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Probate

Wednesday, September 17, 2014

A Simple Will Is Not Enough

Minneapolis Estate Planning and Probate Lawyer Explains the Minimum Documents You Need to Protect Your Family

 

I sometimes hear comments like "I just need a simple will" or "Why can't I just get my will on the internet"?  I want to be clear that a basic last will and testament cannot accomplish every goal of estate planning; in fact, it often cannot even accomplish the most common goals.  This fact often surprises people who are going through the estate planning process for the first time. Or worse, the family left behind finds this out when they attempt to settle a loved ones estate.  In addition to a last will and testament, there are other important planning tools which are necessary to ensure your estate planning wishes are honored.

Beneficiary Designations
Do you have a pension plan, 401(k), life insurance, a bank account with a pay-on-death directive, or investments in transfer-on-death (TOD) form?

When you established each of these accounts, you designated at least one beneficiary of the account in the event of your death.  You cannot use your will to change or override the beneficiary designations of such accounts.  Instead, you must change them directly with the bank or company that holds the account. It is crucial that you update these as life changes.

Special Needs Trusts
Do you have a child or other beneficiary with special needs?

Leaving money directly to a beneficiary who has long-term special medical needs may threaten his or her ability to qualify for government benefits and may also create an unnecessary tax burden.  A simple vehicle called a special needs trust is a more effective way to care for an adult child with special needs after your death.

Conditional Giving with Living or Testamentary Trusts
Do you want to place conditions on some of your bequests?

If you want your children or other beneficiaries to receive an inheritance based on certain prerequisites (life events such as marriage or at certain ages), you must utilize a trust, either one established during your lifetime (living trust) or one created through instructions provided in a will (testamentary trust). You can further use a trust if you would like any assets remaining at the death of your beneficiary (spouse) to be given to someone of your choosing. This is a popular estate planning tool used for blended families.

Estate Tax Planning
Do you expect your estate to owe estate taxes?

A basic will cannot help you lower the estate tax burden on your assets after death.  If you think your estate will be liable to pay taxes, you can take steps during your lifetime to minimize that burden on your beneficiaries.  Certain trusts operate to minimize estate taxes, and you may choose to make some gifts during your lifetime for tax-related reasons.  

Joint Tenancy with Right of Survivorship
Do you own a house with someone “in joint tenancy”?

“Joint tenancy” is the most common form of house ownership with a spouse.  This form of ownership is also known as “joint tenancy with right of survivorship,” “tenancy in the entirety,” or “community property with right of survivorship.”  When you die, your ownership share in the house passes directly to your spouse (or the other co-owner).  A provision in your will bequeathing your ownership share to a third party will not have any effect.

Financial Power of Attorney
Do you need someone to assist with your financial matters if you're incapacitated?

Clients often respond to this discussion by explaining that they don't need to appoint a financial agent because they're married and all assets are jointly held. However, the largest asset in most of your estates is likely your retirement account and that is held only in your name. If your spouse ever needs to contact someone regarding your retirement plan, the company will refuse to speak with them without a Power of Attorney.

Medical Power of Attorney/Health Care Directive
Would you like to appoint the person who will make medical decisions on your behalf?

You are able to appoint someone to make your medical decisions if you can't by using a health care directive. Without one, that person (even a spouse) will be forced to go to court to be appointed as a guardian to make such decisions. This can be a costly and lengthy process.

As you can see, there are many things to consider to ensure you have a full and comprehensive estate plan.This is such an important topic that the New York Times published an article how important it is to have more than just a will in the September 5, 2014 issue.


Please contact a Minneapolis estate planning lawyer to help work through the details of your estate.


Thursday, May 29, 2014

What is Estate Recovery?

Minneapolis Estate Planning Attorney Explains Minnesota's Medical Assistance Program. 


Medicaid, known as Medical Assistance in Minnesota, is a federal health program for individuals with low income and financial resources that is administered by each state. This program is intended to help individuals and couples pay for the cost of health care and nursing home care.

Most people are surprised to learn that Medicare (the health insurance available to all people over the age of 65) does not cover nursing home care. The average cost of nursing home care, also called "skilled nursing" or "convalescent care," can be $8,000 to $10,000 per month. Most people do not have the resources to cover these steep costs over an extended period of time without some form of assistance.

Qualifying for Medical Assistance can be complicated as it is governed by a combination of federal state laws/rules. Once qualified for a Medical Assistance subsidy, Medicaid will assign you a co-pay (your Share of Cost) for the nursing home care, based on your monthly income and ability to pay.

At the end of the Medical Assistance recipient's life (and the spouse's life, if applicable), the county who paid for care will begin "estate recovery" for the total cost spent during the recipient's lifetime. The county will issue a bill to the estate, and will place a lien on the recipient's home in order to satisfy the debt. Many estate beneficiaries discover this debt only upon the death of a parent or loved one. I have numerous clients who came to me upon trying to sell their parents' house only to learn - sometimes at closing - that there was a Medical Assistance lien on the property. In many cases, the Medical Assistance debt can consume most, if not all, estate assets.

