I have a will. Doesn't that mean my estate won't go through probate??
Unfortunately, just because someone has a will does not mean that their estate will not go through probate.
What is probate?
Probate is the legal process of settling an estate after a person has died. A petition must be filed with the court and a personal representative must be appointed. The personal representative is responsible for: collection, inventory, and appraisal of assets of the person who died, protection of the estate’s assets, payment of decedent’s debts, and distribution of the remaining assets to the proper parties as provided by law.
When is probate required?
In Minnesota, probate is required if the decedent owned any real estate that is titled in his or her name alone or as a “tenant in common.” It is also required if the decedent has personal property in his or her name alone in excess of $75,000. Probate may also be required if the will is contested, unclear, or invalid.
Probate assets can include: real estate, bank accounts, brokerage and investment accounts, promissory notes, business interests, contracts for deed, stocks and bonds, vehicles and boats, and life insurance or retirement assets payable to a decedent’s estate.
“Nonprobate assets” are described as either (1) assets a decedent had at death that were designated to someone other than the estate or the personal representative of the estate or (2) assets the decedent jointly owned with another person. This could include: assets owned as a joint tenant with right of survivorship, accounts with “transfer-on-death” or “payable-on-death” arrangements, life insurance and retirement assets in which a beneficiary, who is not the personal representative, is designated, and assets in which the decedent held a life estate.
How does a will impact probate?
If the decedent did leave a will, it does not automatically mean that that there is no need for probate. A will can be similar to an instruction booklet for the probate court, as it provides the court with guidance as to how distribute the assets. A will can eliminate some steps that would be required in the probate preceding, which in turn can make the process cheaper as well.
Why is estate planning important and why is having a will better than not having a will?
Because a will is the primary tool of the probate system, it tells the Court how you would like your property distributed. If you do not have a will when you die, you are considered to die “intestate” and the laws of Minnesota will determine who inherits your estate. By having a will, you are able to decide how your estate will be distributed and it also increases the speed of the probate process. Having a will also allows you to decide who becomes guardian of your children.
Furthermore, a will allows you the opportunity to decide who specifically will inherit from your estate, as you can disinherit individuals with your will. A will also allows you to decide who will be the executor of your estate, whose responsibilities can include paying off your debts, canceling accounts, and other business decisions. Another positive to having a will is the fact that you can change your mind if your life circumstances change. Your life is always changing and having a will allows you to change how you want the future to be.
How can one avoid probate?
A simple way to avoid probate is to add a pay on death designation. You are able to have listed beneficiaries on many different types of things such as: retirement accounts, investment accounts, life insurance policies, pension plans, 401k plans, IRA accounts, and stocks and bonds. If you have the forms filled out, these assets can pass directly to the beneficiary named without probate. Minnesota also has a law that allows you to transfer the title of real estate when you die. This is an estate planning tool called “Transfer on Death Deed” (TODD). It allows the beneficiary to take ownership of the property when the current owner dies. Using a Transfer on Death Deed.
Another option is the use of a trust. A trust is similar to a will, as it allows the distribution of property and assets to heirs, but it allows the distribution outside of probate. The reason for this is because the assets were already distributed to the trust; therefore, they do not need to be distributed by probate. In order to set up a trust, one must place their assets in the trust, making sure that any titles are transferred to the trust and the person no longer personally owns them. Then trust is then managed by a trustee, which can be the original owner of the assets or another trustee. This trustee holds the assets for the beneficiaries of the trust and following the settlor’s (creator of trust) death, the trustee will distribute the assets of the trust to the beneficiaries that were named.
Another way to transfer ownership without probate is by the use of joint property ownership agreements. This allows property to pass to the remaining owner when one of the other owners passes away. The property interest is automatically transferred with no probate required.
One does not have to wait until their death in order to divide up their estate. As gifting assets while you are alive is another way to get around probate. You are able to give up to $14,000 in tax-free gifts per calendar year per person. This is a helpful for large estates as it can minimize future tax burdens. For example, if you and your spouse each give $14,000 to your three children, their three spouses, and nine grandchildren (imagine you have three married children who all have three children), you could give away $420,000 a year off your estate without any gift tax. Although, unless you and your spouse plan on having an estate of over $22 Million, you will not have to worry about gift taxes. See our estate tax update.
Read more probate FAQs here: https://www.startaminnesotaprobate.com/probate-faqs.
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