Keep in mind that different states call these powers different names and Minnesota has also changed the name over time. Prior to the passing of the Uniform Guardianship and Protective Proceedings Act in 2003, conservatorship used to be referred to as “guardianship of the estate” and guardianship used to be titled “guardianship of the person.”

Also, be aware of the subtle difference in terminology regarding a person under guardianship versus a person under conservatorship. An individual who has a guardian appointed to protect his or her person is referred to as a “ward.” An individual who has a conservator appointed to protect his or her assets is referred to as a “protected person.”

The difference in terminology may reflect the fact that a ward is declared to be incapacitated when a guardian is appointed, whereas a protected person is not declared to be incapacitated. Conservatorship appointment by the court only declares the protected person to: (1) be unable to receive and evaluate information; and (2) have assets at risk of waste or loss. In cases where both a guardian and a conservator are appointed, the individual is usually referred to as the ward and protected person.

In a will, you state who you want to inherit your property and name a guardian to care for your young children should something happen to you and the other parent.

2. Consider a trust.

If you hold your property in a living trust, your survivors won’t have to go through probate court, a time-consuming, public and expensive process.

3. Make health care directives.

Writing out your wishes for health care can protect you if you become unable to make medical decisions for yourself. Health care directives include a health care declaration (“living will”) and a power of attorney for health care, which gives someone you choose the power to make decisions if you can’t. (In some states, these documents are combined into one, called an advance health care directive.)

4. Make a financial power of attorney.

With a durable power of attorney for finances, you can give a trusted person authority to handle your finances and property if you become incapacitated and unable to handle your own affairs. The person you name to handle your finances is called your agent or attorney-in-fact (but doesn’t have to be an attorney).

5. Protect your children’s property.

You should name an adult to manage any money and property your minor children may inherit from you. This can be the same person as the personal guardian you name in your will.

6. File beneficiary forms.

Naming a beneficiary for bank accounts and retirement plans makes the account automatically “payable on death” to your beneficiary and allows the funds to skip the probate process. Likewise, in almost all states, you can register your stocks, bonds, or brokerage accounts to transfer to your beneficiary upon your death.

7. Consider life insurance.

If you have young children or own a house, or you may owe significant debts or estate tax when you die, life insurance may be a good idea.

8. Understand estate taxes.

Most estates — more than 99.7% — won’t owe federal estate taxes. For deaths in 2017, the federal government will impose estate tax at your death only if your taxable estate is worth more than $5.49 million. (This exemption amount rises each year to adjust for inflation.) Also, married couples can transfer up to twice the exempt amount tax-free, and all assets left to a spouse (as long as the spouse is a U.S. citizen) or tax-exempt charity are exempt from the tax.

9. Cover funeral expenses.

Rather than a funeral prepayment plan, which may be unreliable, you can set up a payable-on-death account at your bank and deposit funds into it to pay for your funeral and related expenses.

10. Make final arrangements.

Make your end-of-life wishes known regarding organ and body donation and disposition of your body — burial or cremation.

11. Protect your business.

If you’re the sole owner of a business, you should have a succession plan. If you own a business with others, you should have a buyout agreement.

12. Store your documents.

Your attorney-in-fact and/or your executor (the person you choose in your will to administer your property after you die) may need access to the following documents:

• will
• trusts
• insurance policies
• real estate deeds
• certificates for stocks, bonds, annuities
• information on bank accounts, mutual funds, and safe deposit boxes
• information on retirement plans, 401(k) accounts, or IRAs
• information on debts: credit cards, mortgages and loans, utilities, and unpaid taxes
• information on funeral prepayment plans, and any final arrangements instructions you have made.

Keeping your documents organized will be a great help to your survivors.

The SECURE Act changed a variety of retirement account rules, including who is eligible to contribute to retirement accounts and when withdrawals are required. The new legislation also adds a new exception to the early withdrawal penalty.

Important retirement account changes from the SECURE Act include:

• The required minimum distribution age increases to 72, up from 70 1/2.
• The age limit for IRA contributions has been removed.
• Inherited retirement account distributions must be taken within 10 years.
• New parents can take penalty-free withdrawals.
• Long-term part-time employees may now be eligible for 401(k) plans.

Here’s an in-depth look at the SECURE Act and how it may affect you.