There are estate planning strategies available that can help you accelerate qualification for a Medical Assistance subsidy, and also eliminate the possibility of a Medical Assistance lien at death. It is very important to consult with an experienced elder law attorney in your jurisdiction.


Sunday, March 23, 2014

How Do You Put Assets Into Your Trust?

A Minneapolis Estate Planning Attorney Answers the question: What Does the Term "Funding the Trust" Mean?



If you are about to begin the estate planning process, you have likely heard the term "funding the trust" thrown around a great deal. What does this mean? And what will happen if you fail to fund the trust?

The phrase, or term, "funding the trust" refers to the process of titling your assets into your revocable living trust. A revocable living trust is a common estate planning document and one which you may choose to incorporate into your own estate planning. Sometimes such a trust may be referred to as a "will substitute" because the dispositive terms of your estate plan will be contained within the trust instead of the will. A revocable living trust will allow you to have your affairs bypass the probate court upon your death, using a revocable living trust will help accomplish that goal.

Upon your death, only assets titled in your name alone will have to pass through the court probate process. Therefore, if you create a trust, and if you take the steps to title all of your assets in the name of the trust, there would be no need for a court probate because no assets would remain in your name. This step is generally referred to as "funding the trust" and is often overlooked. Many people create the trust but yet they fail to take the step of re-titling assets in the trust name. If you do not title your trust assets into the name of the trust, then your estate will still require a court probate.

A proper trust-based estate plan would still include a will that is sometimes referred to as a "pour-over" will. The will acts as a backstop to the trust so that any asset that is in your name upon your death (instead of the trust) will still get into the trust. The will names the trust as the beneficiary. It is not as efficient to do this because your estate will still require a probate, but all assets will then flow into the trust.

Another option: You can also name your trust as beneficiary of life insurance and retirement assets. However, retirement assets are special in that there is an "income" tax issue. Be sure to seek competent tax and legal advice before deciding who to name as beneficiary on those retirement assets.

The estate planning attorney at Unique Estate Law offers all clients a 6-page set of Funding Instructions to help walk you through the process after you've left the office and can't recall how to put your checking account into your trust.


Sunday, January 19, 2014

Protect Your Family Cabin with a Trust

Protecting Your Vacation Home with a Cabin Trust

Many people own a family vacation home--a lakeside cabin, a beachfront condo--a place where parents, children and grandchildren can gather for vacations, holidays and a bit of relaxation. It is important that the treasured family vacation home be considered as part of a thorough estate plan. In many cases, the owner wants to ensure that the vacation home remains within the family after his or her death, and not be sold as part of an estate liquidation.

There are generally two ways to do this: Within a revocable living trust, a popular option is to create a separate sub-trust called a "Cabin Trust" that will come into existence upon the death of the original owner(s). The vacation home would then be transferred into this Trust, along with a specific amount of money that will cover the cost of upkeep for the vacation home for a certain period of time. The Trust should also designate who may use the vacation home (usually the children or grandchildren). Usually, when a child dies, his/her right to use the property would pass to his/her children.

The Cabin Trust should also name a Trustee, who would be responsible for the general management of the property and the funds retained for upkeep of the vacation home. The Trust can specify what will happen when the Cabin Trust money runs out, and the circumstances under which the vacation property can be sold. Often the Trust will allow the children the first option to buy the property.

Another method of preserving the family vacation home is the creation of a Limited Liability Partnership to hold the house. The parents can assign shares to their children, and provide for a mechanism to determine how to pay for the vacation home taxes and upkeep. An LLP provides protection from liability, in case someone is injured on the property.

It is always wise to consult with an estate planning attorney about how to best protect and preserve a vacation home for future generations.


Monday, December 02, 2013

14 Costly Misconceptions About Planning for Your Senior Years

A Minneapolis Estate Planning and Probate Lawyer Discusses Estate Planning Issues Specific to Seniors

Misconception #1: Most seniors move into nursing homes as a result of minor physical ailments that make it hard for them to get around.  Wrong!  A large percentage of admissions to nursing homes is because of serious health, behavior, and safety issues caused by Alzheimer’s disease and dementia.

Misconception #2: Nursing home costs in Minnesota average $1,500 to $2,500 per month per person.  Hardly.  Current nursing home charges for one resident typically run $6,000 per month, or $72,000 per year, which does not include prescription drugs -- and those costs continue to rise.

Misconception #3: Children can care for a parent with Alzheimer’s disease at home, without the need for nursing home care.  Not true!  Many patients with Alzheimer’s disease end up in nursing homes because children are simply unable to provide the level of care their parent needs.  In most cases, the children want to care for their parents.  But, as a practical matter, they simply can’t.  Moving a parent into a nursing home is an intensely personal issue and should not be labeled as a right or wrong decision. In many cases, it’s the only realistic option.  The rare exception is when the family has enough money to pay for skilled nursing care at home.

