Planning for Incapacity
At some point you may need help managing your finances or property. If so, it pays to have done some advance planning. Explained below are a few management tools you may use to help plan for incapacity. If you don’t make advance arrangements it may be necessary for the courts to set up a guardianship or conservatorship for you.
You might not need a formal arrangement to receive help with your finances. A trusted family member may help write checks, file tax returns and help with other financial matters. If you have someone help you, make sure that person keeps good records and goes over them with you periodically. For your protection, you generally should not transfer money or property out of your name into the name of your helper without first consulting your lawyer. If you do not have a lawyer and wish to consult with one, you can call the Minnesota State Bar.
Be aware that property transfers can make you ineligible for Medical Assistance (the program that helps pay nursing home and other medical expenses). Transferring your property to another person may also mean that your money will no longer be available to you if that person dies, is divorced, or goes bankrupt. Talk to your lawyer about these possibilities as well.
Formal Arrangements
You may want to set up a more formal arrangement for your finances. There are several ways to do this. You should choose the way that best addresses your needs and makes you the most comfortable.
Banks offer several alternatives that may fit your needs. You can set up a joint account, an “authorized signed” account, or a “payable on death” account. Talk to your lawyer or banker to see which of these might meet your needs.
You may wish to create a “durable power of attorney.” This is written authorization for someone to manage your property or financial matters according to your directions. A durable power of attorney remains valid even if you should later become incompetent. Forms are available to create durable powers of attorney, but you should be very cautious in completing them — the person you appoint could get authority to dispose of all your property, even by giving it to himself or herself. Talk to your lawyer about ways to protect yourself and your finances if you plan to use a durable power of attorney.
Guardianship and Conservatorship
Guardianship and conservatorship result from court proceedings where the court appoints someone to make decisions for you. This is done to protect you, if you become incapacitated and unable to make your own financial or personal decisions. Under Minnesota law, guardianship and conservatorship are very similar, but guardianship limits more of your civil rights, such as the right to vote. Because of this, conservatorship is usually favored over guardianship. The protected person in this relationship is called the “conservatee,” and the person named by the court to make decisions is called the “conservator.” Under guardianship, the protected person is the “ward,” while the person named by the court is the “guardian.”
If you should become incapacitated and have not previously planned for incapacity, a guardianship or conservatorship may be the only way to handle your personal affairs. Anyone can petition for or be appointed to be your guardian or conservator. A person may be appointed even against your wishes if the court determines such appointment is in your best interests. By planning ahead, however, you can have a say in this process and consequently protect your independence.
“Conservatorship planning” (also called “nomination of conservator”) involves a written document, like a will, in which you name the person you want for your conservator. You can also include instructions on how you would want your personal and financial matters handled by your conservator. For example, the conservator could be instructed to manage your property, know where you would like to live, and be informed about your wishes regarding health care. (The same person could also serve as your health care power of attorney.) Then, if you should become incapacitated and need a conservator, the court must name the person you chose and order that your instructions be followed, unless the court finds that this would not be in your best interests. Be aware that the person you choose is not required to serve as your conservator — so choose a reliable person and discuss your plan with the person in advance to make sure he or she agrees with it.
If you have other informal arrangements with relatives or formal planning arrangements such as a durable power of attorney, you may not need to do conservatorship planning. However, if it is likely that someone would challenge your planning arrangements (for example, if there might be disagreements within the family), you should use conservatorship planning as a “backup” to your other planning arrangements. Remember, anyone can petition to be a conservator or guardian for an incapacitated person, and a conservator or guardian can revoke or terminate prior planning arrangements. By naming the person you would want to be your conservator or guardian, you have the best possible protection against the appointment of someone you would not want to be your conservator.
Planning for Your Estate Wills
Wills are important documents that help ease the transition of ownership of an estate after a person’s death. An estate consists of bank accounts, houses, land, furniture, automobiles, stocks, bonds, life insurance policies, retirement funds, pensions and death benefits.
Your will should ensure that your assets are distributed as you wish. And, you still have full use of your property while you are alive.
In Minnesota, you must be at least 18 years old and of sound mind to make a will. The will must be in writing and must be witnessed by at least two people, both of whom must also sign the will. You must intend for the document to operate as a will. The will must be signed by you, or by another person at your direction in your presence. Handwritten wills are recognized as valid in Minnesota only if the will is witnessed and signed by two people. Notarization by itself is insufficient to make a handwritten will legally binding.
Your will should clearly state who will get your property upon your death. Minnesota law provides that a spouse inherits a specified amount of property, even if she or he is left out of the will. You may, however, disinherit a child, if your will clearly states that you do not wish the child to get anything.
A personal representative (also known as an executor or administrator) should be named in the will. This person will be responsible for seeing that the property is distributed as you desire.
Wills can be changed by writing a new one, or by adding a “codicil,” which is an addition to a will. Wills cannot be changed by simply crossing out language or writing in new provisions. Such alterations will not be effective. The codicil must be written, signed and witnessed the same way as the will, and should be attached to the will.
If a will specifically states that personal property should be distributed by a separate document, it is all right for a person to distribute most personal property in a handwritten statement. The statement can be written after the will is signed, and it can be changed without revising the will itself.
A will is effective until it is changed or revoked. It is a good idea to periodically review your will. Changes in your family, the value and kind of property, tax laws, or a move to another state may make changes in the will advisable.
