What is Estate Planning
Estate planning is generally considered the process by which an individual arranges the transfer of assets upon death. Emphasis is on whether to create a Will or avoid probate through a trust or beneficiary designations. While post death planning is primary, an effective estate plan will also include a power of attorney to ensure uninterrupted property and financial management and a health care directive to provide health care decision making and end of life instruction.
Ultimately, an estate plan must clearly reflect the individual’s wishes and concerns. At Hartley Law Office, Client intentions are learned through casual conversation rather than multi paged intake forms and questionnaires. Once prepared, each component of the estate plan is reviewed in detail using plain English; thereby ensuring a working knowledge of the entire estate plan.
Click on the links below for further estate planning information or contact Hartley Law Office to schedule a free initial consultation.
A trust and will share a similar function in that both documents distribute a person’s assets upon death. A will distributes probate assets. A probate asset is titled in the decedents’ name alone. Probate asset examples include a home owned exclusively by the decedent or a financial account or life insurance policy that fails to name a beneficiary. Probate assets require assistance from a probate court to transfer title. A will does not dictate the distribution of non-probate assets. A non-probate asset passes title automatically upon the owner’s death and therefore, does not need assistance from a probate court. Examples include real estate owned by two or more persons as joint tenants and financial accounts and life insurance that name a beneficiary. Importantly, if a will directs the distribution of a non-probate asset, the titling or beneficiary designation of the non-probate asset has priority over the will language.
A trust in an estate planning context allows for the management and ultimate distribution of assets that have been transferred to the trust. A trust can be irrevocable, meaning the person creating the trust, referred to as the Settlor, cannot amend, revoke or otherwise control the trust assets after the trust has been created and funded. Irrevocable trusts are often used to reduce the value of the Settlor’s estate for tax reduction purposes. In most estate planning instances, a revocable trust is used. A revocable trust can be amended or revoked at any time and the Settlor retains full control over the trust assets until mental incapacity or death.
A trust typically appoints the Settlor as the initial trustee and primary beneficiary. A successor trustee is also named and given the authority to step in and manage the trust assets if the initial trustee is unable to act or has passed away. The Settlor transfers ownership of assets or names the trustee or successor trustee of the trust as primary beneficiary The transition of trust assets from trustee to successor trustee creates non-probate assets; thereby avoiding the need to probate the Settlor’s trust estate. During the Settlor’s lifetime and mental capacity, the trust assets are controlled exclusively by the Settlor as the initial trustee and primary beneficiary.
Upon the Settlor’s mental incapacity or death, the successor trustee takes control of the trust assets as a fiduciary to the trust beneficiaries. The trust establishes a plan of distribution for specific gifts, personal effects and the residue of the trust estate. A trust can create additional trusts to address distributions to grandchildren or the continued ownership of a family cabin.
Trusts are typically more expensive to create than a will or certainly a transfer on death deed if probate avoidance is a primary consideration. The increased trust cost however, is considerably less than the costs and expense of a probate proceeding. Furthermore, a trustee is granted sole authority to administer the trust estate; thereby avoiding the potential for conflict and deadlock between transfer on death deed grantee beneficiaries. A trust also avoids issues created when the grantee beneficiaries own the property as tenants in common and one or more grantee beneficiary dies leaving minor children.
Depending upon a person’s assets and intentions, a trust can be an effective way to transfer assets upon death. Call or email Hartley Law Office for more information or to schedule a free initial consultation.
There are a number of ways to keep the cabin in the family. The cabin can be transferred outright to the children while the parents are still alive or upon the death of the surviving parent. If the intention is to pass the cabin to successive generations beyond the children the cabin could be transferred to a trust or legal entity such as a limited liability company. The following is an overview of common methods used to transfer the family cabin to the children or successive generations.
Selecting the proper method of transfer however, should begin by considering various family and cabin-related factors. Initially, what is the desired future for the cabin? Is the intention to simply pass the cabin to the children or to ensure the cabin will pass to successive generations? In either case, do all the children share the same desire to acquire an interest in the cabin? If not, are there sufficient assets to account for those disinterested children?
What are the expectations regarding cabin control. Will the parents continue to use the cabin and provide all management and financial support during their lives or relinquish control and all responsibility to the children immediately or over an extended period of time?
Does the cabin property have the capacity to accommodate a growing number of cabin users? What started out as a family of five may now include in-laws and a multitude of grandchildren. Is the cabin sitting on a multi-acre lot with room for a bunkhouse and camper parking or is the cabin a single level ranch sitting on a half-acre lot? In either case, it may be best or even necessary to choose a method of transfer that will allow for the adoption of rules and regulations that include cabin use and scheduling guidelines.