Misconception #4: Standard legal forms are all you need for a good estate plan.  Not true.  A competent estate plan begins with clearly defined goals, supported by well-drafted legal documents, and the repositioning of assets, as needed, to protect your estate from taxes, probate costs, and catastrophic nursing home costs. But you MUST PLAN EARLY.

Misconception #5: Your child will never move you into a nursing home.  Wrong.  Most children consider all options before moving a parent into a nursing home.  But, sadly, children usually find they have no other alternative.  As a result, parents who never expected to live in a nursing home soon discover that a nursing home is the only place with the staff and equipment to provide the care they need.

Misconception #6: As payment for nursing home care, the government will take your family home.  Not true, if you plan ahead.  Many people fear that the government will take their home in exchange for nursing home care, but you can avoid this with proper planning.  You’ll be glad to know there are some ways you can protect your home so it won’t be taken.

Misconception #7: You will never end up in a nursing home.  That’s hard to predict.  Your odds are roughly 50/50.  Of Americans reaching age 65 in any year, nearly half will spend some time in a nursing home.  And a surprising number will require care for longer than one year.  That means every year, tens of thousands of seniors will face costs of $48,000 or more ($60,000 in Minnesota), which does not include the cost of prescription drugs.

Misconception #8: If your spouse enters a nursing home, all of your joint savings will have to be spent on his or her care.  No.  With proper planning you can keep half of your combined “countable” assets up to approximately $103,000 (increasing each year).  In some circumstances, you may be able to protect nearly all of your life savings.  In fact, it is often possible to protect much more than the $103,000 maximum.  “Countable” assets are those assets such as cash, checking accounts, savings, CDs, stocks, and bonds that the government considers available to be spent on the cost of nursing home care.

Misconception #9: Legally, you can give away only $14,000 to each of your children each year.  Not true.  You can give away any amount, but you have to report to the IRS gifts in excess of $14,000 per recipient per year ($28,000 if both husband and wife make a gift).  However, there is no requirement that you pay any gift tax unless you have exhausted your lifetime exclusion amount, which is currently set at $2,000,000 for an individual. But, there is a "look back" period so you must work with a qualified attorney before gifting away any assets as you age.

Misconception #10: You can wait to do long-term planning until your spouse or you get sick.  Yes, to some degree.  However, you and your spouse will be much better off if you have taken important planning steps in advance, before a crisis occurs.  What stops most people from being able to effectively plan when they are in the middle of a crisis is that the ill person is unable to make decisions and sign the necessary legal documents.

Misconception #11: All General Durable Powers of Attorney are created equal.  Completely false!  A General Durable Power of Attorney is a highly customized legal document -- and NOT a form!  Most Durable Powers of Attorney don’t contain even the most basic gifting authority.  Without a gifting power, your agent is usually limited to spending your money on your bills and selling your assets to generate cash to pay your bills.  Some Durable Powers of Attorney contain a gifting provision, but the Minnesota Statutory Power of Attorney it is limited to $10,000 per year.  This is particularly concerning for unmarried couples as the IRS considers ANY exchange of money/assets between them to be a gift.  The annual limit of $10,000 is too small for effective asset protection planning, and relates to a completely different type of federal estate and gift tax issue.  Unique Estate Law has created an enhanced power of attorney to get around that limit.

Misconception #12: Since you are married, your spouse will be able to manage your property and make financial decisions without a general durable power of attorney.  Not true.  If you become incapacitated and your spouse needs to sell or mortgage the family home -- or gain access to financial ac-counts that are in your name only -- your spouse will need a general durable power of attorney.  Without one, your spouse will have to go to Court and get the judge’s permission to act on your behalf by way of a conservatorship proceeding.

Misconception #13: You can hide your assets while you become eligible for Medicaid (Known as Medical Assistance in Minnesota).  False!  Intentional misrepresentation in a Medicaid application is a crime and can be costly.  The IRS shares any information concerning your income or assets with the local Medicaid eligibility office.  You -- or who-ever applied for Medicaid -- may have to repay Medicaid to avoid prosecution.

Misconception #14: Medicaid rules that applied to your neighbor when he went into a nursing home will also apply to you.  Maybe not.  Medicaid rules change.  Don’t assume the law that applied to your neighbor will also apply to you.  In addition, there may have been facts about your neighbor’s situation that you just don’t know.


Monday, November 18, 2013

Updating Your Estate Plan, Part II: Signs It's Time to Update Your Estate Plan

A Minnesota Estate Planning and Probate Attorney Lists 20 Red Flags That Signal When Your Will or Living Trust is Out of Date

I offer clients the opportunity to sit down with me and review their estate plans at least once each year.  However, this doesn’t mean you should wait until your next review if your circumstances change.  This Estate Planning Checklist identifies events that could make a significant impact on your estate.  If any of these events occurs, please call me.  For your protection, we may need to amend or revise one or more of your estate planning documents.

