Minnesota Attorney General's Office
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445 Minnesota Street
St. Paul, MN 55101
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Probate and Planning
The process of planning ahead for the end of life is something that many want to avoid. Although planning for such a time may not be comfortable, it is an important step to help those who will care for you and your affairs. In fact, some people find it reassuring to know that they have prepared a will to direct how their property should be allocated, or a health care directive to tell their family and caregivers about the medical treatment they want.
These issues and more are discussed in this handbook, Probate and Planning: A Guide to Planning for the Future. The book addresses wills and the probate process. Next, it describes living trusts, conservatorships, and powers of attorney. Finally, it addresses health care directives and planning a funeral.
This publication contains some legal or technical words that may need further explanation. You may want to scan the Glossary of Terms located on page 38 before reading ahead.
What is a will?
A will is a legal document that allows you to transfer your property at your death.
A will is a simple way to ensure that your money, property and personal belongings will be distributed as you wish after your death. A will also allows you to have full use of your property while you are alive.
Does everyone need a will?
The law does not require that you have a will. However, a will is a useful tool that provides you with the ability to control how your estate will be divided.
If you die without a will, Minnesota’s inheritance laws will control how your estate will be divided. Your property will go to your closest relatives. If you have a spouse and children, the property will go to them by a set formula. If not, the property will descend in the following order: grandchildren, parents, brothers and sisters, or more distant relatives if there are no closer ones. A table of Minnesota Heirship is included among the sample forms at the back of this booklet.
You may not need a will if you have made provisions so that your assets will pass without one, for example, by establishing trusts, life insurance policies with named beneficiaries, or joint property interests such as real estate or bank accounts.
A will is necessary if you want to leave property to a friend or a charity, to give certain items to certain people, or to leave someone out who would otherwise inherit from you. Also, you may wish to appoint a specific person to handle your estate. Thus, often it is best to write a will so your intentions can be met.
What rules apply to wills?
In Minnesota, the following rules apply to wills:
- You must be at least 18 years old and of sound mind to make a will;
- The will must be in writing;
- The will must be signed by you, by another person at your direction and in your presence, or by your conservator pursuant to a court order;
- The will must be witnessed by at least two people, both of whom must also sign the will; and
- You must intend for the document to operate as a will. What is a self-proved will?
What is a self-proved will?
A will is self-proved when you and witnesses acknowledge in affidavits that you signed and executed the will voluntarily, within the presence of at least two witnesses, that you are over 18 years old, not under undue influence, and of sound mind. A will may be made self-proved at the time it is executed or at any time thereafter. You may want to consider this procedure as it helps establish that your will was properly executed, should it be contested in court.
What is in a will?
Generally, the following basic elements are included in a will:
- Your name and place of residence;
- A description of any assets you wish to give to a specific person;
- Names of spouse, children, and other beneficiaries, such as charities or friends;
- Alternative beneficiaries, in the event a beneficiary dies before you do;
- Establishment of trusts, if desired;
- Cancellation of debts owed to you, if desired;
- Name of a trustee for any trusts created;
- Name of a personal representative to manage the estate;
- Name of a guardian for minor children;
- Name of an alternative guardian, in the event your first choice is unable or unwilling to act;
- Your signature; and
- Witnesses’ signatures.
Your will should clearly state who will get your property upon your death. You should also indicate, in an itemized and organized manner, how much each person will receive. You should be sure to name a guardian for your minor children and name a personal representative for your will.
Can I leave my spouse or my children out of my will?
In Minnesota, your spouse may claim up to one half of the estate, even if he or she is left out of the will. The amount of money your spouse would get depends on how long your spouse and you were married. Your spouse has an option of whether or not to take this amount. Unlike a spouse, you may disinherit a child in your will.
What is a personal representative?
A personal representative (also known as an executor or administrator) is the person who oversees payment of your debts and distribution of your assets according to your will. A personal representative is considered a fiduciary. This means that he or she must observe a high standard of care when dealing with the estate. You should identify a personal representative by name in your will. Most people choose their spouse, an adult child, a relative, a friend, a trust company or an attorney to fulfill this duty, but anyone can be named personal representative in a will. Since your personal representative will handle your assets, you should always pick someone you trust.
