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Minneapolis Estate Planning and Probate Lawyer Blog

Monday, March 16, 2015

First Party and Third Party Pooled Income Trusts, Explained

Generally, a "pooled trust" holds assets for people that have a disability, and/or elderly individuals. The trust is established and run by a not-for-profit organization, which will establish separate accounts for each individual within their system. However, the money of all of the individuals served is added together (in other words, it is pooled together) for investment and management purposes.

There are typically two types of pooled trusts. The first type is sometimes referred to as a "first party" trust. In this type of trust the disabled person places his or her own assets into the trust. Doing so will cause those assets to be non-countable for government benefit programs, such as Medicaid. The trustee of the trust (the not-for-profit organization) can use that person's money to pay for things that Medicaid will not cover. So, the assets are still there for the benefit of the person but their use is restricted. In this type of "first party" trust, any assets that remain when the person dies must be paid to the state up to the amount that the state has paid out for the person's care under the Medicaid program.

The second type of pooled trust is referred to as a "third party" trust. This means that the money did not come from the disabled person. For example, a parent with a disabled child could leave that child's inheritance to a pooled trust for the benefit of the child. The benefit is that the money would still be there for the child but would not disqualify the child from receiving SSI or Medicaid because the money would not be counted for these government programs. Unlike the first party trust, upon the death of the disabled person (in this example, the child) any remaining assets do not have to go to the state but can pass to any other beneficiaries that the parent wanted to have them.

Whether a pooled trust would be of any benefit to you depends upon many factors. Seek the advice of a qualified estate planning attorney to determine your best course of action.


Monday, March 02, 2015

Changing Uses for Bypass Trusts

Minneapolis Estate Planning Lawyer Explains the Reasons Why You May Want a Bypass Trust

Every year, each individual who dies in the U.S. can leave a certain amount of money to his or her heirs before facing any federal estate taxes. For example, in 2013, a person who died could leave $5.25 million to his or her heirs (or a charity) estate tax free, and everything over that amount would be taxable by the federal government. Transfers at death to a spouse are not taxable.

Therefore, if a husband died owning $8 million in assets in 2013 and passed everything to his wife, that transfer was not taxable because transfers to spouses at death are not taxable. However, if the wife died later that year owning that $8 million in assets, everything over $5.25 million (her exemption amount) would be taxable by the federal government. Couples would effectively have the use of only one exemption amount unless they did some special planning, or left a chunk of their property to someone other than their spouse.

Estate tax law provided a tool called “bypass trusts” that would allow a spouse to leave an inheritance to the surviving spouse in a special trust. That trust would be taxable and would use up the exemption amount of the first spouse to die. However, the remaining spouse would be able to use the property in that bypass trust to live on, and would also have the use of his or her exemption amount when he or she passed. This planning technique effectively allowed couples to combine their exemption amounts.

For the year 2013, each person who dies can pass $5.25 million free from federal estate taxes.  This exemption amount is adjusted for inflation every year.  In addition, spouses can combine their exemption amounts without requiring a bypass trust (making the exemptions “portable” between spouses). This change in the law appears to make bypass trusts useless, at least until Congress decides to remove the portability provision from the estate tax law.

However, bypass trusts can still be valuable in many situations, such as:

(1)  Remarriage or blended families. You may be concerned that your spouse will remarry and cut the children out of the will after you are gone. Or, you may have a blended family and you may fear that your spouse will disinherit your children in favor of his or her children after you pass. A bypass trust would allow the surviving spouse to have access to the money to live on during life, while providing that everything goes to the children at the surviving spouse’s death.

(2)  State estate taxes. Currently, 13 states and the District of Columbia have state estate taxes. If you live in one of those states, a bypass trust may be necessary to combine a couple’s exemptions from state estate tax.

(3)  Changes in the estate tax law. Estate tax laws have been in flux over the past several years. What if you did an estate plan assuming that bypass trusts were unnecessary, Congress removed the portability provision, and you neglected to update your estate plan? You could be paying thousands or even millions of dollars in taxes that you could have saved by using a bypass trust.