Changes Involving You or Your Spouse/Partner

1.  You get married.
2.  You and your spouse divorce or partner break up.
3.  Your spouse/partner dies or becomes incapacitated.
4.  Your health changes.

Changes Involving Your Children, Grandchildren or Other Beneficiaries

5.  You have a child.
6.  You adopt a child.
7.  Your child marries.
8.  Your child divorces.
9.  Your child becomes ill.
10.  One of your beneficiaries experiences an economic change, good or bad.
11.  One of your beneficiaries proves to be financially irresponsible.
12.  One of your beneficiaries has a change in attitude toward you.

Changes in Your Economic Condition

13.  The value of your assets increases or decreases.
14.  Your insurability for life insurance changes.
15.  Your employment changes.
16.  Your business interests change, such as becoming involved in a new partnership or corporation.
17.  You retire from your business or profession.
18.  You acquire property in a different state.
19.  You move to a different state.

Changes to a Person Named in Your Estate Plan

20.  Something happens to a person named in your estate plan, such as the death or incapacity of your personal representative, executor, trustee, guardian or conservator.


Monday, November 11, 2013

Updating Your Estate Plan, Part I: Why Your Plan May Need Maintenance.

Minneapolis Estate Planning and Probate Lawyer Explains Why Your Estate Plan Needs Maintenance

When you buy a new car, everything works perfectly.  (At least, you hope it does.)  But then in 3,000 miles, it’s time for an oil change.  Also, you must keep your eye on the level of coolant in the radiator, your transmission fluid, and your power steering fluid.  You must make sure your alternator works to keep the battery charged.

What happens if you don’t maintain your car?  Your engine could burn up.  Your transmission could fail.  Your car could overheat.  Your battery could go dead.  All of which mean you’re stuck on the side of the road trying to hitchhike to the nearest town.

Your estate plan is like your car.  When you set it up, everything is current and accurate.  But you need to keep your eye on your assets, insurance, Powers of Attorney, gifting program, distribution plan, successor trustees, beneficiaries, and so much more.  That’s why it’s important that you meet with your estate planning attorney every year.

You wouldn’t think of going on a long trip without making sure that your car was in tip-top shape.  Yet every day, people embark on the long trip we call life.  And the problem with our “life trip” is that we’re never sure when that trip might end.  It’s a good idea to review your estate plan with your lawyer every year or two to see if changes in your family’s circumstances need to be reflected in your estate plan.

For example: You should review your estate plan with your estate planning attorney any time (1) you get married, (2) you go through a break up or divorce, (3) your partner/spouse dies or becomes incapacitated, (4) your health changes, (5) you have or adopt a child, (6) your children marry or divorce, (7) a potential problem arises with a beneficiary, (8) the value of your assets changes, (9) your employment changes, (10) your business interests change, (11) you retire, (12) you acquire property in another state, (13) you move to a different state, or (14) something happens to a person named in your estate plan that could affect your relationship or the duties they are to perform on your behalf.

But wait.  Is your estate plan really like your car?  It’s more accurate to say it’s like a fire engine -- ready to handle any emergency at a moment’s notice.  When your spouse has a heart attack, you want the paramedics -- right now!  You don’t want to call 9-1-1 and have the dispatcher explain to you that the fire truck has a dead battery.  Or a flat tire.  

It would be ridiculous to buy a new fire engine, back it into the fire station where it waits for the next emergency, and then not have a mechanic check under the hood for a year.  Do you know how many things can go wrong with a fire truck’s engine if it goes without service for a year?

Yet that’s exactly what people do with their estate plans.  They invest hard-earned money to set up their plans.  Then they put their plans in a drawer or safe deposit box where they gather dust for 2 years, 5 years, even 10 years -- often without updating the plan even once!

And then, when these people have an emergency, do you know what happens?  They dig out their paper-work only to learn that their plan no longer works.  You see, it was custom designed to fit their specific needs 5 years ago.  But now their needs, and often the law, have changed -- and no one updated the plan.  What a tragedy!

Your estate plan must be fully operational, ready to handle any emergency at a moment’s notice.  If your spouse has a heart attack and cannot make medical decisions, you don’t want the nurse at the hospital to explain that the legislature changed the law and now your Powers of Attorney are no longer valid.  Or, if your spouse dies, you don’t want the judge to tell you that your estate must go through probate because your Revocable Living Trust has not been properly maintained and updated.

You need your estate plan to be ready for any emergency -- 24 hours a day -- because you never know when you might need it.

