What Happens to a Family Trust in a Divorce?

“What happens to a family trust in a divorce?” If you have a family trust and are worried about an impending divorce, this post will go over the basics of who to speak with and what to ensure you understand. If you want to prevent issues with trusts during a divorce, this is important information.

By Mike Rogers, AIF® of 360 Financial, Founder and President

Mike Rogers is the President and founder of Wayzata-based 360 Financial. As a fiduciary, he utilizes his 30+ years of experience to orchestrate and implement customized strategies tailored to address the issues and concerns of qualified retirement plan trustees, high-level professionals, and thriving business owners.

What Happens to a Family Trust in a Divorce?

Divorce can be emotionally taxing, and the added complexity of understanding how it impacts aspects like trusts only adds to the strain. 

It can be helpful to have a guide when navigating through such a challenging period in your life. In this article, I’ll go over the important things you need to know about family trusts when embarking on a divorce.

This article isn’t a substitute for professional advice, so please make sure you speak with a financial advisor who will guide you through your estate planning as well as an estate planning attorney. It’s important to have all your ducks in a row, so that your financial life doesn’t get complicated as you start a new chapter in your life.

Plan ahead and speak to a professional if you’re dealing with a family trust as you go through a divorce.

What happens to a family trust in a divorce? 

During a divorce, family trusts can be complex depending on their nature and structure. Typically, a trust’s provisions and whether assets were mixed with marital assets play a significant role in how they’re addressed in a divorce.

Below are some scenarios that may play out when you’re getting divorced and a family trust is involved:

Assets May Remain Shielded From Division:

If a trust was established prior to the marriage and was kept separate from marital assets, it might remain untouched in the divorce. This means the trust continues to operate as it did before, and the assets remain shielded from division.

Classification as Marital Property: 

If a family trust was established during the marriage or if marital assets were used to fund or augment the trust, it could be classified as marital property. This means that its assets could be subject to division during the divorce, depending on the laws of the jurisdiction.

Beneficiary Changes:

If a spouse is a beneficiary of the trust, and the trust allows for changes in beneficiaries, it’s possible that after a divorce, the terms might be modified to remove that spouse. However, this largely depends on the terms of the trust itself.

Income Distribution May Be Considered Spousal or Child Support: 

Even if the trust’s principal remains untouched, any income generated by the trust and distributed to a spouse may be considered when calculating spousal support or child support.

Hidden Assets May Be Discovered: 

In some cases, a spouse may attempt to hide marital assets by transferring them into a trust. If discovered, courts can reclassify these assets as marital property and subject them to division. Such actions may also lead to penalties.

Trust May Be Dissolved: 

In rare cases, a court might order the dissolution of a trust to ensure a fair distribution of assets during a divorce. This generally happens if the trust is deemed to be a sham or created specifically to defeat marital property claims.

Mingling of Trust Assets May Complicate Matters: 

If assets from a trust are mixed or mingled with marital assets (for instance, using trust money for a marital home), this can complicate the trust’s status. The commingled assets might be considered marital property and subject to division.

Children May Be Considered: 

If a trust is established primarily for the benefit of the couple’s children, courts usually try to ensure the trust’s purpose remains intact, safeguarding the children’s future.

If a trust is established primarily for the benefit of the couple’s children, courts usually try to safeguard the children’s future.

Who is the beneficiary of a trust after divorce? 

After a divorce, the original beneficiaries of the trust typically remain unchanged unless the trust document specifies otherwise or there’s a post-divorce modification.

Can a spouse hide assets in a trust? 

While a spouse may attempt to hide assets in a trust, doing so is both unethical and illegal. Courts can take action if it’s discovered that assets were concealed during divorce proceedings.

What is the difference between a marital trust and a family trust? 

A marital trust is specifically designed to benefit the surviving spouse, often for tax reasons, whereas a family trust can be set up to benefit any family member, including children or grandchildren.

How is money distributed from a trust? 

Money is distributed from a trust based on its terms and provisions, typically overseen by a trustee who ensures that distributions align with the trust’s intended purpose. 

What happens to an irrevocable trust in a divorce settlement? 

Irrevocable trusts are generally protected from divorce settlements, as they can’t be easily changed or revoked. However, they may be considered if they’re seen as a source of income or if marital assets were used to fund them.

