Do I need a Trust In Missouri?
One of the most common estate-planning questions we hear is:
“Do I really need a trust, or is a will enough?”
The answer is: It depends.
Not everyone in Missouri needs a trust. For some individuals and families, a properly drafted will combined with beneficiary designations and other nonprobate transfers can provide an effective and relatively simple estate plan.
For others, however, a revocable living trust can provide significant advantages—particularly when the goal is to avoid probate, plan for incapacity, control how and when beneficiaries receive an inheritance, or simplify the administration of substantial or complicated assets.
The important question isn’t whether everyone should have trust.
It is whether a trust provides benefits that are important for your particular family, assets, and estate-planning goals.
First, What Is the Difference Between a Will and a Trust?
A will is a document that directs how property subject to the will should be distributed after your death. It can also nominate a personal representative and address other important estate-planning matters.
A revocable living trust, by comparison, is generally created during your lifetime. Assets can be transferred into the trust while you are living, and you typically remain in control of those assets as trustee.
You also designate a successor trustee who can take over administration of the trust upon your death—or potentially during your lifetime if you become unable to manage the trust property yourself.
The biggest practical difference is this:
A will does not avoid probate. A properly created and funded trust can.
A Will Does Not Avoid Probate in Missouri
This is probably the most common misunderstanding we encounter.
People often say:
“I have a will, so my family won’t have to go through probate.”
Unfortunately, that isn’t how a will works.
Under Missouri law, a will must be presented and admitted to probate to be effective as a will.
If you die owning a house, bank account, investment account, or other property solely in your individual name without a beneficiary or another nonprobate transfer mechanism, your family may still need probate to transfer that property—even if your will clearly states who should receive it.
A will tells the probate court what you want to happen to your probate property.
It does not necessarily eliminate the probate process.
How Does a Trust In Missouri Avoid Probate?
How Does a Trust Avoid Probate?
A properly funded revocable trust changes the ownership or disposition of assets so that they can be administered under the trust rather than through a probate estate.
For example, suppose you own a home, investment accounts, and other significant assets.
If those assets remain solely in your individual name at death without effective beneficiary designations, probate may be necessary.
(You can also read more about when probate court may be necessary in Missouri.)
If those assets have instead been properly transferred to your revocable trust—or otherwise structured to pass to the trust at death—the successor trustee can generally administer the trust property according to the trust agreement without opening a probate estate simply to transfer those assets.
There is an important word in that sentence:
Properly.
Creating a Trust Isn’t Enough—You Have to Fund It
Signing a beautiful 40-page trust agreement and placing it in a binder does not automatically avoid probate.
The trust must be properly funded.
Funding a trust means taking the necessary steps to place appropriate assets into the trust or otherwise arrange for them to pass according to the estate plan.
Depending upon the asset, this might involve:
- Deeding real estate into the trust;
- Retitling appropriate financial accounts;
- Assigning certain property or business interests to the trust; or
- Coordinating beneficiary designations with the overall estate plan.
If an asset is left solely in your individual name with no beneficiary designation, it may still become a probate asset despite the existence of a trust.
This is why trust funding is every bit as important as drafting the trust itself.
Why Would Someone Choose a Trust?
Avoiding probate is an important reason, but it isn’t the only reason.
1. Avoiding or Minimizing Probate
Probate is a court-supervised legal process. It involves filings, deadlines, notices, administration requirements, and potentially attorney’s fees and other expenses.
A properly structured trust can allow trust assets to pass to beneficiaries without requiring a probate estate to transfer each asset.
For someone with significant assets, real estate, business interests, or property in more than one state, probate avoidance can be particularly valuable.
2. Planning for Incapacity
A will primarily addresses what happens after you die.
A revocable living trust can also address what happens to trust assets during your lifetime if you become incapacitated.
If you are serving as your own trustee and later become unable to manage your financial affairs, the person designated as successor trustee may be able to step in and manage the trust property according to the terms of the trust.
