Category: Trusts and Succession Planning

Trust Types in Minnesota are Endless

Trust types in Minnesota are nearly endless. Whether you are set on a revocable trust or an irrevocable trust, there are far more than two trust types in Minnesota.

Always clarify the intended purpose of the trust. Then, picking a trust type is easier. The trust purpose is dependent on needs, the property being transferred, and the beneficiary. If you do not know the ideal purpose for your trust, seek help weighing the pros and cons.

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What Is a Trust?

A trust is a document or legal instrument establishing the terms and conditions of our property, which is a legal arrangement where a trustee holds and manages assets on behalf of a beneficiary or beneficiaries.

There are several types of trust documents, each with their own specific requirements and purposes.

A trust is a promise made by another person. The promise is exclusive to holding property safe on behalf of a beneficiary. The person making the promise is called a Trustee. 

The Trustee is given access to the property by a person called a Grantor.  In many cases, the Grantor and Trustee are the same person. That is, until the Trustee is no longer able to manage their promise.  Ideally, the promise is expressed and described in written format. 

What makes a trust complicated is the fact that there are many types of trusts.  In fact, there are more than 100 different types of trusts. 

The trust type is often specific to the Grantor, intentions for the Beneficiary, and a host of other planning goals.   For example, a trust can be used to avoid probate and navigate estate taxes. 

Also, a trust can be used to reduce stress when considering long term care, like a nursing home or skilled nursing facility. 

Other times, a trust is used to manage their business affairs, real estate, a family cabin, and protect their assets from creditors or a former spouse.  Additional trust types might involve special needs, titled property, military veteran matters, and or agriculture. 

Before you start focusing on selecting the right type of trust(s) that fit you and your goals, consider reviewing other frequently asked questions herein or attending an upcoming seminar to learn more. 

Audio About Trust Types

Revocable Trust Types

One common type of trust document is a revocable living trust. A revocable trust can be used by a single person, a married couple, and unmarried partners. This trust type allows the grantor(s) to maintain control over their assets while they are alive, and transfer them to a designated beneficiary upon death.

There are many disposition options available for this trust type. Even better, it can be modified or revoked any time during the grantor’s lifetime. A Grantor has options regarding pre-residuary gifts for tangible personal property, real property, intangible personal property, pecuniary gifts, and of course, pets.

In addition, this type of trust supports see-through options, single options, and separate trust options for a spouse, descendants, grandchildren, nieces, and nephews.

Irrevocable Trust Types

An irrevocable trust is a legal arrangement where assets are transferred by the grantor into the trust, relinquishing ownership and control permanently.

Typically this type of planning document is used for asset protection and tax efficiency, and offering beneficiaries security and assurance of receiving designated assets according to the trust’s terms.

Single Beneficiary Trust

A common type of irrevocable trust is a single beneficiary trust. This is a one named beneficiary for a period of years or for life. Several options are available for the term of the trust and the disposition of the remainder including several optional powers of appointment. Supplemental Needs Trust and “see-through” (accumulation/conduit) trust options are also available.

Children’s Trust

A children’s trust is not what you think. From an irrevocable persecutive, a children’s trust is when a grantor doesn’t retains a right to income or principal. This kind of trust can be either a grantor trust or a non-grantor trust. with the intent of making assets non-countable, children trusts are used to protect assets when transitioning into a nursing care facility.

For families domiciled in Minnesota, this type of trust is used most often for life insurance. That said, this type of trust is also used with special needs, elderly care matters (shielding assets from nursing homes), veteran benefits, protecting assets from creditors, and installment sales and purchase agreements.

Irrevocable Life Insurance Trust or ILIT

Another opportunity is an irrevocable life insurance trust (ILIT). This kind of trust holds assets for life insurance. That said, a life insurance trust can hold more than insurance. Features of this kind include life insurance provisions intended to save on taxes, Crummey Powers, Installment Options, and contingent martial triggers.