You may also appoint more than one personal representative. When there is more than one personal representative, all representatives must agree on any decision regarding the estate unless the will provides otherwise.
If no personal representative is named in a will, a judge will appoint one for you to oversee the distribution of your assets.
Responsibilities usually undertaken by a personal representative include:
- Filing your will, an inventory of your assets, and other documents with the court;
- Paying valid creditors;
- Paying taxes;
- Notifying Social Security and other agencies and companies of the death;
- Canceling credit cards, magazine subscriptions, and similar consumer items; and
- Distributing assets according to your will.
What is a guardian?
In most cases, a surviving parent assumes the role of sole guardian of your minor children. However, if neither spouse survives, or if neither is willing and able to act, it is very important to name a guardian in your will. The guardian you choose should be over 18 and willing to assume the responsibility. Talk to the potential guardian about what you are asking before naming that person 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. If you do not name a guardian to care for your children, a judge will appoint one.
How do I prepare a will?
You should outline your objectives, inventory your assets, estimate your outstanding debts and prepare a list of family members and other beneficiaries. You should then use this information to consider how you want to distribute your assets. Some questions include the following:
- Is it important to pass my property to my heirs in the most tax-efficient manner?
- Should I establish a trust to provide for my spouse or other beneficiaries?
- How much money will my grandchild need for college?
- Do I need to provide for a child who has a disability?
Assets that you do not specifically address in your will may fall into a “catch-all” clause in your will. This catch-all provision is often called a “residuary clause” since it generally states, “I give the residue of my estate to …” Without this clause, the items you do not specifically mention will be distributed in accordance with state law. When it comes to actually writing your will, you may find it helpful to contact an attorney. In the Referral Guide section of this book on page 40, phone numbers are available for various attorney referral and legal aid services.
How do I change or update a will?
You may want to update or change your will if:
- Your marital status changes;
- A child or grandchild is born;
- There is a death in the family;
- You move to a new state;
- The value and kind of property you own changes substantially;
- Your personal representative moves away or dies; or
- Tax laws change.
Wills can be changed either by writing and executing a new one or by adding a “codicil,” which is an amendment to a will. The codicil must be written, signed and witnessed the same way as the will, and should be kept with the original will.
Do not try to change your will by simply crossing out language or writing in new provisions. Crossing out language raises the question of whether you intended to revoke your whole will or just a part of it. Writing new provisions will be ineffective unless the provisions are signed by you and two witnesses.
The only part of your will that can be changed without being rewritten and executed is a separate personal property distribution list. If your will specifically states that you are distributing personal property by a separate document, you may simply write out a statement describing how you want to distribute your personal property. The statement can be written after the will is signed, and it can be changed without revising the will itself. If you use such a statement, always be sure to date and sign it and clarify whether you wish to revoke any prior statements. If an item is disposed of to different persons in different writings, the last statement controls the disposition of the property, and all statements may be ineffective if their order cannot be determined..
A will is effective until you change, revoke or cancel it, so it is a good idea to periodically review your will.
Where do I keep a will?
Your will should be kept in a safe place. The original will should be placed where it can easily be found after your death. Make sure your personal representative, a close friend or relative knows where to find it and can access it, particularly if you are considering a safe deposit box.
In Minnesota, the probate court or court administrator’s office will accept wills for safekeeping at no charge or for a nominal fee. You have the right to get your will back at any time. If an attorney prepares your will, he or she may be willing to hold it for safekeeping. If you do this, be sure to tell your family that the attorney has it.
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. Your personal representative is responsible for “probating” your will. If you have no will or did not name a personal representative, the court will appoint one for you.
Probating a will begins by filing an application with the probate court. Probate ends when all debts and taxes are paid and all assets are distributed. If there is disagreement over your will, a probate judge will resolve the differences.
When is probate necessary?
Probate laws in Minnesota apply to the estates of people who were residents of Minnesota at the time of their death. Probate also applies to other states’ residents who own real property in Minnesota.
Having a will does not avoid probate. The need for probate depends on what property you own and whether you own it alone or with others.
