THE BASIC LEGAL TOOLS FOR ELDER LAW AND ESTATE PLANNING

Presented By:

Troy & Associates, P.A.

2550 University Ave.; Ste. 459S

St. Paul, MN 55114

651-603-8888

POWERS OF ATTORNEY

Financial Powers of Attorney (Statutory Short Form Power of Attorney)

This document allows you to appoint another person, called an Agent or attorney-in-fact, to perform financial transactions on your behalf. They can perform banking transactions, insurance transactions, stock transactions, real estate transactions, and any other financial transaction you assign to the Agent. The power of attorney can be created pursuant to the Minnesota form, or can be created pursuant to your own terms to match your specific needs. Minnesota has created a standard power of attorney form called the Statutory Short Form Power of Attorney.

Durable v. Non-Durable Powers of Attorney. The durable power of attorney is effective before and after a person becomes incompetent. The non-durable power of attorney is not effective after the person becomes incompetent.

Powers of attorney terminate on your death. Powers of attorney are not effective after your death.

Problems/Dangers with a Power of Attorney.

They are usually effective immediately, not just when you are incapacitated.

There is no useful safeguard to prevent the Agent from abusing his/her power, particularly after you become incapacitated.

The scope of an Agent’s power is largely undefined and unknown.

Health Care Powers of Attorney – Health Care Directive

The health care power of attorney appoints an agent to make health care decisions for you if you are incapacitated, i.e., you cannot speak for yourself. Similar to the financial power of attorney, you give the Agent power to make health care decisions on your behalf.

Health Care Directive. This document allows you to do many things including:

You may give specific directions and instructions to your health care provider regarding your care. You do not need to appoint an Agent.

You may authorize, or decline to consent to, organ donation.

You may provide for burial-cremation instructions. This is particularly important in second marriages when the spouse may want to do one thing and the kids of the first marriage want to do another thing.

You may appoint a health care agent, i.e., this document can act as a health care power of attorney.

You can appoint an agent and give specific instructions regarding your care that the agent and health care providers should follow.

You can mix and match all of these options.

Living Wills. These documents are no longer effective if executed today. The older documents may be effective under grand-fathered provisions. The living wills are effective only in a terminal state. They are not effective in a permanent vegetative state.

WILLS

What does a Will dispose of? A Will only disposes of probate property. Probate property does not include joint tenancy property, payable-on-death property, or property in revocable trusts. Probate property is property that is titled in the name of the decedent alone. For example, if the home is titled in the husband’s name alone, it may be disposed of by the husband’s Will.

What does a Will do? A Will appoints a personal representative (formerly called the “executor”) to act on behalf of your estate. The personal representative collects all of your probate assets, pays your last debts, files tax returns and pays your taxes, and then distributes your estate according to your wishes. The Will may direct the personal representative to create a Trust. The Trust is created after your death and is funded with assets after your debts and taxes have been paid. You determine the terms of the Trust. Once the personal representative creates the Trust, the person you appoint as Trustee then manages the money in the Trust. The personal representative is then done with his/her job.

How much does a Will cost? The prices vary based upon the market, the law firm, and what you need done with your estate plan. Some lawyers bill based upon a fixed fee. Some lawyers bill at an hourly rate. Some lawyers bill based upon the type of Will you need. When trying to price a Will, you will not get an accurate estimate is you ask for the price of a “SIMPLE WILL.” There is no such thing as a simple Will. If you really only need a simple Will, then my guess is that you do not need a Will.

The lawyer may say that a simple Will is $X. But if you want a trust, then that may be more. If you want to make specific gifts, then that may be more. If you also want powers of attorney and a health care directive, then that may be more still.

If the lawyer bills hourly, then time is money. If you have questions then expect to pay. If you call with questions, expect to pay.

PROBATE

What is Probate? If you have a Will, then you file the Will with the court. The Will is then acknowledged as valid, the personal representative (executor) is appointed, and the estate is administered. If you do not have a Will, a spouse or child files papers with the court to be given authority to administer your estate. The court then appoints someone as the personal representative (executor) and the estate is administered. The estate is distributed pursuant to the intestate statutes, i.e., the estate is distributed according to the Will the state wrote for you if you do not have one.

Should You Avoid Probate? In some states, the state charges a fee to probate your estate. The fee is a percentage of your probate estate. The larger the estate, the larger the fee paid to the state. Minnesota charges a single fixed fee to probate the estate. The fee is $165, regardless of the size of your estate. The actual cost of probate in Minnesota is attorney fees.

Multiple Probates. If you have real property in multiple states, then you will have to probate the property in each state. That means attorney fees in each state, potentially larger probate fees in other states, and the administrative burden of multiple state probates.

Time. Probate takes time. Generally, at a minimum, probate takes at least six to nine months. In larger estates, that is not a problem because tax laws require a prolonged administration and thus even if you wanted to, the estate could not be closed quickly. But in smaller estates, if all of the assets were held in some form of non-probate manner, then the estate could be closed quickly and easily.

REVOCABLE TRUSTS

What is a Revocable Trust? A Revocable Trust (sometimes called a living trust) is an instrument that you create and becomes effective immediately. Unlike Wills, the Revocable Trust is effective when created. You are usually the trustee of your own trust. You then transfer the title to all of your assets into the trust. This is done by changing the title from “[YOUR NAME]” to “[YOUR NAME] AS TRUSTEE OF THE [YOUR NAME] REVOCABLE TRUST DATED XXXX, XX, XXXX.” The trustee (you) administer the trust for your benefit during your life. After your death the trust operates just like a Will, but you do not have to file anything with the court. There is no probate.

What are the Benefits of a Revocable Trust?

They can be amended, modified, or revoked by you at anytime. You retain complete control. Although it may seem scary to “transfer title” to the trust, you still retain complete control. In fact, you give up more control when you add someone onto your bank account as a joint tenant than transferring the asset to a trust.

If you become incapacitated, the successor trustee can manage your affairs without having to start a guardianship.

If you have real property in multiple states you will not have to open a probate in any state.

There is no probate.

Your assets have centralized management.

What are the downsides to a Revocable Trust?

If you don’t follow thru and actually fail to fund the trust, then you will still have to probate your estate. At that point you pay for the trust and still pay for probate, i.e., you pay twice.

Revocable Trusts usually cost more upfront to create than a Will (but if the trust is funded there is no probate cost later).

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