Estate Planning

Do I need an Estate Plan?
Whether you are younger or older, married or single, a parent or without children, wealthy or not, you need to invest in an estate plan. You and your loved ones can gain a lot through estate planning; moreover, even more can be lost if you don’t.
Estate planning is the process by which an individual or family arranges the transfer of assets in anticipation of death. An estate plan aims to preserve the maximum amount of wealth possible for the intended beneficiaries and flexibility for the individual prior to death.
Estate planning is much more than having a will. Proper estate planning will avoid the chaos and wasted assets of an unplanned estate, enhance your sense of security, and provide a dimension of personal well-being to your loved ones.
Wills and trusts are common ways in which individuals dispose of their wealth. Trusts, unlike wills, have the benefit of avoiding probate, a lengthy and costly legal process that oversees the transfer of assets.
What is a trust?
Generally, a trust is a right in property (real or personal) which is held in a fiduciary relationship by one party for the benefit of another. The trustee is the one who holds title to the trust property, and the beneficiary is the person who receives the benefits of the trust.
A trust is a form of property ownership. The person who sets up a trust is called the “grantor” or “settlor.” The trustee is the “legal” owner of the trust property, and her name is on any document of title. The beneficiary is the person who receives the benefits of ownership, such as the right to receive the income from the trust’s investments. A “living” or “intervivos” trust is one that is set up and funded while the grantor is alive. Usually the grantor names his or her self as both trustee and beneficiary. In contrast, a trust which comes into being under the terms of a will, after the grantor’s death, is called a “testamentary” trust.
How does a trust avoid probate?
When an estate is conveyed through a Will, the probate court must validate the Will before its provisions can be executed. The probate process can require up to two years. Assets held in a Living Trust, however, are not subject to probate. There are several advantages of avoiding probate.
Expedited Distribution. A Living Trust allows assets to be distributed to your heirs as quickly as your trust agreement instructs and the taxing authorities allow, without the additional delays of probate. Your spouse, for instance, could receive income to provide for living expenses immediately.
Expense Reduction. The expenses of probate are completely avoided for all assets held in your Living Trust.
Privacy and Confidentiality. When a Will is entered into probate, all of its provisions become a matter of public record. Since a Living Trust is a private arrangement, its terms are not made public at your death. Your assets and intentions are known only to your trustee and beneficiaries.
What is a will?
A will is a written statement directing who will wrap up your financial affairs, and who will receive your money and other property, when you die. The property left in your name at the time of your death is called your “estate.” The ones you name in your will to receive your property upon your death are called “legatees.” They may or may not also be your “legal heirs.” The person named in your will to be in charge of your estate when you die is called the Executor. The job of the executor is to investigate what you own at the time of your death, make a list of all of your property, collect all of your property, care for your property until it is sold or passed on to the people you have selected to inherit it from you, pay your bills, file your final tax returns, and finish up any other financial business required of your “estate” after your death. Once everything is done to wrap up your financial business, the remaining money or other property can be distributed to the legatees named in your will. Money and property held in joint tenancy ownership, such as a bank account or house, goes automatically to the surviving co-owners upon the death of one owner. Similarly, property held in trust, or in a payable-on-death account, goes automatically to the named beneficiary upon the death of the owner. Life insurance proceeds go automatically to the named beneficiary on the death of the insured person. These types of property are not affected by your will. Each state sets formal requirements for a legal will. In Minnesota, the maker of the will must be at least 18 years old and of sound mind, the will must be written and the will must be signed and witnessed as prescribed by law.

A will may be changed as often as changes in circumstances or choices dictate. Changes are frequently made by a "codicil" which must be executed in the same manner as the will.
What does a will accomplish?
A carefully crafted will is your most reliable guarantee that distribution of your assets is conducted according to your wishes. In addition, your will:
enables you, if your family includes minor children, to specify who will assume responsibility for their upbringing as well as the manner in which you wish them to be raised
presents the most dependable way of communicating any special intentions you have (arrangements for the continuing care of pets, for example)
provides the best means of indicating who should receive items and "keepsakes" that hold sentimental value
Do I Need a Will?
You may believe that you don't need a will. Perhaps you assume that a will is unnecessary since states laws exist that, absent a will, govern the division and distribution of your assets after your death. Or, you may feel that the size of your estate doesn't warrant a will.
What happens if I die without having a Will?
Not having a will means:
When the decedent has no will, or dies "intestate", his or her property is distributed according to Minnesota State statutes. In other words, if you do not make a will, the law disposes of your estate for you.

