The COVID-19 pandemic has motivated people of all ages to create, revise, or finalize their estate planning documents. While establishing wills, trusts, health care directives, and powers of attorney can seem overwhelming, understanding some of the common myths and misunderstandings about estate planning can go a long way towards demystifying the process.
1. There will be a "Reading of the Will."
Movies, television, and books often portray scenes involving a "reading of the Will," where, upon someone's death, an attorney assembles all of the heirs to read the terms of the document (complete with dramatic pauses, gasps, and ultimately, tears). Historically, this practice was carried out due to low literacy rates and unreliable mail delivery. Today, there is no requirement in any state for such a reading and they rarely, if ever, happen. With beneficiaries scattered across the globe, high literacy rates and access to mail, email, and fax, the "reading of the Will" is a thing of the past.
That said, consistent communication with beneficiaries is often key to avoiding disputes upon death. Given that probated Wills are public record, providing a copy of the Will to beneficiaries and other interested parties is generally considered good practice. Further, under Minnesota law, a personal representative (also known as an executor) must observe certain standards of care in dealing with the estate. A personal representative must act as expeditiously and efficiently as is reasonable in administering the estate. If you are concerned about acting as a personal representative generally or about the acting personal representative of an estate of which you are a beneficiary, please reach out to one of our estate planning attorneys for guidance.
2. If I die without a Will, the State will get everything.
There are many misconceptions about what happens if you die without a Will. The legal term is that you die "intestate," meaning you didn't have a Will before you died or your Will does not meet the requirements of the laws in your state. For example, some states allow handwritten Wills, while others do not. If you die "intestate," the intestacy provisions under state law dictate how your property will pass upon your death. Who inherits your property will vary depending on what your family looks like at the time of your death. If a person is married, their spouse may or may not inherit everything. For example, if someone has a blended family, their estate will be divided between their spouse and their children (in amounts and percentages that they may not have chosen had they planned it themselves). If someone is single, everything will generally pass to their children, if they have any. Keep in mind, however, that minor children cannot inherit assets. The Court will have to appoint someone to take care of those assets until the children reach a certain age. This process is called a conservatorship and can be arduous and expensive.
Having a Will allows you to decide who receives your assets, how much they receive, and for parents of minor children, who will take custody of their kids (it is worth expressly noting that a Will is the only place that you can name a guardian for your children). By having a Will, you may be able to avoid the potentially adverse consequences of dying intestate.
3. If I have a Will, my estate will avoid probate.
While having a Will provides clarity as to who gets your property and who will take custody of your children upon your death, the one thing that having a Will does NOT do is avoid probate. To the contrary, a Will GETS probated! This is perhaps one of the bigger misconceptions. So, what is probate? Probate is the legal process of administering a deceased person's estate, resolving all claims, and distributing the deceased person's probate property according to their Will or the intestacy statutes. If there is a Will, the Court determines its validity and appoints someone to act as the "personal representative" or "executor" to carry out the wishes set forth in the Will (a Will generally nominates someone to serve in that role). If there is no Will, the Court still appoints a personal representative, but because there is no Will to tell the Court who ought to act as such, sometimes a dispute will arise as to who should be appointed.
Of course, this all begs the question of whether you should try to avoid probate. A quick Google search will imply that probate is the absolute worst thing in the world and that it should be avoided at all costs. In reality, while the probate process has a bad reputation, it does not have to be as complicated, expensive, or arduous as it sounds. That said, probate processes in some states are, in and of themselves, arduous and/or expensive, and in those states, avoiding probate may be advisable. In other states where the probate process is relatively straight forward (like Minnesota), planning to avoid probate may not actually save you money in the long run and could add unnecessary complexity (and cost) to your planning now. Whether it makes sense to try to avoid probate depends on your unique circumstances. If you have questions, please reach out to one of our estate planning attorneys.
4. Probate will tie up your estate for years!
Horror stories about probate in which a decedent's estate is "caught up in probate for years" often have very little to do with the probate process itself and more to do with: (a) whether the decedent had a Will; (b) what the decedent owned; and (c) the decedent's family situation. For example, if a person who owned several rental properties, including property in multiple states, died without a Will, leaving 7 kids, 5 of whom do not get along, chances are that the process will be long and arduous. In that situation, however, the probate process itself is not to blame. The kids might disagree over who gets to act as personal representative or the estate might have to evict tenants living in the decedent's properties, which will delay the process significantly. All of this takes time and money.
One thing is for certain—having a Will can absolutely streamline the probate process. In the fifth misconception below, you will learn about one of the ways to avoid probate. If you have questions about whether it would be advisable to plan to avoid probate, please contact one of our estate planning attorneys.
5. Having a Revocable/Living Trust is the best way to avoid probate.
The most common way to avoid probate is to have a Revocable/Living Trust. A Revocable Trust is an alternative to a Will. Any assets transferred to the Trust during a person's lifetime will not require a probate proceeding. "Transferred to the Trust," however, are the key words here, and also why this is listed as a misconception. The mere existence of a Revocable Trust will not avoid probate. In order for a Revocable Trust to be effective as a probate avoidance tool, you must "fund" the Trust by transferring all of your assets to it. That means executing a deed to your home and re-titling your bank accounts, brokerage accounts, cars, any business assets, etc. Funding your Trust can be an onerous task.
If you do not fund the Trust, then your estate will still end up going through probate. Even worse is when a person goes through the cost and effort to create a Trust and fund it, but then purchases a new home, for example, and neglects to put the new home in the Trust. In that case, the Trust would be administered upon death, but a probate would also need be initiated for that single asset, thereby thwarting the decedent's efforts of avoiding probate. Unfortunately, in our experience, a fully and properly funded Revocable Trust is rare, which means that most of the time, a probate ends up being necessary anyway.
If done properly, a fully funded Revocable Trust can be a powerful tool with a number of advantages over a Will. Administering a Revocable Trust (as opposed to probating an estate) often ends up being slightly less work for the decedent's successors, provides quicker access to money upon the decedent's death, can offer additional privacy with respect to the decedent's assets, and can reduce the likelihood of legal challenges to the estate.
How might having a Revocable Trust reduce legal challenges upon a person's death? First, when a probate is initiated, all "interested parties" must receive notice of the proceeding. Under Minnesota law, an "interested person" includes a person's heirs, devisees, children, spouses, creditors, beneficiaries, and any others having a property right in or claim against the estate of a decedent, ward, or protected person which may be affected by the proceeding. That means that even if a person is explicitly disinherited under a decedent's Will, he or she still may receive notice of the probate proceeding and be provided with an opportunity to object. On the other hand, only beneficiaries of a Trust are entitled to receive notice of the Trust and its contents. Second, because a Revocable Trust administration is generally performed without Court involvement or oversight, any legal challenge would need to be affirmatively initiated. On the other hand, a probate proceeding that is already initiated can provide a disgruntled beneficiary or family member an easy route to challenge the Will.
We Can Help
If you have questions about whether it makes sense to utilize a Will or a Revocable Trust, or other related topics, please contact an attorney in Maslon's Estate Planning Group.