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Minneapolis Estate Planning and Probate Lawyer Blog

Thursday, December 15, 2011

IRS to Gay Couples: Oops..Sorry About Denying You That Adoption Tax Credit

After my partner gave birth to our wonderful daughter 4 years ago, we immediately began working with a lawyer on the second-parent adoption process. A second-parent adoption is the legal procedure through which the non-birth parent (me) may adopt the child of the biological parent. During the process, our lawyer mentioned that there is a tax credit granted to adopting parents. The one-time tax credit allows adoptive parents to seek “reimbursement” for the money spent on the adoption expenses. Because we are both lawyers, we spent some time researching the adoption credit and decided that it was risky as the IRS sometimes refused the use of the tax credit by same-sex couples when applied toward a second-parent adoption. So, we declined claiming the credit on our return that year.

But, as is true of all things related to same-sex couples right now - things are about to change. The Government Accountability Office criticized the IRS for its failure to properly train staff members on how to handle tax credits and second-parent adoptions. This lead to the unthinkable – the IRS admitted it made a mistake in not giving its auditors proper guidance on this issue.

What was the IRS’s reasoning behind denying the credit? One explanation it gave was that the birth mother does not terminate her parental rights as part of the adoption procedure. While that may be true, it is also irrelevant. There is nothing in the federal tax code that prohibits claiming the adoption credit for adopting a domestic partner’s child.

The IRS did explain that when the taxpayers in question pushed back on the issue, the taxpayers usually won - after spending money and time fighting the IRS. Hopefully, after this, those couples may spend time and money on more importants things: like daycare, diapers and life insurance premiums (until the day when a same-sex couples are granted the same benefits (social security survivor benefits or estate tax free inheritance) as other married automatically get upon marriage.

Of course, this issue would be moot if the nonbiological parent was given the right to be on the birth certificate in the first place. But, that’s a continuing fight for our future rights. As for now, I have one question:

Do we get to amend our 2007 tax return to get this deduction?
 

 

 


Monday, December 12, 2011

6 Events Which May Require a Change in Your Estate Plan

6 Events Which May Require a Change in Your Estate Plan

Creating a Will is not a one-time event. You should review your will periodically, to ensure it is up to date, and make necessary changes if your personal situation, or that of your executor or beneficiaries, has changed. As 2011 winds to a close, it's a great time to reflect back on the changes in your life.  Keep in mind that there are a number of life-changing events that require your Will to be revised, including:

Change in Marital Status: If you have gotten married or divorced, it is imperative that you review and modify your Will. With a new marriage, you must determine which assets you want to pass to your new spouse or step-children, and how that may relate to the beneficiary interest of your own children. During a divorce it is a good practice to revise your Will, to formally remove your soon-to-be ex spouse as a beneficiary. Under Minnesota law, a divorce will remove your ex spouse as a beneficiary of your will even if you don't actively change your will. The law treats the ex as if he or she predeceased you (insert sarcastic comment here) so you shouldn't worry that your ex will inherit via your will once the divorce is complete. But what about during the divorce?  Most clients with whom I've worked on these matters do not want their spouse to inherit while the divorce is pending, but that does not happen by law or inaction.  If you are going through a divorce, you must take active steps to ensure that the spouse you are divorcing will no longer inherit through a will that hasn't been updated to reflect your current status. While you’re at it, you should also change your beneficiary on any life insurance policies, pensions, or retirement accounts as these trump even your will. You may have disinherited your spouse from your will but if you forgot to change your life insurance policy he or she will still received the proceeds of that policy until you state otherwise. Estate planning is complicated when there are children from multiple marriages, and an attorney can help you ensure everyone is protected, which may include establishing a trust in addition to the revised Will.

If one of your Will’s beneficiaries experiences a change in marital status, that may also trigger a need to revise your Will.