Tax Planning Options for a Trust

Tax planning for any kind of trust is an exclusive conversation. Indeed, there are opportunities for tax planning with every trust. Because Minnesota has an estate tax, tax planning is especially important.

Nonetheless, tax planning for either a revocable or irrevocable trust types includes reviewing disclaimer options, credit shelter or marital deductions, seeking excess exemptions like the formation of a QTIP, Generation Skipping Transfers (GST), or optional direction for a deceased spouse’s unused exemption amounts (“DSUEA”). In all, tax planning is a critical step.

Testamentary Trusts in Minnesota

A less common type of trust is created and administered using a will. In previous decades, testamentary options were very popular. Today, families see the conflict of forcing loved ones into a probate court process to form and facilitate their assets.

For those deciding between a testamentary trust, this type of document is established through a will, and only takes effect after a person dies. It can be revocable or irrevocable, and is often used to provide for minor children or other beneficiaries who may not be able to manage their own assets. Additionally, there are stronger options. Other planning options allow for immediate impact versus waiting on court approval.

All this aside, each type of trust document requires careful consideration and expert legal advice to ensure that it meets the grantor’s needs and objectives.

More Minnesota Trust Types

Further, opportunities are endless, when working through the purpose of a trust and various estate planning needs. To assist with your research, here is list of various trust types worth considering:

Lawyer For Choosing a Trust Type

If you’re searching for a trust lawyer near you, consider contacting this law office for a free visionary meeting, such that you can share your goals and planning needs.

Twin Cities Trust Planning Attorney

I meet potential clients by phone, email, video, one-on-one, and through educational seminars. If you live or work in the Twin Cities, great!  Do not allow where you live prevent you from contacting this law office for help.

This law office serves individuals and families near and afar. Even if you are limited to a cell phone, this law office can help. As a result, residing near Edina, St. Louis Park, Richfield, Eden Prairie, Bloomington, Minneapolis, Hopkins, Minnetonka, Saint Paul, Woodbury, Eagan, Burnsville, Plymouth, Blaine, Wayzata, or a city in-between, this law office is ready to field your inquiry.

Trust Planning Lawyer in Edina, Minnesota

Although located in Edina, MN, it is very common that an attorney from this law office to meet with Clients outside the Twin Cities area and in rural areas. After all, assets are often located in multiple counties and jurisdictions.

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A living trust shouldn’t feel like algebra. If you are considering a Living Trust or want to know more about what it means and how it works, then consider my simplified definition.

In general, this type of estate planning tool is a piece of paper that is controlled while we are alive. In other words, a document that allows flexibility.

When we die or become incapacitated, a living trust turns into an irrevocable trust. So, getting the living trust language right the first time is important.

If you need help addressing the good, the bad, and the in-between of this tool, you found the right place.

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Why Is It Called A Living Trust?

I see a lot of people who are fearful that a trust makes life more complicated. And, I see a lot of families get scared off by fancy names like a conduit trust, grantor trust, a see through trust, or even a “complex” trust.

For now, keep it simple. Just like there are hundreds of different makes and models of cars, there are an infinite number of trusts and types. Every trust is different because every person is different.

Now is not the time to turn back. Remember, this is about keeping this simple and down to one sentence versus outlining everything that you should write.

A Living Trust versus a Revocable Trust

Generally, a living trust and a revocable trust are one in the same. However, they don’t have to be. A living trust that is revocable too is a piece of paper that allows a person to terminate or end the trust.

Living Trust versus a Inter Vivos Trust

In Minnesota, a living trust and an inter vivos trust are the same. A living person who is at least 18 years of age creates a trust during their lifetime. The trust document be revocable or irrevocable, simple or otherwise.

Reasons for a Living Trust

In Minnesota, there are many reasons why a person or couple create a living trust. As a reminder, the reasons are different for every person and family.

In no particular order, a person entertains a living trust to:

• Avoid or reduce the risk of probate,
• Prevent the government from making decisions on their behalf,
• Make life easier for a spouse,
• Serve the needs of young children,
• Tax goals,
• Serve the needs of grandchildren,
• To assign a specific trustee,
• Privacy,
• Avoid time delays,
• Land owned in more than one state, and
• Reduce conflict.