An Older Required Minimum Distribution Age

Previously, you were required to start taking withdrawals from a traditional IRA by April 1 of the year after you turned age 70 1/2. These withdrawals are known as required minimum distributions. “One benefit of the law is the extension of required minimum distributions from the age of 70 1/2 to 72,” says David Mann, a wealth management advisor in Las Vegas, Nevada. “This allows IRA owners to defer withdrawals longer in hopes of additional growth of their IRA assets.”

If you turn 70 1/2 in 2021, you don’t have to start withdrawing from your traditional IRA. You have the option of waiting until you turn 72 to begin taking RMDs.

No More Age Limit for IRA Contributions

Workers with an individual retirement account used to only be able to contribute up until age 70 1/2, but that age limit has now been removed. “Anyone who is working and has earned income may contribute to a traditional IRA regardless of age,” says Ryan Brown, a partner and attorney at financial planning firm CR Myers & Associates headquartered in Southfield, Michigan. “This will benefit older retirees who may wish to keep contributing to their IRAs.”

In 2021, the contribution limit for an IRA is $6,000, or $7,000 if you are 50 or older. If you and your spouse are both over 50 and at least one of you is still working, you can contribute up to $7,000 to an IRA in each of your names, or $14,000 total.

Inherited Retirement Account Distributions Must Be Taken Within 10 Years

Before the new law was in place, those who inherited IRAs could stretch out the withdrawals and required tax payments on each distribution over their life expectancy. Now, for retirement account owners who pass away after Jan. 1, 2020, beneficiaries may be required to withdraw assets in an inherited IRA or 401(k) within 10 years. However, there are a variety of exceptions to the new 10-year rule, including a surviving spouse, minor children, disabled and chronically ill beneficiaries and beneficiaries who are up to 10 years younger than the IRA owner.

“Prior to the SECURE Act, a 40-year-old IRA beneficiary could take relatively small withdrawals for 20-plus years while allowing the IRA to potentially continue to grow, net of the withdrawals,” Mann says. “In theory, after those 20 years, that beneficiary would now be retired with a reduced income, thereby able to pay lower taxes on the withdrawals.”

With the SECURE Act, a 40-year-old beneficiary will need to withdraw the entire IRA balance by age 50. The withdrawals will be subject to taxes. Taking out everything within a decade “could result in a significant increase in taxes on the withdrawals due to the likelihood that a 40-year-old is in their peak earning years,” Mann says.

New Parents Can Take Penalty-Free Withdrawals

Prior to the law, if you took a withdrawal from your IRA or 401(k) before age 59 1/2, the amount would usually be subject to income tax and a 10% penalty. However, the IRS allows penalty-free early distributions from some types of retirement accounts for specific circumstances, such as an expensive medical emergency or to purchase health insurance after a job loss. The SECURE Act adds an additional exception to this list. Your plan may allow a $5,000 withdrawal from an IRA or 401(k) after the birth or adoption of a child. You won’t have to pay a penalty for withdrawing the funds, and you can repay the funds as a rollover contribution. Income tax will be due on the distribution if it is not repaid to the account.

Long-Term Part-Time Employees Are Now Eligible for 401(k) Plans

The law provides a way for more part-time workers to be eligible for a 401(k) plan. In the past, part-time employees needed to work at least 1,000 hours during a 12-month period to be able to contribute to a 401(k) plan. Under the SECURE Act, employees who log at least 500 hours in a 12-month period for three consecutive years can contribute to a 401(k)-plan starting in 2024. “This means the clock starts ticking now on accruing hours, so it’s important for part-time employees to start thinking about how they can take advantage of their company retirement plan,” says Allison Brecher, general counsel and chief privacy officer at Vestwell in New York.

Tax Credits to Start a Small Business Retirement Plan

Many small businesses find it too costly to provide a 401(k) option for their employees. “The SECURE Act helps to offset costs for business owners with the hope that more employees of small businesses will have access to a 401(k) plan to save for retirement,” Mann says. The SECURE Act provides a tax credit to small employers with up to 100 workers that start a workplace retirement plan, with an additional credit available if the plan includes automatic enrollment.