Change in Relationship Status: If you enter or end a serious relationship in which you plan(ned) to leave your unmarried partner assets, you should meet with an estate-planning attorney who is well versed in the complexities of planning for unmarried couples.  I handle many unmarried clients who have planned their estates together and if they ever break up, they will need to take active steps to revise their plans. Unlike for legally married couples, there is no law to automatically disinherit a partner after a breakup.  While I do carefully draft these plans to include such provisioins, they will still be interpreted in court, which may lead to a lengthy and expensive court battle over those assets. This is the exact situation these couples attempted to avoid by coming to me in the first place. If you are entering a relationship that is not legally recognized, you should also meet with an attorney upon deciding to leave assets to each other OR if you want that person to handle medical or financial decisions on your behalf. I have experience handling nontraditional estate planning and can help you draft the right plan to protect your family.

Births: Upon the birth of a new child, the parents should amend their Wills immediately, to include the names of the guardians who will care for the child if both parents die. Also, parents or grandparents may wish to modify the distribution of assets provided in their Wills, to include the new addition to the family.

Deaths or Incapacitation: If any of the named executors or beneficiaries of a Will, or the named guardians for your children, pass away or become incapacitated, your Will should be revised accordingly.

Change in Assets: Your Will may need to be changed if the value of your assets has significantly increased or decreased, or if you dispose of an asset. You may want to modify the distribution of other assets in your estate, to account for the changed value or disposition of the asset. Further, you may wish to set up a trust to handle some of your assets to as to avoid probate or leave them to a minor.

Change in Employment: A change in the amount and/or source of income means your Will should be examined to see if any changes must be made to that document. Retirement or changing jobs could entail moving to another state, thus subjecting your estate to the laws of that state when you die. If the change in income modifies your investing, saving or spending habits, it may be time to review your Will and make sure the distribution to your beneficiaries will be as you intended.

Changes in Probate or Tax Laws: Wills should be drafted to maximize tax benefits, and to ensure the decedent’s wishes are carried out. If the laws regarding taxation of the estate, distribution of assets, or provisions for minor children have changed, you should have your Will reviewed by an estate planning attorney to ensure your family is fully protected and your wishes will be fully carried out.

 

 


Wednesday, December 7, 2011

Family Business: Preserving Your Legacy for Generations to Come

 

Your family-owned business is not just one of your most significant assets, it is also your legacy. Both must be protected by implementing a transition plan to arrange for transfer to your children or other loved ones upon your retirement or death.


More than 70 percent of family businesses do not survive the transition to the next generation. Ensuring your family does not fall victim to the same fate requires a unique combination of proper estate and tax planning, business acumen and common-sense communication with those closest to you. Below are some steps you can take today to make sure your family business continues from generation to generation.

  • Meet with an estate planning attorney to develop a comprehensive plan that includes a will and/or living trust. Your estate plan should account for issues related to both the transfer of your assets, including the family business and estate taxes.
  • Communicate with all family members about their wishes concerning the business. Enlist their involvement in establishing a business succession plan to transfer ownership and control to the younger generation. Include in-laws or other non-blood relatives in these discussions. They offer a fresh perspective and may have talents and skills that will help the company.
  • Make sure your succession plan includes:  preserving and enhancing “institutional memory”, who will own the company, advisors who can aid the transition team and ensure continuity, who will oversee day-to-day operations, provisions for heirs who are not directly involved in the business, tax saving strategies, education and training of family members who will take over the company and key employees.
  • Discuss your estate plan and business succession plan with your family members and key employees. Make sure everyone shares the same basic understanding.
  • Plan for liquidity. Establish measures to ensure the business has enough cash flow to pay taxes or buy out a deceased owner’s share of the company. Estate taxes are based on the full value of your estate. If your estate is asset-rich and cash-poor, your heirs may be forced to liquidate assets in order to cover the taxes, thus removing your “family” from the business.
  • Implement a family employment plan to establish policies and procedures regarding when and how family members will be hired, who will supervise them, and how compensation will be determined.
  • Have a buy-sell agreement in place to govern the future sale or transfer of shares of stock held by employees or family members.
  • Add independent professionals to your board of directors.

You’ve worked very hard over your lifetime to build your family-owned enterprise. However, you should resist the temptation to retain total control of your business well into your golden years. There comes a time to retire and focus your priorities on ensuring a smooth transition that preserves your legacy – and your investment – for generations to come.

