What Happens to Your Frequent Flier Miles When You Die?


 If you are a frequent flier on domestic airlines, one of your many estate planning concerns might be what will happen to your accumulated miles once you have passed away. Depending on the number of miles, they could be worth thousands of dollars. In that case, you probably don’t want them to just vanish, but some airline policies say that’s exactly what will happen.

The law doesn’t generally consider airline miles personal property that can be bequeathed directly to heirs, but there are still some steps you can take to help ensure your miles live on. It all starts with examining the airline policies in question.

Airline Policies Regarding the Transfer of Frequent Flyer Miles

Some relevant policies include:

American Airlines AAdvantage: “Neither accrued mileage, nor award tickets, nor status, nor upgrades are transferable by the member (i) upon death…However, American Airlines, in its sole discretion, may credit accrued mileage to persons specifically identified in court approved divorce decrees and wills upon receipt of documentation satisfactory to American Airlines and upon payment of any applicable fees.”

Delta Airlines SkyMiles: “Except as specifically authorized in the Membership Guide and Program Rules or otherwise in writing by an officer of Delta, miles may not be . . . transferred under any circumstances, including…upon death…”

Southwest Airlines Rapid Rewards: “Points may not be transferred to a Member's estate or as part of a settlement, inheritance, or will. In the event of a Member’s death, his/her account will become inactive after 24 months from the last earning date (unless the account is requested to be closed) and points will be unavailable for use.”

United Airlines MileagePlus: “In the event of the death or divorce of a Member, United may, in its sole discretion, credit all or a portion of such Member’s accrued mileage to authorized persons upon receipt of documentation satisfactory to United and payment of applicable fees.”

It is clear that policy terms vary, and they may vary even when talking with different airline agents. Airfarewatchdog.com has found discrepancies between written policies and what customer service representatives told them over the phone. Here is the chart published by Airfare Watch Dog. You can see their excellent chart here.

 The New York Times also highlighted this issue with an article summarizing their findings here: New York Times - Airline Miles Afterlife.

How to Transfer Miles After Death

The key point is that even though airline policies may say they don’t permit miles transfers after death, employees often have the discretion to approve them. Despite this, there is no way to know whether your airline will work with your loved ones regarding the transfer of your miles after you are gone.

One way to better ensure your miles get transferred is to include a provision in your will or trust that makes your wishes clear. This step is especially important if your airline requires a copy of a will as documentation, but it can be helpful in any event.

Another option is to leave your account number, login and password to the person you would like to be able to use your miles. Some airlines permit such transfers and usage of miles after the account holder’s death.

In either scenario, you should talk to your loved ones about your intentions, so they know to pursue the issue in your absence.

Lastly, if you’re the one trying to claim miles of a deceased person, you should understand the airline’s policies before offering information about the account holder’s death, as the account could be cancelled immediately, leaving you with no recourse.

Final Thought on Frequent Flyer Miles: Use ‘Em or Lose ‘Em

Frequent flyer policies can change at the whim of the airlines even as you are living, so another idea to keep in mind is to use the miles now and create experiences with your loved ones rather than plan to pass the miles on later.

If you have any concerns about frequent flyer miles, contact our office, and always be sure to include all your assets, even your airline miles accounts, when discussing wills, trusts, and estate plans with your attorney.

Zach Wiegand is a Burnsville, Minnesota estate planning attorney who also handles probate in Dakota County and other counties in the greater Twin-Cities area. Zach is the owner of Gold Leaf Estate Planning, LLC, which is a Minnesota estate planning law firm that handles probate and trust administration in Minnesota. Zach was named a 2017 Minnesota Super Lawyer – Rising Star and he is a member of WealthCounsel – a national organization of estate planning attorneys dedicated to practice excellence. You can contact Zach via e-mail at zach@goldleafestateplanning.com or by calling (952) 658-6503. Gold Leaf Estate Planning is located in Burnsville at 3000 County Road 42 W., Suite 310, Burnsville, MN 55337.


How to Include Grandkids in Your Estate Planning


As wealth is accumulated, there is a natural desire to pass that financial stability to your family. With the grandkids, especially, there is often a special bond that makes people want to provide well for the grandkids’ future. However, that bond can actually turn into a weakness if proper precautions aren’t set in place. If you’re planning to include the grandchildren in your will or trust, here are six potential dangers to watch for, and ways you can avoid them.

1. Not including an age stipulation.

We have no idea how old the grandchildren will be when we pass on. If they are under 18, or if they are financially immature when you die, they could receive a large inheritance before they know how to handle it, and it could be easily wasted.

Avoid this pitfall: Create a long-term trust for your grandchildren that provides continued management of assets regardless of their age when you pass away.

2. Too much, too soon.

Even if your grandkids are legally old enough to receive an inheritance when you pass on, if they haven’t learned enough about handling large sums of money properly, the inheritance could still be squandered rapidly.

Avoid this pitfall: Outright or lump-sum distributions are generally not advisable. Luckily, there are many options available, from staggered distributions to leaving their inheritance in a lifetime, “beneficiary-controlled” trust. An experienced estate planning attorney can help you decide the best way to leave your assets.

3. Failing to communicate how you would like them to use the inheritance.

You might trust your grandchildren completely to handle their inheritance, but if you have specific intentions for what you want that inheritance to do for them (e.g., put them through college, buy them a house, help them start a business, or something else entirely), you can’t expect it to happen if you don’t communicate it to them in your will or trust.

Avoid this pitfall: Stipulate specific things or activities that the money should be used for in your estate plan. Clarify your intentions and wishes.

4. Being ambiguous in your language.

Money can make people act in strange ways. If there is any ambiguity in your will or trust as to how much you’re leaving each grandchild, and in what capacity, the door could be opened for greedy relatives to contest your plan.

Avoid this pitfall: Be abundantly clear in every detail concerning your grandchildren’s inheritance. An experienced estate planning attorney can help you clarify any ambiguous points in your will or trust.

5. Using your retirement.

Many misguided grandparents make the mistake of forfeiting some or all of their retirement money to the kids or grandkids, especially when a family member is going through some sort of financial crisis. Trying to get the money back when you need it might be difficult or impossible.

Avoid this pitfall: Resist the temptation to jeopardize your future by trying to “fix it” for your grandchildren. If you want to help them now, consider giving them part of their inheritance in advance, or setting up a trust for them. But, always make sure any lifetime giving you make doesn’t leave you high and dry. Also, advancements can, and often should, be accounted for in your estate planning. If you give assets during your life to one grandchild but not another, and you fail to account for it in your plan, the grandchild who did not receive a lifetime gift may contest your plan. Again, speaking with an experienced estate planning attorney can help you navigate these treacherous waters.

6. Failing to Protect Your Children's Inheritance from Divorce and Other Creditors.

Often times, grandparents hope that the inheritance left to their children will trickle down to the grandkids. In our society, where divorce is commonplace, all too often inheritances are lost to divorce settlements because beneficiaries commingle their inheritance with "marital" assets. It is also not uncommon for inheritances to be lost to that beneficiary's creditors or judgments.

Avoid this pitfall: An experienced estate planning attorney can devise strategies to protect your beneficiaries' inheritance from divorce, creditors, bankruptcy, and other law suits and judgments by using spendthrift clauses and other provisions in trusts set up for your children. Doing so will result in a higher probability that your assets trickle down to the grandchildren eventually.

