Probate and Planning
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 the amount of property you own, the type of property you own, and whether you own it alone or with others.
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.
If your estate is worth less than $75,000, 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 $75,000 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 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 Is an Estate Probated?
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.
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 any 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 an application for informal probate and any such rejection does not prevent the will from undergoing formal probate proceedings.
Formal probate typically involves complex estates where a judge is needed to make determinations. Formal probate proceedings are commenced by filing a petition for formal probate with the court. The petitioner then must appear before a court at a hearing. Formal probate matters can be either supervised or unsupervised by the court. 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. Click here to view a “Table of Minnesota Heirship."
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.
Determination of Descent
If a person has been deceased for more than three years, and the estate was not probated, an interested party must petition the Court for “Determination of Descent” in order to transfer the decedent’s probate property either in accordance with the deceased’s will or, if there is no will, Minnesota’s inheritance laws.
What Taxes Must Be Paid?
Federal law provides that an individual can transfer up to a certain threshold amount to someone other than a spouse before incurring estate tax. As this amount varies year to year, visit the Internal Revenue Service’s website at www.irs.gov for the most current federal estate tax exclusion amount. 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. The Minnesota estate tax is separate from the federal estate tax and applies to estates over $1,800,000. As of 2018, only estates with over $2,000,000 will be subject to the tax. There are various programs and deductions that can reduce an estate’s liability for the tax. For example, transfers between spouses are generally not taxable. Additionally, the State exempts certain types of farm property from the tax. An experienced attorney or accountant can help you plan for the impact of estate tax, and can help develop a plan to minimize the tax as much as possible.