A will is a legal document that allows you to to transfer your property following your death. A will ensures that your money, property, and personal belongings will be distributed in accordance with your wishes. It also allows you to have full use of your property while you are alive. The law does not require you to have a will, though, and if you die without one, Minnesota’s inheritance laws will control how your estate is divided. In most every case, your property will go to your closest relatives. If you have a spouse and children, the property will go to them by a set formula. If not, the property will descend in the following order: grandchildren, parents, brothers and sisters, or more distant relatives if there are no closer ones.
A will is necessary if you want to leave property to a friend or a charity of your choice, to give certain personal items to certain people, or to leave someone out of your will who would otherwise inherit money or property from you. You may also want to appoint someone to handle your estate.
In Minnesota, the following rules apply to wills:
You must be at least 18 years of age to make a will;
The will must be in writing;
The will must be signed by you, by another person at your direction and in your presence, or by your conservator pursuant to a court order;
The will must be witnessed by at least two people, both of whom must also sign the will; and
You must intend for the document to operate as a will.
Generally, the following basic elements are included in a will:
Your name and address;
A description of any assets you wish to give to a specific person;
Names of spouse, children, and other beneficiaries, such as friends or charities;
Alternative beneficiaries, in the event a beneficiary dies before you do;
Establishment of trusts, if desired;
Cancellation of debts owed to you, if desired;
Name of a trustee for any trusts created;
Name of a personal representative to to manage the estate;
Name of a guardian for any minor children;
Name of an alternative guardian, in the event your first choice is unable or unwilling to act;
Your signature; and
Your Witnesses’ signatures.
Your will should state with specificity who will get your property upon your death. You should also indicate, in an itemized and organized manner, how much each person will receive. You should be sure to name a guardian for your minor children and a personal representative for your will.
A personal representative (also known as an executor or administrator) is the person who oversees payment of your debts and distribution of your assets according to your will. A personal representative is considered a fiduciary. This means he or she must observe a high standard of care when dealing with the estate. You should identify a personal representative in your will. Most people choose their spouse, an adult child, a relative, friend, trust company or attorney to perform these duties. Your personal representative will be handling your assets, so it is imporant that you select someone you trust.
Probate is the legal process os settling your estate in court after you die. Your property is inventoried, your debts and taxes are paid, and everything left over is divided among your heirs. Probating a will begins by filing an application with probate court. Probate ends when all debts are paid and all assets are distributed. If there are disagreements over your will, a probate judge will resolve the differences. It is often advisable to obtain the services of an attorney to ensure that an estate is probated correctly.
It should be noted that certain types of assets are not subject to probate. These include real property held in joint tenancy, 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.
Distributions to Heirs
If there is a will, the personal representative should distribute the property of the estate in accordance with the provisions of the will. If there is no will, the property of the estate will be distributed according to intestate succession laws. The law generally provides that, absent a will, your estate will pass to your spouse. However, in situations where either spouse has children from other marriages, the share awarded to 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. If there are no children, the estate will pass to other relatives. 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.
A trust is an entity that manages the distribution of your assets. A trust is created by the transfer of property by the owner (also called a “grantor,” “donor,” or “settlor”) to another person (the trustee). A trustee can be a professional with a financial knowledge, a relative or friend, or a professional trust company. The trustee holds title to the property for the benefit of the beneficiaries who may be a specific person, a group of people or an organization.
There are two basic types of trust. A “testamentary” or “after-death trust” is created by the settlor’s will which transfers property to the trust. A “living” or “intervivos trust” is created during the lifetime of the grantor when all or part of the grantor’s property is transferred into the trust.
Establishing a Trust
Establishing a trust requires a document that specifies your wishes, lists beneficiaries, names a trustee or trustees to manage the assets and describes what the trustee or trustees may do. For a living trust, you can name yourself as trustee but, if you do, you should also name a successor trustee to take over if you should become disabled or die. Once the document is completed, you must then transfer the assets to the trust. Please keep in mind that in some instances, such as the transfer of real estate, there may be associated fees or tax consequences.
If the living trust contains all of your property, a will may be unnecessary and you can avoid probate. If the trust contains only part of your property, you will need a will for the rest of it. If you want your property to go into the trust after you death, your will should include a “pour-over” provision to put the remaining property into the trust upon your death. If the assets are not placed into a trust and are disposed of by a will, they will have to probated, which would negate the advantages of the living trust.
As you can see, the issues surrounding wills, trusts, and the probating of an estate can be quite complex. An individual would be well-advised to seek the assistance of an attorney. To that end, I would be happy to provide you with a free consultation regarding these very important matters.