Undoubtedly, the most significant consideration involves an honest assessment of the family dynamic. Is there a small number of children with a couple of kids each who all get along or numerous children, grandchildren and difficult in-laws in what seems to be an endless stream of disagreements and hurt feelings? Also consider whether the children are well-adjusted with steady employment and strong marriages or in some instances, struggling financially and perpetually on the verge of divorce or bankruptcy?
METHODS OF TRANSFER
With the various cabin and family related considerations in mind, the ultimate goal of any method of transfer is to ensure the cabin remains an object of ongoing family unity and joy rather than the subject matter of bitter litigation.
- Outright Conveyance
The easiest way to transfer a cabin to the children is by making a present conveyance using a quit claim deed. Once the deed is drafted and signed, it must be delivered to the children and then filed with the county recorder. Advantages of an outright conveyance include: the minimal cost of preparing and filing the deed; while cabin control is relinquished, the parents’ elevated status at the cabin typically continues without management or financial responsibility, the cabin is no longer a probate asset of the surviving parent’s estate; and the cabin is no longer an available asset for medical assistance eligibility purposes if the transfer is beyond the uncompensated transfer look back period.
Disadvantages of making an outright conveyance include the loss of parental control of cabin management to specifically include the ability to resolve disputes by direct command. This lack of control can be addressed however, by the creating a life estate in the quit claim deed. A life estate grants the parent(s) a right to occupy, possess or otherwise use the cabin property during their lifetime. The children receive full legal control of the cabin only after the surviving parent’s death. Be advised however, the retention of control through a life estate has value when determining medical assistance eligibility.
An outright conveyance eliminates a considerable asset that may otherwise be used for other purposes. Over time, the parent’s interests may change such that world travel is preferred over cabin use. Children may choose to purchase cabins of their own or it may become evident the family dynamic will not support joint sibling ownership. Once the cabin is conveyed however, each child and spouse if any, would have to agree to convey their interest back to the parents.
An outright conveyance doesn’t implement cabin rules and regulations or a means to transfer the cabin to successive generations. Once the cabin has been transferred, the children would have to collectively negotiate rules and regulations governing cabin use and management. Without such guidance and depending upon the family dynamic, sibling conflict may quickly arise that may result in a protracted and costly effort to partition the cabin property. Furthermore, succession to subsequent generations would require the siblings to either jointly transfer their interests to a trust or legal entity, or create individual estate plans sufficiently drafted to accomplish this goal.
Outright conveyances introduce a number of potential negative child-related factors. Each child’s interest becomes susceptible to creditor’s claims as well as bankruptcy and divorce proceedings. Children, and oftentimes their spouses, are unable/unwilling to get along with the other family members, contribute to the cabin finances or participate in ongoing cabin maintenance. Furthermore, each child is free to transfer their interest to anyone, to include non-family members.
Finally, the cabin is not an inherited asset with an outright conveyance and therefore there is no step-up in basis to the cabin’s fair market value at the time of the surviving parent’s death. If the cabin is later sold, the cost basis determining the taxes owed will be the original purchase price either paid by the parents or prior generation if the cabin property was inherited by one of the parents. The combined state and federal tax consequences may be significant if the cabin is sold by the children or later generations.
For more information and questions about outright conveyances call or email Hartley Law Office to schedule a free initial consultation.
- Transfer on Death Deed
A transfer on death deed (“TODD”) conveys the cabin property to the children upon the death of the surviving parent or “Grantor Owner”. A TODD can be used instead of a deed granting a life estate or joint tenancy ownership and like an outright conveyance, will not be subject to probate upon the death of the surviving parent. However, the interest transferred by a TODD is subject to the encumbrances made by the parents during their lifetimes. For instance, any liens and mortgages against the property are transferred to and become the responsibility of the children or “Grantee Beneficiaries”. In addition, any medical assistance received by either parent will become a lien on the cabin property. While the cost of preparing and filing a TODD is similar to a quit claim deed, a TODD must be recorded in the county where the cabin is located prior to the death of the surviving Grantor Owner.
Unlike an outright conveyance, control of the cabin remains with the Grantor Owners. A TODD may be revoked at any time by the Grantor Owner by filing a revocation document or a second TODD that is acknowledged and filed on a later date. A Grantee Beneficiary can be a trustee or any other legal entity such as a corporation, limited liability company (“LLC), partnership, etc. Successor Grantee Beneficiaries or a class of Successor Grantee Beneficiaries can be named – such as to a named child if they survive, if not, then to their descendants in equal shares. Unlike an outright conveyance, the Grantee Beneficiaries receive a step-up in the cost basis to the date of death of the surviving Grantor Owner.