You may revoke your will; however, revocation must be done in strict compliance with the law and the assistance of an attorney is highly recommended.
A surviving spouse who is not satisfied with his or her share in the will may elect to waive rights under the will and take his or her share according to state law. (A surviving spouse should seek legal counsel to do this.)
Your will should be kept in a safe place. The original will should be placed where it can easily be found after your death. In Minnesota, the Probate Court or Court Administrator’s Office will accept wills for safekeeping at no charge or for a nominal fee. You have the right to get your will back at any time. Putting a will in a safe deposit box might make it inaccessible after your death until probate begins, unless you are survived by a person who jointly owns the box and would have access to the box after your death.
If you do not have a will, your estate will be distributed according to Minnesota’s law of intestate succession. This law generally provides that, without a will, your estate will pass to your spouse, if still alive. If your spouse is not alive, your estate will pass to your children in equal shares. You should consult an attorney to determine exactly how your estate will be divided if you do not have a will.
Living Trusts
A trust manages the distribution of your assets. A trust is created by the transfer of property by the owner, or “grantor,” to another person, the “trustee.” The trustee holds the title to the property and manages the property for the benefit of a third party, the “beneficiary.” There are two general types of trusts. The “living” trust is created during the lifetime of the grantor when all or part of the grantor’s property is transferred into the trust. The other type of trust is called a “testamentary” trust. In a testamentary trust, the property is transferred into the trust after the grantor dies.
There are potential drawbacks to a living will. For example, transferring property into a living trust can make you ineligible for Medical Assistance. Talk to your lawyer about that possibility. Also, if the grantor is also the trustee, the grantor has a fiduciary obligation to the beneficiaries for both present and future income. This, for many, may be the biggest drawback of a living trust.
There are also good reasons to consider a living trust. A living trust, unlike a will, enables you to have a trustee with financial expertise manage your assets during your lifetime. A living trust can allow for a smooth transition of property if you become incapacitated or incompetent. A living trust can also protect your privacy regarding the distribution of your assets.
With a will, the probate laws require that an inventory of the estate’s assets is filed with the court. The inventory is public information. With a living trust, generally only the beneficiaries of the trust will be informed of the nature and the value of the assets. In cases where there is both a will and a living trust, this privacy may be lost.
A living trust is legal in Minnesota if properly written. It is important that a living trust be written to reflect the individual characteristics of each person’s estate while complying with Minnesota law. How a particular trust is drawn up depends on the type of property being placed in the trust and the purposes for which the trust is formed. It is good to have your attorney evaluate the use and legality of a living trust in the context of your other estate planning documents and objectives.
If the living trust contains all your property, a will may be unnecessary and you can avoid probate. If the trust contains only part of your property, you need a will. If you want your property to go into the trust after your death, your will should include a “pour-over” provision to put the remaining property into the trust upon your death. Also, a will can be used to distribute personal belongings, identify guardians for your children, and provide for an executor to handle any unfinished business.
Minnesota does not have an inheritance tax. Federal law requires that an individual with an estate totaling more than $600,000
file an estate tax return. If your estate is less than $600,000, there will not be any inheritance tax owed on your estate whether it transfers through the probate courts or in a trust.
Prepared forms or “kits” used to establish living trusts are currently marketed through magazines, brochures and door-to-door salespeople. Although the forms themselves may not be illegal, they may be too generic to suit you and your situation.
Planning a Funeral
Minnesota law and the federal Funeral Rule give you tools to control the cost of funerals. The Funeral Rule requires funeral directors to provide detailed, pre-purchase price information, including a General Price List of all services offered. Following the funeral arrangement, a detailed itemization, called the Statement of Funeral Goods and Services Selected, must be prepared.
Some things to keep in mind when planning a funeral:
- Your budget and true desires should guide your choice of arrangements
- You may wish to involve several members of your family, and perhaps an objective friend or clergy member when you make funeral arrangements.
Safeguards for Consumers
You may choose to make your own funeral arrangements, and set aside funds to pay for your funeral. One way to do this is to invest the needed amount of money, or put it in a bank account or insurance policy, making sure it will be accessible to family members upon your death. Another option is to prepay for funeral goods and services.
Unfortunately, money received from the advance sales of funeral goods and services is sometimes mishandled. To help safeguard prepaid funds, Minnesota law provides several protections. Under state law, a funeral director or cemetery operator must place all prepaid funds in a trust account in a bank or other financial institution until the need for a funeral arises. Minnesota law allows you to ask for and receive a full refund at any time before goods and services are provided.
There are also safeguards in the law to ensure that funds are available for the long-term upkeep of cemeteries and mausoleums. Cemetery owners must place in trust 20 percent of funds received from the sale of cemetery lots and ten percent of funds from the sale of mausoleum space. These “permanent care and improvement” trust accounts are to ensure the future care and maintenance of cemetery grounds and buildings.
To help safeguard prepayments for funeral goods and services, state law also requires funeral directors and cemetery operators to give you the name of the financial institu
tion where your money is in trust, and the account number of that trust. The law requires annual reporting and record keeping for both “pre-need” and the “permanent care and improvement” trust funds:
- Licensed funeral directors must file an annual report disclosing the status of the pre-need trust fund with the State Commissioner of Health.
- Cemetery operators must file an annual report disclosing the status of the permanent care and improvement trust fund with their County Auditor.