An out-of-date estate plan isn’t worth the paper it’s written on.  But a current estate plan that works precisely the way it should -- protecting your family and safeguarding your assets -- is the greatest gift of love you can give to your family, your spouse, and yourself.  Your custom designed estate plan, created specifically for you -- combined with yearly maintenance meetings to keep your estate plan in tip-top shape -- are the best investment you’ll ever make.  I guarantee it.


Monday, September 30, 2013

12 Problems That Could Cost Your Family a Fortune – and Their Solutions

Minnesota Estate Planning Attorney Discusses Frequent Issues/Concerns that Arise When Handling Someone's Estate

Problem #1: Probate. Probate is the Court-supervised process of passing title and ownership of a deceased person’s property to his or her heirs. The process consists of assembling assets, giving notice to creditors, paying bills and taxes, and passing title to property when the judge signs the order. Probate can cost your loved ones a sizeable portion of your estate. The biggest portion of the costs are the fees charged by attorneys and personal representatives for their services for the estate, in addition to filing fees, costs of publication, fees for copies of death certificates, filing and recording fees, bond premiums, appraisal and accounting fees, and so on. Often the fees of attorneys and personal representatives are based on a hourly rate, and while they can tell you what their hourly rate is, they cannot tell you the number of hours their services will take, so they cannot tell you what their total fees will be. Like surgery, probate can be simple and easy, but frequently probate can have very drastic and damaging results. Accordingly, like surgery, because of its uncertainty in terms of both the potential for problems and high costs and fees, probate is something best to prepare for if you can. You can avoid a substantially larger probate process by having an estate planning lawyer set up and fund a Revocable Living Trust. Since the Trust actually owns your assets, no significant probate of the estate will be required, saving your family many thousands of dollars.

Problem #2: Lawsuits and Creditors. Protect the property you leave to your partner/spouse and children from the claims of their creditors, ex-spouses, and the IRS. This can best be done with proper creditor protection provisions in a Revocable Living Trust.

Problem #3: Estate Taxes. For married couples, protect your assets from state and federal estate taxes by setting up and funding a tax-saving Credit Shelter Trust. Under current law, a Credit Shelter Trust will completely protect your assets from estate taxes for estates valued up to a certain amount will have to pay federal estate taxes. What is that amount? No one knows right now. The current exemption is $5,000,000 a person or $10,000,000 for a married couple.

Further, in Minnesota, the estate limit is $1,000,000 so your estate will pay taxes TO THE STATE for anything over $1,000,000. The tax rates generally comes out to 10% of the assets over that 1,000,000 mark.

Most couples don’t realize that the value of their estate for purposes of determining estate taxes includes their life insurance death benefit proceeds. Your estate includes EVERY asset you own at the time of death: real estate; cash, stocks, bonds, life insurance, retirement accounts, automobiles and personal property. It is not difficult to reach the $1,000,000 mark once all these assets are added up.

A well-designed estate plan costing between $3,000 and $6,000 will save a significant amount in federal estate taxes. Other ways you can avoid or reduce estate taxes include setting up (1) an Irrevocable Trust for your children, grandchildren or other heirs, (2) an Irrevocable Life Insurance Trust, (which detaches your life insurance benefits from your estate), (3) a Charitable Remainder Trust, and (4) Second-to-die Life Insurance so you can pay estate taxes for pennies on the dollar.

Problem #4: Income Taxes. A family can lower its overall income taxes by setting up a Family Limited Partnership to own income-producing property. A parent can do this by setting up a Family Limited Partnership and making gifts of limited partnership interests to the other limited partners, normally their children or grandchildren who pay income tax at lower tax rates. A Family Limited Partnership is an excellent tool to shift income to partners who pay taxes at lower rates. It is also an effective way to make gifts and still keep total control of the property owned by the partnership.

Problem #5: Lawsuits. Protect your assets from lawsuits by doing any or all of the following, as appropriate: (1) purchasing an umbrella liability insurance policy, (2) setting up a Family Limited Partnership, (3) setting up a program for lifetime gifting, (4) setting up a Limited Liability Company, and (5) incorporating. Further, you can protect your children from lawsuits by putting their inheritances into a Discretionary Trust. This is especially important if your children are likely to become professionals subject to potential malpractice actions or, on the other hand, are spendthrifts!

Problem #6: Inexperienced Beneficiaries. Protect your assets from being wasted by young or inexperienced family members. Most beneficiaries spend their entire inheritances in less than two years, regardless of the size of the estate or the heir’s socio-economic background. Your lawyer can set up your Family Trust with protective provisions that provide guidance and safeguard your life savings.

Problem #7: Guardianships. Protect your assets from the high costs of incapacity by (1) setting up a Living Trust so you avoid the need for a guardianship, (2) drawing up an Advance Healthcare Directive, and (3) drawing up a Health Care Power of Attorney.

Problem #8: Nursing Home Care. Protect joint assets from the high costs of nursing home care. Buy insurance that covers nursing home care and provides a death benefit that returns the money spent on nursing home care to your heirs.

