Frequently Asked Questions About Wills And Estate Planning
Tarrant & Liska, P.L.L.C., provides affordable estate planning services in the Twin Cities metro area. We invite you to arrange a consultation to discuss any of these issues in greater detail.
Why should I have a will?
- You own property in your name alone and want to specify who will get it when you are gone.
- You or your spouse has children from another relationship.
- You have minor children and need to name someone who would raise them and handle their money for them until they have grown up.
- You want to leave money to someone who is disabled.
- You want to choose the person who will administer your estate.
If I do not have a will, my property goes to the government upon my death, right?
If I have a will, there is no probate, right?
Assets like life insurance, IRAs, 401(k)s, jointly held property, transfer on death (TOD) or pay on death (POD) designations, and transfer on death deeds (TODDs) have named beneficiaries and so those assets do not normally have to go through probate.
Assets in your name alone or held with someone else (such as tenancy in common) are assets that have to probated.
If I have a will, I do not have to pay estate taxes, right?
First, only large estates are subject to estate taxes. Presently, estates have to be valued over $1 million for the state of Minnesota to assess an estate tax.
Second, the government will include in the estate tax calculation all assets you owned, regardless of whether those assets are governed by the will or not. Life insurance, IRAs and other assets that are not governed by the will and are not “probate” assets will still be included in the tax calculation.
What is this living trust that I see in advertisements and seminars about?
If I have a health care directive, that means I am more likely to become an organ donor, right?
If my attorney prepares a living trust and also a will for me, the attorney is doing more for me than I need, right?
How can I avoid probate?
Many people have the impression that if they have a will, they can avoid the probate process. This is not true. Having a will is a good thing. A will allows you to have a say in what you want to happen to your assets upon your death and who you want to act as your personal representative or your trustee. It also allows you to deal with a lot of contingencies and establish trusts to hold any assets going to minors or disabled people. However, a will tells your loved ones what needs to be done during the probate process; it does not help avoid the process altogether.
Things you can do to avoid the probate process.
The other way to avoid probate is to name beneficiaries on all of your assets. When you set up a retirement account or buy a life insurance policy, you will be asked to complete a form naming beneficiaries. The process is simple and easy.
For other assets like bank accounts, stock accounts, certificates of deposit or bonds, you can ask the bank or brokerage firm to add a pay on death (POD) or transfer on death (TOD) designation to the account. This is simple and easy, but you have to ask the bank or brokerage firm to do this. They will not necessarily suggest it. Also, be careful not to let the bank officer or stockbroker persuade you to make the bank account a joint account with a family member. Making a person a joint owner on the account means that those assets will go to that person upon your death, if that person survives you. This also gives that person the power to take those assets and use them during your lifetime. You avoid such a lifetime transfer by adding a POD or TOD designation to the account.
For real estate, a document similar to POD or TOD designation can be signed for liquid assets. It is called a transfer on death deed (TODD). Again, this is better than making a person a joint tenant or reserving a life estate and giving someone a remainder interest because it does not actually transfer anything until you die. The house remains your house, and if you sell it, you get all the proceeds. However, if you have made relatives joint tenants or transferred a remainder interest to them, you may not get all the proceeds from the house sale. If you are interested to know more about TODDs, please read the FAQ: What is a transfer on death deed?
Given that it is possible to avoid probate altogether, why wouldn’t everyone establish a living trust or name beneficiaries for their assets?
The disadvantage of using POD/TOD/TODD and beneficiary designations to avoid probate is that it is not as flexible as a will or trust. Beneficiary designations on retirement accounts, life insurance and TODDs do allow at least one contingency to be handled (If a child dies before you, who gets what would have been that child’s share?). However, most POD or TOD designations do not allow that. Furthermore, if you need to have trusts established for a minor or disabled person, or want to control where an asset goes when the first beneficiary dies, POD /TOD/TODD alone will not get the job done. You can establish a trust, either separately or in a will or living trust, and then use a POD/TOD/TODD designation to get the asset to the trust.
Do You Have More Questions?
If you need more information or wish to discuss your situation, please call us at 651-315-8738 or contact us online. We provide comprehensive estate planning services in the Twin Cities area. Our office is conveniently located on Concordia Avenue, just off Snelling Avenue, in St. Paul.