Will Based vs. Trust Based Estate Plan (Part 1)

Have you found yourself walking away from a conversation with a friend or family member and you were convinced you needed a Will?  Or you attended one of those “free meal” seminars where you were sold on the idea that you had to have a Trust?  Navigating the options in estate planning can be frustrating and confusing for most.  Unfortunately, many of us put off completing an estate plan thinking it will just be too daunting to complete.  For purposes of our discussion today, we will focus on a Will based estate plan, which would include a Will, Power of Attorney and Health Care Directive document.

What is a Will?  A Will is a written document that is created to tell others how you want to dispose of your property and who you want to be in charge of wrapping up your estate.  You can modify or revoke your Will at any time as long as you have the capacity to do so.   To be valid in the State of Minnesota, your Will must be in writing, signed by you the “testator” and signed by at least two individuals who witnessed the testator signing the Will.  You must be at least 18 years of age and of sound mind to make a Will.  Often times the Will has an additional page where it will be “self-proved” and the testator, witnesses and notary sign indicating the testator signed willingly, is at least 18 years of age and of sound mind and under no undue influence.  It can strengthen the validity of your Will.

Your Will provides you the opportunity to:

• Name the person you want to wrap up your estate after your death who is called the executor or personal representative.  They are responsible for collecting your assets, paying final expenses from estate assets and distributing any final amounts as you’ve spelled out in your Will.
• Nominate a guardian for your minor children and provide for the establishment of a Trust after your death to provide for your children and name the Trustee.
• Provide for gifts to charities at death.
• List someone you may wish to disinherit.
• Enforce your personal property list you have written out to designate specific people to obtain your stuff.  The list may be revised or updated without the need to re-execute the Will itself.  The list can be a time saver and prevent family squabbles.
• Equalize and “gifts” or “loans” you may have made to one child during your lifetime.  Your Will would say:  my assets shall be divided equally between daughter and son, but son’s share shall be reduced by the $50,000 loaned to him.
• Wills can be especially important for people who are:

• Couples with minor children, who as noted above can name a guardian for minor children and provide for a trust setup after death for the children.
• Single persons without children, who don’t have that spouse that would be the next in line to receive the assets at your death.  You should take the opportunity to designate where your estate should go.
• Second Marriage situations, where it is often times good to spell out how you want your surviving spouse to be treated and then the final disposition of your assets, which may vary from your spouses.  For example:  Your half to your kids, your spouse’s share to her kids.
• Unmarried individuals living together, who do not have the same spousal protection as married couples do.

Wills are enforced by going through the Court process called probate.  In Minnesota, the probate process is fairly streamlined and can often be completed within a reasonable timeframe after death.  Assuming no objections by heirs, most probates are handled by default and no one has to go to Court.    Often times the biggest delay is waiting for a buyer on the real estate that is being liquidated as part of your estate, which would be the same whether there was a probate or not.

Many clients ask if the “Do It Yourself Wills” you can buy online are good enough.  Experience has shown that these check the box programs do not have the flexibility that most clients need.  A test case was done several years ago on the effectiveness of these kits and many holes were discovered.  Not only were some programs not up to date with current law changes, they failed to cover the in depth questions that only a human can ask you.

There is a certain peace of mind that comes with knowing your wishes after death, will be carried out and who will do that for you.  Failure to have a Will at the time of your passing would result in intestacy and the State of Minnesota would decide the distribution of your assets.

Read Will Based vs. Trust Based Estate Plan (Part 2).

Please send me an email at rene@breenandperson.com with any topic suggestions or requests you may have.  Although we cannot give you legal advice through the column, we can provide some general information that may be helpful for you to know.  Our purpose is to educate and we hope that you can take something new away from this column each time you read it.