Problem #9: Unwanted Medical Care. Protect your assets from unwanted and costly medical care by having an Advance Healthcare Directive and Health Care Powers of Attorney that spell out your instructions, including which medical care, treatment and procedures you want -- and which you don’t want.

Problem #10: Unwanted Emergency Care. Protect your assets from unwanted emergency care. If you have a terminal illness, you can draw up and sign a Pre-hospital Medical Directive that will tell emergency personnel not to resuscitate you in the event of a medical emergency. This directive is often referred to as a “Do Not Resuscitate Order”.

Problem #11: Ineffective Estate Plans. Protect your assets from an ineffective estate plan. Don’t depend on pre-printed “cookie cutter” form kits or document preparation services for your estate plan. Contrary to what you may have heard or read, one size does not fit all! You may think you have precisely what you need. But you will never know -- because your family members will have to clean up the mess. You see, after you die, your family members will try to use your documents to settle your estate. And if the documents weren’t drafted correctly, they will cause additional expense and long delays because a probate will have to be done to convey title to your assets.

Problem #12: Unqualified Lawyers. Many attorneys are getting into estate planning because it’s less stressful than other areas of law. Not surprisingly, most of these newcomers focus on the needs of senior citizens and almost never deal with issues affecting young families. If you have young children, make sure you choose an independent attorney who focuses their law practice on asset protection and estate planning for young families. This will help insure that the lawyer you choose has the knowl­edge, skill, experience and judgment necessary to fully protect your family and your assets, and to give you advice and counsel that is in your best interests.


Monday, September 23, 2013

8 Potential Problems With Revocable Living Trusts

Problem #1: Choosing the wrong trustee. Many people believe that you must name your bank as your trustee, but this is not the case. You act as your own trustee (if you are married, your spouse can serve as a co-trustee) during your lifetime so you continue to manage and invest your assets, just as you do now. If you do not choose to serve as trustee, you may hire a professional fiduciary who is not affiliated with a bank or trust company.

Problem #2: Leaving your Trust empty. A Revocable Living Trust is like a safe deposit box. It’s a good place to put your valuables, but it won’t do any good if you leave it empty. It’s not uncommon for people to have a lawyer draw up their Trust and then, years later, still have to go through probate. Why? Because the client never put their assets into the Trust and the attorney didn’t bother to help the clients with funding the Trust. Your property must be put into the Trust. But don’t worry. The process of retitling assets is easier than you think.

Problem #3: Initial cost. A Revocable Living Trust is more expensive to set up than a simple Will. But, in the long run, the cost will probably be much less because the Revocable Living Trust allows you to avoid probate, Court supervised estate administration, guardianships and conservatorships.

Problem #4: The potential for poor management. You could find that the person you selected to man-age your affairs is not a good manager. Your choices for successor trustee(s) should be family members or friends you can trust. Corporate trustees, such as banks, are also an option. But, even if you don’t put your assets into a trust, you could still have a problem with management of your assets.

Problem #5: Refinancing real estate may be inconvenient. Some mortgage companies and banks re-quire that you take real estate out of your Trust before they will place a new mortgage on your property. Once the financing is complete, then you simply transfer the property back into your Trust. Unique Estate Law assists clients who encounter this situation without additional fees.

Problem #6: Keeping a list of assets in your Trust. Some people don’t like to keep track of assets they put into their Trust. Others don’t mind this small amount of extra work. When you want to add some-thing to your Trust, you simply title it in the name of the trustees and add it to your list. I assure you the benefits of having a Revocable Living Trust far outweigh these minor inconveniences.

Problem #7: Opening a new bank account. Some banks will require you to close your current bank account and open a new bank account if you transfer the account into a Trust. This is a matter of the bank being uninformed. If you have substantial direct deposits or automatic debits, it will be necessary to see that the new account is functioning properly before closing the old account.

Problem #8: Imprinting on your checks. Some banks will require that you put the name of your Trust and trustees on the checks. You can respond to this in one of three ways. (1) The name of your Trust and trustees can very closely match your own name and be abbreviated in many respects. (2) You can order checks from a printing company with anything on them that you choose. Or (3) you can print your own checks with very simple and inexpensive computer software packages.


Monday, September 09, 2013

20 Costly Misconceptions About Wills and Trusts

Misconception #1: A Will avoids probate.  No.  A Will is the primary tool of the probate system. Your Will is like a letter to the Court telling the Court how you want your property distributed.  Then you must make sure that you prove to the Court that all your property is collected and appraised, and all your bills and taxes are paid, before your property can be distributed to your heirs.

Misconception #2: A Testamentary Trust avoids probate.  No.  A Testamentary Trust is a Trust contained within a Will that holds property for a specific purpose.  For example, one purpose would be to hold property until minor children turn 18, when they can legally own property -- or until children reach the age when you believe they are mature enough to responsibly handle the property.  A Testamentary Trust is not a Revocable Living Trust.  It is part of a Will and takes effect only when the Will is probated.