Like an outright conveyance, a TODD has the potential to create more problems than it is worth. Once title has been established following the surviving Grantor Owner’s death, the Grantee Beneficiaries own the property with the interests determined by the TODD. Each Grantee Beneficiary becomes financially liable for their proportional share of the costs and expenses associated with the property. Conflict is likely to arise if one or more Grantee Beneficiaries are unable to make their respective financial contribution while nonetheless using the cabin property.
All Grantee Beneficiaries must agree on the future of the property. If the property is a family cabin, the Grantee Beneficiaries must decide whether the cabin should be sold or kept in the family. If sold, the Grantee Beneficiaries must agree on such things as necessary pre-sale maintenance or improvement of the cabin property, the sale price and if a realtor should be involved. The potential for conflict increases with a contentious family dynamic or large number of Grantee Beneficiaries. Just as with an outright conveyance, each Grantee Beneficiary is free to sell or assign their interest to a non-family member. If the decision is to keep the cabin in the family, each Grantee Beneficiary must take some action to either pass their interest to their descendants or join with the other owners to create a common ownership and management structure. Again, the potential for conflict rises when Grantee Beneficiaries pass away without adequate estate plans or the Grantee Beneficiaries have collectively failed to create a method of passing the cabin to successive generations.
To eliminate or at least reduce future conflict and to facilitate transfers to successive generations beyond the children, the cabin property can be transferred to a trust or legal entity which is typically an LLC.
For more information and questions about TODDs call or email Hartley Law Office to schedule a free initial consultation.
- Cabin Trust
Transferring the cabin to a revocable trust allows parents to retain control of the cabin during their lives and mental capacity, provide an ownership and management structure for the benefit of the children upon the death of the surviving parent and create a means to transfer cabin ownership to a limited number of successive generations. Through the trust, the parents act as initial trustees and are granted exclusive use and possession of the cabin during their lives and mental capacity. The trust also appoints a successor trustee who will take control of and manage the cabin property upon the mental incapacity of the surviving parent. The trust further instructs the successor trustee to hold the cabin in a single cabin trust upon the death of the surviving parent.
The primary purpose of the cabin trust is to own and manage the cabin for the benefit of the children or their descendants as primary beneficiaries. The cabin trust defines the form of cabin management that is often dictated by the family dynamic. Depending on how the children have historically gotten along, the successor trustee may be granted control of the cabin’s operating expenses while the primary beneficiaries are granted control of major decisions related to cabin use, improvements and determining assessments or user fees. Alternatively, the successor trustee may be granted exclusive authority to manage the cabin to include major decisions.
In drafting the cabin trust, parents are able to implement an operating agreement that includes rules and regulations regarding use of the cabin and surrounding grounds. Ideally, the rules and regulations are strictly enforced by the parents so as to create a precedent prior to the children becoming primary beneficiaries. With the ultimate goal of “keeping the peace”, the rules and regulations address such things as tree cutting, scheduling use of the property, immediate action items, parties and noise and the use of private personal property of others. Most significantly, the rules and regulations will address storage of private personal property on the cabin grounds and all things related to dogs. Each primary beneficiary is required to sign a copy of the rules and regulations which is then typically kept in the cabin for reference and enforcement if necessary.
The cabin trust addresses instances where a primary beneficiary dies or wishes to relinquish their interest. Typical provisions include a prohibition of any sale or assignment to anyone other than a lineal descendants of that primary beneficiary. If no person qualifies, then the interest will generally remain vacant until there is a qualified person. The cabin trust normally does not pay money to a primary beneficiary seeking their interest as the primary beneficiary’s inheritance is often viewed as the time spent at the cabin or the opportunity to spend time at the cabin.
A cabin trust cannot exist forever. Termination provisions are typically based upon a set number of years or at the discretion of the primary beneficiaries. Ultimately under Minnesota law, the cabin trust must terminate twenty-one (21) years after the death of an individual then alive or within ninety (90) years after its creation. Upon termination, the trustee must distribute the remaining cabin trust property or the net sale proceeds to the primary beneficiaries or to the parents’ then living descendants.
Additional cabin trust advantages include probate avoidance as the parent’s trust transfers the cabin property to the successor trustee. A spend thrift provision will provide creditor protection if the primary beneficiary has not participated in funding the trust. The cabin property receives a step-up in basis upon the trust terminating.
