The Intersection of Estate Planning and Probate Law (Or: Your Wishes Become the Law.)

It’s easy to understate the relationship between Estate Planning and Probate Law: Estate Planning involves planning your eventual inability to speak for yourself. Probate law takes over when the ultimate inability to speak for yourself takes over - your passing from this life. (This assumes certain circumstances, such as assets left behind in your name alone.) But this simple relationship underscores something profound:

Estate Planning and the Law

We, through our probate laws, have built a system that not only allows us to express our wishes beyond our ability to speak for ourselves, but also enforces those wishes with the full power of our justice system. Properly created, your Estate Planning documents become “law” unto themselves, which a judge will enforce on your behalf.

If you Die or Become Incapacitated without Properly Documenting your Wishes, the Statutes will Decide for You.

If you pass away in Minnesota without a Will or Trust, Minnesota statutes determine who will inherit your estate (“estate” meaning, generally, all assets which your leave behind.) See Minnesota Statutes 524,101. Your assets will pass by operation of law to your surviving spouse, children, and/or nearest classifications of relatives in statutorily defined shares and amounts. This statutory distribution may or may not be what you would have intended. In one example that we often hear about: if you have a long-time partner that you are not married to, there is generally no provision in the law that will provide assets to them. Without estate planning documents that provide otherwise, all of your assets will pass to your next closest of kin. Similarly, if you become incapacitated (e.g. serious chronic memory issues or traumatic brain injury), absent a properly drafted Power of Attorney and Health Care Directive, a costly Guardianship proceeding may be required in order for a loved one to establish the legal authority to speak for you.

If you have properly-drafted estate planning documents in place, your wishes have the force of law.

Within limits, if you have left behind a properly drafted and executed Will or Trust agreement, your wishes take priority over what would otherwise be a statute-driven asset distribution. See Minnesota Statutes 524.101. Under Minnesota law, you may not entirely disinherit your spouse and children. See Minnesota Statutes 524,402, 524,403, and 524.404. But absent that limitation, assuming proper drafting and execution of your estate planning documents, you can decide:

  • Who inherits your assets (your “Beneficiaries”)

  • Who administers your estate (your “Personal Representative”, previously known as “your Executor”. “Estate Administration” generally means taking control of your assets, paying valid costs and claims on your behalf, and distributing your remaining assets (your “residuary estate”) as you have detailed in your estate planning documents.)

  • Who has legal authority to continue or complete your personal business transactions (your “Attorney in Fact” under a Power of Attorney)

  • Who has the authority to speak for you regarding medical decisions (your “Health Care Agent”; also having the authority to review your medical records.)

See our handy guide: Estate Planning Legal Toolkit for a one-page overview.

The Probate Court will Enforce Your Wishes

If Probate is required at your passing, a presiding Probate Registrar or Judge will “admit” your Will to Probate, and directly oversee the administration of your estate. This means that, assuming properly documented estate planning documents and within the limitations sited above, your wishes have the power of law. In the Probate Court setting, the judge will “probate” your Will, meaning that it will be adjudged and authenticated as your witnessed and notarized Last Will and Testament. From that point forward, the court will oversee and approve that your wishes are properly administered (followed through on) by the Personal Representative that you have nominated in your Will. Even in an Unsupervised Informal Probate, your Personal Representative must provide, in a sworn Personal Representative’s Statement to Close, that all of your wishes as stated in your estate planning documents have been fulfilled. Any person wishing to contest or argue your wishes must make their case, formally, in front of the judge. Your estate planning documents have the force of law. A judge will enforce your properly stated wishes as contained in your estate planning documents.

Posted by Thomas C. Myers IV

Please remember, this post provides educational information only and in no way constitutes legal advice.

A Case for Tribal Probate Courts

Sovereignty is the ability of a people to be self-governing. It is a society making its own laws reflective of its people. Courts play pivotal roles in sovereignty as part of self-governance is the system in which laws are enforced. Probate courts are microscopes, magnifying the values of a community and a family. Through these proceedings we see what items held value to a person. We learn about the relationships between family members and their past difficulties. Tribal probate courts can strengthen tribal sovereignty and self-governance by upholding the values of the community.

