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Celebrate National Make-A-Will Month by Claiming Control of You and Your Loved Ones Futures

By Cole Hickman '08

August is national Make-A-Will month. Only about one-third of Americans have an estate plan-meaning that most Americans have given up their independence when it comes to deciding what will happen to them should they become incapacitated and what will happen to their property when they die.[1] The fact is: if you do not create your own estate plan, your state will create one for you through its state intestacy laws. This year, declare your own independence from your state's intestacy laws.

State Laws for Money and Property

If you have not created a plan for what will happen to your money and property upon your death, your state has created one for you.[2] If you have created an estate plan, the state will also intervene if your plan does not properly account for all of your money and property or does not provide for backup beneficiaries if your chosen beneficiaries pass away before you. While each state's laws may differ slightly regarding how your money and property are distributed at your death, in general, if you are married, most, if not all, of your money and property will go to your surviving spouse. However, if you have children who are not also your surviving spouse's children, usually some portion will go to your surviving spouse and the remainder will go to your surviving children. If you are not married or your spouse has died before you, your money and property will go to your children. If you are not married and have no children, generally your parents will receive your money and property. If you are not married, have no children, and your parents are both deceased, it is likely that your siblings will inherit your money and property. The state also has laws that cover what happens if you have no living relatives.

However, most people know how they want their money and property to be divided after their death and whom they want it to go to. And for many, the people and relationships they want to include in their estate plan go beyond what the state's plan anticipates.

Example: George and Martha Washington have been married for forty years but have no children together. Martha was previously married and inherited a substantial fortune from her deceased husband. She also has two children from her previous marriage. George has nine siblings and is very close to his nieces and nephews, treating them as if they were his own children. However, George has been so busy fighting wars and running the country that he has neglected to create an estate plan. Upon his death, all his money and property, including Mount Vernon, goes to his wife, Martha. Upon her death, she leaves all her money and property (which now includes George's money and property) to her two children. George's nieces and nephews, who were like George's own children, receive nothing. This is not what George would have wanted.

State Laws for Financial Decisions if You Become Incapacitated

If you have not appointed someone to make financial decisions for you if you become incapacitated and cannot make those decisions yourself (by creating a financial power of attorney) or your chosen person is either deceased or unable to act, the state's plan commonly requires that a court appoint someone to make those decisions for you. Whom the court appoints is normally based on who has priority under the state's rules. Usually, the spouse has priority, followed by an adult child and then a parent. However, the person with priority may not always be the person you would have chosen.

Example: Thomas Jefferson's pride and joy is Monticello, the hilltop home and gardens he designed. Thomas is unmarried because his wife of ten years died in childbirth many years ago, and he never remarried. The couple had six children, but only two daughters survived. After completing two terms as president of the United States, Thomas retires to Monticello where he suffers a stroke, leaving him incapacitated. Unfortunately, amid all his accomplishments, he did not accomplish creating a financial power of attorney. His daughter Mary is appointed to manage his financial affairs. Mary is quite inexperienced in financial dealings, and Thomas would have actually chosen his good friend James Madison to be his agent under a financial power of attorney. Because of the pressures of significant debt, Mary sells much of Thomas's property, including Monticello, for less than market-value prices. This outcome may have been much different if Thomas had appointed James Madison by executing a financial power of attorney.

State Laws for Medical Decisions if You Become Incapacitated

If you have not appointed someone to make medical decisions for you if you become incapacitated and cannot make such decisions yourself (through a medical power of attorney, advance health care directive, or similar document) or your chosen person is either deceased or unable to act, the state has laws about who has priority to make those decisions for you. The order of priority usually includes someone who has been appointed by a court, a spouse, a child, a parent, a sibling, a grandchild, and so forth. Again, the person with priority may not always be the person you would have chosen.

