Why Have A Will?

I often field the question: "Do I (we) need a Will?" More often than not--actually, MUCH more often than not--the answer is YES.

Let's look at some reasons why a valid Will should be in your estate planning portfolio.

First of all, not having a valid Will means a probate court must decide how your assets are divided up and distributed to your descendants. This is called intestacy. Intestacy is merely a fail-safe created by the Legislature, an attempt at a one-size-fits-all solution, but it is far from perfect.

Having a valid Will helps ensure that your assets go to the persons you want them to, in the amounts you choose. Without a valid Will, Minnesota intestacy law requires the probate court to distribute your assets based on a certain hierarchy, a particular order of who is in line to inherit your estate assets. Without a valid Will giving instructions, the court has to rely on this state-mandated default to determine how your estate is to be divided. That hierarchy may or may not be what you wish to happen.

A valid Will allows you to tailor the proportions of your estate assets you wish to give to family members. Maybe you don't want to divide up assets evenly. Perhaps there is a child who is closer to you or needs more financial help and deserves more. Conversely, there may be a family member who, due to dependency issues or poor money management skills, or who is estranged, is deemed one who should receive less--or none at all. Without a valid Will, the probate court will likely distribute your assets evenly between your descendants, without your input to the contrary.

A valid Will enables you to give certain items of property or money--specific gifts--to individuals or charities. The laws of intestacy make no provision for specific gifts to be given to people outside of the shares given to the legally-mandated heirs. Want to donate some money to a friend or relative, or a charity? Sorry, the laws of intestacy do not accommodate those kinds of wishes. You need a valid Will to make those choices.

A valid Will allows you the freedom to nominate persons to act as your fiduciary--the Personal Representative (executor) of your estate. The job of the estate PR is absolutely crucial and I cannot emphasize enough the importance of this selection. You may have certain individuals in mind whom you can trust to manage your estate after you are gone. Without a valid Will, the probate court decides who will act as the fiduciary. The person they choose may not be the person you want acting in that important role. The PR collects estate assets, pays valid debts, and distributes the remainder to the beneficiaries. If you see no other reason to obtain a valid Will, this is the one that should tip the scales in favor of it.

If you have children who are under the age of 21, a valid Will allows you to nominate a custodian to manage the minor's inheritance until that minor attains the age of 21. Without a valid Will, the probate court chooses that custodian.

If you own real property, your estate must pass through probate, unless you have executed a Transfer On Death Deed (TODD). With a valid Will your chosen Personal Representative will be someone you can trust to work with the probate court, and handle any real estate transactions.

Note that I have used the term "valid Will" throughout this article. I want to point out that just having some "will" may not, in itself, be sufficient. You need a carefully constructed Will, a legal document that reflects your values and wishes. This should be a document crafted by a competent Minnesota estate planning attorney, ensuring that it complies with Minnesota law. Sure, you could go DIY, download some template from the internet and fill in the blanks. But without the careful guidance of a competent attorney who understands your wishes and the legal landscape, your money-saving DIY document may not hold up to legal scrutiny after you die. Is it worth the risk, just to save a little money?

Preserving your hard-earned assets for the security of your family members is too important to leave to chance. Contact a licensed Minnesota attorney to begin protecting your estate.

What's In (And Not In) Your Probate Estate: A Quick Outline.

Your Will governs only those assets which fall within the probate estate. Accordingly, the probate estate is subject to administration by a probate court. However, there are many assets that are not part of the probate estate--they are not distributed by a Will and thus not subject to the probate court. 

Not long ago I discussed property that's ordinarily not distributed by a Will. To follow up on that, I decided to post this quick list of which assets are--and aren't--disposed of by a Will.

Below is a brief outline of the types of assets that generally fall into each category. This list is by no means exhaustive, but it covers the more common items.

Probate Assets (Distributed by Will):

• Real property titled in the decedent's name only or property in which the decedent is a tenant-in-common with other persons. This includes homestead, vacation property, business and rental properties.
  
• Personal property.
• Funds in bank accounts.
• Beneficiary assets with predeceased beneficiaries or no beneficiary designations. 
• An interest in a partnership, corporation, or limited liability company.
  
• Assets left out of a trust.
• Financial instruments that name the decedent or the decedent's estate as beneficiary.
  
• Any other assets titled solely in the decedent's name.
  

Non-Probate Assets (Not Distributed by Will):

• Real property titled jointly or subject to a transfer on death deed (TODD).
• Bank account funds jointly owned or subject to a payable on death (POD) provision naming someone else.
• Financial instruments with designated beneficiaries, such as life insurance policies, pension funds, investments, etc. 
• Motor vehicles registered with a POD provision in the titles.
  
• Property held in a trust. 

Avoiding Probate.

Administration by a probate court may be avoided in cases of certain small estates. This may be accomplished by executing a transfer on death deed for your real property. If the aggregate value of your remaining personal property is less than $75,000, probate may not be necessary. Setting up POD provisions on bank accounts and motor vehicle titles may enable you to lower the remaining probate estate value below that maximum.

A qualified estate planning attorney can help you sort through your assets and develop a strategy for preserving them for your loved ones.

Thinking About A Transfer On Death Deed?

There are many benefits of a Transfer On Death Deed (TODD), and it's a tool often used to help keep estates out of probate, as it conveys real property directly to a beneficiary upon the death of the property owners.

