August in Minnesota is a great time to discuss the importance of estate planning. It also happens to be “National Make a Will Month”. According to a recent survey, 64% of Americans do not have a will. Some of the top reasons people give for not doing a will include:
- I just have not gotten around to it;
- I will not need it for a long time;
- I do not have enough money to need a will; and
- I do not want to think about my own mortality.
Certainly death is not pleasant to think about, however the reality is we are all going to reach the end someday. Although we hope we have plenty of time to check off all the things on our bucket list, we do not know when that day will come. Failure to plan ahead for the inevitable can have unwanted and unintended consequences for those you leave behind.
The State Knows All
You may not realize it, but if you do not have a will, the state has made one for you by statute. The statutory will provisions called “intestate succession” provide who will administer your estate, who (including the government) will receive your assets at death, and who will care for your dependents. The statutes do not take into account your wishes or which of your heirs needs the assets.
Not having a will in place can also prolong the court process of probate. Probate is the court proceeding that your survivors must go through in order to transfer your assets. Probate lasts a minimum of four months and is costly. Realistically, even a simple estate takes six months to a year to complete. An estate planning attorney can assist you in preparing a will and other documents to shorten this process and avoid probate.
Beyond the Basics
A will is the most basic estate planning structure. For some, especially in Minnesota where our state estate tax exemption is much lower than the federal estate tax exemption, a revocable trust or other estate planning structure is more effective to minimize estate taxes.
Every person regardless of their age, assets, marital status or family situation should have a proper estate plan in place:
1) Families with Dependent Children
Often the biggest concern parents have about death is who will care for their children if they die. Naming a guardian in your will allows you to make that decision. A will also allows you to make decisions regarding when and how your children will receive assets. The statutory default is that your children will receive assets at the age of eighteen (18). Most parents are uncomfortable with the idea that their child will receive a lump sum distribution at a young age. A will can require a trust to be created, designating a trustee to hold the assets until a more appropriate age, and provide for multiple distributions at the ages you feel are appropriate.
2) Same Sex Families
Now, more than ever, it is important for same sex couples to talk with an estate planning attorney. The recent Supreme Court decision opens the door to estate planning techniques previously unavailable for same sex families. These families can now take advantage of the federal estate tax benefits allowed to married couples such as the unlimited marital deduction which allows tax free transfers between spouses upon death, and portability which allows spouses to transfer any unused estate tax exemption their deceased spouse does not utilize (Note: Portability is not available for the Minnesota estate tax, but we can assist you with navigating this issue). Even if same sex couples have a will, now is a great time to update or revise the plan given these new opportunities.
3) Single Persons
Without a will, intestate succession provides that the parents of an unmarried decedent will receive the assets at death. For many individuals, this statutory succession does not fit with their wishes. If there are significant people in your life to whom you wish to leave assets or charitable bequests that you wish to make, the only way to ensure your wishes are met is with a properly executed estate plan.
4) Blended Families
The estate planning goal in many blended families is to ensure that both the spouse and the children are properly provided for, and to avoid conflict in the future. A will or trust divides the assets appropriately, ensures that your spouse will have adequate assets and safeguards assets for your descendants. It also allows you to appoint an independent, neutral party to act as personal representative or trustee to administer the assets without a conflict of interest.
5) Special Needs
Many individuals with disabilities or special needs receive government benefits such as social security or medical assistance. If these individuals receive an inheritance upon your death, they will no longer qualify for government benefits. A supplemental needs trust can be created with a trustee appointed to accept and distribute the assets pursuant the terms of the trust. If properly structured, the trust is not considered an asset of the disabled beneficiary and they can continue to qualify for government programs.
Now is also a great time to make sure you have incapacity documents in place. A will is only effective at death. Every person should also have a financial Power of Attorney, as well as a Health Care Directive (sometimes referred to as a Living Will). A Power of Attorney appoints another person to make financial decisions on your behalf while you are still living. This document becomes extremely important should you become ill or otherwise incapacitated and you are unable to attend to your financial affairs. A Health Care Directive allows you to state your wishes with regard to life-sustaining measures, and appoint an individual to make health care related decisions for you if you are unable to communicate or make decisions for yourself. Having these documents in place makes certain your wishes will be followed without the necessity of a guardianship/conservatorship court proceeding.
If you would like more detailed information regarding these topics, or any area of law please contact our Estate Planning department. We would be happy to provide a complementary review your assets and family information and provide you with estate planning recommendations that will ensure that your wishes are followed and maximize the inheritance your beneficiaries will receive.