Living Trusts: Essential Estate Planning in Minnesota
What will happen to all of your assets in case of your sudden demise? How do you ensure they remain safe from unnecessary court interference and go directly to the people you selected?
If this is a concern for you, you can create a living trust in Minnesota and protect your assets using that. This strategy offers many benefits, like avoiding the time-consuming and public process of probate. Here, you will learn more details on the good and bad sides of living trusts and how to create one, among others.
What are Living Trusts?
A living trust (also termed an “inter vivos” trust) is a type of legal arrangement commonly used in estate planning. People create living trusts during their lifetimes to protect assets and properties until they distribute them to their designated beneficiaries.
The person who creates the trust, i.e., the grantor or trustor, can assign a trustee to manage their Minnesota living trust. The trustee is responsible for transferring the assets to the selected beneficiaries when the grantor dies or becomes mentally incapacitated.
In this context, wills also perform the same function, but they generally involve a complicated probate court process. On the other hand, you can avoid probate with living trusts, which many consider a better alternative.
Which Type Of Living Trust Should You Create?
In estate planning, many individuals prefer creating revocable living trusts since they can still retain ownership of their trust property with this type. One can revoke or modify this legal document at any time. The grantor can name themselves the trustee of their living trust in Minnesota. This means that they can retain control over their estate during their lifetime.
Plus, they can add someone as their successor trustee in their living trust document. This person will take over the responsibility of managing the living trust and distributing all assets to proper beneficiaries after the trustor's death or incapacity. It is worth noting that if the trustor had a shared trust, then their spouse would have authority over the trust at their death. The control will pass to the successor trustee they named only after both spouses die.
Is It Useful To Create Living Trusts In Minnesota?
The main benefits of living trusts in estate planning are:
- The process is less time-consuming than the strict probate process.
- You can save on high legal fees.
- Living trusts assure privacy, unlike wills, which go into the public record.
- It can work for trustors in case they suffer through incapacitation of some kind instead of activating only at their death.
- The living trust document assures more protection than wills in case anyone raises a dispute in court.
Also, it is easier to give beneficiary designation to minor children with living trusts. The successor trustee will keep certain assets as per the terms in the trust document for minor beneficiaries until they reach age.
In Minnesota, you must consider the Uniform Probate Code and how it applies to living trusts. The Uniform Probate Code is a model law that standardizes the public process and aims to simplify it. So, you should discuss this with an estate planning attorney for more detailed advice on whether you should create a living trust in Minnesota.
Steps to Create Living Trusts in Minnesota
Talk to an estate planning attorney when creating living trusts as they can provide necessary professional guidance. Also consult your financial advisor or wealth manager for advice with your estate plan here.
The following are the steps for preparing Minnesota living trusts.
Select the trust type
Go through the different types of living trusts and choose the one that will suit your personalized needs and financial goals.
Review all assets
Take stock of all your assets, shared or individually owned. Then, create a comprehensive list of your accounts, properties, and valuables that you will put into the trust.
Assign a trust
Next, you must select the person you want as the trustee for managing your living trust. Assign this role to a professional entity, a trustworthy family member or friend, etc. You can also become one yourself.
Choose beneficiaries
Name the person/people you want to choose as the trust beneficiaries. They will receive your assets after your death or incapacity.
Prepare the trust document
Then, draft the legal document for your trust. Work with a qualified attorney to check that you meet all legal standards with the clauses, add correct terms, etc.
Proceed with document signage
Sign the trust document before a notary for verification.
Add funds to trust
Transfer your assets into the living trust to officially establish it.
Connection of Taxes and Living Trusts in Minnesota
You will not stay completely free of estate taxes if you get a living trust in Minnesota. Reportedly, the estate tax rate varies between 13% and 16% within the state of Minnesota. The federal estate tax affects estates with $12.92 million or lower value.
The estate tax exemption threshold in the state is around $3 million as of 2024. To simplify, the state will not impose taxes on estates valued below the exemption. But if an estate value is higher than that, then that wealth is taxed.
There is no separate inheritance tax or gift tax in Minnesota.
Frequently Asked Questions
Yes, living trusts can avoid the probate process in Minnesota. After adding assets to the living trust, they technically become part of it. So, when the trustor dies, all the assets inside transfer to the selected beneficiaries without engaging in the complex probate process.
You, as the trustor, will still retain control of your assets in the living trust, granted that you have a revocable living trust. Then, you can be the grantor as well as the trustee. So, while you are alive, you can make changes to the trust terms, sell or buy new assets, choose new beneficiaries, etc. However, if you have an irrevocable living trust, you as the trustor will not have full control over the trust after its creation.
In the state of Minnesota, marital status, age, or income level do not determine who can get a living trust. Anyone who owns titled assets and wants to safeguard them for their loved ones at their death or incapacity without going through a complex, public probate process can prepare a living trust.
Yet, one should properly consider the magnitude of one's total assets before planning to create a living trust. If you have a complicated estate situation with many types of property and assets, you will fare better with living trusts in Minnesota.
Living trusts cover various aspects of one's estate plan. But if you also have a will, it will prove to be a good safety net for your belongings, which you could not put into your trust. Keep in mind that you must name a guardian for your will.
If you have prepared a revocable living trust, you can make changes to the trust or close it while you are alive. Grantors can adjust the terms of their revocable trust document in light of new life changes, like marriage, the birth of their child, or divorce. However, if you have an irrevocable trust, you would not be able to make any changes to the terms.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Please consult a qualified attorney for advice on your specific situation.
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