:: J.F. Henderson Law

FAQs Wills & Trust

What is an estate plan?
What is a will?
Why should I make a will?
What Is a Power of Attorney?
What is a Living Will?
What is a Health Care Directive?
What is a Living Trust?
How long does it take to make an estate plan?
What's the process of creating an estate plan?
How much does estate planning cost?

What is an estate plan?

The term “estate” simply means the aggregate of all assets and debts held (owned) by an individual during his or her life or at the time of his or her death. (It is not another term for “mansion” as many people believe.) An estate plan is therefore an arrangement for the management and disposition of a person's property during lifetime and at death. This is most commonly accomplished by a will, trusts, gifts made during life, or a combination of these. Estate planning is sometimes considered more broadly and may include consideration of life insurance, burial plans, and the use of tools that direct appropriate management of one’s health and personal finances in the event of incapacity through various powers of attorney (referred to in this website as a Health Care Directive and a Power of Attorney).

What is a will?

A will is a legal document. It allows you to choose who receives your belongings and assets after you die. A will can also be used to appoint a guardian to look after children until they can look after themselves. And a will designates who will be in charge of making sure your wishes are carried out.

Apart from these obvious advantages, a will can save the expense and possible squabbles that may arise when a person dies without a will.

The basic rules for making a will include the following:

• You must be of legal age (usually 18 years old) and mentally competent.

• Your will must be in writing and letter perfect, which is to say no whiteout or erasing is allowed.

• You may change your will as often as your life circumstances change; it's not written in stone.

• You only have one will. Any will, by necessity, states that it supersedes any prior wills you may have made.

• You should name a guardian for any minor children.

• You’ll stipulate where the money to pay taxes, debts and your funeral should come from.

• Your will must be signed by two witnesses that are not included as beneficiaries in the will. (We can provide witnesses for you during your Final Signing Appointment.) Beneficiaries (people who will receive something by the terms of your will) signing the will could lose what you wanted them to inherit.

• You don't have to put dollar amounts in a will, in fact you shouldn't. Percentages are fine.

• Your will names an executor, also known as a personal representative – someone who will make sure your wishes as stated in the will are carried out.

Why should I make a will?

Everyone should have a will. A will is the only way you can tell others how you want your assets to be distributed after your death. It is the only way you can provide for people who may depend on you financially, e.g. children.

Even if you only own a few assets, it's worth making a will so that you can ensure what happens to those assets after you die. If you don't have a will, your assets will be distributed according to intestacy rules. These rules apply to everyone and do not take account of your individual circumstances or what you may have wanted.

A will also allows you to choose a person to manage the distribution of your assets. This person is called an executor. If you don't have a will, your assets are distributed by a court-appointed person called an administrator.

What does “intestate” mean?
Intestate is the condition of dying without a valid will. In the event someone dies intestate, a judge will appoint an administrator to distribute the deceased person's property according to state law.

What does “intestate succession” mean?
When someone dies without a will, state law dictates how and to whom their assets are distributed. Intestate succession refers to the law providing for the inheritance assignments. Thus, to carry out a "intestate succession" simply means to transfer something after the owner has died and in accordance with the State law.

Who should I choose to serve as the guardian(s) of my children?
This is the question that parents of younger children agonize over the most. Many people even put off writing a will because of it. It is important for you to consider this question very seriously and to discuss your choice openly and honestly with the person or persons you choose to name. But before you let this difficult decision get in the way of creating an estate plan, remember that nobody is going to be the perfect guardian because nobody is going to be able to take your place. You nonetheless owe it to your children to get over the agonizing, and get on with the business of writing the will. If you designate a guardian and later change your mind, you can easily change your will to designate someone else. But if you and your spouse die without a will, your child's destiny will be in the hands of the state.

What is a Pour-Over Will?
If you choose to create a living trust, you may also create what is called a pour-over will. It provides that any property that was not included in the trust, get distributed – or “poured over” – into the trust upon the death of the testator (person writing the will).

What is the difference between a Living Trust and a Will?
While living trusts and last wills are both used to distribute property to beneficiaries, there are some important differences. For example, one of the key benefits of a living trust is that it circumvents probate court. Unlike a last will, which can be tied up in probate for years, a living trust quickly and smoothly transfers assets to your beneficiaries. And because a living trust is never registered with the courts, the details of your estate remain private.

What Is a Power of Attorney?

A power of attorney is a legal document that gives someone you choose the power to act in your place. In case you ever become mentally incapacitated, you’ll need what are known as “durable” powers of attorney for medical care and finances. A durable power of attorney simply means that the document stays in effect if you become incapacitated and unable to handle matters on your own. (Ordinary, or “nondurable,” powers of attorney automatically end if the person who makes them loses mental capacity.)

