A Summary Proceeding is a probate proceeding used for administering small estates. Basically, they are allowed when the value of the estate is less than $150,000 after payment of all expenses and deducting the homestead, exempt property, and family allowances. Additionally, summary proceedings are allowed when the decedent actually had no probate assets. Also, they are allowed when probate assets were destroyed, lost, abandoned, or rendered valueless, and the loss is not recoverable.
Read MoreMost people would say there are essentially two categories of probate – formal and informal. I think that is a bit overly simplistic. In reality there are several, for example, there is transfer by affidavit, informal probate, formal supervised probate, and formal unsupervised probate. In the next few blog posts we're going to look at each of them in detail. Today, we're going to tackle transfer by affidavit.
Read MoreThe holidays are when families come together. Nobody really wants to think about dying, let alone what will happen to their stuff after they have died. But doing so can have many benefits. It can bring you peace of mind. It can make things easier for those you will leave behind. And it can bring family harmony, or at least avoid family conflict.
Read MoreAB Trusts are a tool for sheltering assets from taxes. There is both a Federal and Minnesota estate tax. The Federal estate tax exemption is $11.58 million per person in 2020. This means that for large estates, any amount over $11.58 million is taxed at the Federal rate of 40 percent. For Minnesota, the estate tax exemption is $3 million, with a graduated tax for amounts greater. The AB Trust is an instrument for married couples to get the most bang for their buck out of the estate tax exemption.
Read MoreA Medicaid Asset Protection Trust, or MAPT, is a trust vehicle that allows you to protect your assets from Medicaid when you go into a nursing home. To explain, 52 percent of people turning age 65 will need some kind of long term care in their lifetimes. Long term care is expensive, costing an estimated $48,000 and $90,000 a year in Minnesota. While some people with means can afford this, many others will rely on Medicaid to cover the costs.
Read MoreA Qualified Domestic Trust (QDOT) is a trust that allows a surviving non-U.S. citizen taxpayer to take the marital deduction on estate taxes. Normally, estates worth $11.58 million or less enjoy a lifetime estate tax exemption. Below that threshold, estate taxes do not apply. For married couples, the exemption is doubled to $23.16 million, and taxes only apply when the second spouse dies. This is the Unlimited Marital Deduction. It only applies, however, when the surviving spouse is a U.S. citizen.
Read MoreOnce you have decided that your estate plan should include a trust, you need to decide who will be the trustee after you die. This is a complicated decision, involving family dynamics, personal responsibility, and a whole lot of trust on your part.
Read MoreSo exactly what is a “Law Firm in a Box”?
In short, it's a predatory business model. This post won't make me popular, but I think it's necessary. Before I explain further, it's time for a little background…
Read MoreSeptember 18, 2020 will be the 50th anniversary of Jimi Hendrix's death. In spite of a professional career lasting only 4 years, Jimi Hendrix is considered one of the greatest and most influential guitarists of all time.
Read MoreOn July 30, 2020, Governor Walz announced the going back to school plan for Minnesota. Minnesota has elected to adopt an empirically based stratified plan. This means that districts, using empirical scientific data, will choose whether to open completely, stay totally remote, or use a hybrid remote/open system. Many Minnesota school districts are adopting a hybrid plan, with students on site two or three days out of the week and remote for the rest of the time.
Read MoreA GRAT is a financial instrument for leaving a substantial gift to a beneficiary without paying any gift tax. “GRAT” stands for Grantor Retained Annuity Trust. It essential gambles against the IRS predictions of the economy, with the winnings going to your beneficiaries.
Read MoreA QTIP trust allows one to provide for a spouse after death and guarantee an inheritance for later beneficiaries. “QTIP” stands for Qualified Terminable Interest Property. It is a type of irrevocable trust often used in second marriages to manage one's estate. They are often used as part of an AB trust structure. QTIP trusts are authorized under Federal law in 26 USC 2056(b)(7)(A)-(B). They were authorized in Minnesota in 2014 in Minn. Stat. § 291.03, Subd. 1b.
Read MoreThe Generation Skipping Tax (“GST”) is a tax made on gifts to grandchildren, great grandchildren, or beyond. This tax came about to address the problem of dynasty trusts. Essentially, very wealthy families would set up a life estate for their children, which turned into a life estate for their grandchildren, which turned into a life estate for their great-grandchildren, and so on and so forth. During each life estate, the generation would have access to income from the trust. Because a life estate is not subject to a federal estate tax, the plans could shield massive amounts of money from federal taxation.
Read MoreAn Irrevocable Life Insurance Trust, or ILIT, is a vehicle to gain various financial advantages. Primarily, the ILIT is used as a tax shelter. This was much more common in the past when the estate tax exemption was much lower. For example, twenty years ago both the Federal and Minnesota estate tax exemption was a mere $675,000. If a person purchased life insurance, then its payout would likely push the estate above the exemption amount. Today the Federal exemption is $11.58 million. It is much less likely that life insurance will push an estate over the limit. However, there are other reasons to use an ILIT.
Read MoreChallenging a will is the process of getting a Court to decide that a will cannot be upheld. One way to do this is to prove a lack of “testamentary capacity” when the decedent wrote their will. In Minnesota, “testamentary capacity” exists if “the testator can form a rational judgment concerning her property and the claims of others on her property.” Such a will contest tends to be quite an uphill battle, and more will challenges fail than succeed on these grounds.
Read MoreSLAT stands for Spousal Lifetime Asset Trust. It is an irrevocable trust created by one spouse to benefit the other as well as other beneficiaries. To form a SLAT, one spouse (the grantor) uses their assets to form a trust. The beneficiary of the trust is generally the other spouse during their lifetime. This is similar to a QTIP trust, except that it is formed while both spouses are alive. The grantor also names other beneficiaries for after the beneficiary spouse dies.
Read MoreThe Reciprocal Trust Doctrine is an IRS rule that prevents tax payers from gaming the system. Read today’s post to learn more.
Read MoreYesterday the Senate passed SF3357 that, among other things, updated the Minnesota guardianship and conservatorship laws. The bill was sponsored by the Minnesota State Bar Association's Probate & Trust Law Section. (UPDATE: The bill was signed into law on May 16, 2020.)
Read MoreMany people, when they think of their legacy, have charitable intent. They want some or all of their estate to pass to a charitable organization when they die. The government favors this intent, and estate planning has created several ways to fulfill it using charitable trusts.
Read MoreRecent studies show that 60 to 70 percent of people have not done any estate planning. This includes older people, younger people, people with and without children, and people of all races and backgrounds. In fact, pre-Covid, the number of people with estate plans has dropped from 2019 to 2020.
So why do people fail to plan? A lot of it has to do with some common estate planning myths.
Read More