Example: Benjamin Franklin has three children and a common-law wife, Deborah Read. One of the children is Benjamin's from a previous relationship; the other two are Benjamin's and Deborah's children. Benjamin also has eight grandchildren. When Benjamin falls into a coma after being struck by lightning, the family disagrees on whether his life should be sustained. Since the law does not recognize Deborah as Benjamin's wife, she does not necessarily have priority to make healthcare decisions for him. This family drama could have been avoided had Benjamin created a document that named the person he wanted to make medical decisions for him during his incapacity.

This year, choose to celebrate Independence Day by taking the steps to put in place or update an estate plan that will allow you to claim control of your and your loved ones' futures. We want to help ensure that your family does not go through the same unfortunate events as in our fictitious examples above. Call us today so that we can help.

[1] Lorie Konish, "67% of Americans have no estate plan, survey finds. Here's how to get started on one," CNBC, https://www.cnbc.com/2022/04/11/67percent-of-americans-have-no-estate-plan-heres-how-to-get-started-on-one.html

[2] An example is the intestacy statutes of Minnesota, which are contained at Minn. Stat. 524.2.-101 through 524.2-405.


The Black Hole of Your Estate Plan

"I'm giving her all she's got captain!"

Never was this statement so applicable as when the infamous starship Enterprise was attempting to pull free of a Black Hole in the blockbuster hit Star Trek The Future Begins. It took all thrusters firing and then some to escape.

Black Holes have a way of pulling you into darkness, with gravity fields so strong that not even light traveling at 186,000 miles per second escapes it. The last thing you want to do in space is lose your warp speed when approaching a Black Hole.

Welcome to probate.

Ok, perhaps the analogy is a bit harsh. Afterall, the probate Black Hole is not the crushing menace of the celestial kind. But it does pull you in, sucking time and money out of you. It's a dark place for first time travelers but eventually it spits you out on the other end, sometimes for the better. Experienced probate attorneys know this and are not intimidated as they routinely enter 'where no man has gone before' and escape to do it again.

But how does one get sucked into the probate Black Hole? By having a " I will get to it someday" mentality when it comes to estate planning, i.e., by drifting through life. What's needed is intentionality or, "thrusters" to propel you away from these Black Holes. I will introduce you here to five such thrusters in this article. Two are quite popular, two not so much and one is just plain odd.

With that let's get the two unpopular thrusters out of the way first.

Thruster #1

Open "joint" accounts. When you die whomever you have listed on your accounts as "joint" will have access to the asset right away, without going through probate. But the drawbacks to this arrangement are considerable. A joint owner may withdraw a part or 100% of the assets, whether you are alive or dead. And even if your joint owner has stellar ethics, i.e., respecting your money, his or her creditors won't care. Creditors will now have presumptive access to your assets to pay for the other joint owner's bills. This is not a recommended thruster to use.

Thruster #2

Die broke. Ok, this one's kinda' funny but not really. This is the equivalent to a starship never leaving the launch pad. You don't have to worry about encountering Black Holes if you never launch. In Minnesota, never launching means dying with less than $75,000 in "probate" assets. If that happens no probate is required so long as those probate assets do not involve real estate.

But you're a Johnnie or a Bennie. We don't die broke. Next.

Thruster #3

Obtain a Revocable Living Trust. This is the most universally recognized way to avoid probate. Everything placed in your Trust during your lifetime or, after death via a beneficiary designation, will skip probate. But for this to work you must actually "fund" your trust. This is a common area of failure with Trusts. Obtaining a Revocable Living Trust will be your most costly option, costing two to three times as much as your Will option, but considering the savings of not having to pay for probate it could be viewed as a type of prepaid funeral plan.

Thruster #4

Place beneficiary designations, at the institutions holding your money, and expressly name individuals or charities to receive your estate assets upon your death. Those assets will go straight to the beneficiaries within weeks of your death, without a probate proceeding.

Using beneficiary designations as a 'probate avoidance' tool is not failsafe, however. There are situations where probate will become necessary such as gifting to a minor, a wrongful death lawsuit brought on your behalf after your passing or, having a beneficiary die before you with no successor beneficiary named. Assets with no beneficiary designations at death are 'mystery assets' and are thus deemed "probate". Once 'mystery assets' exceed $75,000 (this amount & concept varies from state to state) going through probate becomes a must, no matter if you have a Will. You see, a Will is more a 'mystery solver' than a 'probate avoider'. A Will does not avoid probate, a Will controls probate.