An obvious disadvantage of a cabin trust is that it must terminate at some time. While the term could be nearly a century, it is not perpetual succession. To accomplish that objective, the cabin property must be transferred to a legal entity; which oftentimes is a limited liability company.
For more information and questions about trusts call or email Hartley Law Office to schedule a free initial consultation.
- Cabin Limited Liability Company
The cabin property can be transferred to a legal entity such as a limited liability company. Unlike a cabin trust, a limited liability company is perpetual thereby allowing for unlimited succession to subsequent generations. A limited liability company is formed by filing articles of organization with the Minnesota Secretary of State and requires corporate formalities such as annual meetings and record keeping. Limited liability company ownership is by membership which typically begins with the parents alone. Membership interests can be transferred to the children while the parents are living or upon the surviving parent’s death.
An operating agreement is adopted to govern the internal operations of the cabin to include financial and functional decisions. The operating agreement also allows parents to establish their aspirations regarding the cabin as a fundamental philosophy for consideration by successive generations. The operating agreement establishes how the cabin property will be managed which is typically by the members but can also be through one or more managers or a board of governors elected by a majority vote of the members. Procedures and requirements of member meetings are set forth in the operating agreement as well as provisions related to providing additional capital contributions and payment of annual membership dues.
The operating agreement also addresses the transfer of membership interests. Transfers are generally prohibited unless made with prior unanimous written consent of the members or to a trust where the member is the grantor of the trust. When transferred to a trust, typical language restricts the primary beneficiaries of the trust to another member of the cabin limited liability company, a lineal descendants of the grantor who created the trust or a lineal descendant of a member other than the member that created the trust. Ultimately, the goal is to restrict subsequent membership to family members descending from the parents. For example, the operating agreement may include language that admits the oldest living descendant of a deceased member who is of sufficient age and willing to join with both economic rights and full management authority.
Most importantly, the operating agreement allows for adoption of rules and regulations regarding use of the cabin and surrounding grounds. Ideally, the rules and regulations are implemented and strictly enforced by the parents so as to create well established policies and procedures prior to the children becoming members. As discussed in the Cabin Trust Section above, the ultimate goal of the rules and regulations is to resolve conflict by establishing clear guidelines for such things as tree cutting, scheduling use of the property, immediate action items, parties and noise and use of private personal property of others. The rules and regulations should address storage of private personal property on the cabin grounds and all things related to dogs. A copy of the rules and regulations are typically kept in the cabin and should be reviewed by the members at the annual meeting for compliance and amendment.
For more information and questions about cabin LLCs call or email Hartley Law Office to schedule a free initial consultation.
LAST WILL & TESTAMENT
A common refrain is that everyone needs a will. Ultimately, no one actually needs or is obligated to have a will. The benefits of a will are generally dependent upon a person’s assets and desire for those assets to be distributed in a specific manner.
To begin, a will is a document prepared by a person or “testator” that details what is to happen to probate assets owned by the testator upon death. To be a valid will in Minnesota, the testator must be at least eighteen years old and mentally competent. The will must be in writing signed by the testator or in the testator’s name by some other individual in the testator’s presence and by the testator’s direction. The will can also be signed by the testator’s conservator pursuant to a court order. Furthermore, the will must be witnessed by at least two individuals, each of whom signed the will within a reasonable time after witnessing either the signing of the will or the testator's acknowledgment of that signature or acknowledgment of the will. Under certain circumstances, a document or writing that was not executed in compliance with Minnesota law may nonetheless be considered valid if there is clear and convincing evidence showing the decedent’s intention. Importantly, a document written and signed by a person purporting to be a will is not considered a valid in Minnesota.
The function of a will is to distribute the decedent’s probate assets. A probate asset is an asset titled in the decedent’s name alone that requires assistance from a probate court having jurisdiction over the decedent’s estate. As an example, the decedent’s home or other real estate in the decedent’s name alone will require a probate court to transfer title. Through the probate process, a personal representative is appointed to manage the administration of the decedent’s estate. In comparison to probate assets, non-probate assets do not require the authority of a court to transfer ownership. Non-probate assets may include: jointly owned real estate and financial accounts or solely owned assets that include named beneficiaries.
A will typically includes provisions directing the distribution of specific gifts, personal effects and the residue of the estate. Specific gifts to named beneficiaries can be stated directly in the will or included in a specific gift list as prescribed by law. For all remaining personal effects, the will can establish the manner of distribution to named beneficiaries, to include express procedures for resolving beneficiary disputes. Finally, a will includes provisions that direct distribution of the residue of the estate which is the surplus of the testator’s estate remaining after all the debts, taxes and costs of administration have been paid. Potential distribution approaches are wide-ranging but often include equal distributions or percentage distributions to named beneficiaries.
