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Do You Need Estate Planning?
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Everyone
should have an estate plan. Your estate plan may involve a simple Will or it may be quite complicated involving the
use of trusts, life-time transfers, etc. The more assets you acquire during your lifetime the greater the need for an
estate plan but everyone needs at least a Will. Without a Will if a probate is needed your assets will be distributed
pursuant to the state's intestacy laws and not your intentions. A Will does not create the need for a probate but is
there in case a probate is required. Estate
planning can be used for the following purposes: 1. to lower or eliminate estate taxes; 2. to protect assets from creditors; 3. to control to assets after your
death; or 4. to allow for a viable transfer of a business. Wills, trusts, variuos types of deeds, various types of insurance and lifetime
gifts are tools to be used to effectuate your estate plan.
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Everyone needs a Will. While you may attempt
to avoid a probate, mistakes are made and it is not always possible. If nothing else, you need a backup in case your plan
to avoid probate does not succeed. If you have children who are minors you need a Will to appoint a guardian of your choice
to be responsible for your children and their finances. Finally, in some instances it is best to use a Will to distribute
some of your assets. A properly drafted Will usually allows for a trouble free, informal probate by your survivors, and can
help them avoid a costly bond and costly court hearings to determine the heirs.
A Will is the primary tool for
providing for the care of your children and their finances if you and/or your spouse die. If you don't have a Will, a judge
will then decide who will be responsible for your childrens' well-being until they become adults. Do you want to decide who
the guardian of your children is or do you want a judge to make this decision? If you want to make that decision, you need
a Will.
If you have any property that is not formally
jointly owned with another person as a joint tenant, a judge will determine how it is distributed according to the intestate
rules of the State of Minnesota then in effect. Do you want to decide how your property is distributed or do you want the
intestate rules of the State of Minnesota to make that decision? While you may attempt to put all of your property into joint
tenancy to avoid this problem, you may not be able to do so with all of your assets or you may make a mistake (many a probate
battle has been fought over a deed that wasn't properly drafted) or miss a property. In any case, if you want to decide how
your property is distributed in case it has to go through a probate, you need a Will.
For more information on Wills
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A Trust is a contract that divides the legal and beneficial
ownership of assets that are transferred into the trust. When the property is transfered into the Trust, generally the legal
owner becomes the Trust, a trustee is appointed to manage the property of the Trust, and beneficiaries are granted some ability
to receive a benefit from the trust (such as use of the property, principal and/or income).
The Trust typically
gives the trustee instructions as to how the property should be handled and the purposes for which distributions of trust
income and/or principal (the funds intially placed into Trust) can be made to the beneficiares. A Trust can be restrictive
or flexible as to the trustee's powers depending on the preference of the individual establishing the Trust and the purpose
for which the Trust is established.
Generally, the trust will name “successor” trustees in case the
original trustee dies or becomes unable to fulfill his/her obligations as trustee. It is permitable to have co-trustees and
trustees do not have to be related to the grantor or beneficiaries.
An advantage that trusts have over Wills are as follows:
One, avoids probate;
Two, provides for guardianship
planning;
Three, is private; and
Four, provides
for quick, efficient administration.
If the grantors of a trust are married, own all of the assets jointly, and
have an estate of less than $1,500,000.00 they most likely would have a joint trust in which they serve as co-trustees. If
the grantors own assets separately or have an estate over $1,500,000.00, two trusts should be considered. This often is the
case with second marriages.
Trusts can be used to replace wills or to be used along with wills. A “Pour-Over”
Will is a will that pours over everything in the will into the trust upon the death of the creator of the Will.
A Trust can be a very useful tool in the following situations.
For more information on each, please click on the link.
An Incompetent/Irresponsible
or immature beneficiary;
Several Beneficiaries;
Keeping
property "in the family";
Managing behavior;
Avoiding
probate.
For more information on Trusts
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What Happens When Someone Dies?
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When a person passes
away the first questions to be asked is what did they own at the time of their death? If they don't won any assets no
probate is needed. If they owned assets but they were owned in a way that their interest automatically transfered their
interest no probate is needed (for example, holding property as joint tenants). If they own assets that do not automatically
transfer at death, a probate will be needed to transfer their interest. If probate is necessary, a Will directs the
probate court as to the intentions of the deceased as to how the assets are to be distributed. This is called a Testate
Probate. If there is no Will, the probate court looks to the intestacy laws of the state to determine how the assets
will be distributed. This is called an Intestate Probate. When a person passed away, we review their assets to determine if a probate
is necessary and,if necessary, we determine what type of probate is needed. Is there a Will? How many and what
types of assets need to be probated? Are there liabilities that need to be paid? Not all probate are the same
in terms of cost or length of time needed to complete. We often can provide flat fee options and can provide options
where the asset can be sold prior to the probate actually being completed. |
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