1. A will gives you a say about who will care for your children. If you die and your children do not have another capable parent to take care of them, a court will appoint a personal guardian to raise them. In figuring out who to name for this job, the court will focus on the best interests of the children, and it will usually ask for opinions of people who know the kids. Because you’re dead in this scenario, you won’t be able to weigh in, but you can use your will to be clear who you think should be named—and you can even provide your reasoning. Your opinion will be especially important if there are differing opinions within your family about who your kids’ guardians should be. Times will be difficult enough with you gone; a family feud would only make things worse for your kids. Your documented preference will make it easier for the court to make a decision and for your family to accept it.
2. A will allows you to name a guardian for your children’s finances. If you die, you will also need someone to look after your children’s finances. You can name the same person that you named to be the children’s personal guardian, or you can choose someone different. However, unlike your choice for personal guardian, the court will usually just accept your choice for property guardian unless the person you name is unavailable or obviously incompetent. Your children’s property guardian will look after any of their property that isn’t already managed in another way. In other words, the property guardian won’t manage property that was left to your children in a trust or custodianship.
3. You can use your will to set up long-term management for your children’s property. Separate from naming someone to take care of any unmanaged property, you can also use your will to set up property management for the property you leave to your children. You can use your will to name a trusted adult to manage the property until the children reach a certain age. If you don’t set up property management that lasts into their young adulthood, your children will receive their inheritance from you when they legally become adults – age 18 in most states.
4. You can use your will to decide who will wrap up your estate. The person who serves as executor will have a big job after you die. He or she will manage the court process for wrapping up your estate and will have to make many decisions—big and small—affecting your children’s inheritance. If you have an opinion about who would be best for this job, then you should name that person in your will. If you don’t, the court will appoint someone, and it will have to make an educated guess about who the best choice is. Even if you aren’t worried that the court would make a bad choice, using your will to state your preferences will minimize family conflict over this issue, allowing the focus to remain on taking care of your kids.
5. A will lets you decide who should get what—and who should get nothing. If you want your children to split your property evenly, then you may not be too concerned about using a will to decide who gets what. But your state’s one-size-fits all approach to divvying up property to family members may not be what you want, and many small choices will be left to your executor. It is almost always better to use a will to make your wishes clear. Here are some things to keep in mind: If you’re married, your spouse and your children will split your property using a state-specific formula. The children will split the children’s portion evenly. Your executor will have to make judgment calls about how to divide property that can’t actually be divided (cars, animals, furniture), including decisions about which items should be sold. So if you have any items that you want to leave to specific children, or if you want one child to get more than another, you must make a will to make your plan known—otherwise your executor will be obligated to make an even split as judiciously as possible. Also, if you want to leave any of your children nothing, you must make that clear in your will, otherwise that child may be able to claim a portion of your estate.

Keep in mind that a will alone may not provide enough planning to cover your needs and the needs of your family. For example, if you have a substantial estate, you may want to save your family time and money by avoiding probate. Or, if you have a child with special needs, you may want to set up a special needs trust. You might also consider buying life insurance to cover any big-ticket expenses. And most people should make health care directives and powers of attorney—these will allow your loved ones to make informed decisions about your health care or finances if you cannot make those decisions yourself.

The uncomfortable talk:  For both parents and adult children, confronting the prospect of each other’s deaths can be uncomfortable. Privacy around financial matters is often a key concern, even among close family members.

Why Conversation Is Critical

When it comes to estate planning, there are often significant financial and personal benefits to being transparent and having sensitive conversations. For example, you might assume one of your likely survivors would be comfortable managing a certain asset or serving as trustee, when in reality that person is not up to the responsibility, such as how do they manage the cabin or lake home. 

From the survivors’ perspective, it’s important they understand your intentions and plans for your estate. Lack of clear communication during estate planning (or an inadequate or outdated plan) can not only reduce the amount your beneficiaries receive, it can also result in uncertainty and conflict for them in an already difficult time.

If you do most of the work on your family’s finances, you’ll want to be certain of your survivors’ comfort level with taking on the task and their understanding of your intentions. For some, it may be best for a professional to assume the responsibility. Consult with your attorney or advisor.

Survivors may even make decisions based on erroneous ideas of what the deceased would have wanted. For example, when communication is lacking, some surviving spouses think honoring their loved one means keeping investments exactly as they were at the time of death. Eventually, this could lead to an outdated portfolio and missed growth opportunities.

Additional Benefits of Dialogue

Covering All the Bases

Sometimes, to be effective, the conversation may need to extend beyond your immediate household.

As an adult child, make sure your parents have their own plans and will be properly cared for if one of them passes away or becomes incapacitated.

