Category: Estate Planning

Plan for the future with expert estate planning insights. This blog category covers wills, trusts, probate, power of attorney, asset protection, and tax strategies. Stay informed with the latest legal updates to secure legacy and protect loved ones.

  • Downsizing For Future Trustees

    Downsizing For Future Trustees

    Downsizing

    Downsizing can help your future trustee. However, doing so can be a challenging process. This is especially true when deciding what to keep and what to throw away.

    Here are some tips to help you and your future trustee determine what to throw away when downsizing:

    1. Duplicate items: Get rid of items that you have more than one of, especially if they serve the same purpose. For example, if you have two sets of dishes, consider keeping only one.
    2. Outdated or Unused Items: If you haven’t used an item in a year or more, or if it’s no longer relevant or useful to you, it’s time to let it go. This can include clothes, electronics, and other items that have been collecting dust.
    3. Broken or Damaged Items: Items that are broken or damaged beyond repair are taking up space and serve no purpose. It’s better to let them go rather than holding onto them. Might I suggest making a donation?
    4. Sentimental Items: While it can be tough to part with sentimental items, it’s important to assess their true value. Unfortunately, the sentimental weight you assigned to an item might not be the same value assigned by a future trustee. If you have multiple items with sentimental value, consider choosing one or two to keep and take pictures of the rest. Speaking of pictures, let’s talk about digital downsizing in a future post.
    5. Excess Furniture: Furniture can take up a lot of space, so consider whether you really need all the pieces you have. If you’re moving to a smaller space, you may need to downsize your furniture as well.

    Remember, downsizing doesn’t mean you have to get rid of everything. It’s about making intentional choices and keeping only the items that are truly important or useful to you.

  • Spring Cleaning Your Estate Plan

    Spring Cleaning Your Estate Plan

    Spring Cleaning

    Spring cleaning applies to our estates too. As we approach Spring, now more than ever is a great time to revisit, review, and perhaps revise your estate plan.

    Just like spring cleaning a home or cabin, refreshing and organizing our planning documents helps others help us.

    Even more so, it offers assurance to our children and grandchildren. So, let’s take a look at a checklist.

    Spring Cleaning Checklist

    A spring clean-up checklist from an estate planning perspective looks something like this:

    • Revisit and Review. As we age, our plans and needs change. Take 15 minutes and reflect on your current plan, wishes, and circumstances.
    • Beneficiary Designations. Review every beneficiary designation. This includes any forms associated with bank accounts, retirement accounts, life insurance policies, annuities, motor vehicles, and other assets to ensure they are up-to-date and aligned with estate planning goals. Even more so, if you do not have a hard copy of each form, you have a problem that needs immediate attention.
    • Tax Changes. Evaluate any (Federal and State) changes in tax laws that may negatively impact an estate plan. Then, consider necessary adjustments to account for such matters.
    • Ancillary Documents. Review and update powers of attorney documents (both financial and HIPAA). Also, look at your healthcare directives to ensure wishes are being accurately represented. Have you made any changes based on our experiences from COVID-19? Certainly being locked behind glass doors isn’t appealing for you or your loved ones.
    • Family Dynamics. Consider any changes to your family, that may impact an estate plan, such as the birth of a child, marriage, divorce, substance abuse issues, and or mental impairments.
    • Trust Funding. Incorrectly funded trusts is a chronic problem or flaw with many estate plans. Spring is the perfect time to readdress whether an asset was included or purposely excluded from a trust. If you do not know, this issue must be addressed.
    • Lost and Found. Organize estate planning documents and ensure loved ones know where to find them in case of an emergency. For those with a safe deposit box, there is added risk.

    All this said, spring cleanup requires action. Thus, start right now.

  • Hurricane Estate Planning 101

    Hurricane Estate Planning 101

    Hurricane estate planning in a pinch might mean expeditiously:

    • Making sure your loved ones are in a safe place;
    • Addressing care for your pets;
    • Gathering needed medicines and medical supplies;
    • Filling a storage container with drinkable water;
    • Taking exterior photos of your real property;
    • Taking interior photos of your tangible property;
    • Gathering your home computers and power cords;
    • Finding a hard copy of your online usernames and passwords.

    Additional Important Documents to Gather

    Other important documents to gather in preparation of a hurricane includes:

    • Driver’s License
    • Passports
    • Marriage License
    • Birth Certificates
    • Financial Documents
    • Tax Filings
    • Insurance Records
    • Medical Records
    • Motor Vehicle Titles
    • Real Estate Documents
    • Military Records (DD214)
    • Family Photos
    • Estate Planning Portfolio

    Of course, there are many more action items when preparing for a hurricane. That aside, hurricane estate planning strategies is a great opportunity to weigh the pros and cons of storing documents in the Clo

  • Inflation Planning Within an Estate

    Inflation Planning Within an Estate

    Inflation protection within an estate plan starts here. To begin, consider this brain teaser. How many cookies can you buy with ten dollars? If you are like me, the State Fair Cookie Test is likely the wrong sample type because of the infrequence of the event. That aside, perhaps you already reached this conclusion: prices always seem to rise. This is true for cookies, cars, and commodities.