Misconception #3: Probate costs and the costs of administration of the estate are small.  Not necessarily.  Such costs can be very substantial.  The real problem is, no one can tell you how much the costs will be until the probate has been completed, which often can take several years.  The biggest portion of the costs are the fees charged by attorneys and personal representatives for their services for the estate, in addition to filing fees, costs of publication, fees for copies of death certificates, filing and recording fees, bond premiums, appraisal and accounting fees, and more.  Often the fees of personal representatives are based on an hourly rate, and while they can tell you what their hourly rate is, they cannot tell you the number of hours their services will take, so they cannot tell you what their total fees will be.  Like surgery, probate can be simple and easy, but frequently probate can have drastic and damaging results.  Accordingly, like surgery, because of its uncertainty in terms of both the potential for problems and high costs and fees, probate is something best to avoid if you can.

Misconception #4: Property can be distributed according to the terms of your Will in only a few weeks.  In Minnesota, the administration usually takes 12 to 15 months.  During this time, the deceased person’s property must be inventoried and appraised.  Heirs must be notified.  Estate and inheritance taxes, if any, must be paid.  Contested claims, if any, must be settled.  Creditors must be notified and paid.  If all of this is not done before the estate is distributed to the beneficiaries of the estate, the personal representative will be personally responsible for those claims.  As a result, most personal representatives won’t distribute property until they are sure all claims have been settled.

Misconception #5: Your Will and your assets remain private.  No.  Because probate is a public legal proceeding, your estate may become a matter of public record.  This means that anyone -- including nosy neighbors and salespeople -- can go to Court to find out the balance in your savings account, the value of your stocks, even the appraised value of your diamonds.

Misconception #6: A Will helps you avoid taxes.  No.  A simple Will does nothing to lower your taxes. A Will simply tells how you want your property distributed, and who you want to act as guardian for your minor children in case you and your spouse die in a common accident.  A skilled lawyer can use a Will to plan complicated estates that require tax planning, but the cost of the complex plan will be comparable to the cost of a Revocable Living Trust plan.  Plus, the Will-based plan will still have to go through probate.

Misconception #7: Your permanent family home and your vacation home can be handled through the same probate and qualification.  Yes, but only if they are in the same state.  If you own property in different states, a second probate, called an ancillary administration, will need to be opened, which means your estate may need to hire another attorney. This will increase the overall estate administration expense.  And if you own real estate in other states, probates will need to be opened in those states as well.

Misconception #8: A Will prevents quarrels over assets.  Wrong.  Wills are among the most contested legal documents in the United States.  Today, it is common for unhappy relatives to challenge a Will.  This results in higher attorneys’ fees and even more delays.  Wills actually encourage challenges over assets because a petition must be filed in Court to probate them, which is like filing a lawsuit.  As a result, since a lawsuit has already been filed to probate the Will, a contesting party can simply file their claim in Court without instigating their own lawsuit.

Misconception #9: Estranged family members do not need to be notified of a probate if the Will excludes them from an inheritance.  In Minnesota, the Court may require that all heirs be notified of the probate even if they are excluded from the Will.  Certain aspects of the probate process can be avoided and financial responsibility can be mitigated through the use of various trusts and other types of financial planning.

Misconception #10: A Will from one state is not legal in another state.  Wrong.  If the Will is legal in the state where it was prepared, it is legal in all 50 states.  However, Wills do not travel well from state to state and should be reviewed by an attorney and very likely changed whenever you move to a new state. This is because the Will’s language may not mean the same in other states as it did in the state where it was signed.  In addition, many states require witnesses to the Will signing.  If proper procedures are not followed, you may need to produce those witnesses in order to probate the Will.

Misconception #11: A Will helps you when you become physically or mentally incapacitated.  No.  A Will is totally ineffective until death, and, therefore, does nothing to help you through incapacity and disability.  Your family or friends may have to go to Court to start costly guardianship or conservatorship proceedings.

Misconception #12: You must name your attorney as your personal representative.  No.  You may name anyone you choose.

Misconception #13: The cost of your estate plan is only the cost of drawing up the documents.  No.  The cost of your estate plan is both the cost of drafting the documents and the cost of distributing property to your heirs.  Simple Wills are less expensive to set up, but potentially expensive when they go through probate and there is qualification on the estate and estate administration.  Revocable Living Trusts may initially cost more than a simple Will, but the overall cost of settling your estate is often substantially less.

Misconception #14: Revocable Living Trusts are only for large estates.  No.  Revocable Living Trusts are for anyone who wants to avoid costly conservatorship and probate proceedings.  In appropriate cases, people with small estates can benefit from a Revocable Living Trust.  People with larger estates can benefit even more.