Real estate. Unless real estate is owned in joint tenancy with right of survivorship or placed into a trust, it must be probated. Joint tenancy means that the property is owned by two or more people who have an undivided interest in the property, and that interest continues in the survivor after other owners die. If you are a resident of Minnesota and own real estate in another state at the time of your death, the probate laws of that state will apply to that real estate. In other words, real estate is probated in the state where it is located.
Personal property. If your estate is worth less than $50,000, your heirs may be able to collect the property without going to court by using an Affidavit for Collection of Personal Property. Your personal representative should notify all of the heirs of the property that they can collect. Heirs may not take your personal property until 30 days after your death. If your personal property exceeds $50,000 or you own real estate in your name alone, your estate must be probated.
What items are not subject to probate?
Some kinds of property and assets do not need to be probated. These include property owned as joint tenants, jointly held bank accounts, payable-on-death accounts, life insurance proceeds to a specific beneficiary, and pension benefits with a designated beneficiary in the event you die.
Joint tenancy property. As discussed previously, holding title to property in joint tenancy means that you and another person each have an undivided interest in the property and a right to own it after the other person dies. In the case of real property, this fact would be stated in your title documents. When a co-owner dies, the surviving property owner must file a certified copy of the death certificate of the deceased property owner and an affidavit of survivorship with the county recorder or registrar.
Jointly held bank accounts. As in joint tenancy of real property, you and one or more people may be listed as account holders of the same financial account. If one of the joint account holders dies, the other joint account holders own the money in the shared bank account.
Payable-On-Death accounts (PODs). A payable-on-death account is an individually owned account in which you choose someone else to receive the funds in your account upon your death. The beneficiary, or person getting the money upon your death, has no right to these funds until your death. You may set up a POD by contacting your financial institution. You may change the beneficiary by completing a new signature card at any time.
Life insurance proceeds. Your life insurance policy can indicate a specific person, called a “beneficiary,” who will receive your insurance proceeds when you die. Call your insurance agent or company if you are interested in naming a specific person or persons to receive your life insurance money.
How do I probate an estate?
Your personal representative starts a probate proceeding by filing an application or petition with the probate court in the county where you lived at the time of your death. Probate proceedings in Minnesota may be either formal or informal and generally must be initiated within three years after the decedent’s death. The services of an attorney may be needed in order to correctly probate an estate.
Informal. The informal probate process is initiated by filing an application with the probate court. In some counties, you must file the application in person. If the probate registrar determines the application is complete, the registrar will issue a statement of probate and appoint a personal representative. In the informal process, the personal representative may pay debts and inheritances and may otherwise administer the estate without the court’s supervision.
Applications for informal probate should include the following:
- The applicant’s interest in the proceeding (i.e. spouse, child, attorney, personal representative, etc.);
- The decedent’s name, dates of birth and death, and the county and state of residence at the time of death;
- The names and addresses of the decedent’s spouse, children, heirs, and any others named in the will if there is one, and the age of any minors in this list;
- Statement showing venue if decedent was not domiciled in Minnesota at time of death;
- The name and address of the person who is, or should be, named personal representative; and
- Statement of applicant’s knowledge of probate or appointment proceeding concerning decedent filed in Minnesota or elsewhere.
If there is a will, the following also must be included in the application:
- A statement that the original will is in the court’s possession, accompanies the application, or an authenticated copy of a will probated in another jurisdiction is attached to the application;
- A statement that the will has been validly executed;
- A statement that the applicant is not, upon investigation, aware that the will has been revoked; and
- A statement that the time for beginning informal probate proceedings has not expired, which is generally three years after the decedent’s death.
The probate registrar has discretion to either accept or reject the application. It is not a final determination if the registrar rejects the application and does not prevent the will from undergoing formal probate proceedings.
Formal. Filing a petition with the court starts formal proceedings. The petitioner then must appear before a court at a hearing. Because most people lack experience in formal probate proceedings, it is best to consult an attorney if an informal probate proceeding cannot resolve the estate. If the court finds that the petition is complete, the court will issue an order for probate and appointment of the personal representative..
How will the estate be distributed to heirs?
If there is a will, the personal representative should distribute the estate property according to the will. If there is no will, the estate property will be distributed according to state intestate succession laws. A table of Minnesota’s Heirship is located in this booklet on page 37.