The purpose of probate is to have a neutral third party make a determination about the final disposition of a deceased loved one’s property in light of that person’s written and witnessed intent. The downside to these court proceedings is often the cost and time involved, as well as the further degradation it can cause to familial ties. Nonetheless, it is useful to have disputes settled by a disinterested party. Some turn to mediators or qualified neutrals to settle these issues. However, all parties must agree to those arrangements and be held to the result. For others, getting a court involved is the only way to finally get resolution and closure. Probate courts decide how to interpret a decedent’s intent and uphold the values of the community as codified by the probate code. Determining which family member inherits property when there is no will or trust is often decided by intestate succession sections of the code. 

Currently, the Minnesota Uniform Probate Code mandates that the entire estate (other than the homestead, exempt estates, and allowances) go to a spouse if the decedent had children and the decedent’s spouse is the parent of all of those children. Minn. Stat. Sec. 524.2-102. Otherwise, the spouse is entitled to “$225,000 plus one-half of any balance of the intestate estate” if the decedent had children that were not legally adopted or biological children of the decedent’s spouse. Id. The intent behind this law is most likely to ensure that the children of the deceased are provided for and that a step-parent is prevented from taking the entirety of the decedent’s property. It assumes that the spouse would take care of the children financially if the spouse were the parent of the children of the deceased. This intestate succession law demonstrates the values that are promulgated in the Minnesota state judicial system. Intestate succession laws can be different in a community where children are viewed as being the responsibility of a parent’s partner regardless of legal adoption or biological parentage. 

Judicial officers who preside over probate hearings must reflect the values of the community just as do probate codes. A judge or referee who does not have a background or understanding of the community can view the parties through a discolored lens. Take an intestate state court probate case that, among other issues, involves a question of who should inherit a spoon. To a judge who is not from or familiar with the community, it seems that this spoon is a piece of tangible personal property that should be distributed according to the intestate succession laws of Minnesota. It comes to light during the proceedings that this spoon is a ceremonial spoon that has been passed down for generations and that custom dictates who should inherit the spoon. The chain of custom can be broken if the person who is supposed to traditionally inherit is different than who inherits under the intestate succession distribution scheme. The state court judge’s hands are tied without a validly executed testate document, such as a Will, to supersede the intestacy laws. 

Tribal communities can enact, and have enacted, probate codes that specifically separate out ceremonial items from being passed down the way of other property. Ensuring that these items stay with the people who are meant to traditionally keep them enables customs to be maintained and bolsters tribal sovereignty. Tribal probate courts are therefore pivotal in furthering tribal sovereignty. This is merely one of the reasons why legal professionals and community members should encourage the funding and establishment of tribal probate courts.

Posted by Schuyler Tilson-Doheny

Please remember, this post provides educational information only and in no way constitutes legal advice.

What To Do After a Loved One Dies

Here are 10 of the most common steps we often advise our clients to take soon after a loved one passes away:

  1. Look for a Will, Trust Agreement, and Health Care Directive where they kept important documents.

    • Contact your loved one’s estate planning attorney if you can’t find the originals of these documents.

    • Their Will should state who they nominated as their Personal Representative or Executor - this is the person who is responsible for handling your loved one’s financial affairs.

  2. Arrange for funeral, burial, and cremation services based on the instructions in their Health Care Directive or Will.

    • Often the funeral home will arrange for an obituary unless you request that one is not posted.

  3. Order at least 8 certified copies of the death certificate.

  4. Determine the extent of their assets and debts.

    • Assets include properties, bank accounts, IRAs, insurance policies, and personal property (vehicles, art, etc.).

    • Debts include mortgages, loans, credit cards, and liens.

  5. Assess whether any of their assets had beneficiary or payable on death designations by contacting the financial institutions.

    • You will need to present a certified copy of the death certificate to the financial institution.

    • Some institutions will not discuss a deceased loved one’s financial matters unless you show them Letters Testamentary (a court order that shows you were appointed as the personal representative) or an Affidavit of Collection for Small Estates (only used in Minnesota when the entire probate estate is less than $75,000.)

