The executor of your will is the individual you appoint to guide your estate through the probate process, which is the court proceedings by which a judge supervises the division closeup of a Last Will and Testament documentof your estate.  Commonly called a Personal Representative, this fiduciary will see to it that your wishes are carried out and that the instructions you leave in your will are followed.  But make sure your affairs are in order with a properly drafted plan; attorney John O. McManus points out in this Daily Finance article that “a common adage in the industry is to name your enemy as your executor as a means of revenge.”  Being an executor can be a tough job.

First and foremost, if you are married, you should consider appointing your spouse as your executor.  Your spouse has the biggest stake in your life and your death, and it makes sense that he or she is in control of the finances.  Your spouse is also most likely to be the person around whom the rest of your family — such as children and your surviving siblings — will revolve at your passing.  Strong family relationships are an important consideration for an executor.

If you do not want to appoint an immediate relative or your spouse, you might want to consider someone you know with an accounting or law background.  The settlement of an estate is a legal process that may require some tax knowledge.  If your executor does not have this background, he or she can always hire a professional.

Be careful when appointing an executor who is also getting some of your assets — there is an inherent conflict of interest when you appoint an executor who is also a beneficiary.  If the individual is trustworthy and enjoys good relationships with the other beneficiaries, this may not be a problem.  But it’s a situation where disputes can be common; after all, the executor is going to be interpreting the language of the will, and if it is perceived that the beneficiary-executor is interpreting ambiguous language in his or her favor, this can pose a problem.

Do you own a business?  Your executor will be in charge of this business interest while the estate is being administered.  If your interest is silent or if winding the business down is an easy task, then this may not be an issue . . . but if it is a labor-intensive operation with employees and specialized knowledge, the executor is going to have a tough time while he or she continues to run things.  It is very important that you have a succession plan in place for your business . . . consider appointing an executor who is familiar with running your company.

In short, your executor should be someone you trust, who is familiar with your assets, and who can maintain positive relationships with the beneficiaries of your estate.  This person can certainly be a beneficiary of the will, but this really works best when your will has been drafted appropriately and unambiguously . . . make sure you have consulted with a professional so that your plan is coherent and thorough.  Put another way by attorney McManus, “If you appoint someone you love as executor, get your house in order.  Otherwise, appoint someone you do not.”  Let me know if I can help.

creates wills and trusts for families who want to feel secure that their loved ones are cared-for. Philip is a trust and estate attorney based in Minneapolis, Minnesota. Philip is the author of Trustee University: The Guidebook to Best Practices for Family Trustees. available at Amazon.com in paperback or Kindle edition (free chapter available here!) He also works with trustees and beneficiaries who need help with their trusts. You can contact him here.

Keywords: trusts and estates, Minnesota wills, revocable trusts, estate attorney, probate, estate planning

If you’re like most Americans, the bulk of your liquid assets are held in retirement plans such as a 401(k) or an Individual Retirement Account (IRA).  These are great places to stash retirement funds — company matches and tax-deferred growth (or tax-free growth, in the case of Roth plans) jump-start these savings plans in a way not available for non-retirement assets.  If used properly, this will create a comfortable retirement nest egg that will carry you through your post-career life.

401k - Nest EggBut what happens after that?  There is a good chance that at least some of these assets will outlive you, and you may have other family members to care for (such as a surviving spouse).  The tax-deferred nature of qualified retirement funds presents unique challenges and opportunities for your family as you contemplate your estate planning.  The biggest thing to consider is who you will list as the beneficiaries of these plans; as far as taxes are concerned, all beneficiaries are not created equal. Speaking strictly from the standpoint of tax liability, the best beneficiaries are charities, followed by a surviving spouse, then other family members, and lastly (and definitely least), outright to your estate.

First, understand that marketable assets such as stocks and bonds receive a step-up in cost basis at the death of the owner.  Consider if I bought a share of stock for $1, and then the value of that share few to $100 and I sold it.  During my life, I would have to pay capital gains tax on the $99 gain I received from this sale (the sale of the stock at $100, less my cost basis of $1).  If instead I died and left the share of stock to a child, the child gets a new cost basis of the value of the share of stock when I died. If that value was $100, then the child gets that share of stock with a cost basis of $100.  If he or she then turned around and sold that share for $100, that child has received the stock completely tax-free, assuming my estate is below federal estate tax levels.  The step-up in basis erased any capital gains and the tax liability that would have gone with those gains.

