Real Estate Taxes

If you live in the City of St. Louis or St. Louis County, Missouri, you recently received a Notice from the Assessor advising you of the new appraised value of your real estate.  For most people that means your residence.

The Assessor is required by law to re-assess the value of all real estate located in his or her jurisdiction every other year.  For St. Louis and St. Louis County, that means odd numbered years.

Of course, the effect of an increase in your assessment is an increase in your real estate taxes.  For those whose assessment increased face the good news-bad news conundrum.  Your property is increasing in value [smile], but you have to pay more in real estate taxes [frown].

In most reassessment years, the Assessor’s work generates very little attention.  Some values increase, some decrease … but the percentage of increase or decrease is relatively small.  Usually less than 10%.

This year, however, the Assessor’s analysis of real estate values in St. Louis City and County has generated quite a bit of attention.  Some, like me, received notices increasing the appraised value of their property by 50%.  Some others received notices reflecting increases of over 100%.  In many of these cases, like mine, no improvements were made to the property.

Angry taxpayers want to know what’s going on.  (I do.)

So, what can you do if you are not happy with the appraised value of your property as shown on your reassessment notice?  One word:  Appeal.

There are two avenues of appeal, and you may want to take advantage of both of them.  One approach, if your property is single family, residential real estate, is to ask for an informal conference.  The informal conference gives you an opportunity to sit down with  a representative of the Assessor’s Office and discuss the value of your property.

The Assessor’s Office will explain how they arrived at their value and you can tell the Assessor your opinion of your property’s value.  You are allowed to provide information supporting your opinion, such as comparable sales, unusual conditions on your property, and other information that would suggest that your property is not worth as much as the Assessor thinks it is.

Many taxpayers are able to achieve a reduction in their appraised values in the course of the informal conference.  If satisfied with the reduction, taxpayers can settle with the Assessor.  The deadline for scheduling an informal conference in St. Louis County is June 9, 2017.

If you are not satisfied with the result of the informal conference, you can take your appeal to the Board of Equalization.  The deadline for filing an Appeal with the Board of Equalization (in the City or the County) is the second Monday in July (July 10, 2017).

The following information is available from St. Louis County’s website:

Appeals Brochure 17_Page_1Appeals Brochure 17_Page_2

For more information regarding your property assessment in the City of St. Louis, go to this website.

To obtain Forms for filing an Appeal with the Board of Equalization in the City of St. Louis, request them in person, or by writing to: Board of Equalization, Room 120 City Hall, St. Louis, MO 63103.

To file an online Appeal with the Board of Equalization in St. Louis County, click HERE.

To download a form to file an Appeal with the Board of Equalization in St. Louis County, click HERE.


Doing Your Homework

Probate avoidance in Missouri requires more than just signing your Revocable Living Trust.  You must make sure your financial assets are properly positioned to achieve probate avoidance.  We refer to that as “Doing Your Homework” and it is as important as the creation of your Revocable Living Trust in so far as probate avoidance is concerned.

If you have a Revocable Living Trust, but have not yet done your homework, you are at risk that at least part of your estate will have to be probated.  So, its time to do it.

“Homework” requires attention to five categories of your assets:

  1. Non-Retirement Accounts.
  2. Life Insurance Policies.
  3. Retirement Plans.
  4. Automobiles, boats, trailers, RVs, motorcycles, etc.
  5. Real Estate.

Virtually every asset you own will fall into one of these categories.  (You do not need to worry about tangible personal property for which there is no title.  For example: furniture, jewelry, tools, electronics, etc.)

Non-Retirement Assets

Non-Retirement Assets are you bank accounts, savings accounts, money market accounts, mutual funds, US Savings Bonds, non-retirement brokerage account, etc.  Anything that is NOT owned by your retirement accounts, such as an IRA, 401(k), 403(b), etc. plans.

Your “homework” requires that you change the title on these accounts from your individual name to that of your trust.  Your trust owns assets in the name of its Trustee.  So, the name into which you would change your Non-Retirement Assets to would be:  John S. Doe, Trustee of the John S. Doe Revocable Living Trust dated [date it was signed].  For married couples it would be:  John S. Doe and Jane S. Doe, Trustees of the John S. Doe and Jane S. Doe Joint Revocable Living Trust dated [date it was signed].  The tax id number for the account would be your social security number.