 

 


Monday, November 28, 2011

Do Heirs Have to Pay Off Their Loved One’s Debts?

The recent economic recession, and staggering increases in health care costs have left millions of Americans facing incredible losses and mounting debt in their final years. Are you concerned that, rather than inheriting wealth from your parents, you will instead inherit bills? The good news is, you probably won’t have to pay them.


As you are dealing with the emotional loss, while also wrapping up your loved one’s affairs and closing the estate, the last thing you need to worry about is whether you will be on the hook for the debts your parents leave behind. Generally, heirs are not responsible for their parents’ outstanding bills. Creditors can go after the assets within the estate in an effort to satisfy the debt, but they cannot come after you personally. Nevertheless, assets within the estate may have to be sold to cover the decedent’s debts, or to provide for the living expenses of a surviving spouse or other dependents.

Heirs are not responsible for a decedent’s unsecured debts, such as credit cards, medical bills or personal loans, and many of these go unpaid or are settled for pennies on the dollar. However, there are some circumstances in which you may share liability for an unsecured debt, and therefore are fully responsible for future payments. For example, if you were a co-signer on a loan with the decedent, or if you were a joint account holder, you will bear ultimate financial responsibility for the debt.

Unsecured debts which were solely held by the deceased parent do not require you to reach into your own pocket to satisfy the outstanding obligation. Regardless, many aggressive collection agencies continue to pursue collection even after death, often implying that you are ultimately responsible to repay your loved one’s debts, or that you are morally obligated to do so. Both of these assertions are entirely untrue.

Secured debts, on the other hand, must be repaid or the lender can repossess the underlying asset. Common secured debts include home mortgages and vehicle loans. If your parents had any equity in their house or car, you should consider doing whatever is necessary to keep the payments current, so the equity is preserved until the property can be sold or transferred. But this must be weighed within the context of the overall estate.

Executors and estate administrators have a duty to locate and inventory all of the decedent’s assets and debts, and must notify creditors and financial institutions of the death. Avoid making the mistake of automatically paying off all of your loved one’s bills right away. If you rush to pay off debts, without a clear picture of your parents’ overall financial situation, you run the risk of coming up short on cash, within the estate, to cover higher priority bills, such as medical expenses, funeral costs or legal fees required to settle the estate.

Please note that the issue of assets and creditors becomes even more complicated where real property (land or a house) are involved.  The New York Times recently printed an article explaining the obligations of an heir who inherits a house - and a mortgage.  One issue is the question of who is responsible for paying the mortgage after the death but before the estate is settled?  I handled a probate for four siblings who agreed to sell the family home to one brother.  While they all agreed on the sale - and the price - they could not agree on who should pay the mortgage while the transfer of title was still pending. While an attorney will assist you in properly transferring the title to a home, you will need to reach agreeement on who should pay the mortgage pending settlement of the estate so as to avoid further conflict or hard feelings.

 

 


Thursday, November 17, 2011

Should I Transfer My Home to My Children?

Most people are aware that probate should be avoided if at all possible. It is an expensive, time-consuming process that exposes your family’s private matters to public scrutiny via the judicial system. It sounds simple enough to just gift your property to your children while you are still alive, so it is not subject to probate upon your death, or to preserve the asset in the event of significant end-of-life medical expenses.

This strategy may offer some potential benefits, but those benefits are far outweighed by the risks. And with other probate-avoidance tools available, such as living trusts, it makes sense to view the risks and benefits of transferring title to your property through a very critical lens.

Potential Advantages:

  • Property titled in the names of your heirs, or with your heirs as joint tenants, is not subject to probate upon your death.
  • If you do not need nursing home care for the first 60 months after the transfer, but later do need such care, the property in question will not be considered for Medicaid (Medical Assistance in Minnesota) eligibility purposes.
  • If you are named on the property’s title at the time of your death, creditors cannot make a claim against the property to satisfy the debt.
  • Your heirs may agree to pay a portion, or all, of the property’s expenses, including taxes, insurance and maintenance.


