MN Probate | Can non-probate assets be used to pay an estate’s debts?

Posted on October 19, 2017 by jlawyer

Non-Probate Assets in Minnesota

Last week we discussed what happens when an estate runs out of money. When this happens, an estate is seen as insolvent, meaning the assets are not sufficient to cover the liabilities owed. In these cases, money is distributed according to a pre-established hierarchy and when it runs out, it’s gone. But what happens if there are assets beyond those in the estate? Can they be used to pay off the estate’s debts? To learn more keep reading.

First, why would there ever be assets that are not part of the estate? The reason is because some assets are seen as non-probate assets and pass outside of the probate system. This happens most often with assets that have what are known as designated beneficiaries.

Designated Beneficiary Law

What is a designated beneficiary? A designated beneficiary is someone who was named as the person to whom an asset will pass should he or she survive the decedent. When you list someone’s name as beneficiary on an IRA, 401(k), life insurance policy or bank account, this makes them a designated beneficiary. In these cases, and those involving pay-on-death or rights of survivorship accounts, the assets pass directly to the named beneficiary. This happens entirely outside of the probate process and results from a contract between the decedent and the financial institution. Because no probate court is involved, these are referred to as non-probate assets.

Insolvent Estates

So what happens if an estate is upside down, but there are non-probate assets with money that could be used to cover some of the debts? Are the non-probate assets up for grabs? Surprisingly, the answer is not always so clear. Recently, Texas passed a new law that says that assets from multi-party accounts that pass outside of the probate process are liable for the debts of an estate. The problem is that the Texas law doesn’t do a very good job of explaining how this should work in practice. The issue is that though these funds may be used to pay debts of an estate, the executors may not have any access to the funds as they were lawfully distributed by the financial institutions directly to the beneficiary. Unless the executor acts quickly and notifies the financial institution that funds are in dispute, it may be too late as they money could already be spent. Should that happen, the Texas law says nothing about how the executor should go about recovering money from the rightful beneficiary.

In Arizona, the law is similar. The legislature there said that non-probate assets can be used to pay a decedent’s debts, but only in cases where the estate’s assets are insufficient to cover its liabilities. In those cases, the beneficiary of the non-probate asset would be held legally responsible for satisfying debts up to the value of the money received. That means if a beneficiary received a bank account worth $10,000, he or she could be on the hook to pay up to $10,000 in debts of the decedent’s estate.

Creditor Claims (Debts of the Deceased)

In other states, non-probate assets are seen as not being part of the estate and thus cannot be claimed by creditors, even if the estate is insolvent. According to the Minnesota Department of Revenue, assets that are payable upon death are not part of the state’s probate process. As a result, the DoR goes on to say that named survivors inherit these non-probate assets, which are not applied to the deceased person’s debts. Examples given of such non-probate assets including things like property with a right of survivorship, insurance proceeds, annuities, pensions, retirement accounts and accounts that are payable upon death.

Minnesota Probate Lawyers

An experienced Minnesota probate lawyer can help walk you through the probate process, answering questions along the way. For more information on estate planning in Minnesota, along with a variety of other topics, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.

Contesting a Power of Attorney in Minnesota

Posted on September 7, 2017 by jlawyer

Contesting a Power of Attorney

Powers of attorney are incredibly useful documents in that they hand over important rights to allow another person to manage certain aspects of your life if and when you are unable to do so on your own.

Depending on how broad the power of attorney was written, the agent (the person on the receiving end of the power of attorney) will be able to make a number of crucial decisions on behalf of the principal (the person giving away the power). Essentially, the agent will be able to act like he or she is the principal, standing in the principal’s shoes.

Control of a Person’s Assets

What does this look like in practice? For broad powers of attorney, it can mean that the agent has the ability to control all of a person’s assets, financial accounts, financial decisions and even healthcare decisions. In these cases, the principal is truly trusting his or her life in the agent’s hands.