A Will is not a Thruster

So, if you're thinking, I will skip getting a Will then, read further.

If one must enter a Black Hole a Will acts as the steering mechanism to get you through. It cuts down the time and expense of probate by designating "informal" and/or "unsupervised" proceedings with "no bond" being required, as examples. Bottom line, having a Will in place establishes a comforting back up plan for that looming Black Hole. Even a Trust is accompanied by something called a "Pour Over Will", a Will that picks up probate assets lying outside a Trust at death and "pours" them into the Trust.

And what about that odd ball Thruster #5?

This is the sure fire, 100%, guaranteed way to avoid probate.

Ready?

Don't die.

Ok, Scotty, you can beam me up now.

Joe Field, Esq.

Joe Field, SJU class of '79, is the senior attorney & owner of Field Law, P.A. located in Anoka, Minnesota. Joe also published "Finding Joe Adams" in 2020, a memoir which details him finding his father for the first time in 2017 (they both appeared on national television) & his faith journey through trying times. Joe is now writing his second book dealing with the subject of avoiding probate.


Ask a Johnnie Estate Planning Professional

August, 2021
Featuring Geordie Griffiths '93 of George Byron Griffiths Law, PLLC in Minneapolis

Do I need a will? What does it accomplish for me and my family/heirs?

Everyone has a Will, whether they realize it or not. Every state has laws of "intestacy" which dictate how a person's Estate will be distributed upon their death. The scheme provided by law may mimic what a person would want to have happen to their assets; but in many cases, it may not. In order to ensure that your Estate will be divided in the way you intend, then you must execute a valid Will. However, having a Will is only one part of the equation. While the Will dictates what will happen to a person's assets after they die, it's also important to execute two important documents that operate during one's life. A Power of Attorney document gives the legal authority to someone else to make your financial and legal decisions on your behalf, especially if you become incapacitated or incompetent. It's important that the person named be trustworthy and also have good attention to detail. You may name one or more persons to act on your behalf, and they may be named to act independently or to act jointly. A Health Care Directive gives the legal authority to someone else to make your medical decisions, only if you cannot communicate your wishes to a medical provider. This document also allows you to indicate if you wish to be an organ donor and if you prefer to be buried or cremated after death. A comprehensive Estate Plan will include a Will, perhaps a Trust, a Power of Attorney, a Health Care Directive, and a Digital Asset Authorization.

What is probate? Is it important that I try to avoid it?

Probate is the judicial process whereby a Will is "proved" in a court of law and accepted as a valid public document that is the true last Will of the deceased, or whereby the Estate is settled according to the laws of intestacy in the state of residence of the deceased at time of death in the absence of a legal Will. When there are minor beneficiaries to a Will, or when beneficiaries are arguing, Probate can be a beneficial process because it produces orders from a court that are binding on all parties. However, Probate can take time and money, and if beneficiaries are arguing, the more time and money it will take. Some of my clients wish to avoid Probate completely. One of the main reasons to avoid Probate is because it is a public process, meaning that all documents -- including one's Will -- become part of the public record. Some clients wish to maintain privacy for who will benefit from their Estate, and to accomplish that, they will have a "pour-over" Will which devises everything to a Revocable Trust. Then the Trust document, which is private, dictates how the Estate will be distributed. Another reason why it may be important to avoid Probate is when a person owns real estate in more than one state. If a person has a homestead in Minnesota, but also has a condo in Florida, then that person's estate could potentially be subject to Probate in both states upon their death. Deeding one's property, or properties, into a Revocable Trust is an effective way of avoiding Probate in the state(s) where real estate is owned.

*If you're an estate planning attorney or advisor who'd like to participate in the series, please contact Jim Kuhn at (320) 363-2116 or jkuhn@csbsju.edu

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