(4)  Protecting assets from creditors. If you leave a large inheritance outright to your spouse and children, and a creditor appears on the scene, the creditor may be able to seize all the money. Although many people think that will not happen to their family, divorces, bankruptcies, personal injury lawsuits, and hard economic times can unexpectedly result in a large monetary judgment against a family member.

Although it may appear that bypass trusts have lost their usefulness, there are still many situations in which they can be invaluable tools to help families avoid estate taxes.

 Don't pay unnecessary taxes, call now to discuss your options with an attorney.


Monday, February 23, 2015

A Discussion of Wills, Part 3: Beware of “Simple” Estate Plans

“I just need a simple will.”  It’s a phrase I hear at least once a week.   What could be wrong with that?  This post explains the many common situations in which a "simple will" may not be a good fit for your family tells the cautionary tale of one family who relied on a will purchased at a stationary store.


Read more . . .


Monday, February 16, 2015

What Happens If Your Heir Doesn't Want What You Are Giving?

Beneficiaries may not want the asset left to them?  Why? And what happens if they reject it? I explain the reasons why someone may reject an inheritance and what happens to it if they do.


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Monday, February 09, 2015

When to Involve Adult Children in the Estate Planning Process

Should you bring your kids to meet with your estate planning attorney? I discuss the issues related to having them present and what an estate planning attorney should do if you want the children involved.


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Monday, January 26, 2015

Leaving a Timeshare to a Loved One

You have a timeshare in a warm sunny place and want to leave it to a loved one to inherit. How can you do this? What are the issues unique to owning a timeshare?


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Monday, January 12, 2015

A Discussion About Wills, Part 2: Is a copy of a will sufficient?

A Minneapolis Probate Lawyer Discusses the Issue of Using a Will Copy in a Probate 

Many people keep their important documents at home where they are easily accessible. It’s not at all uncommon to find people with a filing cabinet or even a shoe box containing passports, account statements, deeds, tax returns, birth certificates and social security cards. Wills are often added to these files once the estate planning process is completed. In choosing to store your important estate planning documents at home, however, you risk having the originals lost or destroyed in the case of fire, flooding or theft. So what happens if the original version of your will is lost or ruined?

When a person dies, Minnesota law determines what must happen in the state probate proceeding. In most cases, the "original" of the will must be submitted to the probate court in the county where the person resided. If the original of the will cannot be located and provided to the court, Minnesota's probate code does permit the submission of a photocopy of that signed will though it may cause a delay.

Should you lose the original copy of your will, the best practice would be for you to execute a new will which would make things easier for your family and loved ones upon your death. In that case there would be better assurances that your wishes were followed and carried out. Preparing a new will should not take much time for your attorney. If you work with Unique Estate Law, we can easily finalize a new original for you. In addition, if you have our Foundational Estate Plan, then you received a free account with Legal Vault and copies of your documents should all be online for your, or your loved ones, to access in case of emergency. If for some reason this is not done, you may wish to execute a document stating the original was destroyed in a flood or fire but that you did not intend to revoke it. 

Another option to consider to keep the originals of your estate planning documents safe, even in the face of disaster, is purchasing a fireproof/waterproof safe for your home or rent a safe deposit box with a local bank where you can still easily access your documents but keep them secure off-site. Many of my clients have gun safes and have decided to put their plan in the safe. Also, each county in Minnesota will, for a small fee, store your original will.

If you have any questions on storage of your documents, please contact an estate planning attorney at Unique Estate Law.


Monday, January 05, 2015

A Discussion About Wills, Part 1: You Really Do Need a Will
A Minneapolis Estate Planning Lawyer Discusses Why You Need a Will

Believe it or not, my busiest time of year is around the holidays and New Year's. I can only guess that it has to do with family getting together and realizing that they may need to take care of business matters for family members. So, I decided to start 2015 with a primer on wills.  This is the first in my series on planning for the unexpected using a will. 

“Do I really need a will?”

This is the most common questions clients ask but it’s really just a rhetorical question. You already have a will. But how is that possible you ask?  You’ve never met with a lawyer or put anything in writing?  It doesn’t matter because the state has generously provided one for you free of cost. So, the decision on whether to spend the time and expense in drafting a will comes down to two questions. The first question is:

Do you care who does or doesn’t get your stuff?