As a parent, make sure your children have an understanding of your plans and wishes; if the children are still minors, make sure the appointed guardians are willing and clear on your intentions.

As a grandparent or other relative, ensure your grandchildren, nieces, nephews, etc., will be taken care of through your own estate planning, as well as coordinating with their parents on their plans, too.

The benefits of having a dialogue about estate planning within your family don’t stop at asset protection and an accurate understanding of intentions. Such an open dialogue can:

• Bring your family a sense of empowerment, that you are taking control of each other’s collective future rather than leaving some elements to chance.
• Pass on family values.
• Help your family develop a common understanding and a common philosophy for how you and your family’s legacy will be carried out through generations.
• Help prepare the family in the event you or another family member becomes incapacitated.
• Help other members of your family—your parents, your siblings, or your children— develop a responsible plan.
• Allow your family to take advantage of some of the best tax strategies.

How to Get the Conversation Started

Despite how important this conversation can be, it may still be difficult to initiate. There is certainly more than one right way to begin a dialogue; however, here are a few suggestions to help guide you:

• Pick a positive, comfortable environment during a period of relative calm. Don’t wait until a time of crisis when it may be too late to make adequate plans and family members may not feel emotionally able to talk.
• Be sincere about your intentions. Be clear that you are initiating these talks out of concern that proper plans are in place and are understood.
• Stress the importance and benefits of this conversation to everyone affected. One way to do this is to show an example of an estate that was improperly handled because family members had failed to discuss their plans with each other.

There are at least three primary reasons why people create revocable trusts:

1. To avoid probate;
2. To plan for incapacity and not just death; and/or
3. To handle out-of-state real estate.

1. Avoid Probate. When someone dies, a probate proceeding is usually required for transfers of probate property. In general, probate property is property in the decedent’s name alone, with no joint owner and no beneficiary designation. If the grantor makes a revocable trust the owner of all probate property, the trustees can distribute the trust property at the grantor’s death as the trust terms dictate, without the need for a probate proceeding.  While in many cases probate is not very complicated and can often be done through the mail, there are certain basic procedures that must be followed. And probate is a public proceeding—the probate documents on file with the court, including the will, the inventory of assets, and information about heirs and beneficiaries are subject to public inspection.  With a revocable trust there are generally no court filings. Revocable trust administration is typically private, open only to those with a need to know.
2. Plan for Incapacity. The grantor may serve as trustee of a revocable trust as long as the grantor is able to do so. But the grantor should also designate someone in the trust document to step in and manage trust property in the event the grantor is no longer able. While a power of attorney also gives a named agent the ability to manage property if the principal is incapacitated, the power of attorney ends at the death of the principal. The trustee of a revocable trust continues to have the authority to manage trust assets even after death, which likely makes for very seamless transition in administering the estate.
3. Avoid Out-of-State Probate for Real Estate. In general, property is subject to probate in the state in which the owner lives at death. However, real estate is subject to probate in the state in which it is located. If a client owns real property in another state and dies, there may be a need for two probate proceedings, a Minnesota probate to transfer Minnesota property and an out of state probate to transfer the out-of-state real estate. Making a revocable trust the owner of out-of-state real estate can avoid probate in any state.  There are other ways to transfer real estate at death without a probate proceeding, such as joint tenancy with right of survivorship, a life estate/remainder interest in the property, or a transfer on death deed to children or others (TODD). But making someone a co-owner of property with joint tenancy or life estate/remainder reduces the client’s ability to control the property. A transfer on death deed to children may create complications if multiple individuals are beneficiaries. A trustee of a revocable trust can manage the sale and/or distribution of property and pay trust expenses without the need to obtain permission from others. A TODD can be used to transfer the client’s real estate to the trust, avoiding the need for a change in ownership during the client’s lifetime.

Disadvantages of a Revocable Trust

Revocable trusts are not for all clients. In general, revocable trusts are more expensive to have drafted than a will, primarily because of the increased complexity and need to fund the trust once it has been signed. If a client has significant value in assets not ideal for trust ownership, such as stock options, investment real estate, or closely held stock subject to transfer restrictions, the revocable trust may not be the best approach because probate may be required for them. It may not save substantial time and/or cost to use a revocable trust if there will be a probate in addition to administering the revocable trust assets.  In addition, the client must keep the trust funded over the client’s lifetime as the client divests himself or herself of assets and acquires new assets. Some clients may not understand or wish to devote time and attention to such details.