Those same assets held in a tax-deferred retirement plan such as a 401(k) or IRA do not receive this step-up in cost basis . . . all distributions from these retirement funds, whether they be to you or to a beneficiary, are taxed as ordinary income when they are withdrawn from the retirement plan.  If I make $50,000 from my job, and I receive $10,000 from a tax-deferred retirement fund, then I pay taxes as if I made $60,000.  That’s going to be much more tax than if I instead received an inheritance from assets that are not taxed as ordinary income (such as an after-tax brokerage account).

Because these gifts contain built-in tax liability, tax-deferred retirement assets are the best assets to give to charities, if you are charitably-minded.  Because qualified charities do not pay any taxes on gifts they receive, they are the ideal beneficiaries of any estate asset that carries income or capital gains tax liability because your gift to goes further than if it were given to someone who will have to use a part of that gift to pay taxes.  This makes qualified charities the perfect beneficiary of high-tax assets such as tax-deferred retirement assets.

For those not so inclined, you should next consider leaving these assets to your spouse.  Your surviving spouse will be able to treat qualified retirement assets as if they were part of his or her own retirement account . . . this typically means he or she could defer taking distribution (and owing income tax) until the spouse 70 ½ years old, which is the age at which individuals are required to begin taking their required minimum distributions (RMDs) from qualified plans.  Even then, they will only be require to pay taxes on the required minimum distribution amount (an amount that is calculated based on the surviving spouse’s life expectancy), and will enjoy continued tax-deferred growth for the assets that remain in the retirement plan.

If you would prefer to leave your qualified tax-deferred plan to another individual such as an adult child, understand that unlike your spouse, a child will not be allowed to defer the RMD distributions until he or she turns 70 ½; the child will be required to begin taking RMDs from the plan immediately.  This can pose some problems if the child is in a high income tax bracket because your gift to them will be diminished substantially by the income taxes he or she incurs at his or her effective tax rate.  But assuming the child does not take large additional distributions from the account (which would incur even more taxes), the majority of the assets will continue to enjoy tax-deferred growth.  You can also work with an attorney to set up a trust which, if properly drafted, can accept the RMDs from the account on behalf of the child, which can then me managed by a trustee.  This is a great option if the child requires assistance in managing money.

The least preferable option, and one that occurs all too often, is to either leave the assets outright to an estate, or to a trust that is not properly structured to receive retirement distribution for a beneficiary.  If this happens, the entire account must become payable to the estate or trust within five years.  Estates and trusts have much smaller tax brackets (resulting in much higher effective tax rates) than individuals, and income tax liability can be devastating. A substantial distribution to an estate or improperly drafted trust could result in half of the gift disappearing into the hands of the tax man.

This is not to imply that someone should turn their nose up at a gift of retirement assets from a family member!  Speaking personally, I would certainly take a taxable gift over no gift at all.  But it’s worth talking about the ideal recipients of gifts from tax-deferred retirement plans so that you can maximize the gifts you make to your family members. Proper primary and secondary beneficiary designations are a key part of any estate plan, and part of what you are paying your estate planner to do.  Ensuring that you select the proper beneficiaries for your plan will give you and your family the peace of mind you deserve from your years of hard work and saving.

creates wills and trusts for families who want to feel secure that their loved ones are cared-for. Philip is a trust and estate attorney based in Minneapolis, Minnesota. Philip is the author of Trustee University: The Guidebook to Best Practices for Family Trustees. available at Amazon.com in paperback or Kindle edition (free chapter available here!) He also works with trustees and beneficiaries who need help with their trusts. You can contact him here.