For estates containing both probate and non-probate assets, particular must care must be taken to ensure the will and beneficiary designation reflect a common intent. Where there are differing intentions, a distribution to a named beneficiary will prevail over the language of the will. Similarly, in Minnesota, joint financial accounts belong to the surviving party unless there is clear and convincing evidence of a different intention, or there is a different disposition made by a valid will; either of which must specifically refer to the joint account in question. Consider a parent’s checking account that names a son or daughter joint owner so as to assist in paying bills. Unless the will identifies the financial account and expressly states a different intention, the sums remaining on deposit belong to that son or daughter as against the parent’s estate.
A will can disinherit children but not a spouse. A will can disinherit children by distributing the entire probate estate to beneficiaries other than the disinherited child. While effective, the disinherited child may raise an objection surrounding the validity of the will based upon fraud, undue influence, duress or unintentional mistake. Efforts to avoid such objections include ensuring the will is valid in form and execution and free from any perceived external influence. It may be also be advisable to have a physician provide written confirmation of the testator’s present mental competency.
A will can also include a “no contest” clause that disinherits any beneficiary or interested person that contests the will. In Minnesota however, such clauses are deemed unenforceable if there is probable cause, or in other words, good reason exists for instituting such proceedings. If such probable cause exists, the no contest clause might not be enforced by the court. The most effective way to disinherit a child may be to leave the child something while incorporating a no contest clause. Depending on the value of the inheritance, the child may elect not to challenge the will for fear of losing the asset they were to receive.
In addition to directing the distribution of the estate, a will can be used to nominate guardians for minor children or include testamentary trust provisions for the benefit of children or grandchildren.
Call or email Hartley Law Office for more information or to schedule a free initial Zoom or in-person consultation.
POWER OF ATTORNEY
A power of attorney is a signed document in which a person authorizes another to act on their behalf in financial and property matters during their lifetime. The person granting the authority is the principal, and the one receiving the authority is the attorney-in-fact. Any action taken by the attorney-in-fact pursuant to the powers granted in the power of attorney binds the principal and the principal’s heirs, assigns and personal representative as though the action was taken personally by the principal. A power of attorney can be “durable”, meaning the powers granted will remain effective if the principal becomes incapacitated or incompetent.
In Minnesota, there are general and limited powers of attorney and a statutory power of attorney. A general power of attorney may grant a broad range of authority to include the management of all forms of property, investments, retirement accounts and insurance and tax-related matters. A general power of attorney may also be beneficial when the principal is not a Minnesota resident or is a Minnesota resident that owns property in another state. A limited power of attorney grants a narrow special purpose power related to the transfer of assets to a revocable trust and the administration of the revocable trust. Both general and limited powers of attorney can have a “springing power”, that is, a power created only upon the principal’s incompetency.
A statutory power of attorney provides broad and unsupervised powers to the attorney-in-fact. Rather than providing detailed descriptions of each power granted as in a general power of attorney, the statutory form provides a brief description of a number of transactional powers. Individual powers include: real property, banking and beneficiary transactions. The individual powers are described in detail within the statute. The principal can pick and choose among the various powers or select all of the powers listed. In selecting all of the powers listed, the principal confers a general authority with respect to all other matters not covered by the stated individual transactions. The attorney-in-fact is authorized to act as an alter ego of the principal with respect to any and all possible matters affecting the principal. Unlike general and limited powers of attorney, a statutory power of attorney goes into effect immediately and only terminates upon the principal’s death, expiration of a date specified in the power of attorney or upon the commencement of a proceeding for dissolution, separation, or annulment of the principal’s marriage when a spouse is the attorney-in-fact.
The statutory power of attorney allows for multiple attorneys-in-fact and successor attorneys-in-fact. In naming multiple attorneys-in-fact, the principal can designate whether the attorneys-in-fact may act independently or must jointly exercise the powers granted. The statutory form allows for an expiration of the powers granted, but in an estate planning context, the powers should remain until the principal’s death. The principal can allow or prohibit the attorney-in-fact from making gifts to themselves or anyone the attorney-in-fact is legally obligated to support. The principal can also dictate the frequency and manner in which the attorney-in-fact is to account to the principal. The principal can require an accounting from the attorney-in-fact either upon the principal’s request or at specific intervals to the principal or named third party.