A comprehensive estate plan should normally coordinate the trust with durable powers of attorney and health-care planning documents.
3. Controlling When Children Receive Their Inheritance
Suppose you have a 19-year-old child who inherits $300,000.
Do you want that child receiving the entire $300,000 immediately?
Maybe.
But many parents would prefer something different.
A trust can provide that the money remains in trust and is available for purposes such as education, health care, housing, and other appropriate expenses while the child is young.
The trust can then provide for distributions at particular ages or milestones—or allow the property to remain in trust for a longer period.
A will can also create a testamentary trust, so this benefit is not exclusive to a living trust. However, a revocable living trust can integrate those provisions into an overall plan that may also avoid probate for properly funded assets.
4. Protecting Beneficiaries Who Shouldn’t Receive Money Outright
Age isn’t the only concern.
A beneficiary may struggle with money management, creditors, divorce, substance abuse, disability, or other circumstances that make an outright inheritance undesirable.
Rather than simply stating:
“I leave everything to my children equally,”
a trust can establish detailed rules concerning how a beneficiary’s share will be held, managed, and distributed.
Depending upon how the trust is structured, continuing trusts may also provide meaningful protection for inherited assets from certain beneficiary creditors or other claims.
5. Providing for a Blended Family
Trust planning can be particularly important for second marriages and blended families.
For example, a person may want a surviving spouse to have the benefit of certain assets during the spouse’s lifetime but ultimately want the remaining property to pass to children from a prior marriage.
Simply leaving everything outright to the surviving spouse may not accomplish that objective.
Once property belongs outright to the surviving spouse, that spouse may generally be able to spend it, give it away, change his or her estate plan, or leave it to someone else.
A properly structured trust can provide substantially greater control over what happens to the property after the first spouse dies.
6. Owning Property in More Than One State
People who own real estate in Missouri and another state should give particular consideration to trust planning.
Without proper planning, real estate located in another state can potentially require an additional probate proceeding in that state.
Placing appropriate out-of-state property into a trust may help avoid that result.
7. Privacy
Probate is a court proceeding.
Trust administration generally occurs outside of the probate court unless litigation or another circumstance requires court involvement.
For families who value privacy concerning their assets and distributions, this can be another advantage of trust planning.
Does a Trust Protect My Own Assets From My Creditors?
This is another area where there is significant misunderstanding.
A standard revocable living trust generally should not be viewed as an asset-protection device against your own creditors.
If you create a typical revocable trust, retain control over it, and can take the property back, transferring your assets into that trust generally does not place them beyond the reach of your existing creditors merely because the word “trust” appears on the title.
Asset-protection planning is a different and significantly more complicated area of law.
When Might a Will Be Enough?
Despite all of the advantages of trusts, not everyone needs one.
Missouri provides several ways for property to pass outside probate.
For example, depending upon the circumstances, a Missouri resident might own:
- A home subject to a properly recorded beneficiary deed;
- Bank accounts with payable-on-death beneficiaries;
- Investment accounts with transfer-on-death beneficiaries;
- Life insurance with designated beneficiaries;
- Retirement accounts with designated beneficiaries; and
- Jointly owned property that passes to a surviving owner.
Missouri specifically recognizes beneficiary deeds that can transfer real estate to a designated beneficiary at the owner’s death if the statutory requirements are satisfied.
For someone with a relatively straightforward estate, responsible adult beneficiaries, no significant concerns about incapacity or inheritance management, and assets that can be effectively transferred through beneficiary designations, a will-based estate plan may be entirely appropriate.
A good estate plan should not be more complicated or expensive than necessary.
An Example: When a Will May Be Sufficient
Consider a widowed Missouri resident who has:
- One adult child;
- A home with a properly recorded beneficiary deed to that child;
- A checking and savings account naming the child as POD beneficiary;
- A retirement account naming the child as beneficiary;
- Life insurance naming the child as beneficiary; and
- Ordinary personal property.
There may be little practical reason to establish a revocable living trust solely for probate avoidance if the existing nonprobate transfers accomplish the client’s objectives.