While a TODD may allow your estate to avoid probate, it is not a substitute for a Will. A well-crafted Will can allow you to name beneficiaries for the remainder of your estate assets, give specific gifts to individuals and charities, nominate a personal representative (executor) to administer your estate, and nominate conservators and guardians to protect minors who are or might be beneficiaries.

But careful consideration must be given before executing a TODD. If you are contemplating using a TODD, you should ask yourself some questions:

1. Do your children want or need the property, or do they just want cash from the sale of the property? [Chances are, they will want the cash.]
2. Do you want the property to stay in the family? [See #1.]
   
3. Do all of your children get along with one another, especially when money is at stake?
4. Do all of your children and their spouses get along with one another?
5. Do all of your children have funds to pay their share of property taxes, assessments, association dues, property insurance, utilities, repairs and maintenance, and are all of your children willing to pay their share of those expenses?
6. Will your children be able to take time from their busy lives to deal with all those responsibilities listed in #5?
   
7. If one of your children wants to sell their share of the property, will the other child or children have the funds for a buyout?
8. If one of your children wants to sell their share of the property, will the other child or children, and their spouses, be willing to sign the listing agreement, purchase agreement, deed and affidavit of seller?
9. If one of your children wants to sell their share of the property, will the other child or children be comfortable co-owning real estate with someone outside of the family, possibly a stranger?
   
10. Are you aware that if one of your children dies, the spouse, children and/or grandchildren could inherit part of the property?
11. Are you aware that if one of your children gets divorced, the property could become part of the settlement?
12. Are you aware that your children's names will be in the chain of title and if one or more of them has financial troubles, owes back taxes or has judgments, creditors can place liens on the property and force a sale?
13. Are you aware that your children inherit the property along with mortgages, judgments and liens?

A Transfer On Death Deed is a useful tool in your estate plan. However, it is not a one-size-fits-all solution. In some situations, it can cause financial burdens and family conflict later on. No matter whether you choose to use a TODD or not, you still should have a valid Will. 

Discussing your estate planning needs with a qualified attorney can help you make the best choices for your loved ones' future.

A Primer On Transfer On Death Deeds (TODD).

The Transfer on Death Deed is a means of conveying real property to another person or entity upon the death of the property's present owner. In a sense, the TODD works much like a payable on death designation for a bank account. The owner retains full ownership and use of the property while alive and the beneficiary takes ownership of the property only after the death of the owner. Minnesota law provides for Transfer on Death Deeds under Minn. Stat. § 507.071.

Here's how it works.

An owner of real property designates a beneficiary to receive real property described in the deed upon the owner's death. In the parlance of the Minnesota statute, the present owner is referred to as the grantor owner and the beneficiary is the grantee beneficiary. The grantee beneficiary can be one or more individuals, and can be an entity such as a business, charitable organization, or a trust.

A TODD may have multiple grantor owners, as in the case of real property owned by multiple persons in joint tenancy with right of survivorship. This is typically the case where two spouses own the property. In the case of joint tenancy, the interest conveyed to the grantee beneficiary transfers only after the death of the last surviving grantor owner.

A TODD may have multiple grantee beneficiaries. The TODD may designate that the beneficiaries take title under a certain form of ownership, such as joint tenancy or tenants in common, and it may designate one or more successor grantee beneficiaries, stating the condition under which the interest vests.

In order for the TODD to be valid, it must be recorded in the county in which at least part of the property described in the deed is located, and the TODD must be recorded before the death of the grantor owner upon whose death the conveyance is effective. The grantor owner retains full ownership of the property while he or she is alive, can revoke the TODD at any time and for any reason, and can choose whether or not to record a new TODD. However, a TODD cannot be revoked by a will, and the TODD supersedes any contrary language in a will. No deed tax is required upon recording of a TODD, nor is a certificate of real estate value needed.

A TODD is often used by individuals with estates where the only asset that would be subject to probate is the home. A TODD can be used to keep the property out of probate, and if the sum total value of the remaining, non-real estate assets in the probate estate is under $75,000, the estate may be exempt from probate altogether and become a non-probate "small" estate.

Things to consider:

A TODD is not for everyone, and should not be viewed simply as a one-size-fits-all solution to avoiding probate. There may be particular tax implications, and there may be practical issues if the property is deeded to multiple grantee beneficiaries, which could result in conflict between them. The property conveyed to a grantee beneficiary under a TODD is transferred subject to all mortgages, liens, judgments, and other encumbrances. These may include claims by the state or county for medical assistance benefits, if the assets in the deceased grantor owner's accounts are insufficient to pay the amount of the claim. The grantee beneficiary is responsible for satisfying any obligation associated with the property, and deeding property to a beneficiary who is unwilling or unable to manage that responsibility could be a recipe for disaster.

In addition, since a TODD operates outside of the probate estate and is not subject to language in the will, the grantee beneficiaries are under no obligation to share the property with other heirs who are not named as grantee beneficiaries. If you wish for all of your children to receive the property, it is therefore important to name them all as grantee beneficiaries, or set up a trust as the grantee beneficiary.

It is very important to consult a qualified attorney or tax advisor before making the decision to record a TODD. And whether or not you decide to use a TODD, it is always prudent to have a robust estate plan in place, to help ensure that all of your assets will be passed on to your loved ones in the manner you wish.