If you’re planning to put your grandchildren in your will or trust, we’re here to help with every detail you need to consider. Contact us to explore your options and protect your family.

Zach Wiegand is a Burnsville, Minnesota estate planning attorney who also handles probate in Dakota County and other counties in the greater Twin-Cities area. Zach is the owner of Gold Leaf Estate Planning, LLC, which is a Minnesota estate planning law firm that handles probate and trust administration in Minnesota. Zach was named a 2017 Minnesota Super Lawyer – Rising Star and he is a member of WealthCounsel – a national organization of estate planning attorneys dedicated to practice excellence. You can contact Zach via e-mail at zach@goldleafestateplanning.com or by calling (952) 658-6503. Gold Leaf Estate Planning is located in Burnsville at 3000 County Road 42 W., Suite 310, Burnsville, MN 55337.

The Positive and Negative Aspects of Probate


In the estate planning world, the word “probate” often comes with a harshly negative undertone. Indeed, for many people — especially those with larger estates — financial planners and estate planners recommend trying to keep property out of probate whenever possible. That being said, the probate system was actually established to protect the property of the decedent and his/her heirs, and in a few cases it may even work to an advantage. In this article, we will look briefly at the pros and cons of going through probate.

The Pros of Probate

For some estates, especially those in which no will was left, the system works to make sure all assets are distributed according to state law. Here are some potential advantages of probating an estate:

●     It provides a trustworthy procedure (and Court oversight) for redistributing the property of the decedent if no will was left.

●     It validates and enforces the intentions of the decedent if a will exists.

●     It ensures taxes and valid claimed debts are paid on the estate, so there’s a finality to the decedent’s affairs, rather than an uncertain, lingering feeling for the beneficiaries.

●     If the decedent was in debt, probate gives only a brief window (4 months in Minnesota) for creditors to file a claim, which can result in more debt forgiveness.

●     Probate can be advantageous for distributing smaller estates in which estate planning was unaffordable or impractical.

The Cons of Probate

While probate is intended to work fairly to facilitate the transfer of property after someone dies, consider trying to avoid probate for these reasons:

●     Probate is a matter of public record, which means personal family and financial information become public knowledge.

●     There may be considerable costs, including court, attorney, and executor fees, all of which get deducted from the value of the estate. This means less money goes to your family and more money goes to those individuals listed above.

●     Probate can be time-consuming, holding up distribution of the assets for months, and sometimes, years. In Minnesota, I tell clients to expect a minimum of 8 months, including 4 months of simply waiting for the creditor claims period to expire. You also have to wait 2 weeks while notice of the probate hearing is published in the local newspaper.

●     Probate can be complicated and stressful for your executor and your beneficiaries.

●     Because probate is a court proceeding, it can lead to a more convenient avenue for a disgruntled beneficiary to object to the decedent’s wishes in his or her will.

Bottom line: While probate is a default mechanism that ultimately works to enforce fair distribution of even small estates, it can create undue costs, delays and can invite disputes among heirs. For that reason, many people prefer to use strategies to keep their property out of probate when they die.

A skilled estate planning attorney can develop a strategy to help you avoid probate and make life easier for the next generation. For more information about your options, contact us today to schedule a consultation.

Zach Wiegand is a Burnsville, Minnesota estate planning attorney who also handles probate in Dakota County and other counties in the greater Twin-Cities area. Zach is the owner of Gold Leaf Estate Planning, LLC, which is a Minnesota estate planning law firm that handles probate and trust administration in Minnesota. Zach was named a 2017 Minnesota Super Lawyer – Rising Star and he is a member of WealthCounsel – a national organization of estate planning attorneys dedicated to practice excellence. You can contact Zach via e-mail at zach@goldleafestateplanning.com or by calling (952) 658-6503. Gold Leaf Estate Planning is located in Burnsville at 3000 County Road 42 W., Suite 310, Burnsville, MN 55337.

What To Do When a Loved One Dies


If you've been appointed as personal representative (formerly known as an executor) of a loved one's estate, or a successor trustee, and that person dies, your heartache – not to mention your to-do list, including tasks ranging from planning the funeral service, coordinating relatives coming in from out of town and eventually meeting with a trust administration or probate lawyer – can be quite overwhelming. First and foremost, you need to take care of yourself during this emotional time.

To help you with the “business” side of things, here’s a quick checklist of crucial details that will make the trip to our office to handle the legal affairs easier. We know it can be difficult, but some of these things have a deadline, so make sure that you reach out sooner rather than later:

●     Secure the decedent's personal property (vehicle, home, business, etc.).

●     Notify the post office.

●     Get copies of the death certificate. You'll need them for some upcoming tasks.

●     Notify the Social Security office.

●     Take care of any Medicare details that need attention.

●     Contact the decedent's employer to find out about benefits dispensation.

●     Stop health insurance and notify relevant insurance companies. Terminate any policies no longer necessary. You may need to wait to actually cancel the policies until after you’ve “formally” taken over the estate, but you can often get the necessary paperwork started before that time.

●     Get ready to meet with a qualified probate and trust administration attorney. Depending on the circumstances, a probate may be necessary. In Minnesota, probate is necessary if the decedent owned real estate in his/her name alone OR if the decedent owned assets in his/her name alone that total more than $75,000.

●     Even if a probate is not needed, there is work that needs to be done to administer the trust properly. Here’s what you need to gather:

1.    The decedent’s will and trust. If the original of the deceased’s will or trust can’t be located, contact us as soon as possible and bring any copies you do have.

2.    A list of the decedent’s bills and debts. It’s often easier to bring the statements or the actual credit cards into the office rather than try to write out a list, but do whatever is easiest for you.

3.    A list of the decedent’s financial advisors, insurance agent, tax professional, and other professional advisors.

4.    A list of the decedent’s surviving family members, including their contact information when available. Even if they’re not named in the trust, the attorney will need to know about everyone in the family.

●     Cancel your loved one's driver's license, passport, voter's registration, and club memberships.

●     Close out email and social media accounts, and shut down websites no longer needed. Depending on circumstances, to take these steps, you may need to wait until you’ve “formally” taken over the estate, but you can often learn the procedures and be ready to take action.

●     Contact your tax preparer.

You may be thinking about handling all the paperwork yourself. It’s a tempting thought – why not keep things as simple as possible? – but a “DIY” approach to this process might cost you and your family dearly. Read on to understand why.

Consequences of Mishandling an Estate: Examples from Real Life

Example #1: Failing to disclose assets to the IRS. Lacy Doyle, a prominent art consultant in New York City, inherited a large estate when her father passed away in 2003. He allegedly left her $4 million, but she only disclosed fewer than $1 million in assets when she filed the court documents for the estate. Per the New York Daily News: “She opened an ‘undeclared Swiss bank account for the purpose of depositing the secret inheritance from her father’ in 2006 — using a fake foreign foundation name to conceal her identity… [she also] didn't report her interest in the hidden accounts — nor the income they generated — from 2004 to 2009.” As a result of these alleged mischiefs and Doyle’s failure to report the accounts to the IRS, she was arrested, and she now faces a six-year prison sentence.