  6. Consult with an estate planning attorney to determine whether your loved one’s estate needs to be probated (administered in court).

  7. Secure their property by changing the locks on the house, maintaining the home, and collecting the mail.

  8. Contact the Social Security Administration and any other agency they received benefits from to inform the agency of your loved one’s passing.

  9. Obtain an Employer Identification Number and open an estate bank account if necessary.

  10. Pay your loved one’s bills using their assets if you are the personal representative/executor.

    • Some estates may be considered exempt from creditors’ claims - consulting with an estate planning/probate attorney will determine whether this is the case for your loved one’s estate.

Posted by Schuyler Tilson-Doheny

Please remember, this post provides educational information only and in no way constitutes legal advice.

So You Already Have a Will or Estate Plan. Checklist of Next Steps

Every week, it seems, clients come into our office with already executed Wills or Trusts that were completed years ago or that are recent but they want to update. Everything looks good on paper; we review how they want assets to be distributed and what the plan is. They are in a good position if something unexpected happens, right? 

Maybe not. If no one took the extra step to review your assets in detail and discuss whether changes should be made to beneficiary designations or retitling assets, then the plan on paper may not actually happen. Here is a checklist for you to review and consider if you have already executed your estate plan:

  1. Have you created an inventory of all your current assets and reviewed all beneficiary designations?

  2. If any accounts or assets do not have designations, have you considered adding these designations to correspond to your estate plan?

  3. If your plan involves taking steps to avoid probate, remember that you must account for any real estate you own as well, whether in-state or out-of-state. Minnesota real estate must either be jointly owned, in a trust, business entity, and/or have a transfer on death deed recorded in order to pass outside of a probate proceeding.

  4. If your plan involves a revocable trust (or multiple trusts), have the applicable assets been transferred into the name of the trust?

  5. Do you have specific gifts to be distributed from already-identified assets?

This can be a time consuming process and is not very glamorous. However, it is a critical step to ensuring that your assets are protected and distributed in the way you intended under your estate plan. Contact us today for a complimentary review of your current plan! 

Please remember, this post provides educational information only and in no way constitutes legal advice.

 

 

 

How Do I Avoid Probate?

This question is often asked when a new client visits with us after a recent death of a friend or family member. "Is there any way around this?" "Do I really have to go through this process?" 

Probate is often required under the law. See this link to understand what a probate administration entails. Minnesota’s probate statutes are in place to ensure that the decedent's property goes to the appropriate heirs or beneficiaries. Sometimes, a probate proceeding is required to help determine who the heirs are and what they should receive of the deceased person's assets.

Let's use the following example to outline a couple of ways probate can be avoided. Bob passes away and has no other assets other than (1) jointly held bank accounts with his spouse Jean, (2) Bob's retirement accounts has Jean named as the primary beneficiary, and (3) Bob and Jean own their home jointly (called the "primary homestead"). All of these assets are considered "non-probate" because they have an identifiable beneficiary -- Jean. 

1. Affidavit of Collection of Personal Property: When The Total Value of all "Probate" Assets are less than $75,000. If we change the above example just a bit and add an asset, e.g. an investment account worth $70,000 that is held in Bob's name alone and has no named beneficiary. This is considered a "probate asset" because Bob has not named who he wants to receive this account. This alone would not trigger a probate, however. Jean, as the surviving spouse, would be able to "avoid" probate by having her attorney draft an Affidavit of Collection of Personal Property. The state of Minnesota permits heirs to collect assets without the need for a full-blown probate proceeding if they can prove their right to inherit and provide this signed affidavit along with a certified copy of the decedent's death certificate to the financial institution where the account is held. 

2. Summary Distribution: When the Only Probate Asset is the Primary Homestead. There are a number of legal requirements that must be met to qualify for this type of proceeding which we will not go into here, but it is available at times when the only asset is the decedent's primary place of residence. If Bob owned the home in his name alone (Jean is not on the title with him) and there are virtually no other "probate assets", then there is a shortened administrative proceeding that can be used to get the home transferred to Jean because the homestead is considered an asset that is exempt from all creditors (except for any mortgages on the property and/or Medical Assistance claims). 