To cover all of the issues that matter to you, you’ll probably need two separate documents: one that addresses health care issues and another to take care of your finances. For ease of conversation and mutual understanding, we refer to medical powers of attorney as “Health Care Directives” and financial powers of attorney as simply “Power of Attorney.”

With a valid power of attorney, the trusted person you name will be legally permitted to take care of important matters for you – for example, paying your bills and managing your investments – if you are unable to do so yourself.

Taking the time to make these documents is well worth the small effort. If you haven’t made both a Health Care Directive and Power of Attorney and something happens to you, your loved ones may need to go to court to get the authority to handle your affairs.

What is a Living Will?

A Living Will is the popular name for a “Health Care Directive” – a document spelling out the general kinds of medical care you would want--or not want--in the event you became unable to communicate with your health care providers. Other names for a Living Will are a "medical directive" or "medical declaration." It does NOT impact who gets your property or who is your Personal Representative or Guardian of your minor children.

What is a Health Care Directive?

A Health Care Directive – also referred to as a Living Will – is a document that outlines very specific medical instructions that apply while you are still alive, but are unable to communicate your wishes. Unlike a typical Last Will and Testament, it really has nothing to do with how you want your property divided when you die. It simply states that you do, or do not, want artificial life support if you become either:

• terminally ill and will die within a short period of time without life support, or
• in an irreversible coma or vegetative state.

A health care directive can also address other matters, such as declaring whether or not you would like to receive pain medication, artificial nutrition, how long you may want to remain on life support and other special wishes or instructions. A health care directive not only ensures your wishes will be heard, but also protects your loved ones from having to make these difficult, deeply personal choices for you.

Can I change or cancel my Health Care Directive?
Yes – a health care directive can be canceled or revoked. You can revoke your health care directive at any time without regard to your mental or physical condition. A revocation iseffective when it’s communicated to the attending physician or other health care provider by you or anyone who witnessed you revoke it.

Do I need a witness in order to make my Health Care Directive valid?
Yes. Because of the gravity of this decision and its potential result, witnesses must verify that a health care directive states the maker’s true intentions. Also, the witnesses must not have any stake in your estate, i.e. they cannot be beneficiaries who will receive anything from your estate.

What is a Living Trust?

A living trust (also known as an inter vivos trust) is a legal entity capable of owning property. It allows you to gather your property into one document and ensure that the property is distributed easily and quickly after your death. When you put your property into a trust, the trust – not you – owns that property. This doesn't mean that you no longer have control of your assets since you, the grantor, will usually appoint yourself as the person who manages the trust (the “trustee”). You can do what you want with that property - you can even transfer property out of the trust or add property to it.

A living trust can help avoid probate when you die because, when your assets are placed into a trust, you do not "own" the assets, the trust does. Since you do not "own" the assets in your trust, those assets would not be subject to any court proceeding concerning the disposition of your property. A living trust is also used in estate planning to help in situations of incompetency, to allow "smooth" management of assets, and can be effective in eliminating or reducing estate taxes for married couples.

Revocable living trusts are established during the life of the grantor, who retains the right to the income and principal and the right to amend or revoke the trust. When the grantor dies, the trust becomes irrevocable and acts as a substitute for or supplement to a traditional will.

The trust must contain the following elements: expression of your intent to create a trust; naming of trust beneficiaries; description of the trust property; a valid trust purpose (e.g. to provide for the welfare of your children or grandchildren) and the transfer of property.

Why would I want to create a Living Trust?
The most obvious benefit of living trusts is that they allow you to control who receives your assets after you die. However, there are many more reasons for creating a living trust. For instance, a living trust can help your beneficiaries avoid the expense and delay of probate normally associated with wills. Probate can last as long as three years and can take up to 10% of your estate's value. A living trust can also provide you with more privacy than a will because you don't have to register it with the courts in probate. Living trusts can help avoid certain estate taxes if prepared properly. Finally, a living trust allows you to hand over the management of your assets to someone else if you become incapacitated.

What is a Trustee?
The trustee is the person who is in charge of the trust during your lifetime. In most cases, the initial trustee is the person who created the trust - - you. You may later designate someone else or an institution, like a bank, to act as a trustee. The trustee is responsible for managing the property covered by the trust.

What is a Successor Trustee?
The successor trustee is the person who assumes control of the trust after you, the initial trustee, die. The successor trustee makes sure that your estate is distributed among your beneficiaries according to the terms of the trust. Usually, the successor trustee is someone that you know well and trust.

What is a Revocable Trust?
A revocable trust is one you can change at any time during your lifetime. When you die, your trust becomes irrevocable.