The law generally provides that, without a will, your estate will pass to your spouse, if still alive, but in situations where either spouse has children from other marriages, the share of the spouse may be less than the entire estate. If your spouse is not alive, your estate will pass to your children in equal shares. You should consult an attorney to determine exactly how your estate will be divided if you do not have a will.
Sometimes, relatives cannot be located or traced. In this case, assets of the estate that cannot be distributed are deposited with the county treasurer until claimed.
What taxes must be paid?
For 2011 and 2012, federal law provides that an individual can transfer up to $5,000,000 to someone other than a spouse before incurring estate tax. If you are married, you can transfer any amount of property to a spouse during your lifetime or after your death without incurring federal estate tax. Individual state tax laws may vary, however, and you should review the tax laws of the states where you have property. For example, Minnesota tax may be due on some estates over $1,000,000. Due to numerous changes in federal estate tax laws over the last several years, you should consult an attorney or tax professional if you are concerned about establishing an estate plan that will minimize tax liability upon your death.
What is a trust?
A trust manages the distribution of your assets. A trust is created by the transfer of property by the owner (sometimes called the “grantor,” “donor,” or “settlor”) 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 who may be a specific person, a group of people, or an organization.
What are the basic types of trusts?
There are two basic types of trusts. A “testamentary” or “after-death trust” is created by the settlor’s will which transfers property to the trust. The “living” or “inter vivos” trust is created during the lifetime of the grantor when all or part of the grantor’s property is transferred into the trust.
Testamentary or after-death trusts. An after death trust will be created by a will after a person’s death. The assets to fund these trusts must usually go through the probate process and may be supervised by the court even after the estate is closed. An example of an after-death trust would be one created by a parent leaving land to a trust to benefit a minor child in his or her will. The will establishes the trust to which the land is transferred, to be administered by a trustee until the child reaches a stated age, at which point title to the land is transferred to the child outright.
Living trusts. A living trust is a trust made while the person establishing the trust is still alive. In this case, a parent could establish a trust for a child during his or her lifetime, designating himself or herself as trustee and the child as beneficiary. As the beneficiary, the child does not own the property, but instead receives income derived from it. Living trusts can be revocable or irrevocable.
The most popular type of trust is the revocable living trust, which allows the settlor to make changes to the trust during his or her lifetime. A revocable trust usually directs the trustee to pay all income to the settlor for life and to pay the trust assets to named persons after the settlor’s death. Revocable living trusts avoid the often lengthy probate process but, by themselves, don’t provide shelter for assets from federal or state taxes. These trusts are often considered tax-neutral as the tax consequences for the grantor are usually the same whether or not the property is placed in a trust.
An irrevocable living trust is usually set up to reduce estate or income taxes. For tax purposes, the trust becomes a separate entity; the assets cannot be removed nor can changes be made by the settlor. In most cases, the settlor cannot be sole trustee of an irrevocable trust without losing the intended tax benefits.
Specific-Use trusts. Trusts can be tailored to your goals. Here are a few special uses for trusts:
- A charitable trust is used to make donations and realize tax savings for an estate. Typically, you transfer property, such as art or real estate, to a trust. The trust holds the asset until it is transferred to a charity, usually after your death. The donor may continue to enjoy the use of the property and also realize estate tax savings by donating it to a charity.
- A bypass trust allows a married couple, in certain cases, to shelter more of their estate from estate taxes. The first spouse to die can leave assets in a trust which provide income to the surviving spouse. Upon the death of the second spouse, the assets in the trust belong to the children or other beneficiaries, without being taxed at the second spouse’s death.
- A spendthrift trust can be a good idea if the beneficiary is too young or does not have the mental capacity to handle money. The trust can be established so that the beneficiary receives small amounts of money at specified intervals. It is designed to prevent the young person from squandering money or losing the principal in a bad investment. Further, creditors will not be able to take a beneficiary’s income from this trust.
- A life insurance trust is often used to give an estate liquidity. In this case, the trustee of the trust is named as the beneficiary of the life insurance policy. The trust then receives the life insurance proceeds upon the death of the insured.
What are the pros and cons of a revocable living trust?