    Allow me to take the cookie test a little further. Assuming you selected the best person possible to manage your cookie supply, would you want them to make decisions on an empty stomach or defer to a hand selected baker with knowledge about ingredients and time?

    Again, using cookies as an analogy, a revocable trust can require our trusted circle to act prudently. As an alternative, a trust can also be drafted in such a way that demands a trustee to seek advice from a more qualified professional.

    Really, it depends a lot on the trustee’s skills and background. Perhaps your trustee is up to date on iBonds and treasury notes, so you might not have a cookie problem.

    On the other hand, what about the back- up trustee? Are you equally as confident? For this reason, I like the drafting strategy of giving the trustee an option for support. Even better, I like the idea of a Grantor selecting a professional for their trustee, long before the professional is ever needed.

    Therefore, inflation planning starts during the drafting process.

  • Laws Impact Estates, But Which One?

    Laws Impact Estates, But Which One?

    Laws impact estates and plans, but which one applies first? For those keeping track, we have local ordinances, Minnesota statutes, Minnesota Rules, a State Constitution, Federal Codes, Federal Regulations, U.S. Constitution, administrative opinions, letters, and court decisions, and a handful of other rules and laws.

    Also, we have made up rules created by financial institutions, third-party administrators, and employers too. The point is this: we have a lot of laws and most of them impact an estate. So, what should we do?

    As the laws around us become more and more complicated, perhaps simplifying our life is the strongest response to an abundance of regulations. Of course, simplifying is different for each family.

    For some, this means having a conversation about what to do with an inherited IRA. For others, this means restricting financial temptations.

    Another strong response includes a purposeful plan that was designed with triggers and conditions.

    For example, if I die with significant wealth, whether that means my family cashed-in on a life insurance policy or otherwise, I want a document that triggers protection from certain taxation. Or, if I suffer from a heart-attack and succumb to a permanent disability, I want my documents to trigger an opportunity for care that alleviates stress.

    Really though, the best answer to so many laws impacting an estate is a reminder about control. We can make choices today that will have a positive impact on our future. Even better, our choices teach younger generations about serving and protecting our family

  • Free Annual Report For Each Family Member

    Free Annual Report For Each Family Member

    Obtaining a free annual report is critical to the planning process. As the name suggests, this is an annual process recommended for each and every person in your household. This includes persons under the age of 18, including newborns.

    This step is important because it helps reduce fraudulent activity. From a practical perspective, print your free annual report every year.

    Next, add a printed version to your estate planning portfolio. One way to remind ourselves to complete this planning task is to do this around the same time we file our annual tax return.

  • Nuclear War Estate Planning and Cloud Storage

    Nuclear War Estate Planning and Cloud Storage

    Until recently, estate planning for a nuclear war seemed unrealistic. As wars develop and nuclear weapons are threatened, one cannot help but consider their worst case scenario. Believe it or not, this is a topic that most military families have already thought about. Nonetheless, let’s address a handful of issues specific to estate planning for a nuclear event.

    The Best Time to Estate Plan

    Obviously, timing is everything. When it feels like time is on our side, planning can move in stages. In other words, the sense of urgency is different in our 20’s versus our 50’s. Nonetheless, as our timing transitions to an urgent need, panic and stress can negatively impact our decisions.

    Likely, planning our affairs during a nuclear war will feel similar to a health scare. On the other hand, nuclear war is neither inevitable or reversible. Thus, all of us can avoid a timing issue by planning when we appear to feel good, versus waiting until the end.

    Luckily, the planning element can intercept nuclear war when the plan is already in place. After timing, there is still an issue that needs attention.

    Document Storage Prior to a Nuclear War

    Again, we need to make the assumption that a plan was created. Next, where should we store completed documents? Unfortunately, this is a very personal issue many families are unsure of. As a result, lets address a some of the pros and the cons.

    First, locking our documents into the cloud because of nuclear war threat, without having a distribution plan can cause significant damage. We are already seeing this play out with bitcoin.

    Second, which is equally problematic from an estate planning perspective, is the risk of duplicating documents. For example, imagine having a hard copy and a copy stored in the cloud. Then, imagine becoming cognitively impaired and using your favorite marking pen to revise the hard copy, while doing nothing with the digital version. Well, this creates a problem. In fact, it creates a major problem.

    Again though, document storage, estate planning, and introducing a risk for nuclear war is going to take on a different meaning for every person. Perhaps the person in Minneapolis, Minnesota is thinking they are at risk, while the family farm near Funkly, Minnesota thinks otherwise.

    Cloud Storage During a Nuclear War

    When adding online storage and the threat of nuclear war to the estate planning process, here are a handful of issues to consider:

    • What happens if a Nuclear War destroys everything, including family members?
    • Does the Company offering cloud storage have a backup storage site in a remote location?
    • Will a remote professional or family member know about the service provider chosen as the cloud provider?
    • Is there a password recovery process after a customer dies?
    • If the person dies, does the back-up plan die too?