Potential Disadvantages:

  • It may jeopardize your ability to obtain nursing home care. If you need such care within 60 months of transferring the property, you can be penalized for the gift and may not be eligible for Medical Assistance for a period of months or years, or will have to find another source to cover the expenses.
  • You lose sole control over your property. Once you are no longer the legal owner, you must get approval from your children in order to sell or refinance the property.
  • If your child files for bankruptcy, or gets divorced, your child’s creditors or former spouse can obtain a legal ownership interest in the property.
  • If you outlive your child, the property may be transferred to your child’s heirs.
  • Potential negative tax consequences: If property is transferred to your child and is later sold, capital gains tax may be due, as your child will not be able to take advantage of the IRS’s primary residence exclusion. You may also lose property tax exemptions. Finally, when the child ultimately sells the property, he or she may pay a higher capital gains tax than if the property was inherited, since inherited property enjoys a stepped-up tax basis as of the date of death.


There is no one-size-fits-all approach to estate planning. Transferring ownership of your property to your children while you are still alive may be appropriate for your situation. However, for most this strategy is not recommended due to the significant risks. If your goal is to avoid probate, maximize tax benefits and provide for the seamless transfer of your property upon your death, a living trust is likely a far better option.

Contact the firm now so we can discuss your options


Wednesday, November 9, 2011

Proper Estate Planning for Your Retirement Accounts

Retirement Accounts and Estate Planning

For many Americans, retirement accounts comprise a substantial portion of their wealth. When planning your estate, it is important to consider the ramifications of tax-deferred retirement accounts, such as 401(k) and 403(b) accounts and traditional IRAs. (Roth IRAs are not tax-deferred accounts and are therefore treated differently). One of the primary goals of any estate plan is to pass your assets to your beneficiaries in a way that enables them to pay the lowest possible tax.

Generally, receiving inherited property is not a transaction that is subject to income tax. However, that is not the case with tax-deferred retirement accounts, which represent income for which the government has not previously collected income tax. Money cannot be kept in an IRA indefinitely; it must be distributed according to federal regulations. The amount that must be distributed annually is known as the required minimum distribution (RMD). If the distributions do not equal the RMD, beneficiaries may be forced to pay a 50% excise tax on the amount that was not distributed as required.

After death, the beneficiaries typically will owe income tax on the amount withdrawn from the decedent’s retirement account. Beneficiaries must take distributions from the account based on the IRS’s life expectancy tables, and these distributions are taxed as ordinary income. If there is more than one beneficiary, the one with the shortest life expectancy is the designated beneficiary for distribution purposes. Proper estate planning techniques should afford the beneficiaries a way to defer this income tax for as long as possible by delaying withdrawals from the tax-deferred retirement account.

The most tax-favorable situation occurs when the decedent’s spouse is the named beneficiary of the account. The spouse is the only person who has the option to roll over the account into his or her own IRA. In doing so, the surviving spouse can defer withdrawals until he or she turns 70 ½; whereas any other beneficiary must start withdrawing money the year after the decedent’s death.

Generally, a revocable trust should not be the beneficiary of a tax-deferred retirement account, as this situation limits the potential for income tax deferral. A trust may be the preferred option if a life expectancy payout option or spousal rollover are unimportant or unavailable, but this should be discussed in detail with an experienced estate planning attorney. Additionally, there are situations where income tax deferral is not a consideration, such as when an IRA or 401(k) requires a lump-sum distribution upon death, when a beneficiary will liquidate the account upon the decedent’s death for an immediate need, or if the amount is so small that it will not result in a substantial amount of additional income tax.

The bottom line is that trusts typically should be avoided as beneficiaries of tax-deferred retirement accounts, unless there is a compelling non-tax-related reason that outweighs the lost income tax deferral of using a trust. This is a complex area of law involving inheritance and tax implications that should be fully considered with the aid of an experienced estate planning lawyer.

 

 


Friday, November 4, 2011

Minnesota Seeks Federal Approval of Medicaid Changes

I have recently been approached by several people seeking assistance on an increasingly common situation: what to do with a parent who suddenly needs living assistance.  One thing to note for these clients is that they are not alone. According to the statistics related by the department of human services, 557,000 Minnesota residents received Medical Assistance (Minnesota’s Medicaid program).