The agent is required to act in the principal’s best interest, but as I’m sure you can imagine, that does not always go so smoothly. In some cases, the agent may be abusing his or her powers or acting in ways that run counter to the wishes of the principal. If the principal is incapacitated and isn’t able to dispute the power of attorney on their own, what can be done? Thankfully, there are options, including a challenge by a loved one.

Power of Attorney Law

First things first, if you’re considering challenging the appointment of a power of attorney and you aren’t the person that made the appointment, you will need to gather evidence demonstrating why the principal is unable to challenge the appointment themselves. If the principal is fully aware of what’s going on and chooses to do nothing, either because he or she agrees or is simply willing to go along with the decisions of the designated agent, then it is unlikely a court will intervene.

It will be important to show that the principal is in some way incapacitated, such as being in a coma, suffering from dementia or other serious health problems. If it can be shown that the principal is unable to raise a dispute, then your chance of mounting a successful challenge increases.

Another thing to pay attention to if you’re considering challenging the appointment of a power of attorney is to see whether the proper legal formalities were followed. Was the power of attorney executed in the way required by state law? Did it include the right language? Was it witnessed by the proper number of people? Any of these flaws could be enough to attack a power of attorney designation and should thus be carefully scrutinized.

If there aren’t any formal flaws, it’s now time to turn your attention to broader abuse by the agent. In these cases, the appointment is valid, but will need to be revoked by a court. To launch a successful challenge, you’ll need to be prepared to show that the agent is abusing the authority he or she has been entrusted with. Examples of serious abuse include theft of the principal’s property, mismanagement of the principal’s assets and a neglect or disinterest in the principal’s needs. You’ll want to do your best to avoid this becoming a he-said, she-said battle and stick to objective facts, as this will improve your odds of raising a successful claim.

Challenging A Power of Attorney

Challenging a power of attorney can be quite difficult. After all, powers of attorneys are meant to withstand attack and give some comfort to the principal that the person they designate will remain the person in charge no matter what. To overcome this presumption that the principal’s selection should be upheld you will need to compile strong evidence showing that the agent has lost sight of his or her duty and that a judge should feel compelled to act.

Minnesota Power of Attorney Lawyers

An experienced Minnesota power of attorney lawyer can help walk you through the probate process, answering questions along the way. For more information on estate planning in Minnesota, along with a variety of other topics, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.

How to Avoid Probate | The Benefits of Bypassing Probate Through The Small Estate Exception

Posted on August 31, 2017 by jlawyer

The Benefits of Bypassing Probate Through The Small Estate Exception

We’ve all heard that probate is a process best avoided, if possible. It can take time, costs money and involves prolonged contact with a court, all things most people would prefer to steer clear of. Probate can be avoided with the help of an experienced Minnesota estate-planning attorney.

The good news is that in other cases probate can also be avoided (or expedited) just because of the size of the estate.

Why would the size of the estate matter? The reason that certain small estates are exempted from certain aspects of the probate process is to avoid wasting precious resources. If a person only leaves behind a few thousand dollars, it would be unjust to spend a substantial percentage of that going through probate trying to figure out whom to disburse the money to.

Far better to let the heirs apply for an expedited process that allows them to walk away with a larger amount in their pockets and less in the probate court’s coffers.

Minnesota Small Estate Affidavit process

If inheritors follow certain steps, Minnesota law allows them to skip the probate process altogether, provided, of course, the estate clears certain financial hurdles. Under the simple affidavit process, all an inheritor has to do is prepare a short affidavit that explains that he or she is entitled to a certain asset.

The document must be signed under oath and can then be presented to a bank or other financial institution holding an asset. The bank then gets the affidavit and a copy of the person’s death certificate and will then release the asset. This simple affidavit process is possible in Minnesota only if the entire estate does not exceed $75,000. The only other rule to keep in mind is that you must wait 30 days after the person’s death to use the affidavit.

