Vote, Dammit.

Tuesday is the general election. This is by far the most important election we have had in a very long time.

If you haven't already sent in your absentee ballot, it's now too late to mail it. You must drop it off in-person. Your ballot must be received by November 3. 

Otherwise, you must vote in-person at your polling place Tuesday. Not sure where to go? The Minnesota Secretary of State has a Polling Place Finder for your polling location. Get out, and do it.

 

Still need inspiration? 

Try this.

And this.

Deeding The Home To Your Kids While You're Still Alive? Could Be Trouble Ahead!

Perhaps you're thinking ahead and you want your kids to have the house some day. You might think that deeding your home to them now (inter vivos gift) will provide some certainty for their future and give them some skin in the game. Maybe you want to do this to avoid probate.

Whether you add the children as additional joint owners with yourself, or you convey it entirely to them by quitclaim deed, there is the potential for conflict, as well as legal and tax issues. There are several reasons why deeding to your children now may not be a good idea.

Multiple joint owners can mean multiple conflicts. One of them wants to sell their interest? Under joint tenancy, the other joint owners (and their spouses) will need to agree to it and sign the deed. But if the property is owned as tenants-in-common, any one owner can independently sell, mortgage, or give away their individual interest in the property. You could end up having a total stranger co-owning your property.

Higher taxes. When children inherit property, they inherit it at at the market value on the date of death--stepped-up basis. This minimizes the capital gains tax when the children sell the property shortly afterwards. But if the property had been gifted to the children while you're alive, for tax purposes the property is viewed as being owned by the children at that time. Thus, the taxes are based on the price you paid for it, which was probably much less than it's worth now. The children are liable for taxes based on the much greater difference in value, which could be a major financial burden for them.

Gift taxes come into play, as well. The current annual gift tax exclusion is $15,000 per child per parent. If you deed your home to your children--in part or in whole--you may be subject to gift tax liability for amounts above that exclusion.

Divorce--the fly in the ointment. If one of the joint owners is going through a divorce proceeding, the property will be considered a marital asset. Even if the divorce decree is from another state, the out-of-state ex-spouse will still need to sign off on the deed transferring the ex-spouse's interest in the property before the title is clear and the property can be transferred to a buyer.

Insurance issues. Property insurance will now include all joint owners on the policy. If someone sues one of the joint owners, the plaintiff would be able to pursue the assets of all of those joint owners if insurance doesn't cover all of the liability.

Judgments. If any of the joint owners has a judgment against them, such as for a personal injury lawsuit or a business deal gone south, the property could be targeted for satisfying the judgment.

Mortgage and expenses. If there is a mortgage on the property, will there be an arrangement in place for the joint owners to split those payments? What if one joint owner loses their job or just stops paying their share of costs? Don't forget apportioning property taxes, utilities, maintenance, etc. Will every joint owner pay their fair share?

Creditors. If one of the joint owners files for bankruptcy, the property could be considered an asset available to creditors and fair game for seizure or sale.

Medical Assistance claims. If you or your spouse need state Medical Assistance, there is a lien placed on the home. The surviving spouse gets to live in the home after you die, but after your spouse passes, the state pursues repayment through sales proceeds from the house, which complicates things for the remaining owners--your kids.

As you can see, deeding property to your descendants while you are still alive is fraught with hazards. It might be better to consider a transfer on death deed (TODD). With a TODD you still have full ownership and use of the property while you are alive. The title only passes to the beneficiaries after both you and your spouse has died. The TODD still allows you to avoid probate. However, it doesn't remove Medical Assistance claims, but the house can be conveyed to your beneficiaries and sold to pay off the MA claims. Any remainder from the sale would go to the beneficiaries.

* * *

Giving valuable property to your loved ones can create some issues for them when they inherit. Talking to a qualified attorney or tax advisor is a good idea when you are planning how best to distribute your assets.

 

Personal Representative's Fees.