Life Insurance Policies

Change the beneficiaries on your life insurance policies to your trust.  The designation for that would be:  Trustee(s) of the John S. Doe Revocable Living Trust dated [date it was signed] or for married couples, Trustee(s) of the John S. Doe and Jane S. Doe Joint Revocable Living Trust dated [date it was signed].

Retirement Accounts

If all of your children are adults, we recommend that the beneficiary designations on your Retirement Accounts name your spouse as your primary beneficiary, and your Trustee(s) of the John S. Doe Revocable Living Trust dated [date it was signed]children as your first contingent beneficiary.  This will allow your children to take distributions from the account over their lifetime if they wish, which will yield them the best financial return.  This is sometimes referred to as a “stretch” IRA.

If any of your children are minors, we recommend that the beneficiary designations on your Retirement Accounts name your spouse as your primary beneficiary, and your trust as the first contingent beneficiary.  It is important that your trust includes language to allow for the pass-through of these benefits to your beneficiaries.  The rules are fairly complicated, so make sure to discuss this with your attorney.

Automobiles, boats, trailers, RVs, motorcycles, etc.

We recommend that you own all of these types of assets in joint names (if you are married) or in your name alone (if you are not married) and that you add a Transfer on Death (TOD) to your title naming your Trust as beneficiary.  The TOD would be:  John S Doe, Tree UTA dtd [xx/xx/xxxx] or JS and JS Doe, Tree UTA dtd [xx/xx/xxxx].  The Missouri Department of Revenue limits the TOD designation to 38 characters.

Go to your local License Office to get this done.  Take your titles with you.  Fees vary, but $12 per title seems to be the going rate.

Real Estate

Your home and any other real estate you own should be owned in your name (and jointly with your spouse if you are married).  Your lawyer should prepare a Beneficiary Deed for you leaving your real estate to your Trust upon your death (or the death of you and your spouse if you are married).  If your real estate is “free and clear” of any mortgages or other liens, then we sometimes transfer title directly to the Trust.

Talk to your lawyer about what is right for your situation.

Remember, doing your homework is extremely important if you have a Revocable Living Trust as part of your estate plan.  Although the “deadline” for getting it done is “before you die,” don’t put it off.  Make a commitment to yourself to get it done as soon as possible.  Your plan to avoid probate is at stake.

Trusts and IRA Beneficiaries: Beware.

There is a very important income tax benefit that your beneficiaries could miss out on if you aren’t careful.  The benefit I’m talking about is the ability to withdraw money from a so called “inherited IRA” over the lifetime of the person who received the IRA as an inheritance.

Consider this example.  Assume you have two children, A and B.  You contact your IRA custodian and name your children, A and B, as beneficiaries of your account.  Upon your death, your children will be able to have inherited IRAs set up for each of them and withdraw money from the newly inherited accounts under IRS Required Minimum Distribution (RMD) rules, including the rules allowing  for the withdrawal of funds over their lifetime.

Assume that your account was worth $200,000 at your death.  Each child would then receive an inherited IRA worth $100,000.  Child A elects to withdraw money from his account over this lifetime.  Child B elects a lump sum distribution.

Assuming a rate of return of 5%, at the end of year 1, Child A would have $105,000 in his account, and would have to withdraw an amount determined by reference to his life expectancy.  Assuming his life expectancy is 30 years, he would have to withdraw and pay tax on $105,000/30 or $3,500.  So, after withdrawing $3,500 from the account, he would have a balance in his inherited IRA of $101,500 going into year 2.  And he would have $2,450 in cash left over from the $3,500 distribution to boot!

Child B, on the other hand, having taken a lump sum distribution, would have to pay tax on $100,000.  Assuming a tax rate of 30%, he would have $70,000 left to invest.  Assume the same 5% rate of return, he would earn $3,500 over the course of year.  Of that $3,500, he would have $2,450 left after taxes.  The balance in his investment account would be $72,450 going into year 2.  This is $31,500 less than Child A.

And with each passing year, Child A will have more money invested that Child B and will earn more (after tax) than Child B.  Over time, the difference between the two accounts grows.

Understanding the importance of being able to withdraw funds from an IRA over a beneficiary’s lifetime, what is it that would prevent your children from being able to do that?