Simplified probate

Small estates can also use what is known as a simplified probate process. This less burdensome approach requires an executor fill out a written request from the local probate court asking to use the simplified probate procedure. The court will then decide whether to grant the executor the authority to distribute assets without going through all the steps usually associated with probate. The simplified process can be used in Minnesota only after the court ensures that no property is subject to claims by creditors.

Are there any downsides? So far it sounds like a universally appealing option if it’s available to you. If you are set to inherit a small estate then anything that helps reduce the time and expense associated with securing that inheritance is a great thing.

One word of warning, though it can be good to avoid the cost of paying a lawyer, if you have any concerns about the estate or the steps involved in finalizing the process, it’s better to take a moment and seek an experienced opinion rather than potentially make a mess that could cost even more money to fix down the road. Even small estates can include complicated questions that would benefit from the wisdom of a skilled estate-planning attorney.

Minnesota Probate Lawyers

Minnesota Probate Law | Disinheritance

Posted on August 9, 2017 by jlawyer

If you’re preparing to draw up a will or a larger estate plan, it’s natural to think about who you do and do not want to leave your possessions to. In many cases, people spend their time and energy thinking through what items to leave to which of their heirs.

In other cases, the energy might instead be expended not on what to leave someone, but whether to leave them anything at all. Disinheritance can be a tricky proposition, both from an interpersonal perspective and a legal one. To learn more about how the process works, keep reading.

Why disinherit?

This is an incredibly difficult question to answer generally as the decision to disinherit is quite complicated and very personal. In some cases, disinheritance occurs because of a sudden event. A nasty divorce in the family could cause a schism, a sudden recurrence of addiction, an incident of abuse, in some cases, it may be a particularly upsetting argument. Other times, the disinheritance is the product of years of issues and estrangement that have gradually gotten worse, prompting the person making the will (the testator) to finally decide that enough is enough. Each instance of disinheritance is different given the complex personal relationships wrapped up in such decisions.

Who can and can’t be disinherited?

You may think that because the money is yours you can do with it what you want. While that’s generally true, there are some limits that are worth keeping in mind. Across the U.S., the rule is that you cannot disinherit your spouse. One exception is if your spouse agrees to be disinherited, either in a pre- or post-nuptial contract, then it might be possible. Even in the case of a prenup, disinheritance isn’t allowed in Georgia, where everyone is entitled of at least one year of support following the death of their spouse. It should be noted that these rules only apply to current spouses. Recent divorces don’t count and former spouses can be safely disinherited.

What about children? In almost every state in the country you can disinherit children as you wish. The only limitation occurs in Louisiana, of all places. The law in Louisiana says that a parent cannot disinherit children who are younger than 23, who have mental or physical incapacity or who are incapable of taking care of themselves. Except for these very narrow circumstances, disinheritance is legally acceptable.

Beyond these restrictions, the general rule is that you can disinherit whoever you like. It’s your money, and you can control who gets it (and who doesn’t).

Is disinheritance the right call?

Though disinheriting your child (or grandchild, or other relative) may be legally acceptable, that doesn’t necessarily mean it is socially acceptable. Saying you want to disinherit someone sounds easy enough, but can be much more difficult in practice. To make such a bold move is almost assured to damage, often irreparably, your relationship with the person being disinherited. It’s also likely that the ripple effects will extend beyond this person, perhaps harming your relationship with that person’s close friends and family who disagree with your decision. Before making the movie, think long and hard and be sure this is a decision you’re ready to own.

Other options besides disinheritance

Rather than take what some consider to be the nuclear option of disinheriting a loved one, another solution worth considering is creating a trust. How does a trust help in this situation? Rather than simply writing the person off, a trust can be used to control the heir’s inheritance, creating limits that prevent the person from using all of the money at once. You can use the trust to creative incentives for working or going to college or staying drug free. You can also place others in charge of disbursing money to the heir, ensuring that the loved one never has direct access to the asset.

An experienced Minnesota probate lawyer can help walk you through the complicated process of establishing a workable estate plan. For more information on estate planning in Minnesota, along with a variety of other topics, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.