In the past Medicaid assistance has meant receving money to put a loved one into institutionalized care. Originally, Medicare would not pay to keep someone out of instituionalized care. But that is changing as people seek to care for loved ones in a more familiar environment. Recognizing this trend, Minnesota’s Human Services Commissioner, Lucinda Jesson, is set to requestapproval from the federal government for large scale changes - a so called "global waiver" - that would allow the state to have increased flexibility in how it can spend federal human-services funds.

In a recent interview, Ms. Jesson stated that the waiver would allow Minnesota to use Medicaid funds to pay for home and community-based services first.  She believes that people would rather stay in their homes and communities than go to a facility.  While there is currently a system of exceptions that allow members of certain populations to remain in their homes or communities, it is very difficult to determine which programs cover what population. Ms. Jesson feels that, if given the chance, Minnesota could design a better system.

The hope is that under a new program, the Minnesota Medical Assistance program would have the ability to serve people at their level of need by offering more services overall.  For instance, offering Meals on Wheels or personal care attendants to seniors instead of requiring that the person needing such services be institutionalized. Ms. Jesson predicts that these changes would, ultimately, save Minnesota money as it costs 3 times more to have someone in a nursing home than to care for that person in his or her home.

The DHS plans to have its proposal ready to submit to the federal government in early 2012. If this is of interest to you, please note that there will be a public comment period later this fall.

 

 

 


Thursday, October 27, 2011

Property Ownership: Property Titling and Your Estate Plan

I recently met with a client to retitled a home so that an ex partner would no longer be on the deed.  But, upon conducting a record's search, we learned that the client had never added the ex to the title.  It was still titled solely in my client's name. This would have been great news except that my client had paid the ex a significant amount of money to "buy back" the title to the home. Post relationship issues aside this is a good example of how titling of your property is an important issue that must be addressed during the various stages of your life. It can be affected by a new relationship, break up, incapacity or death.

Titling of assets is an especially important issue for nontraditional famlies where the law will never assume that someone unrelated by blood or marriage is entitled to an interest in an asset.  Further, if you are in a second marriage and have kids from a prior relationship, absent clear evidence (i.e. will or trust) of your intent, the Minnesota intestacy statute dictates how your assets wiill be distribued to your current spouse and prior children.

The way you title your assets is a crucial part of your estate plan.  Below we will review the ways in which you may own property.

Coordinating Property Ownership and Your Estate Plan

When planning your estate, you must consider how you hold title to your real and personal property. The title and your designated beneficiaries will control how your real estate, bank accounts, retirement accounts, vehicles and investments are distributed upon your death, regardless of whether there is a will or trust in place and potentially with a result that you never intended.

One of the most important steps in establishing your estate plan is transferring title to your assets. If you have created a living trust, it is absolutely useless if you fail to transfer the title on your accounts, real estate or other property into the trust. Unless the assets are formally transferred into your living trust, they will not be governed by the terms of the trust and the purpose of the trust will fail.  Any property not titled in the name of the trust, and that is not jointly held, will be subject to probate.  If you have a proper will then then that property may still go to your chosen beneficiary through the probate process. But, if you do not have a will, or the will is outdated, that asset may not go to the person you would have chosen if someone had asked.  Well - I am asking now.  Who should get your stuff?

Even if you don’t have a living trust, how you hold title to your property can still help your heirs avoid probate altogether. This ensures that your assets can be quickly transferred to the beneficiaries, and saves them the time and expense of a probate proceeding. Listed below are two of the most common ways to hold title to property; each has its advantages and drawbacks, depending on your personal situation.

Tenants in Common: When two or more individuals each own an undivided share of the property, it is known as a tenancy in common. Each co-tenant can transfer or sell his or her interest in the property without the consent of the co-tenants. In a tenancy in common, a deceased owner’s interest in the property continues after death and is distributed to the decedent’s heirs. Property titled in this manner is subject to probate, unless it is held in a living trust, but it enables you to leave your interest in the property to your own heirs rather than the property’s co-owners. The drawback is that the co-tenant may now share ownership of the property with someone they don't know, or worse, don't like. This can lead to a host of issues that will be discussed in a later post specificlly addressing the issues of  all types joint ownership of property.