The general rule for RMDs is very simple.  If the beneficiary is an individual (as opposed to an entity like a corporation, partnership, llc or trust), the lifetime RMD rules apply.  If the beneficiary is a corporation, partnership, llc or a trust, the lifetime RMD rules do not apply.  There are, however, exceptions for trusts that meet specific requirements.

If you have a revocable living trust and name the trust as the beneficiary of your IRA account, there is some risk that the beneficiaries of your trust (your children) could lose the right to use the lifetime RMD rules.

Parents of minor children often name their living trust as the beneficiary of their IRAs when the survivor between them dies.  They do this because their children are not old enough to manage their own money.  The idea is that the trustee of the trust would manage the children’s money, including their IRA funds, if their parents died before they were old enough to manage it for themselves.

The problem is that if the trust is not drafted in a manner that satisfies the IRS’s specific requirements, the children could lose the right to use the lifetime RMD rules.  Without the ability to elect lifetime RMD treatment, your trustee would be forced to withdraw (and pay tax on) all of the IRA funds within five years.  This could be economically disastrous for your family, depending upon your particular circumstances.

So, be aware.  Lifetime RMDs provide real economic benefits to those who inherit IRA accounts.  Make sure that your children will be able to take advantage of them.

If you children are adults, name them as the primary beneficiary of your IRAs.  If your children are minors, its OK to name your living trust as the beneficiary of your IRAs, but make sure that your trust is drafted so that it allows for lifetime RMD treatment.

Call me or send me an email if you want further information.

Chuck James


Will I Have to Pay Estate Taxes?

If you own less that $5.4 Million in assets (including life insurance and the assets held by your revocable living trust) at the time of your death and you live in the State of Missouri, you will not have to pay any estate taxes.  So, for most people the answer is “no.”  If you are one of the few whose assets would exceed $5.4 Million, there are ways to reduce or eliminate the amount of estate taxes you would have to pay using well-established estate tax planning strategies.  A good estate planning attorney will walk you through the options available to you and your family to address these tax issues.


The Healthcare Power of Attorney

A Healthcare Power of Attorney is a document you can use to appoint a person to make health care decisions for you when you are unable to make them for yourself.  (If you are able to make and communicate health care decisions yourself, the law requires you to make them.) This document is designed to work in tandem with the Medical Directive when dealing with decisions concerning feeding tubes and respirators.  Your healthcare power of attorney is authorized to make routine healthcare decisions for you as well as decisions about whether to put in a feeding tube or “pull the plug” on a respirator.

Medical Directive (Living Will)

A Medical Directive (sometimes called an Advance Directive or Living Will) is a document that addresses whether you want to be kept alive using feeding tubes or respirators under circumstances where your attending physician and two other medical consultants believe you are going to die and there is no reasonable likelihood that you can recover from your illness or injury.  Some Medical Directives include a Healthcare Power of Attorney in the same document.

The Power of Attorney

A Power of Attorney is a document you use to appoint someone to handle your affairs for you if you become legally disabled.  In those estate plans that do not include a revocable living trust, a General Durable Power of Attorney is often used.  This document grants a person of your choice the power to do virtually anything that you yourself could do in virtually any situation.  You cannot, however, give anyone authority to make a will for you or to vote in an election for a candidate.

In those estate plans that include a revocable living trust, we usually recommend using a “Special” Durable Power of Attorney.  This document authorizes a person of your choice to handle a limited number of things that fall outside the authority of the Trustee of your trust.  Those things include transferring property to the trust, managing life insurance and retirement plans, signing tax returns, applying for government benefits and obtaining medical information.  If you have a trust, the day-to-day management of your finances and payment of your bills is handled by the Trustee under the authority granted him or her by the trust.

The Last Will and Testament

A Last Will and Testament (Will) is essentially a set of instructions for the Probate Court to follow to probate your estate.  If your estate plan includes a revocable living trust, the Will is often referred to as a “Pour Over” Will.  This is because the terms of the Will direct that all of the property in the probate estate be distributed (or poured over) to the decedent’s revocable living trust.

In estate plans that do not include a revocable living trust, the Will sets forth who you want to distribute your property to, and how you want it distributed.   If you plan to distribute your property by Will, you are effectively deciding that you want all of your property to be probated.


