, for example, you have a savings account; by using a POD designation, you can name a beneficiary who would receive the funds in your account upon your death, without having to go through probate.
In Missouri, various assets can have POD designations, including bank accounts, certificates of deposit, retirement accounts and securities. However, it’s crucial to remember that the beneficiary has no rights to these assets until the owner’s death. Also, POD designations may not be suitable for all situations, so it’s important to regularly review and update beneficiaries to reflect your current wishes.
4. Transfer-on-Death Designations
Transfer-on-death (TOD) designations are another ownership tool that permits the owner of an asset to name a beneficiary who will inherit the asset upon the owner’s death, without probate. For instance, if you own a car and designate a TOD, the vehicle would automatically transfer to your named beneficiary upon your death.
In Missouri, a variety of assets can have TOD designations, including vehicles, real estate and certain types of personal property. However, while TOD can be an effective tool for avoiding probate, it may not be suitable for all situations. Compared with other options mentioned earlier, TOD offers a way to transfer assets directly, but it requires careful consideration and planning.
Understanding the Probate Process in Missouri
In Missouri, probate plays a crucial role due to specific state laws. For instance, Missouri law necessitates a probate process for estates valued over $40,000. This implies that if an individual’s net worth at death exceeds this limit, their estate must undergo probate. Additionally, Missouri has preset statutory fees for executors and attorneys engaged in probate. These fees are a percentage of the estate’s value, setting it apart from states where fees are determined based on ‘reasonableness’. Hence, understanding the probate process in Missouri is crucial to facilitate a smooth asset transition after death.
An executor, appointed through the will or by the court if there’s no will, plays a pivotal role in the probate process. They manage the probate process, including tasks like gathering and appraising assets, paying debts and taxes and distributing the remaining assets to the beneficiaries. Furthermore, the executor is the primary liaison between the estate and the court, creditors, and heirs. Nevertheless, executors may encounter challenges such as disputes among heirs, particularly disagreements over asset distribution, making their role complex and demanding.
The step-by-step probate process in Missouri includes:
- Filing the will at the local probate court and appointing an executor.
- The executor inventorying the estate, which involves identifying and appraising all of the deceased’s assets. This step provides a comprehensive understanding of the estate’s value and ensures all assets are documented.
- Notifying creditors about the deceased’s passing, allowing them to claim any outstanding debts.
- Settling the deceased’s debts and taxes and managing the estate, which may involve selling assets to meet these obligations.
- Distributing the remaining assets to the heirs as dictated by the will or according to Missouri state law if there’s no will.
- Finally, the executor closes the estate, marking the end of the probate process.
The probate process can present challenges like locating all of the deceased’s assets, especially if they were not well-documented, dealing with multiple creditors and resolving potential disputes among heirs about asset distribution. These hurdles can delay the probate process and cause friction among the heirs.
Missouri Simplified Probate Process
This streamlined form of probate is designed for estates of lesser value. Unlike the traditional probate process, which can be protracted, complex and often costly, the simplified probate process offers an alternative that may be more cost-effective, particularly for smaller, uncomplicated estates. This process allows for a quicker settlement and distribution of a deceased person’s assets, may reduce potential legal fees and minimizes the need for extensive court supervision.
To qualify for the simplified probate process in Missouri, certain prerequisites must be met. The estate’s value must not exceed $40,000 after deducting liens and encumbrances. Liens are legal claims or holds on properties used as security for the repayment of debt and other obligations. In addition to a potential reduction in time, the simplified probate process also requires fewer court appearances. This can be a considerable relief for grieving families who are already dealing with the emotional impact of their loss.
Bottom Line
Planning your estate to avoid probate in Missouri can help ensure a smoother transfer of assets to your beneficiaries. This process can be lengthy, costly, and your estate could become part of public record. Luckily, there are several strategies available, including the creation of a trust and joint ownership, as well as payable-on-death and transfer-on-death designations.
Tips for Estate Planning
- A financial advisor can guide you in the estate planning process to make sure that your assets are protected and your wishes are met. They can also help you create a long-term financial plan to grow your wealth. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Estate planning isn’t as easy as it may seem. There are a lot of things to be aware of that can cost you if you’re not careful. This is why you need to be aware of the dangers of DIY estate planning before you decide whether you need to enlist the help of a professional.
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