Believe it or not, you have an estate and an estate plan. Your estate consists of all the things you own from your clothes to your furniture, your car to your house, your checking account to your retirement account; and the unfortunate truth is: “you can’t take it with you when you die.”
The good news is that your estate plan will control how your estate will be distributed to those people and organizations you care about. At its core, an estate plan is simply a set of instructions that state who receives your stuff, exactly what they receive, and when they receive it, and (of course) do so with the least cost (taxes, court costs, legal fees, etc.). That’s really all there is to estate planning; you create a plan in advance and name who gets what once you die. Now, a good estate plan can do much more than simply distribute your stuff after your death, a good plan can: pass on your values (hard work, the importance of education, religious beliefs) as well as your valuables; it can include health care instructions if you become disabled; it can protect your family’s financial future from predators; it can provide for family members with special needs without interrupting governmental benefits, it can provide for the transfer of your business; it can even include insurance to secure your family’s financial health should you die, become disabled, or have an extended illness or injury.
Now, if you die without having created a personal estate plan (because you’re not old enough, don’t have enough stuff, are too busy, did, or simply don’t want to think about it), don’t worry the State of Minnesota has an estate plan for you – it’s a public process requiring court involvement. If you become incapable to managing your financial and legal affairs due to mental or physical incapacity, the court will appoint someone to manage them for you without knowing whom you would choose. The court, through its appointee, will determine how your assets are to be used for your care. If you die without an estate plan, your assets will be distributed according to Minnesota probate laws which mean that, depending on your circumstances, your spouse may get your estate or your spouse and children may each receive a share of your estate and any assets going to minor children will need to be managed by a guardian/conservator. Given the choice (and you do have a choice) wouldn’t you prefer to handle these matters privately and in a way where you keep control of who receives what and when?
Estate planning begins with a Will or a Living Trust. Both documents provide instructions as to how you want your estate to be managed, but Wills don’t avoid probate. Any assets titled in your name or directed by your Will go through the probate process before they are distributed to your heirs. Now, not everything you own will go through probate; jointly owned property and assets that let you name a beneficiary (life insurance, annuities, 401(k)s, etc) are not controlled by your Will and usually transfer to the new owner or beneficiary without probate. Now, there are downsides to joint ownership and probate avoidance is not guaranteed – if a valid beneficiary is not named the asset(s) will have to go through probate; if a minor child is a beneficiary, the court may insist that a guardian/conservator manage the asset(s) until the child is legally an adult.
On the other hand, a Living Trust (provided it is properly funded) can avoid probate, prevent court control if you become incapacitated, bring all your assets together into a single unified plan, provide maximum privacy, and can reflect your love and values to your family and future generations. Unlike a Will, a Living Trust does not have to die with you. Assets can stay in your Trust (managed by a trustee you select) until your beneficiaries reach the age you want them to inherit. Your trust can continue past your death to provide for a loved one with special needs, to protect your assets from a beneficiary’s creditors, irresponsible spending, or future ex-spouses. On the downside, a Living Trust is initially more expensive than a Will and does require some on-going management on your part, but considering it can avoid probate and potential court involvement should you become incapacitated a Living Trust may be a wise investment.
A good estate plan does not need to be expensive; start with what you can afford. You can start by organizing your records and making sure that titles and beneficiary designations are correct. Then add a Will, term life insurance, a power of attorney for your financial affairs and a heath care directive for your medical decisions. Then let your planning develop as your needs and financial situation change. An experienced attorney specializing in estate planning can help you develop your estate plan, provide critical guidance and the peace of mind knowing that the legal documents needed to implement your plan are prepared properly.
The best time to plan is now; nobody likes to contemplate their own mortality or the possibility that there may come a time when they are incapable of making their own decisions, but the sad fact of the matter is that these unpredictable events often catch families off-guard and ill-prepared. Putting something in place now and changing it as circumstances require (which is how estate planning should be done) is a fairly easy thing to do, and knowing that you have a properly prepared plan in place – one that contains your instructions and will protect your family – will give you and your family peace of mind.
If you would like to discuss your estate planning needs, Cameron Law is here to help.
For a complimentary initial consultation, call 507-206-4976