Source: “How to Disinherit Loved Ones—And Which You Can’t,” published at CNBC.com.

Minnesota Probate | Payment of Bills of the Deceased

Posted on April 28, 2017 by jlawyer

In a Minnesota probate, the property of a decedent (the deceased person) passes at his or her death to the people named in the will (or Trust) or the decedent’s lawful heirs. The property is also subject to a spousal elective share right, expenses of administration, and “rights of creditors”. In this article, we are going to discuss the “rights of creditors” or how to properly pay the last bills of the deceased.

Payment of Creditor Claims

The claims provision of the Minnesota probate code “balance” the laws incentive to distribute the decedent’s estate against the right to be repaid lawful debts. As an aside, the law is also clear that estate’s are supposed to be “wrapped-up” as quickly and efficiently as possible while still protecting the rights of those who claim an interest in the deceased’s property.

Below are some initial steps that a personal representative (often referred to as an “executor”) should take when dealing with debts of the estate:

Identify the Creditors: the personal representative needs to make a list of all parties to whom the deceased may have owed money. The names and addresses of the parties should be provided to the probate attorney so that proper notice of the existence of the estate can be given to the parties.
Identify the Nature of the Debt: the personal representative should figure out if the bill is justified and valid. If not, the bill can be contested or potentially reduced.
Provide a Mechanism for Resolving Disputes: the personal representative should work with the probate attorney to discuss how to resolve any bill disputes;
Determine the priority of the various parties who may be entitled to some of the decedent’s property;
Determine a method of payment of the bills of the deceased.

Minnesota Law

The law associated with creditor claims, for the most part, is contained in Minnesota Statutes 524.3-801 through 524.3-817. Please review the specifics of the law for details on payment of creditor claims.

The definition of what constitutes a “claim” is contained in Minnesota Statute § 524.1-201(8). The law provides that “claims include liabilities of the decedent whether arising in contract or otherwise,” and/or “liabilities of the estate which arise after the death of the decedent including funeral expenses and expenses of administration.”

Free Initial Consultations

Contact the Flanders Law Firm today. The firm offers free consultations to all potential clients. Call (612) 424-0398.

Minnesota Probate Law | When Trying To Avoid Probate Only Makes Things Worse

Posted on April 17, 2017 by jlawyer

When many people sit down to create an estate plan, a common motivating factor is the desire to avoid probate. We’ve said it before and we’ll say it again, probate is a long and cumbersome process that is, usually, good to avoid. It costs money, it wastes time, it can be terrible for small businesses and it’s public, meaning details of your family and estate are available for others to peruse. In short, there are many reasons why your family might benefit from avoiding the inefficiencies of the system.

Though it’s often good to steer clear of the probate process, it is critical that you do so thoughtfully. Working with an attorney to plan out how you want your estate to be managed after you’re gone is wise. Taking shortcuts that could end up causing far more trouble than the probate process itself? Not so much. To learn more about two common probate avoidance shortcuts that you should be aware of, keep reading.

Housing | Minnesota Probate

One of the assets that that people most often worry about is real estate. They want to be sure their home (or second home or rental properties, etc.) doesn’t get tied up in probate court, forcing family members to spend time and money getting it out. To avoid the hassle of probate, some will simply transfer the home to a child while they are still alive. This can be a good thing, in some cases. However, there are a number of serious potential pitfalls.

For one thing, if your child is now the owner of the home, then he or she is able to make decisions about what happens to the property, including if it gets sold. That means you can get cut out of crucial decisions about your home and your future, if the child chooses to do so. Though you may not worry about this risk, understandably willing to trust your child, there are others.

What if your child declares bankruptcy? In that case, your house could be sold off to pay creditors. If, for example, you become ill and need medical assistance under Medicare, you might not be eligible if the transfer occurred around the same time. Another concern is that if your child were to pass away before you, the house would be transferred to his or her heirs, rather than yours.

