Gregory E. Robinson, P.C.

Typically, a grantor will execute a written document, known as the trust instrument, which sets forth the grantor’s instructions regarding the disposition of his or her assets upon the grantor’s disability or death. The trust instrument must be in writing if it holds real estate in order to comply with the Statute of Frauds. Missouri law requires that the trust be in writing and provides in part, that all declarations or creations of trust of any lands shall be manifested and proved by some writing signed by the party or by the party’s last will, in writing, or else they shall be void.

You might recall from my discussion of capacity under my Will tab that I discussed the capacity required to make a will in detail. In order to create a living trust in Missouri, the individual must possess the same testamentary capacity as that required to execute a will. In order to possess the necessary testamentary capacity in Missouri to execute a will, a person must be of sound and disposing mind and memory.

Missouri Approved Jury Instruction (MAI) 15.01 defines the phrase sound and disposing mind and memory. That phrase means that when a person signed the will that he or she was, first, able to understand the ordinary affairs of life, second, able to understand the nature and extent of his or her property, third, able to know the persons who were the natural objects of his or her bounty and, fourth, could intelligently weigh and appreciate the natural obligations to those persons.

The first requirement of MAI 15.01 requires the testator to understand the ordinary affairs of life is an inexact definition and open to many interpretations. It might mean that the person is oriented as to time and space. Some cases have discussed this factor and held that the individual executing the will needed to be able to understand the necessity of providing for the daily needs of life. It has also been interpreted as not being required to understand complicated business transactions. The testator must understand the nature of the transaction of executing a will. This is a basic requirement that the testator know he or she is signing a will. If the testator cannot understand that he or she is executing a will, then the testator lacks the necessary capacity to execute the will.

The second requirement of MAI 15.01 is that the testator must understand the nature and extent of his or her property. The testator needs to understand the nature and extent of his property so that he or she can determine who the beneficiaries of the will are and what each beneficiary should receive. This does not mean that the testator must have a perfect knowledge of the assets and liabilities in his or her estate. A general knowledge of the nature and extent of the property will suffice.

The third requirement of MAI 15.01 is that a testator must understand the natural objects of his bounty. The knowledge may be general in nature but clearly the testator should know the names and number of his or her children. Additionally, it is not unrealistic to expect that the testator know the name of his or her spouse, if any.

The last requirement of MAI 15.01 is that a testator must be able to intelligently weigh and appreciate the natural obligations to the objects of his or her bounty and understand the disposition of the property as set forth in the will. This requirement focuses on the disposition of the testator’s assets. The testator must have the required understanding of who the testator desires to name as beneficiaries of his or her estate plan.

As set forth in MAI 15.01, the testator must have satisfied all four requirements at the time of the execution of the will in order to be of sound and disposing mind and memory.

The grantor of a revocable living trust must satisfy all of the above requirements in order to meet the necessary capacity requirement to create a trust in Missouri.

A living trust is an extremely flexible estate planning tool and be used for a number of reasons. Many people use a living trust as the foundation for their estate plan.

The key to making a living trust work is the transfer of title of the assets into the name of the trust. When the grantor creates a living trust and transfers the title of the assets to the trustee, upon the grantor’s passing the assets titled in the living trust do not have to go through the probate process during trust administration.

A living trust is used in order to avoid the expense and delay of probate. Assets that have been titled into the name of the living trust will avoid the expense and delay of probate upon the death of the grantors. A living trust is a private document, and unlike a Will, is usually not filed in the probate court.

Another common reason for using a living trust is to protect against a probate conservatorship proceeding. If an individual creates a living trust and then subsequently lack the ability to manage his or her finances, the successor trustee named in the document can pay the bills and manage the assets for the benefit of the grantor, and avoid a conservatorship proceeding.

A living trust is an especially effective vehicle when an individual owns real estate in two different states. By transferring the title to the real estate in both states into the name of the living trust, the grantor avoids probate in both states.

Another common reason for creating a living trust is to hold assets in the living trust upon the grantor’s passing for the benefit of minor children or grandchildren. Creating a living trust and choosing a successor trustee who will manage the assets for the minor children or grandchildren allows the grantor to provide for the beneficiaries’ college expenses, and their health, maintenance, or support.

Additionally, by holding assets in the living trust after the grantor’s passing and incorporating a spendthrift provision in the trust, the assets in the trust are protected against the beneficiaries’ creditors and their spendthrift propensities. State law provides that a spendthrift protection clause will protect the assets in the trust from the creditors of the beneficiaries.

As individuals age it is quite common for a parent to establish a living trust and name a son or daughter to serve with him or her as a co-initial trustee. The son or daughter named as a co-initial trustee will assist the parent with the management of the assets and the payment of the parent’s liabilities.

There are many additional types of trusts which can be utilized for specific situations. These additional trusts include, but are not limited to:

• Special Needs Trust
• Charitable Lead Trust
• Charitable Remainder Annuity Trust
• Charitable Remainder Unitrust (CRUT)
• Standard Unitrust
• Net Income Unitrust
• Net Income with Makeup Unitrust
• Grantor Retained Income Trust
• Grantor Retained Annuity Trust
• Missouri Asset Protection Trust
• Qualified Personal Residence Trust
• Qualified Terminable Interest Property Trust (Q-TIP)

If you have questions concerning whether a living trust is right for your estate plan, please feel free to contact one of the attorneys at the law firm of Gregory E. Robinson, P.C.