Misconception #15: A Revocable Living Trust is a public document.  No.  Your Revocable Living Trust can remain private because it does not have to be recorded or published in any way.  The only people who will know about your Trust are the people you choose to tell.  However, some professionals may need to review your Trust to confirm that your trustee is authorized to take a particular action.  This review is for the protection of all beneficiaries of the Trust.

Misconception #16: A Revocable Living Trust cannot be changed.  Wrong.  You can change and even revoke your Revocable Living Trust any time you wish.  The decision is entirely up to you.

Misconception #17: A Revocable Living Trust must have a separate tax return.  No.  As long as you are a trustee or co-trustee of your Revocable Living Trust, it does not need a tax return of its own.  Your personal tax return, which uses your social security number, is sufficient for the IRS.

Misconception #18: When you set up a Revocable Living Trust, you lose control of your assets.  No. When you set up your Revocable Living Trust, you simply name yourself and/or your spouse as Trust managers, called “trustees.”  In this way, you never give up control.

Misconception #19: The best way to transfer assets to your Revocable Living Trust is through a pour-over Will.  No.  A pour-over Will can be used to clean up the transfer of any miscellaneous assets to your Revocable Living Trust, but in order for that to take place, the Will must be probated for the assets to be transferred to the Revocable Living Trust.  A better course of action is to transfer the assets to your Trust while you are still healthy and able.  Not only will you get the peace of mind that comes from knowing the transfer was made properly, you will also get an accurate inventory of your estate.

Misconception #20: There are no costs associated with administering a Trust at the death of the original settlor of the Trust.  Not true.  While people commonly think that only the probate system costs money and takes time, they fail to understand that administering a Trust, distributing Trust assets to beneficiaries named in the Trust, and terminating the Trust can result in fees and costs.  Trustees may also charge fees for their service, and many trustees hire attorneys and accountants.  These costs are paid by the Trust before beneficiaries receive their inheritances.

If you have any questions or concerns relating to a will or trust, please contact our office.


Monday, September 02, 2013

What To Do When Someone Dies, Part 4: Should You Choose an Informal or Formal Probate Proceeding?

A Minnesota Probate Attorney Explains the Difference Between Informal and Formal Probate

As stated in my prior posts, there are many different paths to choose when an estate needs to go through probate in Minnesota.  One key decision is whether to take the formal or informal path. The terms informal and formal refer to the type of procedure used to appoint a personal representative to handle the decedent’s affairs and to accept a Will for probate.

Informal probate is the most commonly used form, and is easiest for parties to use when the assets are straightforward and when everyone involved gets along.

You should consider filing for a formal probate proceeding if any of the following apply:

  • problems with the will
  • unknown heirs
  • missing will
  • minor heirs
  • high probability for dispute between heirs
  • when there are expected to be problems with the administration.
  • if the estate is insolvent (meaning there is more debt than assets)
  • no one is trustworthy enough to handle matters

The informal probate process

The informal probate process commences when an applicant presents an application to a registrar instead of a judge. The application asks the registrar to appoint the personal representative and accept the will, if there is one. The registrar then approves the estate to proceed informally and makes sure the paperwork (e.g the will, petition for informal probate, affidavit of acceptance by personal representative, list of interested persons) is complete. The registrar is not involved between when the estate is approved and when the final accounting is due. This process has less oversight by the court and additional costs from hearings are not incurred.

The formal probate process

The formal process starts with a probate attorney filing a petition with the court on behalf of a petitioner asking a judge to: 1) determine the heirs of the deceased; 2) verify the validity of the will; and 3) appoint a personal representative.  Counties differ on whether the petitioner and attorney in a formal probate must appear in front of a district court judge so check with a probate attorney to verify the requirements in your county. After deciding to file for formal probate, a petitioner must also determine whether the estate should be supervised, meaning the court must sign off on any distributions to heirs before they are made, or unsupervised, meaning the personal representative does not need the court to approve anything before closing the estate.

Upon receipt of the petition for formal probate, the court reviews the paperwork and approves the Personal Representative. At that point, the personal representative is able to work to resolve all outstanding issues in the estate. Keep in mind that commencing a formal probate proceeding provides the petitioner with access to the judge later on if a judge’s signature is required on matters subsequent to the appointment of a personal representative. The formal process is generally more expensive due to consistent attorney intervention in obtaining the court’s approval and signature and in attending any required hearings.

The probate process can be complicated and confusing so it is a good idea for family members to meet with an experienced probate attorney to assist with making a decision on which probate process to pursue. Further, to minimize court involvement and ensure your "stuff" goes to the people of your choice, you must have a will.  Don't leave things to chance - or the State - and don't leave your loved ones with the added stress, and expense, of trying to figure out what you wanted.  Protect your family with an estate plan designed to limit hassle, delay and expense so decisions like choosing informal versus formal probate are easy allowing those left to focus on more important matters.


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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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