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Wills and Estate Planning

An important consideration, especially when your domestic situation changes, is the need to protect your family and your assets, in the event of your death or disability. Whether you are facing new beginnings through marriage, pregnancy, assisted reproduction, or adoption, or regrouping after divorce or a death in the family, it is critical that your estate documents are set up to protect those you love.

Every family should have a will, healthcare directive, durable power of attorney, and if there are minor children, proper custodian forms to insure continuity of care for children in the event of death/incapacity of the parent(s). Families and individuals also should consider other planning options such as testamentary or living trusts. Beneficiary designations and other non-probate options are also available to allow you to pass your assets outside the will, and should be used in conjunction with your other planning tools.

Wills and Trusts

Wills

A will is a legal document that allows you to transfer your property at your death. Having a will ensures that your money, property and personal belongings will be distributed as you wish after your death. Without a will, a court will follow Minnesota's intestacy laws to make those decisions in your place. Particularly where relationships and alliances have changed, a will can give you control over how your estate will be divided.

Trusts

There are several types of trusts. A testamentary trust is set up under a will and is usually funded from the assets of the testator (the creator of the will), upon the testator's death. A testamentary trust often is used to provide for the minor children of the testator, but also can be set up to provide for the surviving spouse, other family members, friends or anyone designated by the testator. The trustee of the trust manages the trust assets and distributes the assets per the instructions of the testator, as set out in the trust provisions of the will. The benefit of the testamentary trust is to insure that the assets of the grantor are managed to provide for the beneficiaries of the grantor in a manner determined by the grantor, with less initial work on the part of the grantor. The assets of the grantor remain in the hands of the grantor until he/she otherwise determines or until his/her death, when the trust becomes irrevocable. The testamentary trust will not take the assets out of the estate, for tax purposes, as the grantor maintains control until his/her death or incapacity.

A living trust, or "inter vivos" trust, which is often referred to as a revocable trust, is set up during the lifetime of the settlor (the creator of the trust). A trust set up as a revocable trust can be changed by the settlor at any time prior to his/her death or incapacity. The trustee of the trust can be the settlor, with another person serving as co-trustee or successor trustee, to take over in the event that the settlor is no longer able or willing to handle the management of the trust. The revocable trust often is used to avoid probate of a will. However, it is necessary/advisable to set up a pour-over will, to insure that no assets are left out. The pour-over will acts to "pour over" any assets left out of the initial funding of the trust, or acquired later, that are not addressed in the language of the trust. A revocable trust is advised when the settlor owns property in another state, as placing that property in trust avoids the necessity of a separate probate in the other state, and allows the property to be distributed or managed according to the terms of the trust. A revocable trust also can be helpful in the event of the incapacity of the settlor. Management of the settlor's assets by the successor trustee is sometimes preferable to the action of an attorney in fact under a durable power of attorney. Also, the power of the trustee continues after the death of the settlor, while the power of the attorney in fact is limited to a period of incapacity of the individual and does not survive death.

An irrevocable trust is set up so that the terms of the trust are irrevocable by the settlor. The settlor has relinquished all control of the assets in an irrevocable trust. Such a trust can sometimes operate to take the assets out of the estate of the settlor, usually for tax purposes.

Support Documents

Health Care Directives

A Health Care Directive enables you to name someone as your agent to make decisions about your health care, including decisions about life support, if a doctor determines that you no longer can speak for yourself. You can specify that your agent must act consistently with your wishes, which can be set out in the document or otherwise communicated to the agent. With this document in place, your family is protected from later confusion and difficulty with regard to treatment decisions.

Power of Attorney

A Power of Attorney allows you to designate a trusted individual to handle your financial matters on your behalf, when you are absent or unable to attend to these matters yourself. A durable power of attorney remains in effect in the face of incapacity and/or disability (not death), so that you can continue to receive the help you need, from someone you trust.

Designation of Standby Custodian

A Standby C ustodian is an individual appointed by the parent, to take over the care and custody of the child(ren) upon the occurrence of a triggering event. The triggering event can be the incapacity, absence or death of the parent, as defined in the document appointing the standby custodian. This authority allows the custodian to exercise authority under the appointment for up to 60 days after the triggering event, after which time the custodian must seek court approval to remain in this capacity.

Delegation of Parental Authority under a Power of Attorney

A parent, legal custodian, or guardian of a minor child or incapacitated person, may delegate, through use of a properly executed power of attorney, authority regarding care, custody or property of the child, except the power to consent to marriage or adoption. This power may be in effect for up to one year. If the parent wants the power to continue, the power of attorney has to be renewed on a yearly basis.

This delegation is often used when a parent anticipates being absent for an extended period of time. It goes into effect as soon as it is properly signed. No triggering events are necessary.

Non-Probate Tools

Transfer on Death Deed

A Transfer on Death Deed (TODD) is set up through the County Recorder in the county where real estate is located. This special deed allows the grantor/owner(s) of real property to pass the property directly to the beneficiary(ies), upon the death of the grantor/owner(s). The property owner(s) must set up the TODD in place of the traditional deed, so that the property passes directly to the beneficiary(ies). The TODD can be revoked and replaced at any time prior to the death of the owner(s). Where the owner(s) are married, both spouses must sign.

Payable on Death Accounts

Payable on Death (POD) designations are set up to provide that the accounts bearing this designation pass directly to the beneficiaries, upon the death of the account owner(s). Such accounts are often set up through banks, credit unions and the like. These designations can be revoked or removed at any time prior to the death of the account owner.

Beneficiary Designations

Beneficiary designations are used with insurance policies, retirement accounts, and the like, to set up beneficiaries of the assets represented by these policies and accounts. The administrators of the accounts often have certain forms and/or requirements of their own, which dictate how these designations should be set up. There are tax considerations particularly regarding the retirement accounts. The grantor(s) should check with their financial institutions and perhaps with a tax professional, to ascertain the implications of the distribution of these assets.

For more information, or to schedule an appointment with Gay to discuss your estate planning options, please contact us. There is no charge for your initial consultation.

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