The nature of a trust matters in a divorce settlement. Assets in a revocable trust (where the grantor retains control) might be seen as marital assets, while irrevocable trusts (where control is surrendered) typically provide more protection from division, unless marital funds were used to fund them. 

How can one protect trust assets from a beneficiary’s divorce? 

To shield trust assets from a beneficiary’s divorce, one can incorporate specific provisions or use discretionary trusts that give the trustee greater control over distributions. 

Does a trust protect assets from divorce in the US? 

In the US, trusts can offer protection from divorce, especially if set up appropriately and before the union. However, how they’re treated varies based on state laws and the specifics of the trust.

Are all trusts considered marital property? 

Trusts can be considered marital property if they were established or funded with marital assets. However, trusts created before marriage or with separate assets might remain separate. 

Remember that trusts aren’t automatically exempt from divorce. Their treatment largely depends on the nature of the trust, state laws, and how they were funded.

Estate Planning
A house in a family trust may remain protected. But it’s critical you speak to a professional as soon as possible to find out what you can expect.

What happens to a house in a family trust during a divorce? 

A house in a family trust might remain protected during a divorce, especially if the trust predates the marriage. Still, its treatment can vary based on the trust’s specifics and the couple’s financial entanglements.

Inheritance Trusts and Divorce: Common Problems 

With inheritance trusts, issues often arise when they’re commingled with marital assets, potentially transforming separate assets into marital property. One common issue with trust funds and divorce is determining how it impacts spousal support or alimony calculations.

Next Steps

It’s important to remember that the handling of trusts during divorce can vary considerably based on state laws. Some jurisdictions might provide more protection to trusts than others. Make sure you seek professional advice. 

If you don’t have your own financial advisor and estate planning attorney, now may be a good time to seek professional counsel. 

Connect with a Financial Advisor Online or In Person

If you need a wealth management team to help you achieve your big-picture goals, we recommend scheduling a call with a financial advisor at 360 Financial.

360 Financial is one of Minnesota’s best independent wealth management firms. We work with clients in Minnesota and across the US. If you’d like to work with a team that always puts your best interests first and is committed to helping you create a lasting legacy, please get in touch. 

Schedule a 15-minute Call

Read More:

The Ultimate Estate Planning Guide and Checklist

About the Author: Mike Rogers

Mike Rogers

Mike Rogers is the President and founder of Wayzata-based 360 Financial. Prior to establishing the firm in 1995, he spent seven years building a solid financial base with two of the nation’s largest investment firms. As a fiduciary, he utilizes his 30+ years of experience to orchestrate and implement customized strategies tailored to address the issues and concerns of qualified retirement plan trustees, high-level professionals, and thriving business owners.

Mike holds the series 7 and 63 security registrations with LPL Financial. He served six years on the Benilde-St. Margaret’s Board of Directors, chairing the Investment Committee for many of those years. 

Schedule a 15-minute Call with a 360 Advisor

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

How to Avoid Probate in Minnesota: A Comprehensive Guide

How to Avoid Probate in Minnesota

A Simple Guide to Probate in Minnesota

“How can I avoid probate in Minnesota?”

By Mike Rogers, AIF®, Founder and President of 360 Financial

Mike Rogers is a fiduciary financial advisor with over 30 years of experience in the financial services industry as an investment advisor and financial planner. He founded 360 Financial in 1995 and holds series 7 and 63 security registrations with LPL Financial.

Avoiding Probate Problems in Minnesota

You can avoid probate in Minnesota if you follow a solid estate planning process that includes working with an estate planning attorney, financial advisor, and accountant.

Strategies such as joint ownership, utilizing beneficiary designations, establishing a revocable living trust, and using POD and TOD accounts are popular for avoiding probate.

However, it’s critical that you work with a team of professionals who will give you advice that’s tailored to your specific situation and aligns with your values and wishes.

If you’re concerned about the potential time, costs, and stress involved in the probate process for your loved ones, you’re not alone.

Many Minnesotans are looking for ways to avoid the complexities of probate and ensure a smoother estate distribution for their families. In this overview, we will explore various strategies for how to avoid probate in Minnesota and protect your loved ones.

From joint ownership options to establishing revocable living trusts, this post will cover a range of alternatives that can save time, money, and emotional strain for your beneficiaries.

Read on to discover how you can craft a tailored plan that meets your needs, providing peace of mind for you and your family.