    Unfortunately, a family that chooses cloud storage for their estate planning documents may need to reexamine these issue as a war develops. Therefore, when circumstances change, plans change.

  • Skipping GST Tax or Working Around It?

    Skipping GST Tax or Working Around It?

    GST Tax Audio

    GST Tax or generation skipping transfers are a fancy way of trying to reduce estate taxes when you die.  Because Minnesota is considered a decoupled state and taxes are only going up and up, it does not take very many assets and life insurance benefits to make this a significant issue.  As a result, GST is a proposition that a lot of families are considering when planning for asset transfers. 

    Generation skipping taxes is the process of our government, taxing property that is left for our grandchildren or great-grandchildren.  Unfortunately, this type of trust also applies to property left to unrelated persons who are younger than 37.5 years of age.  Kind of an interesting addition to the rule, but important nonetheless. 

    Most families agree that any way to reduce an estate tax bill should be considered.  For what it is worth, the intent behind the generation skipping transfer tax was to prevent these windows of opportunity.  Luckily, there are other options to consider. 

    From a practical perspective, the GST tax is imposed on all property left, whether through a trust or otherwise.  Historically, these types of estate taxes aligned with the federal exemption amounts.  So, this could reach 40% tax on all amounts above the federal exemption. This calculation doesn’t take into consideration Minnesota’s estate tax.

    Therefore, finding ways to reduce or alleviate estate taxes is the name of the game. 

  • EDB or Eligible Designated Beneficiary

    EDB or Eligible Designated Beneficiary

    There are 5 categories of an EDB or Eligible Designated Beneficiary. As described in Section 401(a)(9)(E)(ii) of the code, an EDB is:

    • The Surviving Spouse
    • A minor child of the participant (but only until the age of majority is reached, at which time the 10-year payout applies)
    • A disabled beneficiary
    • A Chronically Ill Individual
    • A person not more than 10 years younger than the participant.

    Of course, the idea of making this determination is such that the the participant or the person who owns the retirement plan can make planning decisions specific to a see-through trust.

  • A Shorter Life Expectancy for the Young?

    A Shorter Life Expectancy for the Young?

    Life expectancy from an estate planning perspective is only important when there time has expired. That said, assuming younger generations will outlive older generations isn’t necessarily true.

    Take for example the life expectancy of a 40 year old person. Using 2000M actuary tables, that person is expected to live another 38 years. In other words, a person 40 years old is expected to live to 78. This might seem reasonable, until you compare this to a 75 year old person.

    Again, using the 2000M mortality tables from Section 7520 of the Internal Revenue Code, a person that is 75 years old in 2021 is expected to live until their 86th season. Meaning, a 75 year old person might expect to have 8 more years of life than younger generations.

    Of course, what this means to each person and family is going to be different. However, this is something to keep an eye on in the planning process.

  • Registered Agents for a Business in Minnesota

    Registered Agents for a Business in Minnesota

    Registered agents have a specific purpose when specified for a business. The purpose of an agent in the business world is to complete service of process.

    When creating an estate plan, this the goal is to assure clarity.

    Simple so far, but a little more complicated as we start delegating business roles inside an estate plan. From an estate administration perspective, the question that usually follows is whether a trustee or successor trustee can serve as an agent too. This question is often asked because Minnesota’s online business formation forms calls for a declaration.

    Certainly, a business can be organized by a person. But, entity or person that serves as an agent is slightly more complicated.

    Minnesota’s rules for a Limited Liability Company broadly define the term “person” to mean:

    An individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.

    Minn. Stat. 322c.0102

    On the other hand, a registered agent for a business entity is likely limited to a natural person residing in Minnesota, a domestic corporation, or limited liability company, or a foreign corporation or foreign limited liability company authorized to transact business in Minnesota.

    Trustees and successor trustees know this because of Minnesota statute 5.36. According to the plain language of this rule, it appears trustees and successor trustees cannot not serve as a registered agent. On the other hand, the natural person, who also happens to be a trustee too, can serve.

    Unfortunately, this is where the line between trustees and agents acting through a power of attorney or durable power of attorney can become blurred. In other words, preventing contradictions inside trust documents, while also delegating responsibility outside a trust is a significant goal in the estate planning process.

  • Are You An Eligible Designated Beneficiary?

    Are You An Eligible Designated Beneficiary?

    Eligible Designated Beneficiary or EDB is a term created by the SECURE Act under IRS rule 401(a)(9).

    An EDB is a person who has lifetime distribution opportunities to an Individual Retirement Account or IRA. Because this new rule set changes required minimum distribution rules, an EDB designation is significant.

    In general, an Eligible Designated Beneficiary is a:

    • Surviving spouse to an employee or owner of an individual retirement account,
    • A Child of an IRA owner who has not reached the age of majority,
    • A beneficiary who is also disabled under rule 72(m)(7),
    • A chronically ill person within the meaning of section 7702B(c)(2), and
    • An individual who is not more than 10 years younger than the employee or owner of a retirement plan.

    Because this term modifies the rules where a person dies before distributions from an IRA are completed, this new rule impacts both the young and old.