Keywords: trusts and estates, Minnesota wills, revocable trusts, estate attorney, probate, estate planning

There can be a lot of confusion about probate and how it relates to someone’s estate plan. It’s typically talked about as if it were something to be avoided at all costs, lest you bankrupt your family. Talking to someone about the probate process often generates a lot of questions about the basics: What is probate? Is it expensive? It’s bad, right? How do you skip it?

closeup of a Last Will and Testament documentProbate is the process by which the court system supervises the division of an estate. “Estate” is the term given to the assets and debts held by someone at the time of their passing. A will, revocable trust, and other planning documents are created to govern what happens to the estate during the probate process (and in some cases to skip it altogether).

Not all estates will go through probate, but before I explain why, it’s important to understand three basic types of property that affect the probate estate: joint property, non-probate property, and probate property. The amount of these three types of property you have will determine not only whether your estate will go through probate, but whether the probate proceedings will be formal or informal. Spoiler: formal probate can be expensive and time consuming. Informal probate — at least in Minnesota — isn’t so bad.

Joint property, specifically property that is owned in joint tenancy with rights of survivorship (JTWROS) is property that is owned equally and in undivided shares with at least one other person. A common example of joint property is the home where someone lives with his or her spouse or significant other. If the house is deeded in the names of both owners in jointly tenancy with rights of survivorship, then the property transfers automatically at the death of the first owner to the surviving owner. The county office responsible for keeping property records will need to be notified of the passing of one of the joint owners, but aside from this, the transfer is automatic and happens outside of probate by operation of law. No probate proceeding is needed for property that is owned jointly.

Not all real estate titled in the names of multiple owners is JTWROS; property titled in the name of multiple people as tenants in common will not pass automatically to the other owners. In the case of tenants in common, the portion owned by the deceased owner is controlled by that person’s will (or if they don’t have a will, then the state’s intestacy statute). This is property that may have to be supervised in the probate process (property owned as tenants in common is probate property).

Non-probate property is very similar to JTWROS property because it is property that passes automatically at death without any probate supervision. If you have a life insurance policy, a retirement account, or an investment account which allows you to designate beneficiaries, this is typically non-probate property. The account will pass to that individual without the help of the probate court; the beneficiary will need to mail in a death certificate proving that a death has occurred, and the property becomes theirs. There can be various tax consequences with these types of transfers, so be very careful who you name as a beneficiary (a transfer of a 401K to a non-family member can cause a large amount of income tax liability which may not have occurred if the account was given to a spouse, for example). Be careful here . . . if you name your estate as the beneficiary of these accounts, then this non-probate property will suddenly become probate property, and will be controlled by your will. This can be particularly problematic for tax-deferred accounts like 401Ks and IRAs, which can cause huge unintended tax consequences. You probably shouldn’t do this.

There are other types of non-probate property, such as real estate that is titled with a transfer-on-death-deed (TODD). Any property titled in the name of a properly drafted revocable or irrevocable trust, subject to transfer rules, is also non-probate property. This property is removed from the probate estate and will be transferred to beneficiaries according to the terms of the trust document by operation of law.

Lastly we have probate property, which is, loosely, “everything else.” All of your “stuff” that is title in your name at death: your tangible personal property that has not been added to a trust, your bank accounts without beneficiary designations, your cars, your jewelry, etc.  All of this property is controlled by your will and is subject to probate. A Minnesota estate that is less than $50,000 in value will typically be allowed to skip the probate process and instead transfer via an Affidavit of Collection, though there are exceptions.

Probate proceedings in some states can be an all-out lawyer brawl and can get very expensive. Fortunately, most estates that go through the probate process in Minnesota will go through informally (it pays to be Minnesota Nice!). An affidavit is filed with the court and notice is given to the estate’s interested parties. The probate attorney is then able to distribute the probate assets subject to transfer rules and claims from creditors (due to notice requirements, this can be a slow process). If the estate is exceptionally large, if it is insolvent (the person dies with more debts than assets), if there is a dispute among family members, or if the assets are complicated, then there may be a formal probate which is typically more expensive and has a higher level of attorney and judicial involvement.