Joint Tenants:  In joint tenancy, two or more owners share a whole, undivided interest with right of survivorship. Upon the death of a joint tenant, the surviving joint tenant(s) immediately become the owners of the entire property. The decedent’s interest in the property does not pass to his or her beneficiaries, regardless of any provisions in a living trust or will. A major advantage of joint tenancy is that a deceased joint tenant’s interest in the property passes to the surviving joint tenants without the asset going through probate. But, Joint tenancy has its disadvantages such as susceptability to creditors or the inability of any one owner being able to sell his or her interest in the property. 

Make sure your estate planning attorney has a list of all of your property and exactly how you hold title to each asset, as this will directly affect how your property is distributed after you pass on.  One way to handle this is to give your estate planning attorney the autority to discuss your plans with your financial advisor and/or insurance agent. Automatic rules governing survivorship will control how property is distributed, regardless of what is stated in your will or living trust. So, take care to review how your property is titled today!

 

 


Friday, October 21, 2011

Financial Friday: Check Your Beneficiary Designations

Unique Estate Law brings you another post from financial advisor, Jay Dworsky.  This week he discusses the importance of properly filling out, and timely review of, beneficiary designation forms. This is a crucial part of your estate plan and you should work with both your estate planning attorney and a financial advisor to ensure that your plans are not thwarted by imporoper forms for  your life insurance policy or retirment plans.

What is a beneficiary designation?

September was life insurance awareness month. If you didn’t buy that policy you’ve been thinking about, at the very least check your beneficiaries.  A beneficiary is the recipient of funds, property, or other benefits, as from an insurance policy or will. If you own a life insurance policy or participate in a retirement plan, such as an IRA, 401(k) plan, or 403(b) plan, you are asked on the application to name a beneficiary to receive the proceeds of your plan at your death. A beneficiary designation allows you to transfer the proceeds without going through probate. You can choose your spouse, a child, another adult, a charity, a trust, a partner, or your estate as a beneficiary. If you're married, however, the law may restrict your choice. Certain retirement plans require you to name your spouse unless he or she signs a form waiving this right.

How are some advantages of beneficiary designations?

  • If you own a life insurance policy or a retirement account, you get to name the beneficiary of the proceeds from those accounts
  • You are able to avoid the expense, delay, disruption, and lack of privacy of court proceedings
  • ?It is easy to do - simpley fill out a form
  • Simple to set up, change designations, costs nothing
  • Avoids probate; proceeds automatically pass to your beneficiary after your death
  • You own the property until your death
  • You can change the beneficiary at any time, subject in some cases to certain spousal rights
  • Trumps your will or Minnesota intestacy laws
  • Difficult to challenge

What else should I know about beneficiary designations?

  • Retirement plan proceeds frequently are subject to income tax
  • Proceeds of retirement plans or insurance contracts may be subject to estate tax
  • Choice of beneficiary is a factor in determining how quickly the funds of retirement plans are distributed after you die
  • Some plans don't allow alternate beneficiaries
  • You lose control of the funds payable under a retirement plan or insurance contract after your death, unless you designate a trust as beneficiary

In summary, please take the time to ensure your beneficiary designation forms are set up properly.  This is a simple - free - way to know that your assets are going to your chosen beneficiaries.  Having these in place allows your heirs to avoid probate for any assets directed through these forms and will trump your will or intestacy statutes so that you can direct the funds to anyone (with some restrictions on retirement assets if you are married as noted above). 

 

 


Tuesday, October 18, 2011

Gay Couples, Health Care Benefits and Taxes

As you know, gay couples do not have access to many of the benefits that come with legalized marriage. Because of the Defense of Marriage Act (DOMA) the federal government does not recognize gay marriages - even for those who are married in states in which it is legal. As a result, the federal tax code does not recognize same-sex unions.

