Estate Planning

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Estate Planning

Wills, trusts, and other estate planning tools let you decide who will care for your children, how those children are to be provided for, and how assets should be divided and distributed if you become incapacitated or pass away. Making these decisions ahead of time can also reduce conflict between family members, reduce estate taxes, and resolve other problems that may arise.

We assist clients in preparing and executing the following types of documents:

  • Wills
  • Testamentary trusts
  • Living trusts
  • Powers of Attorney
  • Healthcare directives (living Wills)

Estate Plan

An estate plan consists of action(s) or tool(s) that will control aspects of a person's life or property after the person dies or is no longer able to make decisions. These tools can be as simple as a Will or as complex as a business succession plan. The important thing about your estate plan is to tailor it to your specific goals.

Will

A Will is a written document that records a person’s wishes for after that person has died. Wills can control child custody, distribution of assets, and appointment or nomination of the people who will be charged with carrying out the terms of the Will. A common misconception is that spouses can have a joint Will. In fact, each spouse needs to have his or her own Will, even if the Wills are mirror images.

In Minnesota, a Will must be in writing, signed by the person making the Will (called a “testator”), and witnessed by two adults. Generally, the witnesses' signatures acknowledged by the testator’s signature and a notary on an attached document called a self-proving affidavit. This document helps ensure that the witnesses will not need to testify later when the Will is administered. Unwitnessed Wills, regardless of signature or notarization, are not valid in Minnesota.

Wills are usually the building blocks of estate plans. They can work in conjunction with other estate planning tools, such as trusts, or even include trusts within them. Wills should always be drafted by or with assistance from a lawyer to ensure that they meet the unique requirements of Minnesota law.

Trust

Trusts are entities created to hold, manage, and distribute assets to benefit certain persons. Trusts are managed by trustees who are charged with carrying out the terms of the trust. Trustees can be individuals or entities, such as a bank. While trusts are highly customizable, the two most frequently-used are testamentary trusts and living (inter vivos) trusts.

Testamentary trusts are created by a person’s Will. They do not become active until that person has died. The most common use for a testamentary trust is to provide for the needs of minor children, where the trust might create guidelines for distributing funds to children for healthcare, education, and other needs. The trust can continue after the children become adults to ensure that the funds will continue to be used for the purposes that the testator intended.

Living trusts (also called inter vivos trusts) are active during the life of the person who created the trust (called a trustor or a settlor) and can be structured so as to be revocable by the settlor. Living trusts are commonly used to help reduce or avoid estate taxes and avoid the necessity of probate, as well as to manage ownership of assets such as shared family property. Once a living trust has been created, the settlor transfers assets into the trust, at which point those assets are the property of the trust, rather than the settlor. There are gift tax implications to consider when transferring assets to a trust, so be sure to consult with an attorney who can not only draft the trust, but help determine the best way to transfer assets into the trust.

Beneficiary Designations and Asset Titles

Beneficiary designations and careful titling of assets allow many assets to be transferred directly to a new owner or co-owner when the previous owner dies. This type of estate planning normally prevents those assets from becoming part of a probate estate.

Beneficiary designation assets include pay-on-death (POD) accounts, transfer-on-death (TOD) accounts, investments that allow naming of beneficiaries (such as IRAs), and life insurance policies. These types of assets let you name an individual to whom ownership of the asset will transfer in the event of your death. Assets with beneficiary designations generally can be transferred quickly and easily after death by providing a death certificate to the asset holder and completing whatever paperwork the asset holder requires. It is critical to review and revise who is named as beneficiary to ensure that the asset will transfer as intended.

Asset titling involves transferring an asset based on the way the previous owner held title to that asset. Titled assets commonly include vehicles and real estate, though the same principles apply to other assets such as bank accounts that can be held jointly. When the owner of a titled asset gives a partial ownership interest to someone else, the original owner can create a structure that will allow the asset to transfer quickly and easily after his or her death. Examples include joint ownership, which grants an immediate ownership interest in someone else, and transfer-on-death deeds (TODDs), which create an interest in another person that vests only upon the owner’s death.

Power of Attorney

A power of attorney is a document that allows one person (the Principal) to appoint another person (the Attorney-in-Fact) to act on his or her behalf. Powers that are conferred to the Attorney-in-Fact can include the ability to manage your financial accounts, enter into contracts, and even make healthcare decisions.

There are two main types of powers of attorney: standard and durable. A standard power of attorney is effective only while the Principal is legally competent and able to manage his or her own affairs. If the Principal becomes incapacitated or is deemed incompetent, a standard power of attorney will cease to be effective. This type of power of attorney can be helpful in dealing with long-distance matters in which the attorney-in-fact is local to the matter or assisting a Principal with a task they find difficult or undesirable. A durable power of attorney is similar to a standard one, except that the powers granted will continue to be effective even if the Principal is incapacitated or incompetent. This can be a convenient and effective way of managing the affairs of an incapacitated person without having to appoint a conservator.

Powers of attorney are generally effective immediately upon being signed, rather than after the occurrence of an event such as the disability of the Principal. A power of attorney does not affect the powers of the Principal; it simply allows the Attorney-in-Fact to also utilize the designated powers. All powers of attorney cease at the death of the Principal. From that point a Personal Representative or other individual who is administering the Principal’s estate would be required to act in the place of the Principal.

Healthcare Directives

A Healthcare directive (also called a living Will) is a written document containing instructions to doctors and family members who may have to make decisions regarding a person’s medical care if that person is incapacitated or too ill to make decisions.

Healthcare directives can be very specific, listing a long series of treatments and provisions that a person wants or does not want decision makers to utilize. They can also be very brief, just appointing an individual who is trusted to make decisions (called a Healthcare Power of Attorney) and perhaps listing a few broad guidelines.

Our attorneys are happy to assist clients in creating healthcare directives and selecting individuals to act as a healthcare power of attorney. Any healthcare directive or other document that can affect your medical treatment should also be discussed with your doctor, who can help make more informed choices based on your medical history.