You've been asked to be the personal representative (aka "executor") of someone's estate. Congratulations, as that means the testator has entrusted you to perform an important job. While you might feel like it's your duty to volunteer your services for free and that it's a labor of love, you may not be fully aware of what's in store for you when it's time to serve. Being a personal representative is time consuming, it can be a lot of work, and it's often a thankless job.

The personal representative's responsibilities include filing the probate application or petition, notifying creditors and beneficiaries, collecting and securing the estate assets, filing an inventory with the court, filing the decedent's final tax returns, and distributing the remaining estate assets to the beneficiaries. On top of that you may find yourself refereeing family squabbles.

Therefore, you might want to consider asking for compensation for your services, and discussing this with the testator. You may be pulled away from your job and your family for a while to perform your duties, perhaps even requiring travel. Your time is valuable. It is perfectly appropriate to ask for fiduciary compensation and you are entitled to it under Minnesota law, even if compensation is not specifically addressed in the Will.

However, compensation for a personal representative must be reasonable and the statute does not give specific guidance on what rate to bill the estate. To determine what is reasonable, the court may consider the following factors: The time and labor required, the complexity and novelty of problems involved, and the extent of the responsibilities assumed and the results obtained.

For example, charging $250 an hour to haul furniture would likely not be reasonable, when someone might ordinarily charge $25 an hour for that sort of task. On the other hand, expecting a personal representative to only receive $25 an hour to professionally prepare the decedent's tax return would also not be reasonable. You may find it best to bill the estate at different rates for different tasks. If you are responsible for both hauling the furniture and preparing the taxes, you should bill at reasonable hourly rates appropriate for each job.

Typically, $25 to $50 per hour is an equitable range for most routine services, and higher rates might be appropriate in the case of professional services. It depends on the tasks you perform, in light of the statutory "reasonableness" criteria.

When it comes time for you to serve, keep detailed notes of the services you provide. Write down the tasks performed, the time you spent on each, and the hourly rate. Don't forget to list any out-of-pocket expenses you may have incurred, such as postage, filing fees, etc. The court will require you to account for all of your billing and expenditures. The decedent's heirs may also be keeping a close eye on your fees so be prepared to explain your billing to them.

Of course, your compensation as a personal representative is considered taxable income to you.

Is The Personal Representative Required To Serve?

The short answer, "No."

Being a voluntary fiduciary, the person nominated has the right to refuse to serve, and if appointed to serve, can resign from service. That is their choice and their right. People's lives change and serving as a personal representation can create hardships. It's time-consuming and a lot of work.

Sometimes, a nominated personal representative will face strong opposition from other heirs of the estate. The stress created by a death in the family sometimes brings out the worst in people. It might be in the best interests of family harmony (and avoiding the drama) for the nominee to step aside.

A nominee who has not yet been appointed by the probate court can simply refuse to accept an appointment. Since qualifying for appointment requires the nominee to file with the probate court, the person can decline to serve just by not filing.

However, if the person has been appointed by the court as personal representative and that person wishes to resign, there are some formalities under Minnesota law in what is called voluntary termination of appointment. As the appointed personal representative, the person must file a written statement of resignation with the registrar after having given at least 15 days written notice to the known interested persons of the estate. If no one applies or petitions for appointment as a successor within the time indicated in the notice, the filed statement of resignation is ineffective as termination unless and until a successor has been appointed and the estate assets have been delivered to the successor. The personal representative is not off the hook until another person is appointed.

If the personal representative declines to serve or resigns, and the Will does not nominate a successor, the court will appoint a personal representative based on priority set forth under Minnesota law. Generally, the surviving spouse or children have the highest priority.

This is why it is so important to nominate a second and third successor personal representative in your Will. It is also a good idea to review your Will from time to time, and to confirm that your nominated personal representatives still wish to serve when the time comes. If any of them express doubts, you should consider executing a codicil (amendment) to nominate different persons. A qualified estate planning attorney can help you review your Will.

Preparing For The Estate Sale.

