Common Misconceptions Young Couples Have about Estate Planning

Common Misconceptions Young Couples Have about Estate Planning

 

By Emily Blinzig and Heather Rooney McBride

 

Young couples have a lot on their plate. They are busy building their careers and often busy building their family and raising their children. Raising children is expensive, and money is often tight. Estate planning is not something that is normally on the top of anyone’s priority list, especially when finances are limited, but a little advance planning can save thousands in the event that one or both of the young parents pass away.

Young people often do not consider assets as being part of an “estate.” However, an estate is simply a shorthand way of describing all the assets that you own at the time of your death. For example, a person’s estate can be comprised of a house, a car, a checking account and savings account. If even one of those assets does not have a beneficiary upon death, it would likely create a need to open a probate estate.

The most common reason young couples do not prepare estate plans is that they believe it is too expensive. However, if estate planning is not done, the surviving spouse will have to open a probate estate to get access to the spouse’s assets, and probate costs start in the hundreds of dollars and can quickly escalate to thousands of dollars depending on what hurdles must be overcome to settle the estate and the probate estate’s value.

It is very important to understand that, in Missouri, if a person is survived by a spouse and minor children, the surviving spouse does not inherit 100% of their deceased spouse’s assets. Instead, the surviving spouse will receive only half of the assets, and the minor children will equally share the other half. (Section 474.010(1) and (2) RSMo.).  What that means is that a conservatorship would likely need to be established for the money or property that the minor children inherit from their deceased parent, and the court would have control of the property owned by the minor(s) in the conservatorship (Section 475.030.2 RSMo.). A surviving parent has the right to petition the court to serve as the conservator, but he or she will still need to get court approval before spending any money out of the conservatorship. (Section 475.025 and 475.130 RSMo.)

In order to avoid the scenario described above, young parents with minor children can take actions that cost little to no money, as follows:

1. Jointly title accounts and property with your spouse. If one spouse dies, the other spouse will become the 100% owner.
2. Designate your spouse to be the “Payable on Death” (“POD”) beneficiary on single accounts
3. If you do not co-own your car with your spouse, fill out the form at the DMV designating your spouse as the Transfer on Death (“TOD”) beneficiary.
4. Retain an attorney to sign an record a beneficiary deed for your real estate.

These solutions are a good first step, but they do not account for or protect your estate from all scenarios. For example, if each spouse has “digital property” such as social media accounts, memberships associated with online stores or apps, the surviving spouse will not have access to those “digital assets” upon death without estate planning documents that expressly grant access. And, it does not take into account separate property that may come into the estate after one spouse’s death, such as a tax refund check or an insurance premium refund. And in the unlikely, but possible, scenario where both parents die at the same or very close in time, there will be no beneficiary named, and the estate may have to be probated and a conservatorship opened for any minor children.

Creating a Last Will and Testament is the next step to cover these and other possible scenarios. A Last Will and Testament can prevent the assets from being divided between the spouse and minor children because a person can designate her spouse as being the beneficiary of all assets, including digital assets. Even if assets come into the estate after death, the Will would direct who should receive those assets. Additionally, in a scenario where both parents die at the same time, a Will would direct the court who to appoint as the guardian and conservator of any minor children.

Setting up a trust can take the estate planning one step further. A trust can appoint a trustee to manage the estate’s assets on behalf and for the benefit of minor children, which would eliminate the need for a conservatorship altogether.  A trust can also hold assets for longer periods of time so that young adults do not come into a significant amount of money without understanding how to probably manage and invest it.  Trusts also avoid situations of an asset having to be probated because the POD or TOD beneficiary is also deceased.

In summary, having basic estate planning documents will preserve more money for your family after death by avoiding the costs of probate, which far exceed the costs of working with an attorney to create an estate plan. Additionally, estate plans give you peace of mind knowing that your assets will be distributed the way you intend upon your death.  If you or a loved one has questions about or wishes to establish an estate plan, please call our estate planning attorneys at Rooney McBride & Smith, LLC to schedule a consultation.