Probate laws and estate taxation laws are unique to each state. Make sure you consider your state’s laws carefully before making any estate planning decisions (this is where I mention that you should hire an attorney who specialized in estate planning). Probate doesn’t have to be the nightmare that everyone thinks it is, but that assumes your estate is not only planned properly, but is also executed according to your plan.  If you have questions, I can help.

creates wills and trusts for families who want to feel secure that their loved ones are cared-for. Philip is a trust and estate attorney based in Minneapolis, Minnesota. Philip is the author of Trustee University: The Guidebook to Best Practices for Family Trustees. available at Amazon.com in paperback or Kindle edition (free chapter available here!) He also works with trustees and beneficiaries who need help with their trusts. You can contact him here.

Keywords: trusts and estates, Minnesota wills, revocable trusts, estate attorney, probate, estate planning

Most people will receive an inheritance at some point in their lives. Whether this amount is $10 million or $10,000, not everyone is equipped to handle a windfall of cash. There is a misconception that when someone creates their will they have little choice but to leave their money to their adult (or minor) children outright. That’s not necessarily the case; parents can use a testamentary trust — a trust written directly into their wills — to hold funds back from their kids so that the money may be used for specific purposes.  What age, if ever, is it appropriate to leave your children a large sum of cash?

Holding piggy bankIf you’re nervous about when your kids should receive your money, you aren’t alone. There is increasingly a realization that twenty-somethings are not equipped to handle large sums of cash. This article references a study by U.S. Trust in which two-thirds of those polled were unsure whether their children would act responsibly with their inheritance.

When you write your will, there is always an option to leave your estate to your heirs in trust rather than outright. This might be because you are worried that someone will take advantage of your spouse financially, or because you feel that your children may not handle a large sum of money appropriately. You may also feel that the funds should be used for something specific — perhaps for medical care, college, or just for financial emergencies. Increasingly, parents want to simply keep the cash out of their children’s’ hands until the child has reached a certain age where they will be better able to manage these funds for their own benefit.

I’ve noticed that the age at which an attorney recommends a beneficiary receives his or her windfall is closely correlated to the attorney’s age. Younger attorneys are more confident that younger beneficiaries should have their money — often at age thirty-five or so. Older attorneys feel otherwise, and will often recommend a final distribution age that is much later, perhaps into a beneficiary’s forties. The appropriate age of course depends on the beneficiary: how has the beneficiary managed their money in the past?  Are there any concerns about substance abuse or gambling? Does the beneficiary have alimony or other financial obligations which need to be addressed?  Does the beneficiary run a business that has a high risk of being sued? All these things and more should be considered when determining when (or if) the beneficiary should have ready access to funds from the trust you create in your will.

I have to admit that I am biased towards a later inheritance age for beneficiaries.  Having worked as a professional trustee for a number of years, I have seen, repeatedly, what happens to younger beneficiaries who receive a windfall of cash. There are obviously those that handle it responsibly, but when you are talking about individuals between eighteen and twenty-five, the outcome is not often positive. I have seen young people with access to a few hundred-thousand dollars lose the whole thing in a matter of years.  I have also seen young heirs lose motivation to go to school or to find a job, since they don’t have to work for their financial security. You can imagine what their life looks like when the money runs out.

Personally, I think a great way to structure your testamentary trust is to allow the trustee to make distributions for school and for medical costs at any time. When the beneficiary reaches a point of mental, emotional, and professional maturity, this is a great time for him or her to have access to the rest of the money.  My opinion (generally) is that this age is  in the beneficiary’s thirties . . . this provides enough time for the child to have his or her life, education, and career in order. The beneficiary may have priorities at this point that go beyond their own needs, such as purchasing a home or caring for children.

And don’t forget, there is nothing wrong with giving your children and grandchildren an early inheritance, whereby you can supervise their investments and also receive the benefit of watching them enjoy it. Though you will need to be extra careful of gift tax considerations when making lifetime gifts, this option can create a lot of enjoyment for both the person making and the person receiving the gifts.

Remember, you don’t have to leave money to a beneficiary outright; you can delay their inheritance to any age you like via a testamentary trust.  Talk with your estate planning attorney about concerns you have about leaving funds outright to your children or other beneficiaries; together, you can find a solution that works for everyone, while still meeting your estate planning goals.

creates wills and trusts for families who want to feel secure that their loved ones are cared-for. Philip is a trust and estate attorney based in Minneapolis, Minnesota. Philip is the author of Trustee University: The Guidebook to Best Practices for Family Trustees. available at Amazon.com in paperback or Kindle edition (free chapter available here!) He also works with trustees and beneficiaries who need help with their trusts. You can contact him here.