Indeed, there are more reasons for having a living trust. However, the reasons are generally specific to each person and family.

Transfering a house into a revocable trust is the process of funding the trust. When this process goes bad, mortgage payments can balloon and property can end up in the wrong hands.

To reduce these risks, there are generally 4 issues needing review before a home is moved into a revocable trust.

Even though each issues is specific to the property itself, knowing what to ask may help homeowners make longevity decisions in favor of their spouse, children, or heirs. Sometimes, even pets.

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Transfering a House: The Big 4 Plus One

Five issues every family should consider before funding a revocable trust with their home include:

• What does the Deed say?
• Is there concerning Mortgage language?
• Will an Insurance Policy get revoked?
• Which Conveyance Form should be used?
• Are there tax consequences?

To Begin, Review The Deed

Perhaps i is obvious, but looking at the current deed of a property before moving a home into a revocable trust is an important step. Of course, there are others steps, but obtaining and reviewing the deed cannot be overlooked.

Reviewing the deed is important because the deed identifies the owner and legal description.

Then, these elements should be compared with other legal documents, like a marriage license or birth certificate or the County Recorder’s Office.

If either one of these elements are wrong, likely the deed should be corrected prior to a conveyance into a revocable trust.

Review the Mortgage

The next issue is determining whether the mortgage itself, supports a transfer. This is important because of the risk concerning due on sale clause. If there is more than one mortgage, then each mortgage needs to be reviewed.

Defaulting on a mortgage for an unauthorized transfer or breaching a due on sale clause are scary scenarios to be avoided at all cost. Likely, this means involving the mortgage company and asking the lender for an approval to certain documents.

Even though there are protective rules like the Garn-St. Germain Depository Institutions Act of 1982, the rule doesn’t account for every situation.

Thus, double and triple checking the mortgage language before funding a revocable trust with a home is non negotiable.

Homeowners Insurance Problems

Yes, transfering a house into a revocable trust can cause insurance problem or a lapse in coverage. The answer to this issue is also found within long winded insurance policies.

For this reason, inquiring with the homeowner’s insurance agent or asking the insurance company to add a trustee of the trust can prevent insurance problems.

Conveyance Forms

Conveyance forms are specific pieces of paper used in Minnesota to track property transfers. Upon first glance, Minnesota has more than ten pages of possible forms. As a result, guessing is not an option.

When a revocable trust us funded with a home, many families weigh the pros and cons of a quit claim deed versus a warranty deed.

Other times, families forego a conveyance all together and seek out a Transfer on Death Deed (TODD).

As a result, transfering a home into an inter vivos trust requires reviewing which conveyance form is best.

Transfering a Home and Tax Consequences

Preventing a taxable event before transfering a residence into a revocable trust is a common goal. Before conveying real property into a trust, reviewing the tax consequences from the perspective of the Grantor, Trustee, and Beneficiary is a necessity.

Other issues to consider is the homestead creditor protection or property tax exemptions. Otherwise, here is another great resource created by the IRS.

Final Funding Thoughts for a Home

Perhaps funding a revocable trust with a house looks daunting. That said, this is all about reducing risk.

From a practical perspective, taking prudent steps to prevent problems is easier than fixing problems.

Yes, MN taxable estate laws are strict.  Unfortunately, Minnesota is 1 of 14 states (including the District of Columbia) that have an estate tax.

In 2024, the state tax exemption amount is a math problem. As you can see under Minnesota Statute 291.016, the exemption amount is $5,000,000 minus an amount based on the date of death.

Luckily, a trust can be a powerful tool in estate planning to mitigate and reduce estate taxes, providing individuals with a strategic way to preserve and transfer their wealth to future generations. Estate taxes, also known as inheritance taxes, can significantly diminish the value of an estate passed on to heirs. Establishing a trust allows individuals to navigate the complexities of tax laws and optimize their estate for tax efficiency.