Establishing a revocable living trust to avoid probate in Minnesota

Key Takeaways

  • Gaining an understanding of the Minnesota probate process and its associated strategies can help minimize costs, time, and privacy concerns.
  • Joint ownership options are a popular strategy for avoiding probate in Minnesota while utilizing beneficiary designations is also effective.
  • Establishing a Revocable Living Trust or using POD/TOD accounts may be beneficial. Consider professional assistance to craft tailored estate plans.

Basics of Avoiding Probate in Minnesota

Understanding the Minnesota probate process is crucial for avoiding formal probate in Minnesota.

But what is probate?

Probate is a probate court-administered process that involves several steps, including validating the decedent’s will, appointing a personal representative, and overseeing the distribution of the decedent’s assets. In Minnesota, probate can be a lengthy and costly. A public probate proceeding often takes several months or even years to complete. The role of a probate registrar is essential in this process, as they ensure the proper administration of the probate court’s duties.

Minnesota law requires probate for estates valued at more than $75,000, if the deceased owned real estate solely in their name, or if there is an estate checking account.

Avoiding probate helps to:

  • Reduce costs
  • Save time
  • Ensure privacy
  • Comply with the decedent’s wishes.

Gaining insights into the intricacies of the probate process, including informal probate, allows you to leverage various strategies to bypass probate, expedite estate distribution, and safeguard your family’s future.

The Importance of Avoiding Probate in Minnesota

Avoiding probate in Minnesota is beneficial for both you and your beneficiaries.

First and foremost, avoiding probate can save time and money. It can reduce stress for your loved ones. Probate proceedings can be lengthy and expensive. Probate involves court fees, attorney fees, and other costs. Avoiding probate allows your assets to be distributed as per your wishes, eliminating the need for a time-consuming and costly legal process.

Moreover, avoiding probate can help maintain privacy for your estate and beneficiaries.

Probate proceedings are public records, which means that anyone can access information about your assets, debts, and beneficiaries. Utilizing strategies to bypass probate can help safeguard the privacy of your estate and loved ones, and lessen the likelihood of disputes over assets.

Joint Ownership Options

Joint ownership options are a popular strategy for avoiding probate in Minnesota.

Holding assets jointly with another person means the assets transfer directly to the surviving owner upon your death, thereby bypassing the probate necessity.

Two common types of joint ownership arrangements are joint tenancy with rights of survivorship and tenancy by the entirety. While each option has its own unique features and benefits, both allow for the automatic transfer of ownership to the surviving owner without the need for probate.

Joint Tenancy with Rights of Survivorship

Joint tenancy with rights of survivorship (JTWROS) is a type of property ownership where two or more individuals own the property together. Upon the passing of one owner, their share of the property is automatically transferred to the surviving owner(s) without going through probate. JTWROS is frequently employed to avert probate and ensure a seamless transfer of property upon the death of one owner.

The primary benefit of joint tenancy with rights of survivorship is the avoidance of probate, resulting in a more expedited process and cost savings. However, it is important to note that joint tenancy with rights of survivorship does not offer any protection from creditors or lawsuits.

Tenancy by the Entirety

Tenancy by the entirety is another form of joint ownership that is only available to married couples. Similar to joint tenancy with rights of survivorship, tenancy by the entirety allows spouses to own property as a single legal entity, with the surviving spouse automatically assuming sole ownership upon the death of the other spouse.

The primary advantage of tenancy by the entirety is the protection it offers from creditors and other legal matters, as well as the seamless transition of ownership in the event of one spouse’s death.

However, it is essential to remember that tenancy by the entirety is only accessible to married couples and may not be available in all jurisdictions. Additionally, transferring ownership of the property in the event of a divorce can be challenging.

how to avoid probate in minnesota

Utilizing Beneficiary Designations

Another strategy for avoiding probate in Minnesota is to utilize beneficiary designations for assets such as life insurance policies, retirement accounts, and investment accounts. Designating beneficiaries for these assets ensures their direct transfer to the named beneficiaries upon your death, circumventing the probate process.

Designating a beneficiary for your financial accounts is a simple and effective way to avoid probate, ensuring that your assets are distributed according to your wishes and without unnecessary delays or expenses. However, it is crucial to review and update your beneficiary designations periodically, especially after major life events such as marriage, divorce, or the birth of a child, to ensure your assets are distributed according to your current wishes.

Establishing a Revocable Living Trust

Establishing a revocable living trust is another strategy that may help you to avoid probate in Minnesota.