Keywords: trusts and estates, Minnesota wills, revocable trusts, estate attorney, probate, estate planning

We have two dogs, Moose and Ruby. I’m only a little embarrassed to say that we fall into the “pets are a part of the family” category of animal owner . . . our dogs pretty much go where we go, to the point where they may be the determining factor as to whether we go on a vacation or take a weekend trip. For those who know us, this is probably not surprising. We have been active with local animal rescues and at the local municipal animal care and control center. Our animals are a big part of our lives; it probably also isn’t surprising that making sure they are cared for if something happened to us is a pretty big deal.

Yep, that's us.  Philip and Mary Ruce, pictured with Moose Ruce (L) and Ruby Ruce.  Photo via Cara Lemmage Photographs.

Philip and Mary Ruce, pictured with Moose Ruce (L) and Ruby Ruce. Photo via Cara Lemmage Photographs.

Some states make it very easy to provide for your pet in your estate plan, usually by creating a pet trust. Sadly, Minnesota is not one of these states. A pet trust is a legal entity consisting of a trustee and some trust assets (usually some money you leave to the trustee in your will). The trustee manages the trust assets for a human beneficiary who has agreed to care for the animal, and to use those trust funds for the animal’s care. This arrangement is perfectly allowable in Minnesota too, except in the pet trust states, the agreement is an enforceable obligation.

The problem lies in the status of pets as personal property.  This makes sense, of course; dogs, cats, parrots, and ferrets are not people. They can’t make contracts, they can’t consent to legal agreements, and they certainly can’t hire a lawyer and sue when they are having a problem. Pets, in the eyes of our legal system, are property on the same level as your couch or dining room table (though certain states are becoming enlightened ). Sometimes that doesn’t feel right because of the personal nature of our relationship with our animals . . . surely a living, breathing thing that depends on me for food and shelter isn’t on the same footing as my refrigerator. But it’s the reality, and it’s something we need to work around when we are planning our estate.

Your Pet’s Care

You can still set money aside for your pet’s care. I mentioned that you can create a trust for your pet, but it is not enforceable in the same way as it is in states that have pet trust laws. But if there is someone you know of who you trust to care for your pet if something happens to you, make sure you leave instructions in your will indicating that this person has agreed to accept the animal and to provide care. You could then leave this person some money outright, or you could create a small trust for the benefit of this person. The trust could be written to reimburse that person for all animal-related expenses, such as vet bills and pet food.

If you do not have someone who can care for your pet, that is okay. There are organizations with whom you can make arrangements; contact pet rescues in your area. Oftentimes, in exchange for a donation in your will, they will commit to caring for your pet when you are gone and they will work towards finding a new home for your animal.  Make sure you have an arrangement with the pet rescue in writing before assuming your pet will have care.  Here is a downloadable .PDF with more information from the Animal Humane Society.

Changes Coming?

Minnesota is considering changing its trust code to conform to the Uniform Trust Code, a set of model rules that many states are adopting as their own. The Code does allow for pet trusts, but it is up to the Minnesota legislature as to whether the pet trust provisions will be included. As an animal advocate and pet owner, I would love to see pet trusts become part of the estate planning landscape in Minnesota. Until then, let’s make sure we remember our furry friends, and let’s not forget the commitment we have made to care for them.

creates wills and trusts for families who want to feel secure that their loved ones are cared-for. Philip is a trust and estate attorney based in Minneapolis, Minnesota. Philip is the author of Trustee University: The Guidebook to Best Practices for Family Trustees. available at Amazon.com in paperback or Kindle edition (free chapter available here!) He also works with trustees and beneficiaries who need help with their trusts. You can contact him here.

Keywords: trusts and estates, Minnesota wills, revocable trusts, estate attorney, probate, estate planning, will

You need to consider many things when creating your estate plan . . . .  Who would get your favorite family heirloom?  What would be the best way to transfer your house to your spouse? How would your retirement accounts be taxed? And if you have young children, who would care for them?  Most people plan on leaving an inheritance to their children, but many fail to consider how they will give it to them. Giving it outright is not always a great idea . . . have you ever seen an eighteen-year-old with a $100,000 check?  I have. The result of this type of windfall is about what you’d expect.

