Minneapolis Living Trusts FAQ

Q: What is Probate and why does everyone want to avoid it?

When a loved one passes away, his or her estate often goes through a court-managed process called probate or estate administration where the assets of the deceased are managed and distributed. If your loved one owned his or her assets through a properly drafted and funded Living Trust, it is likely that no court-managed administration is necessary, though the successor trustee needs to administer the distribution of the deceased. The length of time needed to complete probate of an estate depends on the size and complexity of the estate as well as the rules and schedule of the local probate court. Every probate estate is unique, but most involve the following steps: 1) Filing of a petition with the proper probate court, 2) Notice to heirs under the will or to statutory heirs (if no will exists), 3) Petition to appoint Executor (in the case of a will) or Administrator for the estate, 4) Inventory and appraisal of estate assets by Executor/Administrator, 5) Payment of estate debt to rightful creditors, 6) Sale of estate assets, 7) Payment of estate taxes, if applicable, 8) Final distribution of assets to heirs.

Q: What is a Revocable Living Trust?

A properly drafted Revocable living trust (RLT) is a powerful estate planning tool that allows you to remain in control of your assets during your lifetime, have them managed during incapacity, and efficiently and privately transfer them to your loved ones at death according to your wishes. Sometimes referred to simply as a Living Trust, an RLT holds legal title to your assets and provides a mechanism to manage them. You would serve as the trustee and beneficiary of your trust during your lifetime. You also designate successor trustee(s) to carry out your instructions for how you want your assets managed and distributed in case of death or incapacity. In order for the Living Trust to function properly, you need to transfer many of your assets to your Living Trust during your lifetime. The fact that it is “revocable” means that you can make changes to it or even terminate it at any time.

Q: What are the advantages of having a Living Trust?

Like a will, a Living Trust is a legal document that provides for the management and distribution of your assets after you pass away. However, a Living Trust has certain advantages when compared to a will. A Living Trust allows for the immediate transfer of assets after death without court interference. It also allows for the management of your affairs in case of incapacity, without the need for a guardianship or conservatorship process. With a properly funded Living Trust, there is no need to undergo a potentially expensive and time consuming public probate process. In short, a well thought out estate plan using a Living Trust can provide your loved ones with the ability to administer your estate privately, with more flexibility and in an efficient and low-cost manner.

Q: Will I lose any control over my property if I create a Revocable Living Trust?

Creating a Revocable Living Trust and transferring your assets to the name of that trust will generally not affect your ability to control such assets. During your lifetime when you are mentally competent, you have complete control over all of your assets. As the trustee of your trust, you may engage in any transaction that you could before you had a Living Trust. There are no changes in your income taxes. If you filed a 1040 before you had a trust, you can continue to file a 1040 when you have a Living Trust. There are no new Tax Identification Numbers to obtain. Because a Living Trust is revocable, it can be modified at any time or it can be completely revoked if you so desire. Upon your incapacity, the individuals you designate will be able to transact on your behalf according to the instructions you have laid out in the Living Trust. Upon your passing, the Living Trust can no longer be modified and the successor trustee(s) you have designated will then proceed to implement your wishes as directed.

Q: Do I have to transfer all my assets to my Living Trust?

Assets with beneficiary designations such as a life insurance policy or annuity payable directly to a named beneficiary need not be transferred to your Living Trust. Furthermore, money from IRAs, Keoghs, 401(k) accounts and most other retirement accounts transfer automatically, outside probate, to the persons named as beneficiaries. Bank accounts that are set up as payable-on-death account (POD for short) or an “in trust for” account (a “Totten Trust”) with a named beneficiary also pass to that beneficiary without having to be titled into your trust. It is important, however, to seek the counsel of an experienced estate planning attorney who can advise on and assist with transferring necessary assets to your trust.

Q: If I transfer title to real property to my Living Trust can the bank accelerate my mortgage?

Federal law prohibits financial institutions from calling or accelerating your loan when you transfer property to your living trust as long as you continue to live in that home. The only exception to the federal law, enacted as part of the 1982 Garn-St. Germain Act is that it does not provide for such protection for residential real estate with more than five dwelling units.

Question 1

What is probate, and why do people want to avoid it?

Probate is the court-managed process that takes place after someone passes away. The court oversees the collection of assets, payment of debts, and distribution to heirs. Probate can take months or even more than a year, depending on the size of the estate and the court’s schedule.

When assets are placed in a properly drafted and funded living trust, probate can often be avoided. That means property passes more quickly and privately to your chosen beneficiaries, without ongoing court oversight.

Question 2

What is a revocable living trust?

A revocable living trust (sometimes just called a living trust) is a legal document that allows you to:

Keep control of your property while you are alive and well
Have a trusted person manage things if you become incapacitated
Direct how assets should be distributed when you pass away

You serve as trustee and beneficiary during your lifetime. You also name a successor trustee to step in if needed. Because the trust is “revocable,” you can change it or even cancel it entirely while you are living and competent.

Question 3

How is a living trust different from a will?

Both wills and trusts allow you to set instructions for distributing your property, but they work in different ways:

Probate: A will must go through probate, while a funded living trust avoids it.
Incapacity planning: A trust lets someone manage your affairs if you cannot, without a guardianship proceeding.
Privacy: Wills become public in probate court, but trusts remain private.

Question 4

What are the benefits of having a living trust in Minnesota?

Families often choose a living trust for these reasons:

Avoiding probate delays and costs
Maintaining privacy over family financial matters
Providing a clear plan if you become incapacitated
Giving loved ones more flexibility in administering your estate

Question 5

Will I lose control of my assets if I create a trust?

No. You remain in full control while you are alive and competent. You can buy, sell, refinance, or give away property just as before. You also file your taxes the same way as there are no new tax ID numbers for you to obtain. The trust only becomes irrevocable once you pass away.

Question 6

Do I need to transfer all of my property into the trust?

Not everything has to be moved. Certain assets already pass outside of probate, such as:

Life insurance and annuities with named beneficiaries
Retirement accounts (401(k)s, IRAs) with designated beneficiaries
Bank accounts set up as payable-on-death (POD) or “in trust for”

Other property, like real estate or non-retirement investment accounts, should generally be transferred into the trust to ensure full probate avoidance.

Question 7

If I put my home in a trust, can the bank call my mortgage?

Federal law protects homeowners from loan acceleration when transferring a primary residence into a revocable living trust, provided you continue living there. The only exception is for residential buildings with more than five units, which are not covered by this protection.

Question 8

How much does it cost to set up a living trust?

The cost depends on your situation, the complexity of your estate, and the attorney’s approach. While a trust is typically more expensive upfront than a will, it often saves your family time, money, and stress later by avoiding probate and reducing potential disputes.

Question 9

Do I still need a will if I have a trust?

Yes. A “pour-over” will is usually prepared alongside a trust. It acts as a safety net by directing any assets not already in your trust to be transferred there after your death.

Question 10

Can I update my living trust if my circumstances change?

Yes. Because the trust is revocable, you can amend it to reflect new life events, such as marriage, divorce, birth of a child, or purchase of new property. Regular reviews ensure your trust continues to reflect your goals.

Question 11

Who should consider a living trust?

A living trust may be a good choice if you:

Own real estate in Minnesota or multiple states
Want to simplify the process for your family
Prefer privacy regarding your estate

Worry about incapacity and want clear instructions in place