Example #2: Mishandling an estate during life using a power of attorney. Another famous case of an improperly handled estate involved the son of famous New York philanthropist and writer, Brooke Astor. Her son, Anthony Marshall, was convicted of misusing his power of attorney and other crimes. According to a Washington Post obituary: “In 2009, Mr. Marshall was convicted of grand larceny and other charges related to the attempted looting of his mother’s assets while she suffered from Alzheimer’s disease. He received a sentence of one to three years in prison but, afflicted by congestive heart failure and Parkinson’s disease, was medically paroled in August 2013 after serving eight weeks.”

Example #3: Naming Your Butler as Personal Representative. Doris Duke was the heiress to a 1.3 billion dollar tobacco fortune. When she died in 1993, she left a great majority of her estate to her charitable foundation established through her will and trust. Rather than naming a qualified professional to handle her foundation, she named her butler, Bernard Lafferty, as the executor. Lafferty was an alcoholic and an improvident spender and he routinely commingled his own personal assets with the assets of the estate despite being entitled to a $500,000 per year annual payment from the estate. The legal challenges came flooding in and the estate paid over $10 million dollars in legal fees following an eventual settlement with Lafferty agreeing to step down as executor. You can read more here.

Keys for Handling a Probate

1.    Seek professional advice from a probate attorney to avoid even the appearance of impropriety when handling an estate.

2.    Errors of omission or accident can be costly – even if your intent was good. An executor who makes distributions from an estate too soon can get into serious trouble, for instance. An executor’s personal assets can wind up in jeopardy if his or her actions cause an estate to become insolvent.

3.    Even if you’re well organized and knowledgeable about probate law, it’s difficult to anticipate what can go wrong. There are many ways to end up in hot water when you’re handling the estate or trust of a loved one.

We are here to help you steer clear of the obstacles and free you to focus on yourself and your family during this difficult time. Contact us for assistance. We can help you manage estate and trust related concerns as well as point you towards other useful resources like our free e-guide: Checklist After Death - What to Do Following the Death of a Loved One. Contact our office today at (952) 658-6503 for assistance with administering an estate of a loved one.

Zach Wiegand is a Burnsville, Minnesota estate planning attorney who also handles probate in Dakota County and other counties in the greater Twin-Cities area. Zach is the owner of Gold Leaf Estate Planning, LLC, which is a Minnesota estate planning law firm that handles probate and trust administration in Minnesota. Zach was named a 2017 Minnesota Super Lawyer – Rising Star and he is a member of WealthCounsel – a national organization of estate planning attorneys dedicated to practice excellence. You can contact Zach via e-mail at zach@goldleafestateplanning.com or by calling (952) 658-6503. Gold Leaf Estate Planning is located in Burnsville at 3000 County Road 42 W., Suite 310, Burnsville, MN 55337.

Are Handwritten Wills and Instructions Enforceable?


Princess Diana of Wales was one of the world’s most beloved celebrities – and one of the wealthiest.  Her tragic death in 1997 was world news. The majority of her estate, reportedly worth $40 million at the time of her death, was divided between Prince William and Prince Harry in her estate plan. 

However, Princess Diana also wrote a “letter of wishes” that directed her executors to give a number of personal effects to her godchildren. Those executors, her mother and her sister, went to court and had her letter of wishes ruled unenforceable. 

Holographic Wills – Sometimes Enforceable, Often Not

Princess Diana’s letter of wishes is similar to what’s known as a “holographic” will in the United States. In its most simple terms, a holographic will is a handwritten document which may or may not have to be signed. 

State laws vary on whether holographic wills can be enforced and how they must be prepared.  Approximately half of U.S. states allow them and those states that do require the matter to be probated. Some of the issues which frequently arise concerning holographic wills include:

·Validity. Did the decedent write the will? In contested cases, handwriting experts are often used to determine validity through comparison with prior handwriting samples.

·Undue Influence. Was the decedent unduly influenced to create the will? That’s difficult to prove – or disprove – as a holographic will does not have to be witnessed. In Minnesota, a will contestant must prove that the improper influence operated at the very time the will was signed and dominated and controlled its execution. If no witnesses are around, clearing this burden of proof becomes nearly insurmountable.

·Intentions. Does the will accurately describe the decedent’s intentions? Again, without witnesses (creating an actual last will and testament requires two in Minnesota), that becomes difficult to answer.

The question becomes – if you believe that no one will contest your holographic will, should you skip the lawyers altogether? The answer is NO.

Don’t Subject Your Wishes to Inquiry or Scrutiny

The whole purpose of creating a document, any document, which spells out your intentions upon death is to make it enforceable. Although last will and testaments still go through probate, they provide the court with a signed and witnessed document which is likely to reflect your intentions. Holographic wills are less likely to hold up in court and will be subject to a great deal more scrutiny.

The bottom line is that creating a will, a trust, or any other type of estate planning document is easy – when handled by an estate planning attorney. In effect, the process is simple and consists of having a conversation about your intentions, listing assets, and creating a legal document which will carry those intentions out. Unfortunately, Princess Diana’s godchildren received nothing. Don’t let someone else decide what you did, or did not, intend. 

Contact our office now and we’ll show you which types of estate planning documents are best for you and your goals.

The IRS Took Nearly Half of James Gandolfini’s Estate: Don’t Fall into the Same Trap!

Celebrity Estate Planning - James Gandolfini

Actor and producer, James Gandolfini was famously known as the implausibly likeable mafia man Tony Soprano on the long running HBO series, The Sopranos. On the show, Tony Soprano went to great lengths to protect his family. In real life, Gandolfini’s family really did mean everything and he had the best intentions when it came to providing for them. He had a will prepared by his attorney, which you can read here.  

However, he made a classic mistake by failing to take advantage of tax incentives, legal protections and opportunities. The Internal Revenue Service (IRS) ended up taking nearly half of his estate. Don’t fall into the same trap.

An Estate Planning Attorney Could Have Saved Gandolfini Millions

When Gandolfini died suddenly in 2013, his estate was an estimated $70 million. In addition to leaving $1.6 million to friends and relatives through specific gifts and bequeathing properties and land in Italy to his kids, his will was relatively straight forward. He provided:

·         30% to one sister

·         30% to another sister

·         20% to his wife

·         20% to his daughter

·         Separate trusts for his wife and his 13-year-old son

Although he was very generous to his two sisters, his plan failed to take advantage of some key tax incentives and opportunities. The only part of Gandolfini’s estate that was protected was the 20% that he left to his wife which qualifies for an unlimited marital deduction. An estate planning attorney could have saved millions of dollars that would have gone to his family instead of Uncle Sam.

It’s Not Always About Taxes

A closer look at Gandolfini’s estate, however, reveals that his probate estate was only one small piece to the puzzle. His will references that he made “other provisions” for his second wife, Deborah Lin. His will also references that he did not provide a specific share to his son Michael because he had made other provisions for him. Those “other provisions” were life insurance proceeds amounting to 7 million dollars. That trust was established as part of Gandolfini’s divorce settlement from his first marriage.

Lastly, Gandolfini’s probate estate was listed as not exceeding 10 million dollars. This accounts for only one-seventh of the estimated 70 million dollar estate. This means that non-probate transfers account for the other 60 million dollars. While it is unclear what the remainder of his estate plan looked like, the point is that not all estate plans are tax-motivated. Gandolfini likely was balancing competing interests and emotions of having a blended family. It is clear he wished to provide for his sisters in addition to his spouse, his daughter from his second marriage, and his son from his first marriage. Just as lives can get messy, estate plans can become complicated when accounting for these various factors.