What is an Irrevocable Trust?
An irrevocable trust is one that neither you nor your successor trustee can alter in any way.

Who is the Grantor in a Trust?
The grantor is the person who creates the trust (also known as the trustor). He or she decides what property to include in the trust and who the beneficiaries of the trust will be. With respect to revocable trusts, the trust is revocable until the grantor's death, and the grantor can change any part of the trust as often as he or she likes.

Do I still need a Will if I set up a Living Trust?
Yes. A will acts as back up to deal with any property that is not included in the living trust, either because it was improperly transferred or acquired after the creation of the trust. A will also designates guardians for minor children and it covers property that was intentionally left out of the trust (e.g. cars, personal checking accounts). The J. F. Henderson Law Living Trust includes a simple pour-over will for this purpose.

Can I transfer property in and out of the Trust while I am alive?
Yes. If you have an individual trust, you can transfer property without anyone's consent. If you have a shared trust, you should get your co-trustee's consent when transferring jointly-owned property.
You will sell property owned by a living trust in one of two ways. The first, and most common, approach is simply to sell the property directly from the trust. In that situation, the seller of the property is the trust, not you. The second approach, used mostly when an institution requests it, is to transfer the property out of the trust and back to you as an individual before selling it.

Can I include property in my Trust on which I still owe money?
Yes. The most common example of such property is a house still subject to a mortgage. Your beneficiary will become responsible for that debt when he or she receives the property from the trust. If you want to structure your trust so that all debts will be paid from the trust upon your death, you should make that known when creating your trust.

Does a Living Trust avoid estate taxes?
Your estate is still vulnerable to estate taxes. It is important to remember, however, that there is no Minnesota state estate tax assessed on an estate worth less than $1,000,000 and no federal estate tax assessed on an estate worth less than $2,000,000 for a single person in 2007. Each dollar over the limit is subject to taxation. Keep in mind that the estate tax exemption levels are constantly changing and an overhaul is expected in the next few years.

When should I update a living trust?
You should amend your trust in the following situations:
• A change in your marital status;
• The birth or adoption of a child;
• Moving to another state;
• A significant change in your financial status;
• After the death of a beneficiary; or
• After the death or incapacity of a named trustee.
What is a Trust Schedule?
A schedule is a list of all property in your trust. For an individual trust, there is only one schedule. For a basic shared trust, there are three schedules: one for property owned solely by the wife; one for property owned solely by the husband; and one for property owned jointly by the husband and wife.

What property should be transferred into a Living Trust?
To take advantage of the benefits of a living trust, you must transfer property into the trust. The person who transfers property into a trust is called a "grantor." In general, your most valuable property should be placed in the trust. This may include:
• your house
• other real estate
• business interests
• stocks, bonds and mutual funds
• money market accounts
• brokerage accounts
• royalty contracts, patents and copyrights
• jewelry and antiques
• precious metals
• works of art
• and valuable collections.
With respect to real estate, you do not need to transfer real estate held by two people (joint tenancy or tenancy by the entirety) because it automatically transfers to the other person if one owner dies. However, it may still be a good idea to transfer this type of property into a living trust. This is because both owners could pass away in a common disaster, or the surviving owner could forget to place the property into a living trust at a later time. You should read your home deed to determine how the property is owned.
With respect to small business interests, if you have a small business, sole proprietorship, partnership interests, closely-held corporation or LLC, you should consider placing your interest in the living trust. Please be aware that S corporations have restrictions on ownership by trusts.

What Property does not go into a Living Trust?
• Property of little value: it may be exempt from probate or subject to a streamlined probate process.
• Personal checking accounts. These are not typically placed into living trusts since money moves in and out of them so frequently.
• Property that you buy or sell frequently: this is especially true if you do not expect to own the property when you die.
• Cars: most cars are not terribly valuable, and insurance companies may be reluctant to insure a car owned by a trust. If, however, you do own a valuable car, it may make sense to check with your insurance company to see whether it will insure cars owned by trusts.
• IRAs, 401(k)s, etc.: technically, such accounts or funds cannot be owned by a trust. You can still avoid probate on these monies if you directly name a beneficiary to receive the funds in those accounts when you die.
• Life insurance: your policy will directly designate a beneficiary.
• Income or principal from another trust: if you are receiving interest or principal from another person’s trust, you may not place this property in your living trust to give to beneficiaries. However, you may give this interest and principal to your beneficiaries through your will.