Business advisory meetingNot everyone realizes that you have a choice about when your kids will receive your money. The money can be doled out over a period of years, or for specific things like college, a down payment on a home, funds for starting a business, or for emergency medical care. You can accomplish this in a very straightforward way by creating a testamentary trust in your will document.

Keeping Control

Testamentary trust provisions allow you to control your money even after you are gone.  The provisions create a trust entity that will be managed by the trustee, who is an individual (or sometimes a professional trust company) that you choose.  The trustee works with your child or the child’s guardian to pay for certain expenses which you specify in the trust document.  Eventually, at a time you’ve determined, the trust pays out its remaining balance; this could be when the beneficiary is twenty-five, thirty-five, fifty, ninety, or any age in between.  Funds could also be left in the trust for the child’s whole life, and then paid out to the next generation (or held in trust for them too).  You can also attach conditions to the money, such as a bonus distribution upon the completion of a college degree, or instructions to keep funds out of the hands of a child who is struggling with substance abuse.  Provisions can be drafted that will prevent the trustee from distributing the money if the child is going through a divorce or a bankruptcy, thereby protecting the child’s inheritance from these proceedings.

Expensive Mistakes

If you leave money to a minor child outright — either through your will or by listing the child as a beneficiary of you financial accounts or life insurance policies, you could be making a very expensive mistake.  Rules vary by state, but funds left outright to minors are held by the probate court and administered by a conservator.  This isn’t cheap, and the court will give the child the funds outright when he or she turns eighteen (sometimes twenty-one, depending on the circumstances).  I have watched eighteen-year-olds spend their entire inheritance within a year on cars, electronics, and misplaced generosity to their friends.

I don’t mean to generalize the behavior of an entire group of people based solely on their age, but I look at myself at eighteen and I look at myself now, and I can tell you unequivocally that a windfall of cash would be handled much differently today than it would have been handled when I was a teenager.

A word of caution: these provisions must be drafted in a very specific way if they are to qualify with the IRS to receive retirement plan funds, and the other provisions in the will have to be very specific as to how the trust will be created and how it will be managed.  This is not a do-it-yourself project.  Drafted properly, these provisions can ensure that your children will be set to succeed and will have access to these funds for a lifetime.  Set up improperly, and you can disinherit them altogether.

creates wills and trusts for families who want to feel secure that their loved ones are cared-for. Philip is a trust and estate attorney based in Minneapolis, Minnesota. Philip is the author of Trustee University: The Guidebook to Best Practices for Family Trustees. available at Amazon.com in paperback or Kindle edition (free chapter available here!) He also works with trustees and beneficiaries who need help with their trusts. You can contact him here.

Keywords: trusts and estates, Minnesota wills, revocable trusts, estate attorney, probate, estate planning, will

I have mixed feelings about do-it-yourself estate planning.  I think that in certain cases, when a person has very few assets and no minor (or irresponsible adult) children, and when they receive assistance in filling out the forms, it works fine.  I also think that if the alternative to discounted legal assistance is no legal assistance, well, I understand.  But these circumstances are limited.  The frequency with which these plans go wrong, and the number of disclaimers pasted all over websites like Legalzoom, gives me serious pause.

closeup of a Last Will and Testament document

My own disclaimer: there is some dispute about whether Legalzoom is even a true competitor of estate planning attorneys.  Either way, when it comes to discussion of this subject, I’m an interested party.

Your estate plan is a big deal.  Even if you don’t have to worry about estate taxes, the probate process, or nosy relatives (three very good reasons to have a professional estate plan), you are at the minimum appointing the people who are going to care for your loved ones, including a guardian for young children, your personal representative (“executor”), and possibly the trustee who will make sure your loved ones aren’t victimized.

I generally consider comparing lawyers to other professionals like physicians as silly and even a little distasteful.   Doctors, after all, save lives, prevent early death, and manage your pain.  Attorney obviously can do literally none of these things.  But there is something we have in common: we take a complex situation that has the potential to really screw things up and we can make it better . . . if someone actually comes to us with the problem before it’s too late.