3 Ways an Estate Planning Attorney Can Help You

It’s clear that anyone with an estate value equal to that of Gandolfini should have a knowledgeable estate planning attorney. However, you need a good estate planning attorney, too. Here are three ways an estate planning attorney can help you:

1.      Assess your current financial situation. Many people don’t fully understand what they have – or how to value it. A good planner always starts by reviewing your assets and income, liquid and illiquid assets, wills, insurance coverage, and estate and retirement planning documents currently in place;

2.      Identify your goals. Identifying your goals and taking your current needs into account provides the foundation for a solid estate plan structure;

3.      Develop a plan. Developing an estate plan is where we can really make a difference – especially in:

· Explaining how estate planning documents work

· Weighing the pros and cons of each of those documents

· Identifying tax issues and taking advantage of incentives and opportunities

· Creating a “network” with other professionals such as CPAs, insurance professionals, and financial advisors

Best of all, an estate planning attorney can keep you on track by periodically reviewing your estate plan, advising you when to update your estate planning documents, and steer you in the right direction to avoid having your assets taken by the IRS.

Although it appears Gandolfini had more of an estate plan than initially reported by the tabloids, it is also apparent that he could have saved a boatload on taxes with alternative planning. Protect your family by working with an experienced estate planning attorney. Contact our office today if you would like to schedule an appointment.

If you are interested in reading more about the Gandolfini estate planning, here are links to several interesting articles:

James Gandolfini's Will a "Tax Disaster" says top Estate Lawyer

Here is a Copy of James Gandolfini's Will

Interesting Blog from Attorney James Radig in Iowa regarding Gandolfini's Estate Planning

Copy of the Petition for Probate for Gandolfini

James Gandolfini's $30 million Tax Mistake     

Zach Wiegand is a Burnsville, Minnesota estate planning attorney who also handles probate in Dakota County and other counties in the greater Twin-Cities area. Zach is the owner of Gold Leaf Estate Planning, LLC, which is a Minnesota estate planning law firm that handles probate and trust administration in Minnesota. Zach was named a 2017 Minnesota Super Lawyer – Rising Star and he is a member of WealthCounsel – a national organization of estate planning attorneys dedicated to practice excellence. You can contact Zach via e-mail at zach@goldleafestateplanning.com or by calling (952) 658-6503. Gold Leaf Estate Planning is located in Burnsville at 3000 County Road 42 W., Suite 310, Burnsville, MN 55337.

Estate Planning Glossary

Below is a compilation of estate planning terminology that is often used by estate planning attorneys. This is not intended as legal advice. You should speak with an experienced estate planning attorney when determining which options make the most sense for you and your family's individual needs.

Annual Gift Exclusion: This is the amount that someone can give to another person during the calendar year without having to pay gift tax. Under IRC Sec. 2503 the annual gift exclusion is $10,000, but that amount is inflation adjusted periodically. For gifts in 2014-2017 the annual exclusion is $14,000 per beneficiary. Annual gift exclusion amount increases typically get posted by the IRS in a publication in late Q3 or early Q4 each year, but they are adjusted on a different basis than the AEA.

Applicable Exclusion Amount (AEA): This is the amount that someone can leave to their heirs free of estate tax. For decedents dying in 2017, the applicable exclusion amount is $5,490,000. AEA increases typically get posted by the IRS in a publication in late Q3 or early Q4 each year.

Basis: Is the tax value of an asset, usually measured by the date on which the asset was acquired. Capital Gains tax is paid based on the increase in value (gain) from the owner’s basis to the value when the asset is sold. For example, if you pay $10 for something and it increases over time to $100, you have a basis of $10 and a “capital gain” of $90. If you sell the asset, you pay capital gains tax based on that $90.

  • Carry-Over Basis: If you give that property away during your life, the person who receives it has the same basis you had. This is “carry-over” basis. So if they sell it for $100, their basis is still $10 and they pay the tax on the $90 gain. Carry-over basis is generally undesirable, because the person who sells the asset has to pay the capital gains tax liability based on the original owner’s “carried over” basis.
  • Step-Up Basis: If you die with an asset that has increased in value and it goes to someone, that person generally gets a “step up” in basis to the value measured at your date of death. Assume again that the asset you bought for $10 increases to $100 by the time you die. After you die your kids receive the asset from your estate (valued at $100), and they then sell the asset for $100. Your kids have taxable capital gain of $0 because their basis got “stepped up” in your estate when you died. Estate planning strategies that target basis adjustment seek to eliminate carryover basis and give step up basis to your beneficiaries.

Beneficiary: This is the person, entity, or group for whom a trust is established. A beneficiary may be a present interest beneficiary, entitled to receive distributions from a trust right now, or a future interest beneficiary, entitled to receive distributions at some point in the future. They may also be vested, where their rights under the trust cannot be taken away, or contingent, where their rights are still subject to conditions that may or may not occur in the future.

Bypass / Credit Shelter Trust: This is the portion of the deceased spouse’s property that gets charged against the decedent’s AEA (Applicable Exclusion Amount; see that definition). The bypass trust can provide benefits for the surviving spouse or other beneficiaries (or a combination) and typically is designed so that it’s not included in the surviving spouse’s estate when he or she later dies.

CLT: Charitable Lead Trust: With charitable lead trusts the donor can donate an asset's income stream for a period of years to a charity instead of the remainder interest. The remainder interest can then pass to a private party under the direction of the grantor (i.e. grandchild, child, etc.)

CLAT: Charitable Lead Annuity Trust. Here the Settlor establishes a trust and names a charity to receive an annuity amount from the trust for a specified amount of time (the “initial term”). At the end of the initial term the remainder pays back to the Settlor or to other noncharitable beneficiaries named in the trust.

Clayton Election: This is a very popular method of determining the amount of a deceased spouse’s estate that will be set aside for the surviving spouse. The name is based on the case, Estate of Clayton v. Commissioner, 97 T.C. 327 (1991). It requires a trustee or personal representative to decide during the trust administration how big the marital deduction should be. The property set aside for the marital deduction gets transferred to the marital trust, which is set up as a QTIP trust. A 706 (Federal Estate Tax Return) is required to notify the IRS of the QTIP election and disclose the amounts going into the marital QTIP and bypass trusts. The Clayton election is a very flexible marital deduction planning tool and is most desirable for clients who have moderate to nearly-taxable estates, or in times of significant uncertainty in the estate tax.

CLUT: Charitable Lead Uni-Trust.  Here the Settlor establishes a trust and names a charity to receive a percentage of the trust’s value for a specified amount of time (the “initial term”). At the end of the initial term the remainder pays back to the Settlor or to other noncharitable beneficiaries named in the trust.

Community Property; CP States: Community Property refers to property acquired by a couple during marriage, or property that is combined - or commingled - between spouses. It only applies in nine states (the “community property states”): Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Alaska and Tennessee have optional, or elective community property laws, allowing married couples to elect to have jointly-held property treated as community property. The biggest benefit of community property is that the entire value of the property gets a basis adjustment (step up; see that definition) when one of the spouses dies. So if a surviving spouse sells community property after the death of their spouse, the capital gain is based on the increase in value from the first spouse’s death (where the basis got adjusted on both spouses’ shares) to the value at the date of the sale. This allows the survivor to save money on capital gains tax liability.