First, a revocable living trust enables you to have a trustee with financial expertise manage your assets during your lifetime. The trustee with financial experience might charge a fee of around 1% of the total amount of the property in the trust. This arrangement is particularly useful if you are having difficulty managing your financial affairs. A trustee could invest your assets, arrange for payment of bills and debts, and file your tax returns. If you wish, you can establish yourself as a co-trustee.
Second, a revocable living trust can protect your privacy regarding the distribution of your assets. With a will, the probate laws require that an inventory of the estate’s assets be filed with the court. The will and the inventory are public information. With a revocable living trust, generally only the beneficiaries of the trust will be informed of the nature and the value of the assets. The important thing is to make sure that all of your property is in the trust.
Third, by placing your assets in a revocable living trust instead of a will, you can avoid the time delays that are typical of probating a will. Trust assets, in most situations, can be distributed to beneficiaries almost immediately after the death of the grantor.
Fourth, if you own land in another state, a revocable living trust might help you avoid a probate proceeding in the other state for that property. For example, if you have a cabin in Wisconsin and place it in a revocable living trust, you may be able to avoid a Wisconsin probate proceeding.
There are some potential drawbacks to a revocable living trust. First, transferring property into a revocable living trust may make you ineligible for Medical Assistance. Second, when the grantor is also the trustee, the grantor has a fiduciary obligation to the beneficiaries for both present and future income. A fiduciary duty is a high standard that requires the trustee to follow the terms of the trust and the law in good faith and with loyalty, confidence and candor to the beneficiaries.
How do I establish a trust?
Establishing a trust requires a document that specifies your wishes, lists beneficiaries, names a trustee or trustees to manage the assets and describes what the trustee or trustees may do. For a living trust, you can name yourself as trustee but, if you do, you should also name a successor trustee to take over if you should become disabled or die. Once the document is completed, you must transfer the assets to the trust. Keep in mind that, in the case of certain assets, such as real estate, you may incur fees and transfer taxes.
If the living trust contains all of your property, a will may be unnecessary and you can avoid probate. If the trust contains only part of your property, you need a will for the rest of it. If you want your property to go into the trust after your death, your will should include a “pour-over” provision to put the remaining property into the trust upon your death. Also, a will can be used to distribute personal belongings, identify guardians for your children, and provide for a personal representative to handle any unfinished business.
If assets are not put into a trust and are disposed of by will, they will have to be probated, which negates the advantage of the living trust.
Prepared forms or kits used to establish living trusts are currently marketed through magazines, brochures and door-to-door salespeople. Review these forms carefully; they may be too generic to suit you and your situation.
You may want to consider contacting an attorney if you would like to set up a trust. An attorney can help you evaluate the need and uses of a trust in light of your overall estate planning objectives. Watch out for investment scams advocating unrealistic benefits of a trust. Also beware of workshops conducted by people with the intent to sell you something rather than to provide objective information. If you want to set up a trust, be sure to talk with people who are credible and trustworthy.
What is the role of the trustee?
The trustee is considered a fiduciary and therefore must adhere to a high standard of care with respect to the trust. Included in this standard is the duty to protect trust property, to manage trust investments prudently, to refrain from engaging in self-dealing or receiving improper benefits from the trust, and to not mingle trust assets with the trustee’s own assets. The trustee has a duty to manage the trust’s assets in the best interests of the beneficiary or beneficiaries. This might include managing rental properties, investing funds, or paying income to the beneficiary.
Trusts differ in how a trustee can distribute trust income. A simple or mandatory trust requires the trustee to distribute income to the beneficiary. A complex or discretionary trust may afford the trustee discretion over the principal and income to be distributed. The requirements imposed on the trustee should be specified in the trust.
If you want to name someone as a trustee, talk with that individual or entity about the trust. Be sure the person not only agrees to serve as trustee but can comply with the terms of the trust. Because the fiduciary standard imposes such a high standard of duty and corresponding potential liability, the trustee cannot be forced into becoming a trustee just because he or she is named in a trust document or will. If your designated trustee is unable or unwilling to perform, the court will appoint a trustee for you, unless a successor trustee, such as a corporate trustee, is designated.