The point I’m getting at is: even when surgery looks very straight-forward, it isn’t, and you are probably going to want to have that looked at.

Your Will is Not a Refreshing Sports Drink

I think the biggest issue I have with do-it-yourself estate planning is that you are buying a bulk product, and it’s like any other bulk product you buy.  Let’s use a silly example and say I am in the market for some Gatorade.  If I go to Target (I love Target), I can choose the flavor I want, the size that I want, and how many of bottles I want and be on my way — but I’ll pay a bit more for the ability to make these choices.  Alternatively, I can go buy it wholesale at Costco, and get a sizable discount (I love Costco too).  But if I go the wholesale route, I better be prepared to be told what I want, and not the other way around.  I’m going to get two dozen bottles of lemon-lime, all the same size.  My preferences and any changes that might occur after the purchase (like getting sick of drinking lemon-lime Gatorade) are not taken into account . . . I can’t have a few lemon-lime, a few orange, and a few cherry.  And I can’t limit my purchase to, say, six bottles.  I’m told what they have, and it’s up to me to decide if that works for me.

Broadly, legal documents can be purchased the same way, but with stakes are a lot higher.  If you want a ready-made will (or, shiver, a trust), you can get it super cheap because these documents are churned out en-masse, with form data. But unlike a trip to Costco, how are you supposed to know if a particular legal product works for you?  You won’t get a choice — or have very little choice — as to how trust provisions will read.  You won’t have a choice about which powers you want to give a trustee, and which powers are specific to your children’s care, etcetera. You are told what is available, just like Costco, and you decide if it will work for you. But unless you are a financial, tax, and estate professional, how do you know it will work for you?  Legalzoom’s own disclaimer says that they will help you choose the right form, but if they are wrong, they are not responsible. This guy ended up disinheriting one of his kids . . . and he’s a lawyer. This is your family we’re talking about, not a refreshing sports drink.

You are not a one-size-fits-all family, and while a one-size-fits-all estate plan may work as a Band-Aid, you don’t get to pick and choose what you want, and eventually you are going to have to re-do this plan.  Will having an estate tool custom-made for you cost more?  Of course it will.  But it’s an incredibly important part of your overall financial plan, and it’s worth the investment.

Put simply, paying for an attorney is not the same thing as paying for a document. Yes, the attorney will fill in the blanks of a document (a document that is customized to your specific state’s laws), but that is secondary.  You are paying for the advice that goes with the forms.  Your minor children likely need a trust drafted into your will, otherwise any money they get will go to the (expensive) court system until they are eighteen.  You can’t make a minor a primary or contingent beneficiary of a retirement plan or insurance policy, but you can leave it to a trust, which has to be worded in a very specific way  (as do the beneficiary designations of the retirement plan and life insurance policy).  You need trustees, personal representatives, and guardians . . . and backups. You may need to word the document so that your growing family is taken into account so that you don’t have to redo this every time you introduce a child (or grandchild) into your family.  You have to take into account changing laws and construct the documents to be flexible.  You have to plan for incapacity — powers of attorney and a health care directive that speaks plainly about your wishes. The documents must be executed properly based on your individual state’s laws (each state has its own requirements), which usually includes a self-proving affidavit (so the probate court doesn’t have to track down your witnesses and bring them in to confirm that it was you who signed the documents). Icing on the cake: your assets all have to be titled properly for your estate plan to work at all.  Et cetera, et cetera, et cetera.

And all of this assumes you have an estate that is small enough where you don’t have to do any real tax planning — federal estate and gift  tax, state estate and gift tax, and income tax.

It is perfectly legal to perform surgery on yourself, but it is not generally recommended.  Be careful, and don’t end up like these guys.

creates wills and trusts for families who want to feel secure that their loved ones are cared-for. Philip is a trust and estate attorney based in Minneapolis, Minnesota. Philip is the author of Trustee University: The Guidebook to Best Practices for Family Trustees. available at Amazon.com in paperback or Kindle edition (free chapter available here!) He also works with trustees and beneficiaries who need help with their trusts. You can contact him here.