Community Property Trust (Alaska or Tennessee): This is a special type of joint revocable trust that takes advantage of special laws in Tennessee and in Alaska that allow people to opt in to the state’s favorable community property laws. The value behind the strategy is to allow a married couple to get a “double step-up” in basis - a step up in the deceased spouse’s property AND in the surviving spouse’s property - when the first spouse dies. (This is a unique feature of community property law, and TN and AK allow people who live in separate property states to elect into community property treatment using these strategies.)

CRAT: Charitable Remainder Annuity Trust. A Settlor establishes this trust and puts property in, keeping the right to receive an annuity payment from the trust for an initial term - either for a term or years or for the Settlor’s life. After the initial term the amount remaining in the trust (the “remainder”) is distributed to a charity named in the trust.

CRT: Charitable Remainder Trust: This is a tax-exempt irrevocable trust designed to reduce the taxable income of individuals by first dispersing income to the beneficiaries of the trust for a specified period of time and then donating the remainder of the trust to the designated charity. The whole idea of a charitable remainder trust is to reduce taxes. This is done by first donating assets into the trust and then having it pay the beneficiary for a stated period of time. Once this time-frame expires, the remainder of the estate is transferred to the charities deemed as beneficiaries.

CRUT: Charitable Remainder Uni-Trust. A Settlor establishes this trust and puts property in, keeping the right to receive a percentage, or unitrust amount, of the trust assets for an initial term - either for a term of years or for the Settlor’s life. After the initial term the amount remaining in the trust (the “remainder”) is distributed to a charity named in the trust.

DAPT: Domestic Asset Protection Trust. This is a type of irrevocable trust that allows a person to set aside assets in trust and protect those assets from creditor claims. The DAPT is established under the laws of a state that has favorable asset protection laws. There is an increasing number of states that have DAPT statutes. Delaware, South Dakota, Alaska, and Nevada are all states with DAPT statutes.

Decanting: This is the process by which a trustee exercises the power to distribute property from one trust (the “originating” trust or the “inception” trust) into a new trust for the benefit of a beneficiary. Decanting is an increasingly popular strategy to allow a trustee to create new, more favorable trust terms for a beneficiary. A trustee can only exercise a decanting power consistent with the trustee’s fiduciary duties to the beneficiaries.

Delaware Tax Trap (DTT): Refers to the process of exploiting the Rule Against Perpetuities (RAP) provision in a trust by allowing a beneficiary to exercise a limited power of appointment in a way that extends the original RAP in the trust. The upshot is that the person who exercises the power causes the property subject to the power to be included in their estate (getting a basis adjustment) when they die. The DTT "loophole" is found in IRC sec. 2041(a)(3) when someone who holds a limited power of appointment exercises it in a way that "...postpone[s] the vesting of any estate or interest... or suspend[s] the absolute ownership or power of alienation of [the interest]... for a period ascertainable without regard to the date of the creation of the power." This is a complicated way of saying that, if someone who holds a limited power of appointment exercises that power to give someone else a presently-exercisable general power of appointment, the person who exercised the limited power of appointment will have estate inclusion over the property for which the PEG power was granted to the other person.

Disclaimer: A disclaimer is a legal “no thank you.” It’s a technique under IRC Sec. 2518 that allows someone who is entitled to receive property to disclaim that property, allowing it to be distributed somewhere else. In the context of marital deduction planning, the disclaimer method allows the surviving spouse to disclaim property into a bypass trust, providing some flexibility in marital deduction planning.

DSUEA: Deceased Spouse Unused Exemption Amount. This is the amount of AEA that is leftover after the estate plan has allocated part of a deceased spouse’s estate exemption to a bypass trust.

  • Husband dies in 2017 and has $1,000,000 in his gross estate. His estate plan is designed in a way that allocates his AEA against that $1,000,000, causing that amount to be put into a bypass trust. Assuming he had made no other gifts that would reduce his AEA, after his estate plan goes into effect he has a remaining unused exclusion of $4,490,000 (his $5,490,000 AEA minus the $1,000,000 put into the bypass trust). His surviving wife now has her own AEA of $5,490,000 plus husband’s $4,490,000 DSUEA, for a combined estate tax exclusion of $9,980,000. Surviving spouse will need to make a portability election on a timely-filed estate tax return.

Executor / Personal Representative: This is the person who is named in a will to administer the estate of a deceased person. The trustee administers the trust; the executor or personal representative administers the probate estate.

FAPT: Foreign Asset Protection Trust. This is another form of an asset protection trust that is established under the laws of a foreign country that has even more favorable asset protection for clients. Nevis, the Cook Islands, and other remote countries are popular choices.

Fiduciary: This describes the nature of a relationship where one party owes a series of duties to another party and is held legally responsible for the outcomes of their actions.

Trustees are fiduciaries of trusts, owing duties to the beneficiaries

  • Executors are fiduciaries of wills, owing duties to the beneficiaries
  • Guardians and conservators are fiduciaries, owing duties to the ward
  • Agents and attorneys-in-fact are fiduciaries, owing duties to the principal under a Power of Attorney
  • Health Care Agents are fiduciaries, owing duties to the maker of a Health Care Directive
  • Trust protectors may or may not be fiduciaries, depending on the nature of the power that they’re given.

Funding: This is the process of transferring property to the trust. The trust must hold title to property in order for it to work -- just like a car needs fuel to run. Funding should take place during the trust maker’s lifetime. If there is any property that has not been funded to the trust (and has not designated the trust as beneficiary) when the client dies, that property must generally go through state probate proceedings before anyone can do anything with that property.

GPOA: General Power of Appointment. This is a power that is reserved by a trust maker or given to someone else to direct how property in a trust gets distributed. General powers of appointment are included in the power holder’s estate under IRC sec. 2041(b)(1). To be a “general” power of appointment, the person holding the power must be able to appoint the property to any one of the following four:

·         Themselves

·         Their estate

·         Their creditors, or

·         The creditors of their estate

Grantor / Settlor / Trust Maker: These terms are generally synonymous, though there are subtle, technical differences. In general, they refer to the individual who establishes a trust. Think of it this way: The Settlor / Trust Maker establishes the trust and determines how the trust will operate. The Grantor (a technical tax term) puts his or her property into the trust. (Thus, the Grantor and Settlor-Trust Maker is usually the same person.) The trustee manages and administers the trust for the benefit of the beneficiary or beneficiaries.

GRAT: Grantor Retained Annuity Trust. A GRAT is a sophisticated gifting & wealth transfer strategy based on a special type of irrevocable trust. The Settlor establishes the trust and puts property in, and takes back an annuity (calculated as a dollar amount) for a specific amount of time based on the value of the property in the trust. After the annuity period ends the GRAT pays to other beneficiaries.

GRIT: Grantor Retained Income Trust. A GRIT is similar to a GRAT except that the Settlor receives the income stream from the trust assets, rather than a fixed annuity amount from the trust for a specified period of time. After the initial term ends the GRIT pays to other beneficiaries.