Banking | Minnesota Probate

Another common approach for probate avoidance is to add a child’s name to your bank account. This can be helpful in that the child is allowed to pay bills on your behalf and automatically becomes an owner of the account in the event of your death. That said, potential problems abound.

Again, if trust is even remotely a concern, this should be avoided at all cost. By becoming an owner of the account, your child could do as he or she wishes, including stealing every last penny. Even if you trust the child totally, harm lurks in the form of creditors or others that your child may owe money to. If your child divorces or is involved in an accident or owes money to creditors, all could result in a judgment seizing your money to satisfy your child’s obligations.

Minnesota Probate Lawyers | Free Initial Consultations

Though many of these risks are speculative, that doesn’t mean they shouldn’t be seriously considered. These kinds of issues occur all the time and should be thought through before moving forward. An experienced Minnesota estate planning lawyer can help walk you through the complicated process of establishing a workable estate plan. For more information on estate planning in Minnesota, along with a variety of other topics, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.

Source: “Shortcuts to avoid probate that can cost more than money,” published at GJSentinel.com.

Contesting A Will In Minnesota | MN Probate Law

Posted on March 30, 2017 by jlawyer

For those who spend the time and energy drafting wills and estate plans, the goal is obviously to ensure that your wishes are respected once you’re gone. Going to this trouble is supposed to ensure that things go smoothly when it’s time to distribute your assets to heirs. Though this is true most of the time, there are circumstances in which things don’t go perfectly to plan. In cases where fraud may have happened or an heir has especially hurt feelings, it’s possible that the will could be challenged in probate court. To find out more about how contesting a will works, keep reading.

Why?

The good news, at least for those drafting the will, is that wills are official legal documents and are thus not easily ignored. Simply disliking the results of a will or feeling you didn’t get a fair shake isn’t enough to justify a valid challenge to a will. Wills can be contested for a variety of valid reasons and these include things like fraud, duress, undue influence, mental incapacity, improper witnessing and the existence of ambiguous language. A will contest requires the existence of a valid legal question about the document itself or the process by which it was created, sour grapes aren’t sufficient.

Who?

Can anyone challenge a will? Thankfully, no. Probate law says that wills can only be challenged by those with proper standing, meaning heirs and other beneficiaries. A person needs to be mentioned in the current will or some previous version of the will. Interestingly, someone mentioned in a will for the purpose of being disinherited is enough to give that person the standing to raise a challenge. These rules mean that those who can bring a challenge are almost always spouses or children of the person who crafted the will.

When?

How long does an heir have to contest a will? The answer varies depending on your location, as each state puts a different spin on its probate rules. In Minnesota, Section 524.3-109 of the Probate Code says that a person has one year after the date of death of file challenges.

Contesting A Will In Minnesota | How?

If it turns out that you have standing to contest the will and have legitimate grounds to do so, the next step is to file a petition with the probate court in which the will has been entered into, objecting to its validity. All heirs and beneficiaries of the estate will need to be informed of the challenge, giving them an opportunity to intervene should they choose to do so. After everyone is on notice, it’ll be time to gather information from other parties, put forward your arguments and lay out your justifications for invalidity. If, after that, you aren’t able to negotiate a mutually agreeable settlement to the dispute, the matter will need to be decided by a probate judge.

Though contesting a will is clearly possible, it’s important to understand that doing so isn’t easy or fast. Any challenge will need to be based on valid grounds, not just displeasure with the disposition of an estate. Even then, victory is not assured and you’ll likely spend a good deal of time and money fighting it out. Just something to keep in mind before heading off down the road of a will contest.

Minnesota Probate Lawyers

An experienced Minnesota estate planning lawyer can help walk you through the complicated process of establishing a workable estate plan. For more information on estate planning in Minnesota, along with a variety of other topics, contact Joseph M. Flanders of Flanders Law Firm at (612) 424-0398.
Source: “What Are the Grounds for Contesting a Will?,” by Julie Garber, published at TheBalance.com.