Keywords: trusts and estates, Minnesota wills, revocable trusts, estate attorney, probate, estate planning, will

Do I Need a Will?

Here’s something I don’t think people ordinarily expect to hear from me: not everyone needs an estate plan.  No will, no trust document.  I was one of these people up until recently — let’s see why.

closeup of a Last Will and Testament documentI was single, with no children. If something were to happen to me, I would have wanted everything I own to go to my parents.  My family, though not wealthy, is secure and does not “need” my money or anything else I own, so I’m relatively sure no one would fight over my things.  I also trusted that anything I own with sentimental value would stay in the family and be given to family members who would appreciate these things as much as I do.

In other words, I did not need to appoint a guardian for minor children, and I was totally okay with my state’s intestate succession statute (the state law that tells a probate judge and your estate’s personal representative where to send your things if you do not have a will).  Non-probate assets — things with beneficiary designations, like IRAs and life insurance — are not affected by a will document.  In situations like mine, the state’s intestacy statutes would take the place of a will.  This “default” plan largely reflects what I would have put in a will anyway.  If this situation describes you, then as far as controlling who gets your stuff is concerned, you don’t need my services.

In Minnesota, the intestate succession laws work (broadly) like this: if I don’t have a will and am unmarried, then everything goes to my parents.  If my parents are not living, or if they disclaim (tell the court they don’t want my things), then it goes to my siblings.  If no siblings, then the court would go up a “branch” in my family tree and see if I have any grandparents living. If no grandparents, then to my aunts and uncles . . . if no aunts and uncles, then to my cousins.  If no cousins, then it goes up another branch, starting with great-grandparents, and then on down the line until they get to my second cousins.  Etcetera.

But life changes; we grow.  We get married, we have kids and grand-kids, we get a promotion and make more money, or maybe we start a small business.  Once married, the intestacy statute divides my assets between my spouse and my other heirs.  The percentage depends on whether my spouse or I have children from other relationships (we don’t).  In my case, my wife Mary would get everything, since we don’t have kids (yet).  Guess what?  That’s how I  want my will to read.  Minnesota’s laws still reflect my estate plan.

But my estate plan does more than just divide my things.  An integral part of estate planning is incapacity planning.  What happens if I am unable to make financial decisions for myself, or unable to make decisions about my health care?  A proper estate plan will create documents to address both of these issues by appointing an attorney-in-fact (“power of attorney”) and a health care agent.

And what if I want to give some money to my favorite charities?  I’ve been active with animal rescues, and supporting them is important to me.  What if I want specific things to go to specific people?  I’d like my great-grandfather’s cuff links and my childhood collection of old baseball cards to go to my brother.  Again, I trust my family, but I won’t have any real control if it’s not in a properly executed will.

What about  a business?  Do I want my family to take over my law practice?  They’re not lawyers, so that’s a resounding no. I need to plan for this with language in my member control agreement or possibly a buy-sell agreement.

And, importantly . . . what happens when we have children?  My will is where I appoint the guardians of our children if something happens to both of us.  This is not an issue for us right now, but it might be later.  If you do not have appointed guardians, then it is up to the probate court system to decide who will care for them.  The court will act in the interest of your children, but they’ll do so without your input. I think deciding who will take care of your children is important to everyone.

To sum it up, if you have minor kids or if you have specific ideas for where you want your stuff to go, you need a will.  Give careful thought to who should make financial and health care decisions for you if you are unable to do so for yourself; if you don’t have documents appointing these people, the court will have to conduct an expensive proceeding to appoint a guardian and possibly a conservator.  A little planning now will give you the security of knowing everyone would be protected later.

creates wills and trusts for families who want to feel secure that their loved ones are cared-for. Philip is a trust and estate attorney based in Minneapolis, Minnesota. Philip is the author of Trustee University: The Guidebook to Best Practices for Family Trustees. available at Amazon.com in paperback or Kindle edition (free chapter available here!) He also works with trustees and beneficiaries who need help with their trusts. You can contact him here.

Keywords: trusts and estates, Minnesota wills, revocable trusts, estate attorney, probate, estate planning, will