GRUT: Grantor Retained Uni-Trust. A GRUT is similar to a GRAT but instead of taking out an annuity interest the Settlor receives a percentage of the trust (called a unitrust amount) for a specific amount of time based on the value of the property in the trust. After the initial term ends the GRUT pays to other beneficiaries.

Guardianship / Conservatorship:  These are the court proceedings that are undertaken when an individual lacks the legal capacity to make decisions for themselves or otherwise protect their own interests. That lack of legal capacity can be due to mental or physical illness, injury, or because the person is a minor child. A guardian or conservator is a fiduciary appointed by the court to make decisions on behalf of the disabled person (who is called the “ward”). That fiduciary must provide periodic accountings to the court and the guardianship or conservatorship continues until the ward (disabled person) dies or is no longer under the legal disability. Durable powers of attorney and trust-oriented planning helps avoid guardianship or conservatorship proceedings.

IDGT: Intentionally Defective Grantor Trust. This is a form of irrevocable trust that gets the value of the trust assets out of the client’s estate but allows the client to continue to be treated as the owner for income tax purposes only. One of the main advantages is that the (often wealthy) client can add value to the trust by paying the income tax that is due on the income in the trust without those tax payments being treated as additional taxable gifts to the trust. Also, it gets the trust out of the more aggressive income tax rate tables that apply to trusts.

ILIT: Irrevocable Life Insurance Trust. This is a very popular form of irrevocable trust that is designed to own high-value life insurance. A client establishes an ILIT and pays enough money into the trust to allow the trustee to buy life insurance on the life of the client (and often, the client’s spouse). When the insured person dies, the death benefit of the life insurance is paid into the trust but is not included in the gross estate of the client (thus keeping it away from estate tax liability).

Intestate / Intestacy: This describes the condition of someone who dies without having a will or trust in place. If you don’t do your estate planning your property will pass through the laws of intestacy in the state where you resided. The laws of intestacy vary from state to state and are set forth in state statutes.

IRT: Irrevocable Living Trust. A trust that can't be modified or terminated without the permission of the beneficiary. The grantor, having transferred assets into the trust, effectively removes all of his or her rights of ownership to the assets and the trust.

LPOA: Limited Power of Appointment. This is a power to appoint property to someone else, but in a way that does not cause the property “subject to that power” to be included in the power holder’s estate. Any powers of appointment that are not “General” Powers of Appointment (see definition above) are limited powers.

Marital Deduction: The marital deduction allows a married individual to leave property to his or her surviving spouse free of estate tax. U.S. citizens can leave an unlimited amount for their surviving spouse, assuming the survivor is also a U.S. citizen, and assuming the gift qualifies under IRC Sec. 2056. There are lots of different ways a trust or will can determine the amount set aside for the marital deduction, including:

  • Fractional formulas, which compute a fraction that gets applied to the dead spouse’s estate;
  • Pecuniary formulas, which compute a dollar amount to be applied to the dead spouse’s estate;
  • Specified dollar amounts or percentages, which are typically based on requirements of a premarital agreement or state law;
  • The Clayton election, which provides that a trustee can later decide how much to use for the marital deduction; and
  • The Disclaimer method, which allows the surviving spouse to decide what property to keep and what property to put into the bypass / credit shelter trust

Marital Trust: This is the portion of the deceased spouse’s property that is transferred into a trust that qualifies for the marital deduction. When the surviving spouse later dies the value remaining in the marital trust is included in that spouse’s estate.

PEG Power: A Presently-Exercisable General Power of appointment, or "PEG" Power is a power that can be immediately exercised by the power holder to appoint property to that person's self, their estate, their creditors, or the creditors of their estate. Possession of a PEG power causes the value of the property over which the power may be exercised to be included in the power holder's estate.

Portability: The concept of portability allows married couples to effectively combine their individual AEAs, allowing them to pass up to $10,980,000 (adjusted for inflation) to their heirs. If a spouse dies and doesn’t use all of his or her applicable exclusion amount (AEA) in their estate plan, the amount they don’t use is called the DSUEA, and the surviving spouse is allowed to use that amount in their own estate tax planning. In order to take advantage of portability the trustee of the deceased spouse’s estate must file a federal estate tax return to claim

Probate: This is the court proceeding that must be undertaken to transfer the property of a decedent to surviving beneficiaries. Probate procedures vary widely from state to state but generally they’re public proceedings and can be time consuming and rather expensive. One of the objectives of trust-based planning is to avoid probate, primarily to save time, minimize the likelihood of disputes among heirs, and preserve privacy.

  • Domiciliary probate: This refers to probate proceedings where the decedent lived at the time of death (i.e., where the decedent was domiciled).
  • Ancillary probate: This refers to possible additional probate proceedings where the decedent owned property, but where he or she did not live. An example would be a Colorado resident who died, but who owned a vacation property in Florida. The domiciliary probate would be in Colorado, and an ancillary probate would be in Florida. (Both could be avoided if the decedent had used a trust!)

QDOT: Qualified Domestic Trust. This is a form of marital deduction that can be used for surviving spouses who are not citizens of the U.S. The QDOT rules are found under IRC sec. 2056A and generally function to defer estate tax on the property transferred to the QDOT until it’s distributed from the trust.

QPRT: Qualified Personal Residence Trust. A QPRT works like a GRAT except that the property transferred to the trust is the Settlor’s personal residence. The Settlor keeps the right to live in the home for a specified number of years and after that term ends, the Settlor must move out or begin paying rent to the trust, since other beneficiaries are entitled to the trust property after the initial term.

QTIP election: This stands for Qualified Terminable Interest Property, and is often associated with a QTIP Trust. This is a form of marital deduction that allows a trust maker to set aside property for the surviving spouse in a trust in a way that qualifies for the unlimited marital deduction. (It’s covered under IRC Sec. 2056(b)(7).)

RAP: Rule Against Perpetuities. This is legal issue that basically determines how long a trust can legally remain in effect. This rule is the bane of most lawyer’s existence in first-year law school. The original rule is generally “lives in being” (that is, people who are alive or who can be easily identified) at the time the trust becomes irrevocable plus an additional 21 years. An increasing number of states have dramatically expanded the RAP, and several have eliminated it completely. The upshot is that if the trust is subject to a RAP, the trust can’t last forever. It can last for hundreds of years sometimes, but it must end and distribute at some point for the trust to be valid and enforceable.

RLT: Revocable Living Trust. This is the main document & planning solution most trusts & estates attorneys implement for their clients. The client transfers their property to the RLT during their life so that their trustee (see below) can manage that property for the client if the client becomes disabled and when the client dies. Because the trust owns the property, probate is not necessary to transfer property after the client dies.

  • Individual / Separate RLT: This is a trust established for an individual. The client may be a single person, or they may be a married person (typically in a separate property state; see that definition).
  • Joint RLT: This is a trust established for a married couple. If the couple’s marriage is not recognized by law, there can be really bad gift tax consequences for a joint RLT. For married clients in community property states (see that definition), a joint RLT is mandatory to maintain community property status and the favorable tax treatment that follows. Married clients in separate property states may use either a joint RLT or may use separate RLTs.

