A lay person’s guide to the Law

Wills and Estate Planning.

The attorney’s primary role in assisting a client with their estate planning is to help the client sort out their objectives with regard to their estate -- the property they currently own or intend to own at the time of their death. Some of those objectives are: determining the impact, if any, of estate taxes; deciding the timing of gifts to heirs, whether during life, upon death, or through a trust which distributes assets over a period of years or decades; assessing the impact of nursing home or long term care costs on one’s estate; balancing the desire to preserve one’s estate for one’s heirs and the costs of long term care in later life; planning for the needs of a minor child should one die while one’s children are still young; implementing one’s charitable intentions; and planning for the succession of one’s family business.

Through a Will or Trust, a client can achieve many of their objectives. Perhaps one’s goal is to ensure the financial security of their spouse or children, or to leave one’s legacy by giving to their favorite charity on death.

The exact form of one’s estate plan requires an in-depth discussion between you and your attorney about your goals. There are many options: Simple Will, Will with trust provisions, Revocable Living Trust, Family Limited Partnership, and so forth. The decision as to what is best for you and your situation can only be made after a personal consultation.

It is not advisable to prepare your own estate planning documents. A “form” which you find on the internet or a stationery store may not fit your situation or it may not conform to Minnesota law. A form which you create may not include all the provisions to make it enforceable in Minnesota.

Come to a conference with your questions and thoughts. A qualified attorney will be able to address your situation and concerns.

Probate (and Avoiding Probate)

When a person dies, they will often own assets solely in their name and without any beneficiary designation associated with the property. Probate is the process of gathering all assets of the person who died (“the Decedent”), determining which of those assets need to be “probated” by the Court, paying the bills of the Decedent, and distributing the assets (after payment of bills) to the Decedent’s heirs or to the persons named in the Decedent’s Will.

Some assets need to be probated and others do not. Under Minnesota Law, assets that need to be probated are those that are solely in the Decedent’s name and for which there is no beneficiary designated. Assets held jointly with another person generally do not need to be probated; for example, real property (real estate) held in joint tenancy in Minnesota passes to the other joint tenant(s) (also called the “survivor”) and therefore does not need to be probated. Joint bank accounts and joint investment accounts also are usually not probated on death. Life insurance and bank accounts or certificates of deposit which name a beneficiary do not require probating (for bank accounts this is called a POD or pay on death instruction).

If one has a Will, the assets will be distributed to the persons named in the Will. If the Decedent does not have a Will, the assets will be distributed to the person’s heirs at law (next of kin) as specified by state law. In Minnesota, the rules regarding one’s “heirs at law” are found in the Laws of Intestate Succession.

One can avoid probate by titling one’s assets in such a fashion that the person does not own probate assets on death. For example, one can own one’s assets in trust and avoid probate entirely on all assets held in trust.

A person should keep in mind that if one is trying to avoid probate by titling one’s assets in joint tenancy or by naming persons as beneficiaries, that there will be no assets to pass through one’s Will on death. Consider this example. If your Will provides that one-half of your assets will pass to charity and one-half will pass to your family, and you own all of your assets in a way that makes them non-probate-able on death (for example in joint tenancy with family members and/or naming them as beneficiaries), then none of your assets will pass to charity on your death because you have made your Will ineffective – there simply will be no property passing through your Will, i.e. to the persons or organizations named in your Will, on your death. Avoiding probate has consequences. Be aware of those consequences if they are not consistent with your goals.

A complete review of your assets will allow the attorney to provide legal advice to you as to how to accomplish your goals – whether it is to avoid probate, to pass assets through your Will, or other goals.

With very few exceptions (for example, untitled personal property which has a total value of $20,000 or less and life insurance passing directly to a trustee), the simple truth is that you need probate property (or probate-able property) on your death for your Will to be effective in directing whom receives your assets (your “estate”) on your death.

Trying to avoid probate can frustrate other goals you may have as well, for example tax planning related to estate taxes, providing for an incapacitated spouse, providing for a minor child into their adulthood, planning for the succession of your business, and so forth.

A Revocable Living Trust is often an excellent alternative to other methods of avoiding probate, and can often permit one to meet one’s other objectives as well. Proper transferring of assets into the trust is required for the trust to be effective in avoiding probate. A competent attorney will provide the client with instructions on how to accomplish the transfers and/or offer to assist the client with all transfers into the trust.

In a conference with an attorney, you will be able to explain your goals and receive advice about how to accomplish them. Every situation is unique, because every client is unique. Clients should receive competent advice specific to their situation.

Planning for Incapacity. Perhaps the simplest, yet most powerful legal document, is a Power of Attorney. A Power of Attorney allows you to name an “agent”(sometimes called an “attorney in fact” – i.e., someone who acts on your behalf), usually your spouse or other loved one, to handle your property and your finances in the event of your incapacity. In Minnesota, a Statutory Short Form Power of Attorney can be used to transfer real estate owned by both spouses when one spouse is incapacitated. Without a Power of Attorney, a spouse could not even re-finance a mortgage or get a new mortgage on their home unless the spouse established a court guardianship for the incapacitated spouse and obtained a court order to mortgage or sell the premises – a costly ordeal for a spouse who may already be in a difficult financial or emotional situation following their spouse’s incapacity.

A Power of Attorney document must be safeguarded and should not be placed with your “agent” until such time as it is needed. A Power of Attorney may be limited in scope (e.g. to handle a single real estate transaction) or can be drafted to be very broad in scope. Other types of power of attorney documents are available and my be desirable in certain circumstances. An attorney should be consulted before entering into a Power of Attorney, so that the right Power of Attorney document is executed for your circumstances.

Another method of planning for incapacity is through a trust, either a Revocable Living Trust or an Irrevocable Living Trust. These trust instruments allow a person to name a trustee to handle one’s trust assets after the person is no longer able to do so themselves, without court involvement.

Elder Law. Due to the many changes in the law at the State level in Minnesota, and the uncertainty as to the future response of the federal government to Minnesota’s legislative initiatives, no substantive information will be provided at this website as to the current status of the law relating to Medical Assistance. Clients should seek a personal consultation with the attorney on this subject.

PreNuptial Agreements (also known as Ante-Nuptial Agreements). PreNuptial Agreements are helpful to persons who will be marrying or remarrying, and who have one of the following concerns or issues: children of a previous marriage or relationship; significant assets upon entering the new marriage; a family business; an anticipated inheritance, and the like. Having a prenuptial agreement prior to marriage will allow you to dispose of your assets on death in the manner you desire (e.g. a substantial portion to your children), rather than being bound to Minnesota law and the substantial protections afforded to spouses (new or otherwise), which may or may not be desirable in one’s own case. In other words, if the PreNuptial agreement is enforceable under Minnesota law, and certain statutes are waived by your spouse in the PreNuptial Agreement, you will be able to make a Will after marriage that allows you to give less to your spouse than what would be required by law without a PreNuptial Agreement.

Similarly, people enter into a PreNuptial Agreement to protect their pre-marital assets in the event of later divorce. If the PreNuptial agreement is enforceable under Minnesota law, and certain provisions are included in the PreNuptial Agreement to allow protection of one’s pre-marital assets, or expected inheritances and the like, one’s pre-marital assets may not be subject to division on dissolution of the marriage.

Exceptions to these general concepts exist, as the appellate courts continue to interpret this area of the law. Unforeseen changes of circumstances during the marriage appears to be one basis for making a prenuptial agreement “substantively unfair” at the time of the divorce, under Minnesota law. Procedural rules must be strictly followed at the time that a Prenuptial Agreement is written and signed, or its enforceability will be in doubt at the time of divorce or death of a spouse.