A living trust is a legal instrument that allows you to transfer your assets to a trust during your lifetime, bypassing probate and ensuring a smooth distribution of your estate upon your death.

Creating a revocable living trust offers several benefits:

  • Retain control over your assets during your lifetime
  • Make changes or revoke the trust as needed
  • Avoid the need for probate upon your death
  • Ensure the privacy of your estate and beneficiaries
  • Save time and cost associated with probate
Payable-on-Death and Transfer-on-Death accounts to avoid probate in Minnesota

Payable-on-Death (POD) and Transfer-on-Death (TOD) Accounts

Payable-on-death (POD) and transfer-on-death (TOD) bank accounts are another excellent option for avoiding probate in Minnesota.

These types of accounts allow you to designate beneficiaries who will receive the assets in the account upon your death, bypassing the probate process. The process of setting up POD and TOD accounts is quite simple. All you need to do is appoint a beneficiary and submit the required paperwork to the associated financial institution. You can modify or revoke the beneficiary designation at any time, providing flexibility and control over your assets.

By utilizing POD and TOD accounts, you can ensure a direct transfer of your assets to your named beneficiaries without the need for probate, saving time and money in the process.

Transfer-on-Death deeds for real estate to avoid probate in Minnesota

Transfer-on-Death Deeds for Real Estate

Transfer-on-death deeds for real estate are another tool for avoiding probate in Minnesota. These deeds allow property owners to designate beneficiaries who will inherit the decedent’s estate, specifically the property, upon their death, without the need for probate.

However this may not be the best option for everyone.

It’s critical that you speak with your financial advisor and estate planning attorney about the pros and cons of using TOD Deeds for Real Estate.

To create a transfer-on-death deed, you must complete a form and submit it to the county recorder’s office, detailing the property owner’s name, the beneficiary’s name, and a description of the property. Upon your death, the property will be transferred directly to the named beneficiary, bypassing the probate process and ensuring a smooth and efficient transfer of ownership.

Transfer-on-death deeds may not be apt for all property types.

Gifting Assets Prior to Death

Gifting assets prior to death can be an effective way to avoid probate and ensure that your assets are distributed according to your wishes. By transferring assets to your beneficiaries before your death, you can reduce the size of your estate and potentially minimize estate taxes.

Although gifting assets before death can help to avoid probate, it’s important to consider potential tax implications and comply with gift tax laws.

Small Estate Affidavit Procedure

For estates below a certain value, the small estate affidavit procedure can provide a simplified estate settlement, helping to avoid the full probate process. In Minnesota, the affidavit for the collection of tangible personal property is applicable for estates worth less than $75,000, allowing heirs to bypass the complexities of probate if the estate is valued below this threshold. (+)

Utilizing the small estate affidavit procedure can provide significant time and cost savings for your beneficiaries, as well as ensuring a more streamlined estate settlement process. However, being aware of the monetary threshold and requirements for this procedure is vital because it may not fit all estates, especially those subject to federal estate tax.

Seeking Professional Assistance

Avoiding probate in Minnesota can be challenging, especially for those unfamiliar with the legal and financial aspects of estate planning. Seeking professional assistance from estate planning attorneys, financial advisors, and estate planners can provide invaluable guidance and expertise to help you craft a tailored plan that meets your unique needs and objectives.

Professionals can help you with the following:

  • Evaluate your specific situation
  • Recommend strategies such as creating living trusts or utilizing beneficiary designations
  • Help you navigate potential legal pitfalls

By enlisting the support of experienced professionals, you can ensure the protection of your assets and loved ones, as well as a seamless and efficient estate distribution process.

Summary

Avoiding probate is an essential aspect of estate planning in Minnesota. It can save your family time, money, and emotional strain. By employing strategies such as joint ownership options, beneficiary designations, revocable living trusts, and more, you can ensure a seamless estate distribution process that protects your assets and your loved ones.

As you begin the estate planning process, remember that seeking professional assistance from attorneys, financial advisors, and estate planners is key. They will help you create a tailored plan that meets your unique needs and objectives.

Frequently Asked Questions

Can probate be avoided in Minnesota?

In Minnesota, probate can be avoided in many ways such as by establishing a living trust for your assets or by ensuring that certain assets, like property owned as joint tenants, have designated beneficiaries. Additionally, it is possible to avoid probate for life insurance proceeds, jointly held bank accounts, and pension benefits with a designated beneficiary.