So, the Tax Code treats the value of employer-provided healthcare benefits for a civil union or domestic partner as ‘imputed income’ to the employee. This means that employees who elect domestic partner benefits must pay income tax on the value of those benefits. So, while many companies offer health insurance coverage for same sex partners, the employees who take advantage of that benefit - just as their straight colleagues do - pay more for it.

But a growing number of companies are attempting to combat this injustice by covering the extra costs that same-sex couples pay for these health benefits through what's known as a "tax gross-up." There term tax gross-ups refers to the practice of employers making employees whole for additional taxes owed, thereby ensuring that employees receive the true dollar amount promised to them as compensation.

Companies such as Google, Bank of America, Barclays, Cisco, Discovery Channel and the Klimpton Hotel chain have already agreed to reimburse U.S. employees whose health benefit for same-sex partners or spouses are treated as taxable income by the IRS. And yesterday, Morgan Stanley announced that it will begin reimbursing employees for the extra taxes they pay on health insurance for their same-sex partners starting January 1, 2012.

Does your company offer a gross up? Check with your HR department today to be sure that you don't miss out on benefits that may be available to you.  And if they don't offer a gross up - ask them why.

Please note that the Bucks blog at the New York Times keeps an updated list of the companies that offer a tax gross up.

 

 


Monday, October 17, 2011

What’s Involved in Serving as a Personal Representative in a Minnesota Probate?

The personal representative is the person designated in a Will as the individual who is responsible for performing a number of tasks necessary to wind down the decedent’s affairs. [While a will merely nominates someone to act as personal representative subject to approval by the court, this post uses the term “personal representative” to refer both to the nominated and appointed personal representative.] Generally, the personal representative’s responsibilities involve taking charge of the deceased person’s assets, notifying beneficiaries and creditors, paying the estate’s debts and distributing the property to the beneficiaries. The personal representative may also be a beneficiary of the Will, though he or she must treat all beneficiaries fairly and in accordance with the provisions of the Will.
   
The first priority for a personal representative is to find out if the deceased had a valid Will.  Then the personal representative should locate the original Will.  The personal representative should also be sure to order certified copies of the Death Certificate if that hasn’t already been done.  The personal representative will be responsible for notifying all persons who have an interest in the estate, including those who are named as beneficiaries in the Will and any known creditors. A list of all assets must be compiled, including value at the date of death.

The personal representative must take steps to secure all assets, whether by taking possession of them, or by obtaining adequate insurance. Assets of the estate include all real and personal property owned by the decedent; overlooked assets sometimes include stocks, bonds, pension funds, bank accounts, safety deposit boxes, annuity payments, holiday pay, and work-related life insurance or survivor benefits. The personal representative must also compile a list of the decedent’s debts, including, credit card accounts, loan payments, mortgages, home utilities, tax arrears, alimony and outstanding leases.

Whether the Will must be probated depends on a variety of factors, including size of the estate and how the decedent’s assets were titled. An experienced probate or estate planning attorney can help determine whether probate is required, and assist with carrying out the personal representative’s duties. If the estate must go through probate, the personal representative must file the appropriate documents with the probate court in order to be appointed legal representative. Upon approval of the appointment, the court will issue a document called Letters Testamentary authorizing the personal representative to act on behalf of the estate to pay all of the decedent’s outstanding debts, provided there are sufficient assets in the estate. After debts have been paid, the personal representative must distribute the remaining real and personal property to the beneficiaries, in accordance with the wishes set forth in the Will. Because the personal representative is accountable to the beneficiaries of the estate, it is extremely important to keep complete, accurate records of all expenditures, correspondence, asset distribution, and filings with the court and government agencies.

The personal representative is also responsible for filing all tax returns for the deceased person including federal and state income tax returns and estate tax filings, if applicable. Please note that Minnesota law entitles a personal representative to reasonable compensation for his or her services.  Unfortunately, there is no guidance offered on the appropriate amount of this fee so it’s a good idea to discuss compensation with other family members to avoid later disputes.  I find it helpful to spell out the compensation in the will so that others know and understand that the deceased intended to offer payment to the personal representative.

 

 


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