A Minnesota living trust is an important estate planning option. Revocable living trusts, or inter vivos trusts, allow you to control and use your assets while also planning for their distribution after your death.
Living Trusts in Minnesota
To create a living trust in Minnesota, the grantor creates the trust and places assets in the control of the trust. You must name a trustee who is in charge of managing the assets during your lifetime. One of the benefits of a living trust is that you can name yourself trustee, and most people take advantage of this. You will need to select a successor trustee to take over management of the trust after your death. The trustee distributes the assets in the trust to the beneficiaries, according to the terms of the trust.
If you set up a revocable living trust you have the power to change or alter it during your lifetime. An irrevocable living trust is set in stone once it is signed. Most people seek to place as many assets into the trust as possible, but there are some assets not eligible for a living trust, particularly retirement and 401(k) accounts.
The assets in a living trust do not need to go through the probate process. Probate is the court procedure needed to verify and carry out the terms of a will. Probate is a lengthy process, taking many months. An executor, attorney, and court fees must all be paid as part of the process. Heirs do not receive their inheritance until probate is wrapped up. A living trust does not go through probate and there are no fees or procedures necessary. Beneficiaries can receive their distributions immediately after your death if you wish. If you own property in other states, a trust allows you to avoid having multiple probate proceedings in multiple states as well. Note that Minnesota follows the Uniform Probate Code, which has made its procedures easier to follow, however it is still not as straightforward as a trust. In addition, estates valued at less than $50,000 can use a small estate proceeding which is faster and less expensive than full probate. This is usually a better option than a trust for estates of this size.
Assets held in a revocable living trust are subject to a spouse’s elective share in Minnesota. An elective share is the right of a surviving spouse to claim a certain percentage of the deceased’s estate, even if the spouse was disinherited.
Do I Need a Living Trust in Minnesota?
A living trust in Minnesota offers privacy whereas a will does not. A will must be probated in court and made public record. Your trust does not need to approved by a court or become public record. The assets, beneficiaries and terms of the trust are not disclosed. A trust offers the added benefit of being more difficult to contest than a will, making your wishes secure.
Your living trust provides you with control over your assets while you are alive. Nothing changes for you – you continue to live in your home, drive your car and you can spend, use, or give away anything you want. After your death, the trust continues to be managed by your trustee. The assets in the trust are only passed to your beneficiaries at times or events that you have specified, meaning the assets can remain in the trust after your death and provide security for your family. A will passes inheritances to heirs as soon as probate concludes.
A revocable living trust protects you should you become mentally incapacitated. All of your assets are already controlled, owned, and managed by the trust and a conservatorship proceeding is likely unnecessary for you to have your financial life managed for your benefit.
Living Trusts and Estate Taxes in Minnesota
A living trust does not protect you from estate tax. Minnesota applies estate tax to estates in excess of $1.2 million and the federal government has an exemption of $5 million. To avoid estate tax you can use a special type of trust called an AB trust, also known as a QTIP trust or a marital trust, which passes assets from a spouse to the surviving spouse without incurring estate tax no matter the size of the estate. Living trusts provide no protection from Medicaid spend down laws.
How to Create a Living Trust in Minnesota
Creating a living trust in Minnesota is finalized when you sign the trust document in front of a notary public and then transfer assets into the name of the trust to finalize the process. A living trust can offer benefits and flexibility that may be an important part of your estate plan. Consider your options and make a choice that works for you.
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