Creating a well-thought-out estate plan is really your last gift to your family. Without such a plan, your relatives may be cursing you for the unnecessary mess that you left behind rather than having sufficient time to grieve your death and navigate ways to cope without you.
Consider these consequences if you die in Minnesota without an estate plan:
- If your spouse remarries after you’re dead, and then dies before his/her new spouse, your original assets could end up with the new spouse and your kids may get shortchanged. Solution: Establish a Trust that includes language to deal with this potential situation.
- Because estate planning and financial planning go hand-in-hand, your failure to undertake estate planning may hamper your ability to provide for your family. Solution: Meet with an estate planning attorney and a financial advisor.
- If you’re single and childless, your assets may go to your parents rather than to friends, siblings or others whom you might like to inherit your assets. Solution: Use a Will and possibly a Trust to select who will receive your assets.
- If you and your spouse die while your children are under age 18, the State of Minnesota will select a guardian for them, and you may not like the state’s choice. Solution: A Will enables you to nominate a guardian for your minor children.
- If you and your spouse are deceased, your kids will get access to all of the money and property that they inherit from you as soon as they turn age 18, and they’ll be able to spend the money however and whenever they wish. Solution: A Trust can be written to control the ages at which your children gain access to the money and property that they inherit from you. The Trust can also address uses of the money.
- If there’s a fight over family keepsakes, the keepsakes may be sold rather than divided among family members. The money from the sale doesn’t have the same emotional connection as receiving the keepsake. Solution: Minnesota law allows you to add a “separate writing” to your Will for directing who is to receive each family keepsake that you list.
- The tax bill for your estate will be as high as possible because no steps were taken to reduce tax liability. Solution: Establish a plan individualized for your situation. The Minnesota estate tax exemption for persons dying in 2017 is $1.8 million. The Minnesota estate tax exemption for persons dying in 2018 or later is is $2 million. True, you can give any amount of assets to your spouse without being subject to estate tax, but a key way to capture the Minnesota exemption for each of you — for a total of $4 million for deaths in 2018 or later — is by establishing trusts. Otherwise, only the exemption for the second spouse to die is captured. As an aside, life insurance proceeds are counted as part of your estate for purposes of figuring the estate tax even though you had to die for the proceeds to be paid out.
Your estate plan should include a Will, Health Care Directive and Durable Power of Attorney, at a minimum. As noted, a Trust may also be helpful. An estate planning attorney can review options with you and help you determine the best plan related to your goals.
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