The statutory form requires the principal to read the Important Notice to the Principal that describes the purpose and powers granted by the power of attorney and the duties of the attorney-in-fact. Similarly, each attorney-in-fact must read and understand the Important Notice to the Attorney(s)-in-Fact that describes the duties and potential personal liability of an attorney-in-fact. To ensure compliance, the principal must initial and each attorney-in-fact sign the form acknowledging they have read and understand the corresponding notices.
The statutory form is the most widely used power of attorney in Minnesota. Third parties such as financial institutions and title companies that must rely upon a power of attorney are more likely to accept a statutory power of attorney over an individually drafted power of attorney. The statutory power of attorney provides a standard form that is readily identifiable and interpreted by third parties; thereby avoiding the need to analyze the extent of each power granted in a general power of attorney. Furthermore, a third party that refuses to accept a valid statutory power of attorney is liable to the principal for damages resulting from losses incurred by the principal as a result of that refusal.
A power of attorney is a critical component of any estate plan. However, every principal must have a thorough understanding of the powers being granted; particularly when the powers go into effect immediately and not upon the principal’s incompetency.
Call or email Hartley Law Office for more information or to schedule a free initial Zoom or in-person consultation.
MINNESOTA HEALTH CARE DIRECTIVE
In Minnesota, a mentally competent adult referred to as the “principal”, can execute a health care directive to provide instructions to direct health care providers, family members and a health care agent regarding health care decisions. A “health care decision” means the consent, refusal of consent, or withdrawal of consent to health care. The term “health care” is broadly defined as any care, treatment, service, or procedure to maintain, diagnose or otherwise affect a person’s physical or mental condition. A health care directive is effective for a health care decision when the principal, in the determination of the attending physician or other authorized health care practitioner of the principal, lacks decision-making capacity to make the health care decision.
A health care directive designates a health care agent and one or more alternate health care agents to act if the named health care agent is not reasonably available to serve. While a health care agent’s authority typically arises when the principal lacks decision-making capacity, the health care directive may grant the health care agent authority to act even though the principal retains decision-making capacity. A health care agent acting pursuant to a health care directive has the same right as the principal to receive, review, and obtain copies of medical records of the principal, and to consent to the disclosure of medical records of the principal, unless the principal has otherwise specified in the health care directive. In exercising authority under a health care directive, a health care agent has a duty to act in good faith. A health care agent or any alternate health care agent has a personal obligation to the principal to make health care decisions authorized by the health care power of attorney, but this obligation does not constitute a legal duty to act.
A health care directive will frequently define “terminal condition” and include instructions regarding the administration of nutrition, hydration and medical treatment that will not substantially improve the principal’s condition but only postpone the moment of death. A typical health care directive also includes language regarding the use of pain relieving drugs to keep the principal comfortable and free of pain even though the use of such drugs may hasten the principal’s death. A Minnesota health care directive cannot be used to condone, authorize or approve mercy killing or euthanasia.
In addition to health care decisions, a health care directive may include among other things: provisions for donating organs, tissue or other body parts; decisions regarding cremation and general funeral directions. Most importantly, a health care directive can grant a health care agent the authority to choose where the principal lives when health care is needed and what personal security measures are necessary to keep the principal safe. This authority becomes particularly important when the principal’s diminished mental capacity is placing the principal in increasing danger. While the principal may not know how they ended up a mile from home or explain how the gas burner on the stove was left on, they do know and are able to strongly voice an intention to remain in their home. With this authority, the health care agent is able to decide when it is necessary for the principal to move from the home; regardless of the principal’s pushback. Without this provision, it may be necessary to petition the court for the appointment of a guardian at a not insignificant cost and time delay.
A mentally competent principal can revoke a health care directive by doing the following: destroying the health care directive or instructing another in the presence of the principal to destroy the health care directive with the intent to revoke the health care directive in whole or in part; executing a written and dated document expressing the principal’s intention to revoke the health care directive in whole or in part; verbally expressing the principal’s intent to revoke the health care directive in whole or in part in the presence of two witnesses; and executing a subsequent health care directive.
Call or email Hartley Law Office for more information or to schedule a free initial Zoom or in-person consultation.