To avoid probate in Minnesota for real estate, you can set up joint tenancy with co-owners, establish a living trust, or complete a Transfer on Death Deed and file it with the relevant county. Each of these options is an effective way to keep your real estate out of probate. However it’s important that you speak with your estate planning attorney and financial advisor before you take action as they can help you with your specific situation.

Does an estate have to go through probate in Minnesota?

In Minnesota, if the estate is worth less than $75,000 at the time of death, it may not need to go through probate. Assets worth more than $75,000 will have to go through probate unless a beneficiary or joint holder is named.

What assets are subject to probate in Minnesota?

Assets owned solely in the deceased’s name without a named beneficiary usually go through probate. This can include real estate, bank accounts, and personal property.

How long does the probate process typically take in Minnesota?

The duration varies but often lasts several months to over a year, depending on the estate’s complexity and potential disputes.

How much does it typically cost to set up a living trust in Minnesota?

Costs vary based on complexity but generally range from a few hundred to several thousand dollars. It’s best to consult with attorneys for precise estimates.

Can I avoid probate in Minnesota if I have a will?

A will doesn’t avoid probate; it guides the probate process. To sidestep probate, you’d need tools like trusts and beneficiary designations.

Estate Planning and Wealth Management in Minnesota

SPEAK WITH AN ADVISOR

If you need a wealth management team to help you achieve your big-picture goals, we recommend scheduling a call with a financial advisor or wealth advisor at 360 Financial.

360 Financial is one of Minnesota’s best independent wealth management firms. We work with clients in Minnesota and across the US. If you’d like to work with a team that always puts your best interests first and is committed to helping you create a lasting legacy, please get in touch.  

Schedule a 15-minute Call

About the Author

Mike Rogers

Mike Rogers is the founder and president of Minnesota-based financial advisory firm 360 Financial. As the founder, Mike’s priority is that 360 Financial always serves the clients with empathy, integrity, and honesty. This customized, client-centric approach allows the firm to help clients decipher between the things they can control and what truly matters.

In other words, Mike understands that money is not the end-all-be-all; instead, it’s the “how” that fuels the “why” to the question: “What’s important to you?”

Other Financial Planning Articles and Guides

3 Estate Planning Tips for Small Business Owners

Estate Planning in Minnesota

Schedule a Call

At 360 Financial, our clients come first. You deserve personalized attention. You’ll be happier and more confident in your financial future when you have an advisor who always puts your needs and best interest first. Schedule a 15-minute introductory call with a 360 financial advisor to see how we can help with your retirement, succession, tax, and estate planning.

Schedule a 15-minute Call

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Living Trust Minnesota: How to Create a Living Trust in Minnesota

Living Trust Minnesota: How to Create a Living Trust in Minnesota

Whether you’re in Minnesota or elsewhere, a living trust is different than a will. A living trust offers privacy, helps your estate to avoid probate, and ensures your assets are managed according to your wishes, even if you become incapacitated.

By Mike Rogers, AIF®, Founder and President of 360 Financial

Mike Rogers is a fiduciary financial advisor with over 30 years of experience in the financial services industry as an investment advisor and financial planner. He founded 360 Financial in 1995 and holds series 7 and 63 security registrations with LPL Financial.

Living Trust Minnesota: How to Create a Living Trust in Minnesota

Do You Need a Living Trust in Minnesota?

As a Minnesotan, considering a living trust is a great step towards making sure your assets are protected. 

A living trust is different than a will. A living trust offers privacy, helps your estate to avoid probate, and ensures your assets are managed according to your wishes, even if you become incapacitated. 

This is crucial in Minnesota as well as many states in the US. Why? Because probate can be lengthy and costly. Most people don’t want their loved ones to have to deal with a probate mess after they pass.

If your primary concern is safeguarding your assets for your beneficiaries while making sure your estate doesn’t pay way too much in taxes or have to deal with legal complications, a living trust could be a good choice. 

A living trust is particularly useful if you have substantial assets including investments and real estate.

Remember, putting together a living trust isn’t just about avoiding taxes or probate. You may find that having a living trust gives you greater confidence because you’ll know that your legacy will be preserved and passed on seamlessly.

If you’re wondering how to create a living trust in Minnesota, this post will help.

However, it’s critical that you seek the advice of a good estate planning attorney as well as consulting with your wealth management team.