1. Basic information (date of birth, contact information, citizenship, marital status);
2. Family and others who would be entitled to probate property in the absence of a will, including predeceased children and any family members or beneficiaries with special needs or considerations;
3. Assets, including the form of ownership, identity of any co-owners, and designated beneficiaries;
4. Liabilities, including the terms of any notes or mortgages;
5. Prior transfers of assets;
6. Present and prospective interests in trusts and estates; and
7. Fiduciary selection (attorney-in-fact, personal representative, executor, trustee, guardian).

The attorney should also clearly communicate the terms of the engagement (hourly rate or fee charged by the attorney, and whether a retainer is required). If the attorney is meeting with a married couple, the attorney should obtain a dual representation agreement whereby each spouse waives any conflict of interest with the other spouse.

Essentially the property that is the topic of the TODD still remains an asset of the transferor (owner) until their death, and is included as an available asset for qualifying for public assistance, Medicaid (Minnesota Medical Assistance) or Long Term Care coverage. 

Planning is important to ensure the proper distribution of property at death, and also to manage finances and health care decision-making during one’s lifetime. While there may be a number of reasons people do not engage in estate planning, here are some common factors:

1. An assumption that “it will work out.” Many people believe they know where their property will pass at death. Unfortunately, many of these assumptions can be wrong, with the result much different from expectations.
2. Their need is not urgent. Why plan today when I can do it tomorrow?
3. Fear of upsetting family harmony (or perceived harmony). Sometimes you cannot please everyone, so it may seem easier to do nothing. However, leaving confusion and uncertainty rarely, if ever, draws  a family closer to each other. While the final plan may not please everyone, it is preferable to ensuring a fight.  
4. Cost. The attorney should be willing to share with the client the attorney’s expectation of the cost of planning, even if in the form of a range of fees. Often this is tempered with caution; the cost can increase if the client requires more work than initially discussed, or if unexpected legal issues are encountered. The attorney can also help the client understand that the cost of the plan should be considered in the context of what is at stake by not having a valid or appropriate plan. What is it worth to protect the client’s estate?
5. Too much of a hassle. The client must gather detailed information for the attorney. This can take time and effort, but is crucial if the attorney’s advice is to be appropriate.
6. Fear of vulnerability. Planning prepares for a time when the client has died, or is otherwise not in control of his or her affairs. This can be painful for some to contemplate. However, the attorney should help clients understand that doing proper planning puts the client in control, even if they are incapacitated. The alternative is to leave decisions up to whoever happens to take an interest. That person may not be the person the client would have chosen.

Not everything you own will go through probate. Jointly-owned property and assets that let you designate a beneficiary (for example, life insurance, IRAs, 401(k)s, annuities, and certain other accounts) are not controlled by your will and usually will transfer to the surviving owners or beneficiary without probate. However, there are many problems with joint ownership and using these methods for estate planning. In addition, avoidance of probate is not guaranteed. For example, if a valid beneficiary is not named, the assets will have to go through probate and will be distributed along with the rest of your estate. If you name a minor as a beneficiary, the court will probably require a guardianship until the child reaches the legal age of majority for the state, often between eighteen and twenty-one years of age.

For these reasons, a revocable living trust (combined with a pour-over will) is preferred by many families and estate planning professionals. Establishing and funding a revocable living trust can avoid probate at death (including multiple probates if you own property in other states), prevent court control of assets if you become incapacitated during life, bring all of your assets (even those with beneficiary designations) together into one plan, and provide increased privacy. Because the trust is revocable, the instructions governing it can be changed by you at any time. The accompanying pour-over will is a backup measure in the event that any assets are not funded into your trust during your lifetime and provides that those assets should be poured over into your trust upon your death.

Unlike a probate, which will end at some point, a trust can continue long after your death. Assets can stay in your trust, managed by the trustee you selected, until your beneficiaries reach the age you want them to inherit or longer to provide for a loved one with special needs; to protect the assets from beneficiaries’ creditors, spouses, and irresponsible spending; or to provide for future generations.

An estate plan that includes both a revocable living trust and pour-over will is not necessarily more expensive initially than an estate plan that only includes a will, but it is more likely to avoid fees and costs later, considering that a funded trust can avoid court involvement at incapacity and death.