Whether it’s a Wii game system or a house, we all care about who gets our stuff. Perhaps you really want your best friend, NOT your brother, to get the Wii system. You must specify that in writing.  The second question is:

Do you trust the State?

Before you answer keep in mind that while Minnesota’s divides your stuff between your immediate family members, this does not include your partner, stepchild, best friend or unadopted children.  So, in the above example, the State will give your Wii system to your brother before your best friend.

I recognize that the above illustration is somewhat silly but the State’s decisions on property inheritance can be devastating to nontraditional families. My next post will further discuss what will happen to your property if you rely on the State’s will instead of drafting your own.

But you don’t need to read that far.  If you want control over who will get your stuff, get a will now!


Wednesday, December 17, 2014

Do I Really Need Advance Directives for Health Care?

Many people are confused by advance directives. They are unsure what type of directives are out there, and whether they even need directives at all, especially if they are young. There are several types of advance directives. One is a living will, which communicates what type of life support and medical treatments, such as ventilators or a feeding tube, you wish to receive. Another type is called a health care power of attorney. In a health care power of attorney, you give someone the power to make health care decisions for you in the event are unable to do so for yourself. A third type of advance directive for health care is a do not resuscitate order. A DNR order is a request that you not receive CPR if your heart stops beating or you stop breathing. Depending on the laws in your state, the health care form you execute could include all three types of health care directives, or you may do each individually.

If you are 18 or over, it’s time to establish your health care directives. Although no one thinks they will be in a medical situation requiring a directive at such a young age, it happens every day in the United States. People of all ages are involved in tragic accidents that couldn’t be foreseen and could result in life support being used. If you plan in advance, you can make sure you receive the type of medical care you wish, and you can avoid a lot of heartache to your family, who may be forced to guess what you would want done.

Many people do not want to do health care directives because they may believe some of the common misperceptions that exist about them. People are often frightened to name someone to make health care decisions for them, because they fear they will give up the right to make decisions for themselves. However, an individual always has the right, if he or she is competent, to revoke the directive or make his or her own decisions.  Some also fear they will not be treated if they have a health care directive. This is also a common myth – the directive simply informs caregivers of the person you designate to make health care decisions and the type of treatment you’d like to receive in various situations.  Planning ahead can ensure that your treatment preferences are carried out while providing some peace of mind to your loved ones who are in a position to direct them.


Monday, November 24, 2014

What is a Successor Trustee

A Minneapolis Estate Planning Lawyer Defines a Successor Trustee and Explains Why You Should Have One

You did everything right. You sat down with a lawyer, paid her to draft your estate plan, created a living trust and named each other as trustees. But, the unthinkable happened and your spouse died before you did. You were so sure it would be you first. Your lawyer now explains that you are the successor trustee and that you must now administer your spouse's trust. What does she mean by a successor trustee? 


Read more . . .


Monday, November 17, 2014

What To Do After Death, Part I

Minneapolis Probate Lawyer: What is Probate?

I often explain to people that I am a "probate lawyer" only to be met with a blank stare.  Occasionally, the statement "I don't know what that means" will accompany the blank stare. So, I decided to draft a series of posts under the "Probate" heading that will offer some general explanations and definitions.  Hopefully, this will offer some guidance to those suffering a loss who aren't sure of their next steps.


Read more . . .


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From within Hennepin County Unique Estate Law represents estate planning and elder law clients throughout Minnesota, including Minneapolis, Edina, Bloomington, St. Louis Park, Minnetonka, Plymouth, Wayzata, Maple Grove, St. Paul, and Brooklyn Park. The Minnesota law firm of Unique Estate Law focuses on all aspects of estate planning, including specialized wills, trusts, powers of attorney and medical directives for married couples, young families, blended families, single parents, gay families and those going through a divorce. Unique Estate Law also handles probate administration, asset protection, Medical Assistance planning, elder law, business succession planning, adoptions and cabin planning.



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