Credit Shelter Trusts Reduce Tax Liability

One common way to alleviate estate taxes is through a bypass trust or credit shelter trust. This type of trust is structured to leverage the available estate tax exemptions. These trusts allow individuals to make use of their applicable exclusion amount by sheltering a portion of their estate from taxation.

Bypass or credit shelter trusts are particularly beneficial for married couples, as it helps maximize the combined exemption amount, protecting a more significant portion of their wealth from estate taxes.

Irrevocable Trusts and a MN Taxable Estate

Another type of trust used to prevent a MN taxable estate is an irrevocable living trust. Unfortunately, placing assets into an irrevocable trust relinquishes ownership and control of those assets.

That said, it effectively removes them from their taxable estate. This can result in a substantial reduction in the overall value subject to estate taxes.

Other Taxing Reasons for a Trust

In addition to minimizing the taxable estate, trusts offer flexibility in distributing assets to heirs. Specific instructions can be outlined in the trust document, ensuring that the assets are distributed according to the individual’s wishes while taking into consideration potential tax implications for beneficiaries.

It’s crucial to consult with legal and financial professionals when considering the use of trusts in estate planning. They can provide personalized guidance based on the individual’s financial situation and goals, ensuring that the trust is structured in a manner that complies with tax laws and achieves the desired tax savings.

Overall, utilizing a trust as part of an estate plan can be a strategic approach to reduce estate taxes and preserve wealth for future generations.

A Minnesota Gun Trust is a strong move for any person wishing to protect their collection from landing in the wrong hands or subjecting their family to an expensive probate proceeding.

Yes, there are legal issues to consider like trigger points for the government, the age of trustees, and making sure your successor can pass a background check.

Also, a few extra forms to satisfy.  But all in all, a worthwhile process to reduce the risk of probate and heartache.

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Number 1 Issue for a Minnesota Gun Trust

As you know, the US Department of Justice and the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“ATF”) has many rules and standards applicable to gun ownership.  

To nobody’s surprise, these same rules apply to you and your list of trustees who handle the guns.  Sometimes, the ATF refers to this person as the “Responsible Person”.

The number one issue for every person wishing to create a Minnesota gun trust is identifying a “trustee” that is authorized to take possession of the weapon(s) being transferred.   

What type of firearms can you transfer into a Minnesota Gun Trust

As a general rule, if your firearm has a serial number, you can transfer your firearm into a Minnesota Gun Trust.

If the gun does not have a serial number, then I like the idea of preparing as if it had a serial number.

Minnesota Gun Trust for antique guns

Yes, antique guns and unserviceable weapons can be transferred into a Minnesota Gun Trust too.

Forms and documents for a Minnesota Gun Trust

There are many forms and documents needed to transfer a firearm into a Minnesota Gun Trust.  Again though, filling out forms is a lot easier versus family members running to a court house to probate hunting weapons.

Here is a short non exclusive list of the forms generally needed to transfer a firearm into a Minnesota Gun Trust:

• A valid Revocable Trust,
• Certificate of Trust,
• Assignment of Firearm,
• ATF E-Form 5 (for each firearm),
• A formal list identifying all Responsible Persons,
• Finger print card (FD-258) for all Responsible Persons [order  this form versus printing it], and
• ATF Form 5320.23, which is a questionnaire for each Responsible Person (order a form for each Responsible Person).

Who is a Responsible Person?

According to the ATF, a responsible person is any person associated with an entity or an estate or an individual.

For some, this means finding a military veteran in the family. For others, a responsible person is any person who might become a trustee for your Minnesota Gun Trust.

Minnesota Gun Trust Trustee vs Responsible Person

The person in charge of an estate is called a Trustee.  A trustee for a Gun Trust is responsible for the firearms.

Yes, while a gun owner is living they are the trustee.  On the other hand, a gun owner can identify reasons when or why they  want to identify a different person as the trustee of a firearm.

On its face, I know this element seems confusing.  As a result, I find consultations are extremely valuable during this process.

