Preparing for incapacity or death is never a pleasant task, but is in many cases all about making sure that events will be handled according to your wishes in circumstances where you may no longer be able to direct the process. The goal is also to ease the process for your friends and loved ones, and provide clear guidance to first responders and health care providers. For those involved with community associations, an essential step is to make sure that you have emergency contact information for all owners and tenants of residential units.
Health Care Directive. Every adult should prepare a health care directive which designates an agent to handle their health care matters upon incapacity. This can later avoid the necessity of petitioning the Court to appoint a guardian. Agents can be appointed jointly (with authority to act jointly or independently), and in succession. A Minnesota health care directive can also include a “Living Will,” which allows expression of end-of-life matters, organ donation, and handling of the remains upon death. The Directive should also be on file with the primary care clinic or physician, which the electronic filing will make available regardless of where you may be traveling.
Financial Power of Attorney. A financial power of attorney should also be executed designating an agent to handle financial affairs in case of disability. This can avoid the necessity of petitioning the court for a conservatorship in many cases. In Minnesota, the document generally is effective immediately when signed, so it is important for the client to maintain custody of the original documents.
Prepare and Update your Will. Although each state has presumptions on how to divide up an estate when there is no direction from the decedent, it is recommended that everyone have a Will. It will appoint a personal representative (executor) to handle the estate administration, direct distribution of tangible personal property, appoint a guardian for minor dependents, and provide for efficient and financially beneficial distribution of assets after death. There also can be significant income and estate tax savings in the right circumstances. A valid Will in Minnesota needs to be signed before two witnesses, and ideally is also notarized.
Establish your Domicile. This can be significant for state income tax and estate tax purposes, and has been a point of much controversy in recent years. How long you live in a particular state, where you register to vote, where you go to religious services, where you have your drivers license or insurance, where dependents attend school, and other issues can arise in determining where your domicile is for tax purposes. The Minnesota Department of Revenue looks at 26 factors.
Inventory Assets/Centralize Documents. This will assist your family and friends in handling the administration of your estate upon disability or death. The list should include your Will, bank accounts, life and health insurance policies, real estate deeds, trust documents, stocks, bonds and other securities, birth and marriage certificates and marital agreements, military discharge records, tax records, social security information, employee benefit brochures, and business agreements. The list should indicate whether you have a safe-deposit box, and if there is one, you may wish to discuss with the bank how the box can be accessed after disability or death. You also may consider listing all of your professional advisors.
Ownership/Titling. Because the titling of the asset controls its disposition after death, it is important to address the ownership and beneficiary designations. For example, if you have joint ownership or beneficiary designations already established on specific assets, those will override any provisions that you put in a Will or Trust. If you do have a Will or Trust, then you need to review the ownership and beneficiary designations to make sure they are consistent with the documents. In most cases you do not want the “estate” to be beneficiary, since this may unnecessarily generate taxes, possibly subject assets to additional claims of creditors, and require a probate proceeding to transfer title after death. The same is true if there is no joint owner or beneficiary designated.
Consider a Revocable Trust. Placing property into a revocable trust can reduce and perhaps even eliminate some of the costs, delay, and uncertainty involved in the probate process. Revocable trusts are also frequently used for tax minimization or elimination.
Arrange for Successor Management and/or Sale of your Business. If you are in business or have a professional practice, it is easier and far more profitable for you, rather than your estate’s executor, to arrange for its sale or succession. You can plan to use life insurance or business assets to possibly redeem your interest, or finance the transfer of ownership to family or key employees.
Conclusion. It is important to address these issues before it is too late to express your wishes and control the process, and it is recommended that you contact appropriate professionals to provide guidance through the process. Aside from the technical and legal issues, it is important to also address your personal and customized needs and goals, and it is highly recommended that experienced professional advisors work with the client to make sure the documents will achieve their unique wishes and needs.
Scott M. Nelson on behalf of the Estate Planning Department at Hellmuth & Johnson, PLLC
Originally published in Minnesota Community Living by CAI-MN.