Are there any specific issues concerning real estate placed in a Living Trust?
If you are the sole owner of property, it can be included in a living trust. You will need to change the title of that property to reflect ownership by your trust. There are several issues particular to real estate that come into play when property is transferred into a trust. They are as follows:
• Property tax reassessment: Minnesota does NOT require a reassessment when you transfer property into a trust when you designate yourself as a trustee.
• Transfer taxes: These taxes, which are normally assessed on real estate transfers, are generally not imposed when the transfer is to a living trust.
• Mortgage interest deductions: You, as the grantor, still have the right to deduct mortgage interest from your income taxes.
• Insurance policies: You do not need to change the registration of insurance policies to the trust for policies that cover property you have placed in the trust.
• Tax breaks for the sale of a home: You still have the right to exclude $250,000 of profit from taxation when you sell your principal home, even if that home is owned by the trust.
• Homestead rights: These rights, which protect a homeowner's equity interest in his or her home, still generally apply to property covered by the trust. A statement to this effect must be included in the Declaration of Trust.
• Due-on-sale clauses: Federal law prohibits lenders from enforcing these clauses when you transfer your principal residence to your trust. If you are concerned about this, you may want to get your lender's consent before the transfer.
• Part interests: You can transfer any part interest you have, such as a time share or percentage ownership, to the trust.
Can I designate a guardian for my children in a Living Trust?
It is important to remember you cannot designate a guardian for your minor children through a living trust. You should do that through a traditional will.
Who receives property from a Living Trust?
There are three types of living trust beneficiaries:
• Primary beneficiaries: Receive specific property.
• Alternate beneficiaries: Receive property if the primary beneficiary dies before you.
• Residuary beneficiaries: Receive all property not left to either the primary or alternate beneficiaries.
In general, you may choose anyone or any entity you wish to be your beneficiaries.

How long does it take to make an estate plan?

Working together, we can prepare a complete estate plan for you in less than 6 weeks. You’ve probably been thinking about this a long time, so let's get your plan done while you're focused on it.

What's the process of creating an estate plan?

As with any matter, you are welcome to a free ½ hour consultation to determine whether J. F. Henderson Law is right for you. The meeting is not mandatory but is an opportunity for you to ask questions of J. F. Henderson Law. You may conduct this meeting by telephone or sit down in J. F. Henderson Law’s office to meet face-to-face.

In undertaking an estate plan, you’ll first need to review and complete J. F. Henderson Law’s “Getting Started” packet. We can mail or email this to you. The “Getting Started” packet includes questions you’ll need to complete (or as much of them as you can) prior to our Initial Appointment. It's common to leave some answers blank, but if you have children who are minors, you’ll need to choose guardians before we meet. It is also wise to also choose a trusted person to serve as your executor/personal representative (and at least one backup) prior to our Initial Appointment.

Once you’ve completed the “Getting Started” packet, we’ll sit down in person for two meetings:

• Our Initial Appointment, and
• Our Final Signing Appointment

During our Initial Appointment, we’ll review your “Getting Started” packet and get to the meat of your estate plan – whether this includes just a will, or includes a health care directive (a.k.a. living will), a durable power of attorney or the creation of one or more trusts. This meeting takes about 1 hour, depending on how many questions you have.

After your Initial Appointment, you'll receive draft documents in the mail to review. I’ll ask you to look at the materials to see whether they appear to accurately reflect your wishes. If you have questions about the drafts, you are welcome to contact me.

Soon thereafter, you'll come back for a Final Signing Appointment. If you still have questions about your drafts, don't worry - by the end of this meeting, you'll know how your estate plan works for your family. The meeting takes about an hour and will give you a chance to get questions answered, sign your final documents and learn about how to take care of your estate plan over time (i.e. who should get copies, how to keep it current, and where to keep it safe, etc.).

How much does estate planning cost?

At the end of our Introductory Consultation, you will sign a fee agreement listing all fees. There will be no surprises after we agree on a fee. NOTE: As a general rule, you will likely choose one of the following:

• A Will Portfolio for a single person (includes a will, power of attorney, and health care directive but does not include a living trust).

• A Will Portfolio for a couple (includes wills, powers of attorney, and health care directives but does not include a living trust).

• A Complete Estate Planning Portfolio for a single person (which includes a will, a durable power of attorney, an advance health care directive – a.k.a. living will, and a living trust).

• A Complete Estate Planning Portfolio for a couple (which includes wills for both spouses, durable powers of attorney for property management, an advance health care directives and a living trust). This includes the initial transfer of property into the trust and any necessary amendments for the first year after signing. There are some additional fees for families with additional properties, private partnerships or businesses, or complicated estates.

Depending on your needs, J. F. Henderson Law offers each of these services at a flat rate so that you can understand and prepare for all of the costs up front. If you are looking to simply update part of your estate plan, J. F. Henderson Law can provide you with flat rate pricing or work on an hourly basis. If your matter is highly complex and another attorney or legal professional is needed, these costs will be arranged with each client in advance.