DEATH DEED A transfer on death deed (“TODD”) is a relatively new deed that conveys an interest in real property to a grantee beneficiary upon the death of one or more grantor owners. A TODD is essentially a beneficiary designation for real property. Like beneficiary designations on financial accounts or insurance policies, a TODD transfers real property without the assistance of a probate court. A grantee beneficiary can be a person or entity and can include a successor grantee beneficiary or class of successor beneficiaries. A TODD designates whether multiple grantee beneficiaries take title as joint tenants, tenants in common or in any other form of ownership or tenancy that is valid under the laws of this state. If as joint tenants, the interest of a predeceased grantee beneficiary will be transferred to the remaining grantee beneficiaries. If as tenants in common, the interest passes to the heirs of a predeceased grantee beneficiary. Importantly, the interest transferred to a grantee beneficiary is subject to all conveyances, encumbrances and contracts made by the grantor owners to which the property was subject; to specifically include medical assistance payments. A TODD does not prohibit a grantor owner from subsequently selling the subject property. Furthermore, a TODD can be revoked or modified by a grantor owner by filing a revocation document or a second TODD which is signed on a later date. A TODD must be filed in the county in which the land is located before the death of the grantor owner(s) to be effective. Upon the grantor owner’s death, title is transferred to the grantee beneficiary by filing an affidavit of identity and survivorship for transfer on death deed, a certified death certificate and a clearance certificate for medical assistance. The clearance certificate shows the existence of a public assistance claim and is obtained by submitting an application to the economic assistance department of the county where the property is located. There are a number of factors to consider when using a TODD. The two most important are likely the number of grantee beneficiaries and whether the grantee beneficiaries get along. Once title is transferred, the grantee beneficiaries must agree upon all matters associated with the property. The greater number of beneficiaries, the greater likelihood of differing opinions as to the future of the property. Initially, should the property be retained such as a family cabin or sold. If sold, for how much? In selling, should the walls be painted and the carpets cleaned, or is an expensive new kitchen necessary? In the meantime, how will utilities, insurance and a potential mortgage be paid? What if certain grantee beneficiaries are unable or unwilling to contribute money? Now consider these same questions where some or all of the grantee beneficiaries fight like cats and dogs. What seemed like a simple, cost-effective way to pass the family home to the kids, could turn into a horrible mess that may require a court action to resolve. A two-step process is necessary to facilitate a transfer to the grantee beneficiary upon the grantor owner’s death. First, an application for transfer on death deed for a medical assistance clearance certificate must be submitted to the county where the real property is located. Information and oftentimes, downloadable forms are available on each county’s human services department web page. Upon receiving the application, the county reviews medical assistance recipient files for claims associated with the decedent and the decedent’s predeceased spouse, if any. If the clearance certificate shows the continuance of a medical assistance claim, the real property remains subject to the claim or lien. Once the clearance certificate is received, an affidavit of identity and survivorship for transfer on death deeds, a certified death certificate and the clearance certificate are filed with the county recorder to transfer title to the property. Upon filing, the grantee beneficiary becomes owner of the property subject to all effective conveyances, assignments, contracts, mortgages, deeds of trust, liens, security pledges, judgments, tax liens, and any other encumbrances against the property the date of death of the decedent. Upon consideration of the factors outlined above, a TODD can be a cost-effective component to an estate plan that utilizes beneficiary designations or multi-party accounts to avoid probate. Call or email Hartley Law Office for more information or to schedule a free initial Zoom or in-person consultation.
It’s not uncommon for a parent to name a child joint owner on financial accounts for convenience purposes. The idea is for the child to write checks or otherwise assist in managing the parent’s finances as necessary. Oftentimes, a parent intends the remaining funds in a checking/savings account for instance, be used by the joint owner child to pay the funeral costs and other post death expenses. While this ownership arrangement can be successfully used by families, the legal relations created by such joint ownership and potential pitfalls should be fully understood. The following will address Minnesota law relating to multiparty accounts and various issues that may arise which should be considered before creating such joint accounts.
The Minnesota Multiparty Accounts Act (“MPAA”) establishes the law regarding joint accounts. Under the MPAA, an account includes a checking/savings account, certificate of deposit, share account and other like arrangements. A joint account is an account so designated and any account payable on request to one or more parties or the survivor of them. Under the MPAA, a joint account belongs during the lifetime of all parties, to the parties in proportion to the net contribution made by each to the sums on deposit. Simply, if a parent contributes all of the funds to a joint account, the joint account belongs to the parent while they are alive. Therefore, funds withdrawn from the joint account must be either by the parent or for the benefit of the parent unless there is clear and convincing evidence of a different intent. Minnesota courts have determined evidence sufficient to show that intent must specifically refer to the joint account. Ultimately, a financial institution is not required to inquire as to the source of the funds being deposited or the proposed application of funds being withdrawn. Obvious problems arise when the noncontributing account owner uses joint account funds for unauthorized purposes.
When a joint account owner dies however, the funds remaining in the account belong to the surviving owners and not the decedent’s estate; regardless of whether any of the funds were contributed by the surviving owners. As during the parent’s lifetime, a contrary intent must be shown by clear and convincing evidence or by a valid will that specifically refers to the joint account. Without specific reference to the account, the following evidence has been found insufficient to show intent: the parent’s will leaves the entire estate to children in equal shares; and the parent had no reason to favor the joint owner-child over the other children.