3. Proper Planning Prior to Death! This is a bit tongue-in-cheek, but if one takes the time to consider where they want their assets to go at their death then it takes very little additional effort to make the necessary changes to avoid the need for a probate. If we again adjust the original example above and add in Bob's investment account but assume it has $100,000 in it rather than $70,000 (and remember that this account is held in the Bob's name only and has no named beneficiary), then that account becomes a "probate asset" and a probate proceeding is required under the law. If Bob and Jean had discussed their goals  (e.g. avoid probate!) and financial inventory with an estate planning attorney and financial advisor before Bob's death, they would have learned that this asset needed a beneficiary designation in order to be considered "non-probate". 

Please remember, this post provides educational information only and in no way constitutes legal advice.

What Happens to your Online Accounts When you Die?

If you pass away unexpectedly and have no plan for what happens to your online accounts (your "digital assets"), your Personal Representative may be left with a huge mess to sort out. A Personal Representative ("PR") is someone you designate in your Will to help settle your estate. They gather all your assets, pay bills/debts, and distribute those assets to family or whomever is designated under your Will.

So, what happens to your digital assets when you die? How does your PR gain access your email accounts, cloud storage, iTunes, PayPal, eBay, gaming profiles, etc?  Here is a quick rundown of a potentially complicated situation:

  • Many Terms of Service (remember that long legal thing that you quickly clicked "I agree" to without reading?) expressly forbid access to anyone aside from the account holder. This is because of strong federal privacy laws.

  • Your PR will have to reach out to each company directly (call up Google, Apple, eBay, etc) and prove your death. Once proven, email and social media accounts will likely simply be shut down and deleted without giving the PR any access to the actual content of the accounts. For some things, that's okay. For other things, not so much (like a PayPal account with $30,000 left in it!). Accounts like these end up in virtual limbo, not to mention are sitting ducks for hackers.

  • To gain access to the data itself (such as cloud storage), your PR could easily be required to get a court order to obtain the information. Who knows how lengthy and costly of a process this can be.

Okay, you get it. It's a mess. So, what can you do about it? Plan!

  • Minnesota recently passed the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). This Act provides a bridge between the rights of your fiduciary (like a PR) to step into your shoes and the federal privacy laws. This law enables a fiduciary to do what they need to do without additional headache of getting court orders as described above. 

  • Create and maintain an orderly list of usernames and the associated email addresses. Or utilize a company like EstateMap, which charge a minimal fee and securely store this information for you. You appoint someone to gain access to this account upon your death. 

  • Ensure that your attorney drafts language into your Will (and Power of Attorney, Trust documents, etc) about how to deal with digital assets (e.g. expressly authorizing your PR to access, modify, control, archive, transfer, and delete digital assets). 

  • Additionally, some companies (like Facebook) are providing an online tool for you to appoint a "Legacy contact" on your account which allows this person access to your account upon your death. You can get directions on how to set this up here: Facebook Help Center. Similarly, Google allows you to designate an "Inactive Account Manager" that gets activated after a certain number of months of no activity on your account. 

Regardless of what you do to back up your passwords, be it on paper, on your computer, or on an app, just do SOMETHING! And most importantly, account for it in your estate plan. Specific language should be in every Will or Trust, stating you expressly authorize your Personal Representative (or Trustee or other Fiduciary) to access your digital assets for enumerated purposes. It is just another way to ease the burden on friends and family that have to put your affairs in order after death. 

Please remember, this post provides educational information only and in no way constitutes legal advice.

Reviewing Beneficiary Designations is Important. Here's Why.

Take a minute and imagine the following scenario: your ex-spouse was listed as beneficiary on a long-forgotten life insurance policy through a former employer that you haven't reviewed in 5 or 10 years. You are now re-married with two minor children. If circumstances led to your untimely passing, the funds from that policy may not go to your children or spouse. It may go directly to your ex-spouse. (While there is a law in Minnesota that allows for automatic revocation of beneficiary designation upon divorce, there are important exceptions which I won't go into here. Better to be safe than sorry.)