A properly drafted will can serve as a backup for property that does not otherwise pass through a beneficiary designation.
That person should still have appropriate powers of attorney and health-care documents, but a trust may not provide enough additional benefit to justify the added complexity.
An Example: When a Trust May Make Much More Sense
Now consider a married couple who has:
- A substantial home;
- A lake property;
- Rental real estate;
- Significant investment accounts;
- A closely held business;
- Children from prior relationships;
- A beneficiary who is financially irresponsible; and
- Specific wishes about when and how their children should receive an inheritance.
That is a very different estate-planning situation.
A revocable living trust may provide a centralized structure for managing those assets, planning for incapacity, avoiding probate on properly funded assets, providing for the surviving spouse, and controlling the ultimate distribution of the estate.
What About Small Estates in Missouri?
Missouri also provides a simplified procedure for certain small probate estates.
Under § 473.097, RSMo, Missouri’s small-estate procedure may be available when the value of the entire estate, less liens, debts, and encumbrances, does not exceed $40,000, assuming the other statutory requirements are satisfied.
Generally, at least 30 days must have passed after the person’s death before the small-estate affidavit procedure can be used.
For someone with limited probate assets, this is another reason a trust may not always be necessary.
Even If You Have a Trust, Should You Still Have a Will?
Yes.
A revocable living trust and a will are not necessarily alternatives where you pick one and throw away the other.
A trust-based estate plan will commonly include a pour-over will.
The will acts as a backup for assets that were inadvertently left outside the trust and directs those probate assets into the trust after death.
However, there is an important catch:
The pour-over will does not magically avoid probate for an asset that should have been placed in the trust but wasn’t.
If the asset is a probate asset at death, probate may still be necessary to transfer it under the will into the trust.
This is why maintaining and properly funding the trust remains so important.
So, Do You Actually Need a Trust?
There is no responsible one-size-fits-all answer.
A trust may deserve serious consideration if:
- Avoiding probate is an important goal;
- You own substantial or complicated assets;
- You own real estate in multiple states;
- You want a seamless mechanism for managing assets during incapacity;
- You have minor children;
- You do not want children receiving their entire inheritance immediately;
- You have a beneficiary with financial, creditor, disability, or other concerns;
- You have a blended family;
- You own a business or multiple pieces of real estate; or
- You want greater control over how property is managed after your death.
On the other hand, a will-based estate plan may be entirely sufficient when the estate is relatively simple and assets can be efficiently transferred through beneficiary designations, beneficiary deeds, joint ownership, and other Missouri nonprobate-transfer mechanisms.
The Best Estate Plan Is the One Designed for Your Family
Estate planning should not begin with the assumption that everyone needs a trust—or that everyone only needs a will.
It should begin with questions.
What do you own?
How is it titled?
Who should receive it?
What happens if you become incapacitated?
Do you want your beneficiaries receiving their inheritance outright?
Would any of your property require probate?
Are there family circumstances that require additional planning?
Once those questions are answered, an estate-planning attorney can determine whether a will-based plan is sufficient or whether a revocable living trust provides meaningful additional benefits.
Talk to a Missouri Estate Planning Attorney
A good estate plan isn’t necessarily the one with the most documents. It is the one that accomplishes your objectives as simply, efficiently, and reliably as possible.
For some Missouri families, that means a will, powers of attorney, beneficiary deeds, and carefully coordinated beneficiary designations.
For others, a properly drafted and funded revocable living trust can make administration substantially easier and provide a level of control that a simple will-based plan cannot.
If you are wondering whether you actually need a trust in Missouri, contact our office to schedule an estate-planning consultation. We can review your assets, family circumstances, and goals and help determine which type of estate plan makes sense for you.
This article is provided for general informational purposes only and does not constitute legal advice. Estate planning is highly dependent upon individual circumstances, asset ownership, beneficiary designations, tax considerations, and changes in Missouri and federal law. Consult a qualified attorney regarding your particular circumstances.