Dealing with the death of a loved one can create an enormous amount of stress. That stress can be compounded when you sift through the decedent's possessions, as that may evoke strong emotions. But at some point, it will be necessary to dispose of those personal property items. If you are the appointed personal representative (PR), you have some work cut out for you.

Having been the PR for my parents' estate a few years ago, I remember the process.  Been there, done that. It takes up a lot of time and energy.

If the estate includes a homestead to be prepared for sale, it will be necessary to have those personal items cleared out at some point. If there is property in a storage locker, that will need to be disposed of, as well.

If the decedent left a tangible personal property gifts list, those listed items can be distributed. This may include family keepsakes, collectibles and other items that are given to the heirs when the estate is settled. 

What remains outside of that can still be a mountain of stuff, but it is considered part of the estate and therefore it must be accounted for. Furniture, household goods, tools, vehicles, etc., have value and should be sorted and prepared for sale. Keep a detailed list of items in a notebook or a spreadsheet.

The personal representative is tasked with disposing of the property, and if the estate is being probated, the PR will be responsible for making an accounting of estate assets. As a fiduciary, the PR has a duty to act in the best interests of the estate to preserve and maximize the value of the assets.

An important task is to secure the property. The personal representative should take all necessary steps to ensure that none of the assets "grow legs and walk out the door." This may require you to change the locks on the doors of the house. It's not uncommon for family members to show up and start digging into things, often with the view that "I'm going to inherit it anyway." You need to enforce a "look, but don't take" policy. However, it's generally OK to distribute a few small family mementos beforehand.

Legally, the assets remain the property of the estate of the deceased until it is time to distribute them to the beneficiaries at the end of probate, after creditors have been paid. If you are the appointed PR, your duty to the estate requires you stand firm on this issue. You may not be popular with some of the heirs, but such is the role of being PR.

There are a number of ways to effectively dispose of personal property items. You can hold an estate sale, often conducted in a similar manner as a garage sale. Certain items of known worth can be sold off individually. Be sure to keep receipts for any such sale, and deposit the sale proceeds into the estate account. DO NOT deposit any estate funds in your own account, as that is a big red flag that the probate court will take a dim view of.

If you don't have the time or patience to organize the goods and sell them yourself it might be more efficient to hire an estate sale company to sell them. Given the current COVID-19 pandemic, you might not want to be engaged in transactions with a bunch of strangers wandering through the house.

High value items, such as jewelry, coin collections, artwork, firearms, motor vehicles, etc., should be appraised before bringing in an estate sale company, so that you can have a rough idea as to the worth of the items. Estate sale companies often charge a commission, typically between 25 and 50 percent of the sale proceeds, so it is in their best interest to get the maximum sale price for the items.

Many of these estate sale companies employ people who are adept at determining the value of items. Don't throw anything away unless you are certain that it cannot be converted to cash. You might be surprised at what that ordinary-looking "pile of junk" can fetch.

When looking for an estate sale company, do some research and talk to more than one. That industry is unregulated and no doubt there are some bad ones. If you have the time, attend one of their sales and observe how it is conducted. Ask friends and colleagues, look at online reviews, check the Better Business Bureau. Ask the estate sale company for references.

If you are disposing of the assets yourself through a private estate sale, you will likely end up with many items that don't sell. Old clothing, kitchen items, knick knacks and such can be donated to thrift stores, like the Salvation Army. Non-perishable food left in the pantry can be given to a local food shelf. If you donate, get receipts for tax-deduction purposes.

After that, there will be things that should be thrown out. Broken and soiled items, containers of household chemicals, outdated clothing, junk, and "white elephant" items are best tossed out. If you anticipate there being a large amount of those kinds of throwaway items, you may need to rent a roll away dumpster.

Clearing out personal belongings can be a huge task. But as personal representative, you can enlist the help of a family member or two to help. But as PR, you are in charge and you must make it clear that property items and the proceeds they bring must be accounted for.