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PROBATE CODE UPDATES

by Emma Maddy on June 20, 2016

Close up of vintage typewriter machine - iStockStarting August 1, 2016, the amounts available under the Minnesota Probate Code (Minn. Stat. Ch. 524) for a number of issues will be adjusted for the first time in more than 25 years. These issues include the family allowance, collection of personal property by affidavit, and spousal intestate share with children from a previous relationship. The updates will also affect amounts under exempt property under Minn. Stat. § 524.2-403(a) and (c), and the threshold for summary administration, in addition to a number of changes that do not relate to dollar amounts.

THE FAMILY ALLOWANCE

The family allowance is designed to provide funds to a spouse and minor children during the administration of an estate. The allowance can constitute monthly payments for up to one year if the estate does not have enough funds to pay all allowed claims, or eighteen months if the estate is fully solvent. These funds come out of the estate before any distributions are made, and the personal representative currently has the ability to determine a monthly allowance of up to $1,500. On August 1st, that amount will increase to up to $2,300 per month.

COLLECTION OF PERSONAL PROPERTY BY AFFIDAVIT

Collection of personal property by affidavit (see Jamie Held’s article from April 2011 here) refers to the maximum amount of probate assets that can be transferred from the decedent’s name without use of the probate process. If the decedent had funds in a trust in order to avoid probate, this is the maximum amount that could be held outside that trust in the decedent’s own name. That amount is currently $50,000, but will increase to $75,000 on August 1st. The process for this collection is outlined in Minn. Stat. § 524.3-1201.

SPOUSAL INTESTATE SHARE

When a person dies without a valid will or trust, the state has enacted statutes that govern that “intestate” succession. One of the standard assumptions that go into that calculation is that the decedent spouse would elect to support the surviving spouse and any surviving children. The statutory default if the surviving spouse is the parent of all surviving children is that the surviving spouse is entitled to the entire intestate estate, because that spouse is likely to support those children.

The calculation gets a little more complex when the surviving spouse is not a parent of one or more of the surviving children, because, while there might be a personal or ethical compulsion to pass on funds to or support the surviving children, there is no biological connection. In order to better ensure support of those children, the statutory default in that case grants the surviving spouse the first $150,000 of the estate, plus one-half of any remaining funds, with the remainder going to the decedent’s children from a previous relationship. On August 1st the amount available to the surviving spouse will be raised to the first $225,000, plus one-half of the remaining funds.

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Bull Dogs - iStockUntil recently, Minnesota was one of the few remaining states that did not allow for a trust to be created for the benefit of animal. However, this past legislative session H.F. No. 1372 was signed into law by Governor Dayton, which includes the statute to allow for the creation of a “pet trust.”

Under Minn. Stat. §501C.0408, “a trust may be created to provide for the care of an animal alive during the settlor’s lifetime.” The trust will terminate upon the death of that animal, or if the trust is for the benefit of multiple animals alive during the settlor’s lifetime upon the death of the last surviving animal.

The trust may appoint a person to enforce the terms of the trust. However, in the event the trust does not appoint such person, anyone who has “…an interest in the welfare of the animal may request the court to appoint a person to enforce the trust or to remove an appointed person.” Additionally, the trust property must only be used for the intended use of the trust. Nevertheless, the court has the ability to determine that the value of the trust exceeds the amount necessary for the intended use.

The trust may designate the distribution of any remaining trust assets upon the termination of the trust. In the event that no such designation is made, the remaining trust assets will be distributed to the settlor’s heirs-at-law according to the intestate statutes.

Lastly, an irrevocable trust established for the benefit of an animal is subject to the conditions of Minn. Stat. §501C.1206, which is to say that an individual who is seeking public assistance for health and medical cannot use such trust to shelter assets in order to qualify for the public assistance.

Should you have any interest in including gifts for the benefit of animals in your estate planning, be sure to contact an attorney to set up a proper plan.

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Will II - iStockUnfortunately, too many recent newsletters have focused on the death of musical legends. This month left us with another untimely death. Prince, whose legal name was Prince Rogers Nelson, died on April 21st at his Paisley Park recording studio and home in Chanhassen, Minnesota. As unbelievable as it may seem, according to his sister, Tyka Nelson, Prince died without a Will or other estate planning instrument, leaving a complex and vast estate that will take years to organize and administer. On April 27th, Minnesota judge, Kevin Eide, declared that Prince did indeed die intestate (without a Will) and appointed Bremer Trust as special administrator of the estate.

Beneficiaries
According to reports, Prince was not married at the time of his death and had no living children, leaving Tyka and his six half-siblings as the heirs of the estate. As is the case in Illinois, Minnesota law states that any “half-relative” inherits as if he or she was a whole-relative. Without a Will or Trust document stating otherwise, Price’s half-siblings are entitled to the same share of his estate as his full-sister, Tyka. There may also be additional relatives and creditors who file claims against the estate as the case proceeds in the Minnesota probate court.

Privacy
Prince was widely-known to be a very private person, which makes it especially surprising that he did not bother to establish an estate plan. As discussed after the deaths of James Gandolfini and David Bowie, while a Will must be filed with the probate court after death, a Trust is a private document between the grantor (creator), trustee and beneficiaries. Privacy is not just a concern for celebrities. Due to the exposure and scrutiny of estates resulting from challenges by family members or creditors, keeping estate planning documents out of the public eye can be an invaluable benefit of a proper estate plan. By using a Revocable Living Trust in conjunction with a Pourover Will—which simply “pours” all of the individual’s assets into his or her Revocable Living Trust at death to be administered by the trustee under the terms of the trust document without revealing the terms of distribution—an individual can ensure that his or her affairs will remain private and out the view of the public, creditors or any dissatisfied family members or friends.  While the benefits of privacy are exemplified by celebrity estates, its value should not be underestimated for all estates.

Valuation, Tax Liability and Liquidation
It is shocking and disappointing that anyone would not have an estate plan, but especially someone who not only valued privacy but also had a sizable, complex estate. Even more disappointing is the fact that a large part of Prince’s estate may have to be liquidated to pay his estate tax bill, which could be as high as $150 million. Reports vary as to the value of his estate, but a large portion of it—his vaults of unreleased music and symbol—will take a long time to appraise. The estate tax return is due nine months after death, so unless a large portion of his estate was held in cash and marketable securities, the estate may be forced to liquidate large portions of his art, music and collections. Unfortunately, reports indicate quite the opposite—that his cash was limited because his concerts and releases were rarely organized and more often impulsive.

For fans of his music, the lack of an estate plan means that his unreleased music may never see the light of day. Had Prince appointed one or more individuals to handle his recordings in accordance with his wishes—a curator of sorts—the estate could have begun organizing and releasing the music almost immediately to not only please the fans but also generate revenue for the estate.

You do not have to legendary musician to need a proper estate plan. An unplanned estate will be a very expensive headache for your loved ones. If you do not have an estate plan or are unaware how your estate would be administered it is incredibly important to contact an estate planning attorney, have an estate plan established that reflects your wishes and inform your loved ones of its existence. It may encourage them to take responsibility over their own estate planning as well.

 

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