Separate Property/Common Law State: Unlike community property, separate property receives a basis adjustment only when the owner of that separate property dies. For married couples in separate property or common law states, they may own their property jointly, but it is not treated the same as community property. When a spouse / co-owner of joint property dies in a separate / common law property state, only that deceased person’s portion of the property receives a step up in basis. The survivor keeps the same original basis. This means that if the surviving spouse sells an appreciated asset after the death of the other spouse, there will be capital gains computation based on the mixed basis of the stepped-up share of the deceased spouse and the carried-over basis for the surviving spouse. All states that are not community property states are separate property states.

SNT: Special / Supplemental Needs Trust. This is a special type of trust designed to set aside assets for the benefit of a beneficiary whose disabilities may allow the beneficiary to receive public assistance for medical and other care expenses. There are generally two types: first-party trusts that someone establishes for their own benefit, and third-party trusts that someone establishes for the benefit of someone else, like a spouse, child, parent, etc.

SRT: Standalone Retirement Trust. This is a special type of trust designed to receive “qualified retirement accounts” like IRAs, 401(k)s, etc. It can be set up as either revocable or irrevocable, and it’s designed to allow trust beneficiaries to continue to defer income tax on the account balance for as long as possible. (This is referred to as a “stretch out.”) SRTs also provide a lot of protection for retirement account balances after they’re inherited by beneficiaries. The SRT gained relevance in 2014 following the Clark v. Rameker case.

Survivor’s Trust: This term only applies in the context of a joint RLT plan. The survivor’s trust is the surviving spouse’s share of the joint trust property, plus any separate property the surviving spouse had. The deceased spouse’s property will typically flow into the marital and/or bypass trusts. The survivor’s trust is fully revocable by the surviving spouse for the remainder of the survivor’s life. It’s treated just as if the surviving spouse had established his or her own individual RLT.

Testate: This describes the condition of someone who dies WITH a will or a trust (often referred to as a “will substitute”).

Trust: A “trust” is really just a formal relationship where someone (the trust maker) appoints someone else (the trustee) to hold title to and manage trust property for the benefit of one or more people (the beneficiaries). When folks talk about “trusts” they’re usually referring to documents, but in its basic form a trust is simply a specific type of fiduciary relationship. Trust documents take many forms, which are generally listed in this glossary.

Trust Advisor: Many attorneys use this term interchangeably with Trust Protector. Whether those terms are truly synonymous is open to question, and is still an evolving issue under the law.

  • Investment Advisor: This is a Trust Advisor whose role is limited to advising the trustee on the kinds of assets to invest in.
  • Distribution Advisor: This is a Trust Advisor whose role is limited to advising the trustee on when to make or withhold distributions from the trust.

Trust Protector: This is a special type of power holder who can control certain aspects of irrevocable trusts. There is little consensus among attorneys as to what the protector can and cannot do, whether they serve in a fiduciary or non-fiduciary capacity, who should be the trust protector, etc.

Trustee: This is the day-to-day decision maker for a trust. The trustee has a series of fiduciary duties to the beneficiaries to make sure that the trust is administered properly according to the trust’s terms and governing law, and that the beneficiaries’ interests are protected. There must always be a trustee for a valid trust to exist, and all trustees are always held to a fiduciary standard.

  • Investment Trustee: This is a special trustee whose job is limited to making investment decisions for the trust.
  • Distribution Trustee: This is a special trustee whose job is limited to making distributions from the trust to beneficiaries.
  • Administrative Trustee: This is a special trustee whose job is limited to keeping documents and records for the trust, often for the purpose of establishing an adequate connection between the trust and the desired state where the law should apply.

UTC: Uniform Trust Code. This is a body of law drafted by the National Conference of Commissioners on Uniform State Laws (NCCUSL) that is intended to consolidate the law of trusts as it is applied among the states. Although many states have enacted significant portions of the UTC, important distinctions are made as state committees and legislatures review and enact the UTC. It’s safe to say that the Uniform Trust Code is far from “uniform."

Various relevant IRS terms & forms

  • 706: Federal Gift & GSTT Tax Return. This is the form a taxpayer will file to report taxable gifts and generation-skipping transfers.
  • 709: Federal Estate Tax Return. This is the form a trustee or personal representative files after someone dies to report the value of the deceased person’s estate. It is also where a QTIP election gets made to calculate the amount of property passing to a surviving spouse under the marital deduction, and where the DSUE Amount gets computed and reported.
  • 1041: Federal Fiduciary Income Tax Return. When a trust is irrevocable - either because it was set up as irrevocable or when it becomes irrevocable when the trust maker dies - the trustee has to report income on the 1041, instead of on a 1040.
  • Form 56: Notice of Fiduciary Relationship. This form is used to notify the IRS that someone besides an individual taxpayer is entitled to receive tax-related information for that individual. It comes up a lot in trust administration when a trust maker becomes disabled or dies and the trustee is appointed for the 709, 706, 1041, etc. or when an irrevocable trust or other non-person entity is established.
  • IRC: Internal Revenue Code. This is the Federal law of taxation.
  • PLR: Private Letter Ruling. This is a type of decision the IRS hands down for a specific client on a specific strategy question. PLRs are handed down to tell a taxpayer how the IRS will treat a strategy if it is enacted. (Thus, they’re forward-looking.) There is an expensive application process involved and a PLR does not carry the weight of law except for the taxpayer who personally obtained the PLR. That said, PLRs often indicate how the IRS is inclined to handle a certain situation, so many practitioners refer to PLRs and PLR-driven strategies. This can be risky, since the PLR does not bind the IRS except for the taxpayer who paid to receive the PLR on their personal strategy. 
  • Regs: Regulations. This simply refers to the specific rules established by the Internal Revenue Service (IRS) under the Internal Revenue Code. They attempt to clarify what the IRC means, and often provide clarifying examples.
  • SS-4: Application for Employer / Taxpayer Identification Number. This is the form a trustee or entity director completes to get an EIN or TIN for a trust or entity. That number works like a Social Security number for an individual; it’s the tax ID number against which the 1041 or other trust / entity income tax returns get filed.
  • TAM: Technical Advice Memorandum. This operates like a PLR except that is backward-looking; it is binding on the IRS and on the taxpayer as to how the IRS has ruled on a completed transaction.

5 Things Every New Parent Needs to Know About Wills

Estate Planning for New Parents

As a new parent, you naturally want to ensure your new baby’s future in every way. For many new parents, infancy is a time for celebrating new life, and making a will is the last thing on your mind. For others, the process of bringing new life into the world sparks strong feelings of wanting control and needing organization. No matter where you fall on that spectrum, you might be struggling to figure out what steps you need to take to protect your children’s future should the unthinkable happen. Here are five key things every new parent should know about wills.

1. Choosing a guardian might be the most important part of your will.

If you pass away while your child is a minor, the first issue will be: who will assume responsibility for your child’s care. If you don’t name a guardian for your child in your will, or you simply don’t have a will, the courts may decide this question for you, and the guardian might not be the person you would choose. Selecting a guardian whom you can trust is in many ways more important at this stage than deciding about how to pass any assets you own.

2. Name an executor you trust.

To ensure your child does receive all that you have allocated when he or she comes of age, choose a trustworthy executor. Many people choose a family member, but it’s just as acceptable to appoint a corporate fiduciary (a bank or professional trust company) to handle your estate. Some people choose to have a trusted attorney handle their estate. Typically, an attorney or a corporate fiduciary has no emotional attachment to the family, which might seem bad, but usually results in less potential conflict.