Ideally, the parent would discuss their intentions regarding a specifically identified joint account when all children are present. Or better yet, intent can be shown through a valid will using such language as:
I have named my son John T. Smith joint account owner of my ABC Bank checking account number XXX1234 for convenience purposes only. It is my express intention that upon my death, the remaining funds in this account shall be used to pay my funeral expenses; with any remaining funds distributed in accordance with my will.
Understanding the effect of naming a joint account owner is critical, especially where there is a blended family and one parent and former account owner has passed away. This is particularly important when the deceased parent contributed funds to the account and there was an expectation that certain funds would be distributed to that parent’s biological children.
A power of attorney is an alternative means to assist an aging parent while ensuring proper use and distribution of financial accounts. When a power of attorney is in place, financial accounts can remain titled in the parent’s name alone. Under a power of attorney, the parent or “principal” can designate one or more children or “attorney(s)-in-fact” to manage financial accounts. As a safeguard, the power of attorney can require the attorney(s)-in-fact to make scheduled accountings to the principal or a person designated by the principal.
Living Wills: Life is unpredictable, and in situations where you are unable to make decisions for yourself due to a coma or vegetative state, a living will becomes essential. This legal document articulates your desires in such circumstances. To ensure its validity and authenticity, it is important to seek the assistance of an attorney when drafting a living will. This ensures that your wishes are accurately represented and followed.
Trusts: Trusts serve a similar purpose to wills, allowing for the transfer of assets and property to beneficiaries upon your death. However, trusts differ from wills in several ways. They are more likely to avoid probate, which can streamline the distribution process. Trusts can also provide protection for government benefits, such as disability benefits. Additionally, trusts may help in minimizing estate taxes or death taxes.
At Hartley Law Office, our experienced team can guide you through the complexities of estate planning, helping you make informed decisions and establishing a secure foundation for your future. We prioritize your peace of mind by offering tailored solutions that align with your unique circumstances and goals. With our expertise in estate planning, we strive to provide you and your loved ones with the utmost protection and clarity when it matters most.
At Hartley Law Office, we emphasize the importance of estate planning and encourage early action. Here are several key reasons why creating an estate plan is a wise decision:
Peace of Mind: One of the primary reasons for estate planning is to provide peace of mind to yourself and your loved ones, knowing that your affairs are well-organized and taken care of in advance.
Asset Distribution: By specifying in your will who should receive which assets after your passing, you can prevent conflicts and hurt feelings among family members, ensuring a smooth transfer of assets.
Avoiding Probate Headaches: Estate planning helps to avoid the complexities of probate court. Without a will or trust, the court system oversees the distribution of your assets, resulting in time-consuming and potentially costly probate proceedings.
Appointing a Guardian for Minor Children: If you have minor children, it is essential to designate a guardian who will take care of them in the event of your death. Estate planning allows you to make this critical decision.
Naming an Executor: Selecting an executor is another vital decision. The executor is responsible for ensuring that the terms of your estate plan are carried out, making it crucial to choose a trustworthy and capable individual.
Establishing a Power of Attorney: It is essential to establish a power of attorney for both financial and healthcare decisions. These legal documents designate someone you trust to make decisions on your behalf if you become incapacitated.
Restricting Minor Children’s Access to Inheritance: Estate planning allows you to set restrictions on when your children can access their inheritance, protecting their financial well-being until they reach a responsible age, typically around 25-30 years old.
Shielding Inheritance from Tax, Divorce, and Creditors: Through the use of trusts, you can protect your assets from potential tax concerns, divorce proceedings, and creditors, ensuring that your hard-earned wealth remains safeguarded.
The Consequences of Not Having an Estate Plan: Failure to establish an estate plan can have significant consequences. Without appointed representatives, the state will intervene, leading to intestacy rules and probate proceedings that may not align with your wishes. In the event of incapacity, a judge will decide on matters concerning your care and assets, resulting in costly guardianship and conservatorship processes. By having a comprehensive estate plan in place, including a living trust and power of attorney, you can ensure that your desires are known, executed efficiently, and alleviate the burden on your family during difficult times.
At Hartley Law Office, our experienced team is dedicated to guiding you through the estate planning process, tailoring solutions to meet your specific needs. We prioritize your peace of mind and the protection of your assets, working closely with you to create a comprehensive plan that safeguards your legacy and ensures your wishes are honored.