Whether or not you have a Will or estate plan in place, reviewing your beneficiary designations every few years is always a good idea. It is the easiest way to ensure that these assets transfer to the individuals you want to inherit them. Maybe you never got around to listing anyone as a beneficiary. Maybe you had a child, got a divorce, or otherwise want to remove the person currently listed as a beneficiary.

By "Beneficiary Designations", I'm referring to those accounts or insurance policies (often called non-probate assets) in which you can choose who receives the benefits of the account in the event of your death. Some common examples include qualified retirement plans (such as 401(k) or 403(b) plans), IRAs, and life insurance policies. For each of these types of accounts, you can name a primary and contingent beneficiary (or beneficiaries). Upon your death, the assets in the account are distributed to the primary beneficiary unless they died before you. In that case, the contingent beneficiary would receive the assets instead. 

Bottom line: take the time to review your beneficiary designations each time you review your estate plan or a significant life event occurs. It only takes a few minutes but it can have a significant impact on your loved ones.

Here are a few other potential mistakes to watch out for:

  • Listing a parent as beneficiary after getting married and having children.
  • Not having a contingent or secondary beneficiary.
  • Naming a minor (or even a young adult) directly as a beneficiary instead of a trust for their benefit.
  • Designating a trust that does not exist or is outdated as beneficiary.

Please remember, this post provides educational information only and in no way constitutes legal advice.

Minimal Assets? No Children? You should still consider having an Estate Plan.

No matter your circumstances, having an estate plan is the best way to plan for your "stuff" when you're gone. It allows you to avoid probate, family rifts and negative tax implications. Below are some of the "typical" documents included in an estate plan along with a description of what they are and why they are useful. 

Will: This document which enables you to dictate where your property goes upon your death. Typically, you name spouse/partner (and a back-up) as Personal Representative — this is the person that executes your Will, paying debts, distributing assets, etc. Your spouse/partner would execute a Will for themselves as well with similar provisions in place.

  • Why it's useful: If you both passed away tomorrow without a Will, your assets (personal property, home, cars, retirement accounts, life insurance policies, other bank accounts) would be distributed via state law. Assuming you don’t have children or grandchildren, it would go to your living parents. If your parents are no longer living, then it would likely go to your brothers and sisters (in “equal shares”). If you have a blended family, inheritance rules get complicated quickly.
  • Usually people want to dictate where their assets go upon death, rather than leave it up to the state they live in. For example, do you have a charity you want to give to? Or perhaps close friends that are like family? Are you unmarried but in a long-term relationship and want to give them something? Do you have a beloved pet you want to gift to someone? A family heirloom? Most state laws recognize only blood relations if you don’t have a Will that states otherwise. And if you have no relatives that your assets can be given to, then what? The property "escheats" to the state -- meaning the government gets it. 

Power of Attorney: This document authorizes someone to act on your behalf in financial matters. Typically, you name your spouse/partner (and a back-up person) as your “Agent”. The same document is also created for the spouse, naming you as his or her Agent.

  • Why it's useful: If you were to get in a car accident, this gives your Agent the authority to pay bills and handle financial obligations on your behalf. Although he or she may already have this authority over things like joint checking accounts and a jointly-owned house payment, he or she does not automatically have that authority for things that you have control over in your name alone. This power only lasts as long as you’re living — the power would cease at the time of your death.
  • It is absolutely critical to understand that this power exists in your Agent the moment you both sign the document. This means they could (in theory) leave you and drain your personal bank account. Or sell your property out from under you. Or 100 other terrible things. So a word of caution, only appoint someone you trust a great deal. 

Health Care Directive: Sometimes called a "living will", this document names an agent and informs others of your health care wishes. Typically, you name your spouse/partner (and a back-up) as your “Agent” over health care decisions in the event you cannot make them on your own. The same document is created for the spouse, naming you as his or her health care Agent. 