What information does the ATF need from the Responsible Person?

Here is what the ATF needs from the Responsible Person:

• Full legal name,
• Social security number,
• Home address,
• Address for the last five years,
• Country of citizenship,
• Place of birth (City and State),
• Ethnicity,
• Gender, and
• Home telephone number.

Taxes to transfer a firearm into a Minnesota Gun Trust

The following types of transfers are tax exempt or less than $5 per transfer:

• Your firearm is unserviceable,
• Your firearm is being transferred to an heir or operation of law,
• Any reasons under Section 5811.

How to transfer guns into a Revocable Minnesota Gun Trust

If you need help creating a Minnesota Gun Trust, please contact this law office for help.

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The term fund revocable trust can be scary for some and annoying for others.  Unfortunately, funding laws in Minnesota keep changing.

In Minnesota, the process to transfer your assets into a revocable living trust depends on the asset. In general though, this can be outlined in a few straightforward steps.

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Fund Revocable Trust: Step 1

The first step to fund revocable trust is to make a list of your tangible assets versus intangible assets.

This law office recommends making a list of your stuff using the following categories:

• Bank Accounts
• Savings Accounts
• List of Firearms you own
• Retirement Accounts
• Real Estate
• Motor Vehicles
• Your Prized Possessions
• Business Ownership
• Debts
• Stock Options
• Intangible Assets

Of course, some categories may or may not apply to you and your situation.  

None the less, your process to fund revocable trust will be smoother if you take time to think through the property you own or have rights to.

Fund Revocable Trust: Step 2

The next step a person in Minnesota should consider when trying to fund revocable trust is to acquire copies of the following documents:

• Your “Certificate of Trust”
• Divorce records
• Life Insurance Policies
• Statements for your Retirement Accounts (IRA’s, 401(k), 403(b), etc.)
• Title(s) for your automobiles
• Copies of Deed for any property you own
• Bank Statements (checking, savings, etc.)
• Military Records (DD 214, Notice of Discharge, Disabilities)
• Social Security Statements
• Articles of Incorporation attached to any business you ave ownership in
• Records attached to your firearms
• Other documents you believe are significant.

Whether you like the idea of thinking through this like a cardboard box or otherwise, this is important to beneficiaries.

In other words, a critical step for any person having a trust is to “re-title” your assets and property such that they match the title and wishes expressed within your trust.

Fund Revocable Trust: Step 3

The third and final step for a person in Minnesota looking to fund a revocable trust is to determine who will complete the funding process.

Some seek out professional advisement to avoid pitfalls, while others prefer other methods.

Reviewing Federal Estate taxes in Minnesota is fun to explore.  OK, perhaps this topic can be daunting.  Death and taxes, right?

The intent of this article is to identify categories of Federal estate taxes many Minnesotans need help with when trying to create or manage an estate plan.

If you become lost or confused, lets not forget the significance of the self-hep section of the IRS website.  Also, seek advice from your Certified Public Accountant or CPA.  If you do not have a CPA, consider looking HERE.

Federal Estate Taxes and Gift Taxes

The first significant category of Federal Estate taxes in Minnesota are gift taxes.  Gift taxes and generation skipping transfer taxes (GST) go hand in hand.

For the purpose of this section, gift taxes and GST are being reviewed before a person dies.

The annual gift tax exclusion amount in the year 2014, 2015, and 2016 is $14,000.

Yes, the IRS imposes a gift tax for each calendar year on the transfer of property by gift from any person to another person or trust.  These types of taxes are reported on an IRS form called Form 709.  Instructions for this form can be found HERE.

3 Gifts that are not Taxed

Right now, the gift tax rate is based on the year in which the gift is transferred.  Luckily, we still have three types of gifts which are generally excluded from our taxable income:  

• Gifts to political organizations,
• Gifts of tuition made to a qualifying educational institution on behalf of an individual are not taxable, as long as the payment is made directly to the educational institution,
• And, medical expenses on behalf of an individual when paid directly to the individual or to the medical institution that provided care.

