Frequently Asked Questions
What is Estate planning?
A process by which I help design a strategy and execute the necessary documents, the core being a will, to administer your assets for your beneficiaries. Tax and incapacitation planning are part of this process. It can also involve the services of a variety of professionals, including your accountant, financial planner, and life insurance advisor.
What is a Will?
A will is a legal document that names a personal representative who is responsible for distributing your assets to the named beneficiaries. If you die without a will Minnesota’s inheritance laws will determine who receives your probate property. There are different types of wills designed to meet your individual needs. They can be simple or contain complex tax avoidance structures.
What is a Personal representative?
Previously called an executor or administrator, the person who is responsible to carry out the directions in your will. The right personal representative is someone who you trust, who can work well with others, who is intelligent and who is not afraid to ask for — or hire — help.
What is a Beneficiary?
A person, like your child, or an entity, such as a charity, who is named to receive the benefit of your property from an instrument such as a will, trust or life insurance policy.
What is a Guardian?
A guardian takes care of a child's personal needs, including shelter, education and medical care. In most cases, a surviving parent assumes the role of sole guardian of minor children. However, if neither parent survives, or is willing and able to act, it is very important to name a guardian in your will. You can name a couple as co-guardians, but that may not be advisable. It is always possible the guardians may choose to separate at some later date; if so, a custody battle could ensue.
What is Probate?
Probate is the legal process of settling your estate in court after you die. Your property is gathered and inventoried, your debts are paid, and everything left over is divided among your heirs. If you have no will or did not name a personal representative, the court will appoint one for you. If there is disagreement over your will, a probate judge will resolve the differences. Not all of your assets pass through probate. For example, a life insurance policy with a named beneficiary goes directly to that person. Therefore, it may be possible to avoid probate proceedings with asset titling and beneficiary designations.
What is a Health Care Directive?
These instruments, like a “living will,” give direction to your health care providers and the person(s) you name on how you would like to be cared for under different medical situations if you become incapacitated. (Previously living wills served this function.) A directive will help you get exactly the care you would like, particularly near the end of your life when your interests may not be the same as those who survive you.
What is a Power of Attorney?
There are different powers of attorney, but essentially they are an instrument that gives someone else the legal right to perform financial tasks on your behalf. Therefore you should carefully consider who you give to hold this power.
For most estate plans a durable power of attorney is drafted because it does not terminate upon incapacitation. If you don't have a durable power of attorney and you become incapacitated, a judge will need designate a conservator to manage your financial affairs. This can be costly and cumbersome.
If you are married, your spouse does have some authority over property you own however when it comes to property that belongs only to you, your spouse has no legal authority without a durable power of attorney.
If you are not married to your life partner, this protection is absolutely necessary.
What is incapacitation?
This can be a temporary or permanent condition in which you are unable to make decisions on your behalf. Some common examples are a coma or memory decline due to aging or disability. Your health care providers determine if you are incapacitated.
What is a trust?
A trust manages the distribution of your assets. A trust is created by the transfer of your property to another person (the trustee). A trustee can be a professional with financial knowledge, a relative or friend, or a professional trust company. The trustee holds the title to the property and manages the property for the benefit of the beneficiaries like your children or a charity. There are many types of trusts.
A Testamentary or After-Death Trust is created by a will after a person’s death. An example of an after-death trust would be one created by a parent to benefit a minor child or an older child who is not responsible with finances. You would name a trustee in your will to be responsible for dispersing your assets in a manner preferable to outright distribution. You can also leave assets to your spouse through a trust to avoid future estate tax.
A Supplemental Needs Trust would be necessary if one of your children or other beneficiary were disabled. This trust is designed to allow the disabled person to remain eligible for all government financial aid by limiting the use of trust assets for purposes outside of the government assistance.
A Revocable “Living” Trust is an instrument created while you are living. Revocable trusts can avoid the probate process if all of your assets are titled correctly, however, they do not provide estate tax shelter. Unlike the probate process, distribution of your assets through a trust will be private. Revocable trusts are also helpful when assets such as real estate are owned in numerous states and you want to avoid many ancillary probate proceedings.
On the other hand, an irrevocable living trust, such as an Irrevocable Life Insurance Trust (ILIT) is usually set up to reduce estate or income taxes. However, to achieve this benefit, the assets cannot be removed, you cannot make changes and you cannot have sole control over your assets.
What is a Transfer on Death Deed (TODD)?
These instruments are new to Minnesota and allow you to avoid probate of real estate by executing a deed that can transfer your interest to another upon your death. This can be changed by you in your lifetime.
All the information presented on this Web site are for educational and resource purposes only. May I suggest that you consult with me or another attorney regarding your individual situation. Use of the information contained in this Web site is at the sole choice and risk of the reader.