Before distribution can take place, however, the payment of expenses of administration, funeral, last illness, taxes (including estate tax), debts and family allowances must be paid. The balance of the estate is then divided among the surviving spouse, if any, the decedent's children, if any, or other more remote relatives. If the decedent has no family or relatives, his or her estate "escheats" to the State of Minnesota.

If the decedent owned a homestead, the surviving spouse receives a life estate with the decedent's children receiving the remainder interest.

As to the remainder of the estate, if the decedent and surviving spouse have children together, the surviving spouse receives the entire estate.

If the decedent's children are not the children of the surviving spouse, the first $150,000.00 and one-half (1/2) of the remainder goes to the surviving spouse with the balance to the children in equal shares. If any child of the decedent fails to survive, that child's share passes to his or her living children, if any.

If no spouse or issue survives, the estate goes to the decedent's parents. If neither parent survives, the estate is divided equally among the surviving brothers and sisters of the decedent, including the children of any deceased brother or sister.
When should I review my existing Will?
Your will may be changed as often as you wish. If the change you desire is relatively simple, an amendment to the document, known as a codicil, is executed with the aid of an attorney. If you decide to write a new will altogether, the new document should specifically revoke all prior wills. (Remember that revoking a will automatically revokes its codicils, but revoking a codicil does not necessarily revoke a will.)
In addition, you should review your will when any of the following events occur:
a change in marital status
the birth of a child
a change in your state of residence
a significant change in the value or character of your assets
a change in intended beneficiaries
the death of a beneficiary
the death of a guardian, trustee, or personal representative named in your will
a change in tax laws affecting federal estate tax deductions and calculations
once every five years
If you believe a change to your will is necessary you should consult an attorney who is familiar with the probate code of the state in which you live. He or she will know how best to comply with various state requirements.
May a person dispose of property in any way the person wishes by a will?
A married person may not completely disinherit a spouse without the spouse's consent in Minnesota. A surviving spouse is entitled to a minimum amount of a decedent's estate, which may be referred to as an "augmented estate" calculation. This calculation includes both probate and non-probate property.

A parent may disinherit an adult child as long as the disinheritance is not occasioned by accident or mistake.

A will cannot establish a trust of infinite duration.

Generally, a will cannot be used to transfer non-probate assets, although exceptions do exist.
How long is a will effective?
A will is effective until it is changed or revoked. An existing will should be reviewed periodically. Changes in the family, the value and kind of property, tax laws or a move to another state may make changes in a will necessary or advisable.

Under Minnesota law the will provisions made by one spouse for the other are revoked by a subsequent dissolution of marriage.
Does a will avoid probate?
This is a common misconception. A will is designed to GO THROUGH probate and transfer any property that the decedent owned in his or her sole name.
Is joint tenancy a substitute for a will?
Joint tenancy can be useful under some circumstances, but may actually increase taxes and expenses under others. It may be suitable for some assets and not for others. It is wise to seek competent legal and tax advice on this subject, and not rely on the advice of a bank teller.
Does a will increase the cost of probate?
The existence of a will does not increase probate expenses, and may reduce expenses. For example, with a will, one can waive the necessity of a performance bond for the executor. If a decedent dies owning probate property, the property must pass through the Probate Court whether a will exists or not.
Does a life insurance program take the place of a will?
Life insurance is simply one kind of property that one can own. By designating individuals or entities (such as trusts) as beneficiary of your life insurance policy, the proceeds will pass outside probate. A life insurance program must be coordinated with other assets to accomplish one's estate planning goals.
Can my will avoid estate taxes?
A will can be drafted and assets can be arranged in such a manner as to avoid or minimize Federal and State estate taxes, as well as income taxes. Unless a comprehensive analysis of your estate is made by competent professionals, significant portions of your estate can be needlessly paid to the government. With a poorly planned estate, little can be done to relieve your heirs from adverse tax consequences caused by the lack of a properly planned estate.