Federal Estate Taxes and Death Taxes

The second most significant category of Federal Estate taxes in Minnesota are death taxes.  For the purpose of this section, death taxes occur after a person dies.

The person most likely stuck or required to manage this element of your estate plan is your Personal Representative.  In case your personal rep does not know, death or estate taxes after a person dies are reported to the IRS using a form called Form 706.

At the date of this article, the basic exclusion amount is $5,430,000.  Spouses wishing to take advantage of significant tax benefits should consider seeking advisement.  

Estate Planning and Federal Estate Taxes

If you need help with your estate planning and are concerned with Federal Estate Taxes, contact this law office for help.

A revocable trust in Minnesota is not a document solely for the rich or wealthy.

Yes, a revocable trust is a fantastic way to reduce stress in your family and reduce the possibility of having your affairs managed by a probate court.

Minnesota has very specific rules governing trusts.  If you need help or have questions about a revocable trust in Minnesota, contact this law office for help.

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What is a Revocable Trust in Minnesota?

But wait, what is it?  Keeping it simple, a revocable trust in Minnesota is a document that acts much like a cardboard box.  A revocable trust allows you to put your “stuff” in a box and hand deliver or distribute it among your friends and family when you are no longer able to think on your own behalf or when you die.

Sticking to my box example, a revocable trust is an opportunity to move your stuff without needing a moving company like a probate court.

Still confused?  Revocable trusts in Minnesota are documents used to transfer assets to friends, family, and entities without requiring your assets to be reviewed or managed by a Court.  The use of a revocable trust keeps your distribute private and is implemented at your command.

Is a revocable trust in Minnesota complicated?

Your revocable trust can be as simple or as complicated as you desire.  For example, some people want their stuff or assets divided equally among their children or grandchildren.  Other people, like Coach Dean Smith, prefer to add details like paying for a dinner in their honor.

Yes, a person can have a revocable trust in Minnesota.  However, a “trust” can mean many different things because they are documents used to describe a specific goal or process.

Yes, the most common type of trust is a Revocable Trust in Minnesota.  However, people sometimes inquire about an irrevocable trust and or a special needs trust.  If you have questions about the differences, please contact this law office for help.

What is the hardest part about a revocable trust?

The hardest part about a revocable trust in Minnesota is funding the trust.

Continuing with the analogy above, funding a revocable trust is the actual process of placing your stuff inside the box.  Generally, a person seeks help building the box.  The person in charge of placing your stuff inside the box can be you, your accountant, an attorney, etc.

How do you fund a revocable trust in Minnesota?

I may have simplified the funding process in 3 simple steps. That said, the process depends on the asset.  

For example, adding your car to a revocable trust is different than adding a bank account to a revocable trust.

Also, a person will not necessarily put all of their assets into a Minnesota revocable trust because of tax consequences or to prevent their stuff from being distributed among other assets.

How long does it take to write a Revocable Trust in Minnesota?

The time required to draft, edit, and for a Client to formalize a revocable trust largely depends on a person’s organization.  Some people are able to identify their assets very easily while others have not visited their bank for many years.

On the other hand, if a person is experiencing a medical issue, the process to draft, edit, and formalize a revocable trust in Minnesota should be expedited.  Yes, it is very common for this law office to expedite the drafting process to accommodate the health of a Client.

How many beneficiaries can you list in a revocable trust?

Here is another wonderful benefit to a revocable trust versus not having a revocable trust – you can pick as many people (young and old) and entities (your Church, a park, scholarship fund, charitable organization, etc.) as you wish.  Also, a revocable trust helps keep your wishes private.

However, if you do not have a revocable trust, your affairs may become public upon being distributed by a probate court.

Do you need an attorney to create a revocable trust?

This law office is biased.  Yes, it is my opinion you should contact a lawyer to draft your revocable trust in Minnesota.

Given the legal rules and laws applicable to revocable trusts, keep it simple and don’t create more headaches for your family and friends.