Setting up a living trust in Missouri can help your heirs receive your estate promptly. It does this by avoiding probate, which can take some time in the state, since it has not adopted the Uniform Probate Code. We’ll tell you all you need to know about the key estate planning tool and how it works in Missouri. You can create one by yourself, though for large or otherwise tricky estates, you’ll probably want a financial advisor to guide you in transferring assets to the trust.
How to Create a Living Trust in Missouri
To create a living trust in Missouri, take the following steps:
Choose the type of trust. You can either establish a single living trust or a joint one with your spouse. You also need to decide between a revocable or irrevocable trust. Chances are you want a revocable one, since it allows you to maintain control of your assets – and cancel the trust if you need the assets, after all.
Take stock of your assets and determine which ones you want to put in the trust. Real estate is an easy yes. But things like bank accounts and life insurance policies do not need to go into a trust, since you can avoid probate by simply telling the bank and life insurance company who your beneficiaries are (those accounts are payable or transferable on death). That said, as long as you are creating a trust, you may decide to simplify things by putting everything in it.
Select a trustee. This person has the responsibility to manage your trust assets. If you make yourself the trustee, you must also designate a successor trustee who will take control of the trust when you die.
Create the trust document by using software or hiring an attorney.
Sign trust agreement in front of a public notary.
Fund the trust by retitling assets to the trust’s name. A lawyer or financial advisor can help you with this.
What Is a Living Trust?
A living trust is a legal document which establishes who will receive your assets and property when you die. Unlike a will, it also is an entity that holds the estate while you – the owner and trust grantor – are alive. The main purpose of a living trust is to avoid probate, the court process for distributing assets according to a will – or state law if there is no will.
The trust grantor names a trustee to manage the assets in the trust. You can designate yourself as the trustee, but in that case, you’ll also need to name a successor trustee for when you die. If your trust is meant to provide for someone who is disabled or pay for, say, your grandchildren’s educations, the trustee will manage the assets for as long as necessary.
A revocable living trust can hold various types of assets and physical property including:
- Bank deposits like savings, money market and checking accounts
- Certificates of deposit (CDs).
- Investments like stocks, bonds and mutual funds
- Real estate
As you can see, a revocable trust can hold just about any type of investment. One major exception, though, comes with individual retirement accounts (IRAs), which must be in the name of an individual. If your estate is large or complicated, a financial advisor can help you determine which assets ought to be transferred into a trust. Based on distinct factors such as your personal tax situation and marital status, it may behoove you to transfer certain investments and not others.
How Much Does It Cost to Create a Living Trust in Missouri?
The cost of creating a living trust in Missouri can vary widely, depending on several factors. Some people do it with a few hundred dollars using online programs. Others seek the assistance of a lawyer and easily drop more than $1,000. But don’t just opt for the cheaper option. Correctly creating a trust can be difficult, especially if you have a complex estate. It may be in your best interest to seek the help of an experienced attorney and financial advisor to make sure all your “i’s” are dotted and your “t’s” are crossed.
Why Get a Living Trust in Missouri?
Probate is the legal process by which a court approves and enacts your will. In Missouri, probate can take months – and sometimes years if several people are contesting the will or many creditors are submitting claims – since the state doesn’t use the Uniform Probate Code. Living trusts, though, can help your heirs avoid the costs, delays and annoyances of probate.
Additionally, with a living trust, you can set terms like heirs have to reach a certain age to receive their inheritance (with wills, estates are distributed once probate concludes). Or as noted earlier, you can provide for disabled relatives.
Who Should Get a Living Trust in Missouri?
Contrary to popular belief, living trusts or trust funds aren’t only for the wealthy. Anyone who wants to ensure that his property transfers on his death to his loved ones should consider creating a living trust.
That said, if your estate is worth less than $40,000, Missouri law allows for your heirs to skip probate and use a simplified process. Also, certain assets such as life insurance policies and retirement accounts can avoid probate by your simply designating your beneficiaries on the policies and accounts.
Living Trusts vs. Wills
You should make a will in addition to your living trust. This ensures that the property not in your trust also gets distributed to your chosen beneficiaries. It also allows you to name an executor and lay out instructions on how to cover taxes and debts. In addition, a will allows you to set up guardianship of any minor children.
This chart shows the differences between living trusts and wills to give you a better understanding of both estate planning documents:
|Living Trusts vs. Wills|
|Names a property beneficiary||Yes||Yes|
|Allows revisions to be made||Depends on type||Yes|
|Avoids probate court||Yes||No|
|Requires a notary||Yes||No|
|Names guardians for children||No||Yes|
|Names an executor||No||Yes|
Living Trusts and Taxes in Missouri
Missouri doesn’t levy an estate tax. It also doesn’t have an inheritance tax.
However, large estate may face the federal estate tax. The government collects this tax on estates valued at more than $11.4 million ($22.8 million for married couples). The Trump tax plan set these new thresholds, which are set to expire in 2025 unless Congress makes them permanent. Unfortunately, a simple living trust won’t offer much protection from the federal estate tax.
To reduce your federal estate tax, you and your spouse should consider establishing a bypass trust (also called an AB trust). You’ll definitely need the help of a qualified financial advisor and estate planning attorney. These trusts can be difficult to build and typically involve large and complex estates.
The Bottom Line
Missourians with estates larger than $40,000 should consider getting a living trust, so that their heirs can avoid probate. If you make yourself the trustee, you will still control the assets in the trust. To ensure that your living trust is set up correctly, your best bet is to hire an attorney. For large or complicated estates, a qualified financial advisor is also a must.
Estate Planning Tips
- Do-it-yourself estate planning is easy to do wrong. Instead, get the guidance of professionals. SmartAsset’s financial advisor matching tool can help you find a local advisor. All you have to do is answer a few questions about your situation and the tool recommends three suitable advisors in your area.
- Name beneficiaries on your bank accounts. This make them “payable on death,” so your heirs will have access to the accounts right away. You can do this for retirement accounts and life insurance policies, too.
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