3. Named beneficiaries on your financial accounts override the will.

Many accounts these days allow you to name a beneficiary. When you pass away, the funds in those accounts will go to the beneficiary named on the account, even if your will states otherwise. If you’re creating a will with your child in mind you should review your investment and bank accounts with your financial advisor to ensure there are no inconsistencies when naming beneficiaries. When planning your estate, it is also a good time to check retirement account and life insurance beneficiary designations with your financial advisor and your attorney.

4. A will is not always the appropriate document for your goals.

When naming your child as a beneficiary, a will only goes into effect after you die. If your will leaves property outright to your minor children, a court will step in and hold the assets until your child turns 18 when he or she will receive those assets outright. Most 18-year old children lack the maturity to handle even a small estate, so it is often unadvisable to make an outright distribution. Creating what is called a “testamentary trust” (a trust in your will) is one way to avoid having a court hold the assets for your minor children.

Creating a revocable trust is another way to avoid having a court step in. A revocable trust goes into effect when you create it and can provide structure to manage the assets you leave behind for the benefit of your child. You can often protect that child’s inheritance from divorce, bankruptcy or lawsuits if structured properly. An experienced estate planning attorney can advise you on the best option for your family and your circumstances.

5. In the absence of clearly stated intentions, the government steps in.

Think of your will, trust and other estate planning documents as an instruction manual for your loved ones, your personal representative, and the courts to follow. You must be clear in your stated intentions regarding your child and family. If you’re not clear or if you don’t leave any instructions at all, the government (probate courts) will step in and follow the government’s plan (Minnesota Statutes), which can lead to long delays and is probably not the plan you would have selected for your child and family.

Providing for your baby’s long-term welfare may start with just a simple will, but to be fully protected, you may need more. That’s why it’s important to talk with a competent estate planning attorney to make sure you have the right plans in place to fulfill your goals. We’re here to help! Contact us today to talk about your options to protect your new baby.

Creating a Valid Health Care Directive in Minnesota

Minnesota Health Care Directives


A Health Care Directive in Minnesota is a legal document that allows you (the Principal) to express your health care wishes if you are unable to do so yourself. A Health Care Directive is only valid while the Principal is alive.

In Minnesota, Health Care Directives were formerly known as Living Wills, Durable Powers of Attorney for Health Care, or Health Care Powers of Attorney. Some states still refer to Health Care Directives by those names. In Minnesota, we now call them Health Care Directives.

The Components of a Health Care Directive

There are typically three parts to a Health Care Directive.

•       Part I: This is the part where you name a Health Care Agent.

•       Part II: This section allows you to specify treatment and care instructions.

•     Part III: HIPAA Waiver – allows your Health Care Agent to access your medicalrecords.

In order to create a valid Health Care Directive, you need to either name a Health Care Agent (Part I) or specify a health care instruction (e.g. your treatment and care instructions) (Part II). This must be done in writing and it must have the Principal’s name included in the writing (e.g. you must identify whose Health Care Directive it is).

Execution Formalities

The next step is to sign the Health Care Directive in front of either (1) a notary public; or (2) two witnesses.

You may list multiple agents in Part I. All of your agents must be 18 years of age or older. Who cannot be your Agent: Anyone under 18 years of age may not be listed as your Health Care Agent. Your attending physician may not be your Health Care Agent unless that physician is related by blood, marriage, adoption, domestic partnership or unless you specify in your health care directive that you want your attending health care provider to act as agent and your reasons for doing so. Lastly, an individual who has been appointed to determine whether you are incapacitated may not serve as your health care agent.

Duties of Your Health Care Agent

Your Health Care Agent has a duty to “act in good faith.” Your Agent must act consistent with any directions found in your Health Care Directive. If the information contained in your Health Care Directive is insufficient, the Agent must act in your best interests. “Best interests” means a consideration of your overall health condition, your prognosis, and your personal values to the extent they are known by the Agent.

Optional Provisions for Your Health Care Directive

Optional provisions you may include in your Health Care Directive are: (1) instructions regarding whether you wish to be buried or cremated; (2) your wishes concerning whether to donate organs; or (3) a funeral directive that directs the preparation for, type, or place of your final disposition.

What to Do with Your Valid Health Care Directive

Once you have signed your Health Care Directive in front of a notary or two witnesses and you have provided for some instructions regarding your health care or named an Agent (or both), you have a valid Health Care Directive.

What should you do with your valid Health Care Directive? Make sure that your health care provider has a copy of your Health Care Directive. You should also give a copy to your Health Care Agent, family members, assisted living facility, or any other important care giver in your life.


This guide is not intended as a substitute for the expert guidance of an attorney. While it may be tempting to try a do-it-yourself Health Care Directive, you should always seek the guidance of an experienced estate planning attorney. An experienced estate planning attorney can help you with choosing the right Health Care Agent and with the proper wording of your instructions. These items can be critical to ensuring that your wishes are followed.

For more information and resources on Health Care Directives in Minnesota, the Minnesota Attorney General’s website has helpful information including sample forms:                                             


4 Quick Tips for Avoiding a Will or Trust Contest

Avoiding a Will Contest

A will or trust contest can frustrate your final wishes and objectives, rapidly deplete your estate, and tear your loved ones apart.  With proper planning, however, you can help your family avoid a potentially devastating will or trust contest. 

If you are concerned about challenges to your estate plan, here are 4 tips to consider:

1.      Do not attempt “do it yourself” solutions.  If you are concerned about an heir or beneficiary contesting your estate plan, the last thing you want to do is attempt to write or update your will or trust on your own.  An experienced estate planning attorney can help you construct and maintain an estate plan that will discourage lawsuits.

2.      Let family members know about your plan.  When it comes to estate planning, secrecy breeds contempt.  While you don’t need to let your family members know all the intricate details of your estate plan, you should let them know that you have taken the time to create a plan that spells out your final wishes and who they should contact if you become incapacitated or die.

3.      Use discretionary trusts for problem beneficiaries.  You might think that you need to completely disinherit a beneficiary because of concerns that a potential beneficiary will squander their inheritance or use it in a manner against your beliefs.  However, there are options other than completely disinheriting someone. For example, you could require that the problem beneficiary’s share be held in a lifetime discretionary trust and name a third party, such as a bank or trust company, as trustee.  This will insure that the beneficiary will only be entitled to receive trust distributions under terms and conditions you have dictated.  You will also be able to control who will inherit the balance of the trust if the beneficiary dies before the funds are completely distributed.

4.      Keep your estate plan up to date.  Estate planning is not a one-time transaction – it is an ongoing process.  Therefore, as your circumstances change, you should update your estate plan.  An up to date estate plan shows that you have taken the time to review and revise your plan as your family or financial situations change.  This, in turn, will discourage challenges because your plan will encompass your current estate planning goals.

By following these four tips, your heirs and beneficiaries will be less likely to challenge your estate planning decisions and will be more inclined to fulfill your final wishes. If you are concerned about heirs contesting your will or trust, you should seek the professional advice of an attorney now. Contact our office today at (952) 658-6503 if you have questions about ensuring that your estate plan is less susceptible to challenges.