The Revocable Living Trust

One of the most basic estate planning tools is a revocable living trust.  A revocable living trust is an amendable and terminable contract, entered into by a single person or married couple during their lifetime, to provide for the management of their financial affairs for the remainder of their life and beyond death.

There are generally five major parts to a revocable living trust.  An introductory section in which the trust is declared to be created, your family is identified and the trust is funded.  A section that addresses what happens during your lifetime.  A section that addresses what happens at your death.  A section that addresses matters relating to your Trustees.  And, finally, a section that addresses general and administrative matters.


Revocable living trusts are frequently used to avoid probate and provide a means by which a person’s property can be managed in the event of his or her disability and upon death.  Property owned by the trust is not subject to probate because it is not owned by you at your death.  Property left to the trust by beneficiary designation is likewise not subject to probate because of the beneficiary designation.  For high net worth clients (clients whose net worth is over $5.25 Million) a revocable living trust can also be used to eliminate or reduce estate taxes.

Think of a revocable living trust as an entity you create to manage your personal financial affairs.  You are both the Trustmaker and the Trustee.  As Trustmaker, you establish the rules pertaining to the operation of the Trust.  As Trustee, you agree to follow those rules.  You appoint others to serve as Successor Trustee if you become disabled and at your death.  They agree to follow the same rules and carry out the purposes for which the Trust exists at that point in time.  If you become disabled, the trust exists for the purpose of taking care of you.  When you die, the trust exists for the purpose of paying your bills and carrying out the distribution of your property to your beneficiaries, much as you might have done in your Will.


While you are alive and well, you can do anything you want with property in your trust.  You are in complete control.  You can invest your money any manner you want.  You can decide what bills to pay and which to contest or put off paying.  You can amend the terms of the trust at any time and from time to time or revoke it altogether.  The trust cannot be changed without your approval, but nothing is cut in stone until your death.

Revocable living trusts are often used in the estate plans of married couples with minor children; single persons and married couples with many beneficiaries, many parcels of real estate, or a closely held business.  The primary reason for this is that the trust avoids probate and centralizes the management of your property in more complicated situations.


Finding a Good Lawyer

Once you are organized, you need to select a lawyer to help you put your plan in place.  In selecting an attorney, keep in mind that different lawyers handle different kinds of legal matters.  Personal injury and trial lawyers generally do not handle estate planning cases.  The lawyer you are looking for should be knowledgeable about wills, trusts, powers of attorney, medical directives, healthcare powers of attorney, HIPAA Releases, estate taxes, income taxes, charitable giving, and retirement plans, among other things.


Chuck James, Tom Hutchison, Mike James and David Forth

Selecting a lawyer who will meet your legal needs is not – and should not be – an easy decision. The wrong estate plan can have a negative impact on your life for years to come. Thus, you should carefully select a knowledgeable attorney who will represent you effectively and efficiently.

The best way to find a qualified lawyer is to ask questions of people you trust: family, friends, doctors, or others whose advice you consider worthy. Have they had experience with a particular estate planning lawyer or law firm? Were they satisfied with the way the lawyer handled their estate plan? Was the lawyer responsive to their questions? A lawyer’s reputation for effectiveness and trust often speaks volumes about his or her character – something of vital concern to you as you work with him or her in addressing your estate plan

Once you have identified a prospective estate planning attorney, call and make an appointment for an initial consultation.  Many estate planning attorneys are willing to meet prospective clients for an initial consultation free of charge.

In the course of the initial meeting with the attorney, you should expect him or her to ask you questions about your family situation and your goals in creating an estate plan and to get to know you. Married or single?  Children and their ages?  Do any of them have disabilities?  Approximate size of your estate?  Have you previously created an estate plan?  Do you own a business?  If so, do you have a plan in place for the continued operation of your business in the event of your disability or death?  Are you worried about Probate?  Are you concerned about estate taxes?  Have you been involved with a particularly difficult estate in the past?

Use your time in the meeting to ask questions and get to know the lawyer.  How long has he or she been in the practice?  How much of his or her work is devoted to estate planning?  How does he or she charge for services?  How long does he or she anticipate that it will take to put a plan in place?  This is your chance to see if you would be comfortable working with this person as your attorney.  If you aren’t comfortable, keep looking until you are.