  • Why it's useful: If you were to get in a car accident, this gives Agent authority to make medical decisions on your behalf. It provides clear notice to everyone involved that you trust this person to make these decisions.  If married, he or she may already have some authority to discuss treatment with your doctor (since he or she is "family"), however this authority is far from absolute. It provides a way to make your preferences for medical treatment crystal clear. It ensures that your spouse/partner can make decisions for you even if your health care directive doesn’t specify what you would otherwise want. Like the Power of Attorney, this document only lasts as long as you’re living.
  • It can be as specific or as general as you wish and includes things like (1) organ donation, (2) end of life care treatment, (3) preferences for artificial nutrition and hydration, (4) preferences regarding mental health treatment, and (5) authorization to release HIPAA-protected information to your Agent. 

 

Please remember, this post provides educational information only and in no way constitutes legal advice.

Written by Jennifer A. Rutz

“Internet Wills” v Attorney. Product v. Service. Understand what you're buying.

1. You get what you pay for.

Internet/Online self-serve Wills may charge very little for you and your spouse to have a Will and other documents delivered to your email inbox. Yes, an attorney likely costs double that amount for the same services. But do you understand why those documents are so essential? Do you understand what the provisions within the documents mean? Are you confident that they are correct? If you answered "no" to any of those questions, then you may be leaving it all to chance. 

2. DIY Legal Companies are selling you a product.

This product is one that they "guarantee" is the right product. Does it meet your specific needs? Does it take into consideration common concerns, i.e. blended families, estate tax planning, caring for minor children, real estate held in other states, specificities regarding retirement accounts, etc? You will truly never know until it's too late. 

In contrast, an attorney is providing you a service that doesn't end with the drafting of the documents. It is a service based upon proper schooling, knowledge, and experience. It is a service that most attorneys are passionate about. They are with you at the beginning planning stages. They are with you every few years to review changes in the laws and significant events that have happened in your life. And they are often with you or your family when the inevitable happens and a loved one passes away. They relish the "value added" components of drafting your estate planning documents, in that they get to build a long-term relationship with you and your family. 

3. If the Will isn't valid, the State decides.

If your DIY Will ends up not being valid under state law, then the state you live in decides where your stuff goes. Who do you trust more to get it "right"? Yourself or the state? 

Similarly, if the Will is valid but has major errors or items that were never considered in your specific plan, we can tell you from experience that it costs much more to try to fix it after your death then to do it right the first time.

These are just a few things to consider when deciding whether to create your Will on your own. At the very least, talk with an estate planning attorney (most give free consultations!) and learn whether you can take the risk of a DIY Estate Plan.

Please remember, this post provides educational information only and in no way constitutes legal advice.

Written by Jennifer A. Rutz

3 Reasons Everyone Needs an Estate Plan

1. You are not immortal. Everyone dies. It could happen at any time. Or you could be involved in a serious accident that renders you unconscious and unable to make medical decisions. A Health Care Directive (aka Living Will) provides you the opportunity to appoint someone you trust to make health care decisions on your behalf. It also provides information to this health care agent and your health care providers about your wishes regarding medical treatment, organ donation, and even funeral arrangements. Best of all, it is easy to get set up and inexpensive to enlist an attorney's help. 

2. You will have assets upon death and the total value adds up fast. Do you own your home? Have a life insurance policy? Own a small business? Even if you have significant student or business loans, your assets can add up to real money. Planning now protects your family in the future. A Will includes tax planning provisions (because if your assets exceed $1.6 million in Minnesota this year, you could incur MN estate tax liability) and allows you to dictate, to some extent, how those debts get paid. 

3. You have minor children and/or are cohabitating with your significant other. All parents have very strong opinions on who they would want to be guardians over their children if the parent passed away. A Will is the main way you can state those wishes so the court knows who to appoint. If you are not married but living with a partner, a Will is the place you can list what specific pieces of personal property or assets you want your partner to receive. If you pass away without a Will in this circumstance, your state laws kick in and assume you want everything distributed to family members (it's called "intestate succession" and the rules vary by state); your partner may receive nothing!

Bottom line, estate planning is important for everyone. Don't let "Make a Will" sit on your to-do list for years. Reach out to an attorney you trust (or ask someone for a referral to one) and learn more!

 

Please remember, this post provides educational information only and in no way constitutes legal advice.

Written by Jennifer A. Rutz