Table of Contents

  1. Do You Need a Living Trust in Minnesota?
  2. What Is a Living Trust?
  3. Revocable Living Trusts
  4. Irrevocable Living Trusts
  5. What Can You Protect with a Living Trust?
  6. How to Create a Living Trust in Minnesota
  7. Living Trust Pitfalls
  8. Who Shouldn’t Use a Living Trust
  9. Estate Planning and Living Trusts
  10. Should Your Financial Advisor Help You with Your Estate Planning?
  11. Estate Planning Basics
  12. Final Thoughts about Living Trusts for Minnesotans
  13. ​​Advantages in Estate Planning and Probate Avoidance
  14. Asset Protection and Planning Flexibility
  15. Financial and Tax Considerations
  16. The Importance of Legal Guidance

What Is a Living Trust?

Living trusts, particularly revocable trusts, have become a vital component of estate planning in Minnesota (MN).

A Minnesota living trust offers a comprehensive approach to managing and transferring assets.

But what is a living trust? A living trust is a legal arrangement that provides a framework for managing your assets during your lifetime and after death.

It involves three key parties: the grantor (you), the trustee (who manages the trust), and the beneficiaries (your loved ones). When you establish a living trust in Minnesota, you transfer the ownership of your assets to the trust. However, you can continue to use and control the assets of your trust as the trustee. After you die—or if you’re incapacitated—a successor trustee, whom you’ve appointed, takes over the management or distribution of these assets. 

In other words, when you create a living trust, you still have control over your assets while alive.

But when you die, someone that you’ve appointed will control the assets. 

When you have a living trust, you’re able to bypass the public and often time-consuming probate court process. This gives your estate privacy and the benefit of less hassle. Essentially, you’re saving your loved ones time and money.

Moreover, a living trust can be structured to minimize estate taxes, ensuring that more of your assets go to your beneficiaries rather than to the IRS. 

A living trust is about control and protection—control over your assets now and protection for your legacy later.

What Is a Living Trust?

Revocable Living Trusts

You may prefer to set up a revocable trust. 

A revocable living trust is often preferred for its flexibility. As a Minnesotan, establishing a revocable trust allows you to maintain absolute control over your assets while you’re alive. You can change, amend, or even revoke the trust at any point. This adaptability is useful if your circumstances or intentions change, which can often happen over a lifetime. 

But what happens when you die? 

Revocable trusts becomes irrevocable upon your death. This is good because it ensures that your assets are distributed according to your wishes, without the need for probate. This saves your family or other beneficiaries time and money. And it ensures the privacy of your estate. A revocable trust is an ideal choice for anyone who wants a balance between future planning and present-day control. 

You’ll know that your assets are protected and will be efficiently transferred to your beneficiaries, but you still maintain full control while you’re alive.

Understanding Revocable Living Trusts

A revocable living trust is a legal entity created to hold ownership of an individual’s assets. 

The creator of the trust, known as the grantor, can alter or revoke the trust at any time during their lifetime. This flexibility is a key feature, allowing for adjustments as your life circumstances change. In contrast to irrevocable trusts, revocable trusts provide the grantor with the freedom to manage their estate while they are alive and competent.

Irrevocable Living Trusts

An irrevocable living trust, in contrast to its revocable counterpart, is a more permanent arrangement. 

Once established, it cannot be easily altered or revoked. This might seem like a bad idea, but an irrevocable living trust offers significant benefits, particularly in terms of asset protection and tax advantages. 

By transferring assets into an irrevocable trust, you legally remove them from your estate. 

This means your assets are typically not subject to estate taxes and can be shielded from creditors in Minnesota. Using an irrevocable living trust is an effective way to manage and protect assets for future generations, potentially providing long-term financial stability. 

However, due to its inflexibility, it’s important that you’re absolutely certain about the trust’s terms and the assets you include.

This type of trust is often favored by individuals with substantial assets who are looking to reduce their taxable estate and ensure a secure financial legacy for their heirs.

We recommend speaking with an estate planning attorney as well as your wealth management team about whether a trust is right for you. If you aren’t currently working with a fiduciary financial advisor and wealth manager to do your estate planning, we recommend that you put together that team sooner rather than later.

Your wealth management team can facilitate family meetings, that are an important part of estate planning.

They can guide you through the tax planning and wealth preservation steps that are critical to leaving a positive legacy.  

Revocable Living Trusts

The Role of the Trustee and Grantor

In a living trust, the grantor (creator of the trust) typically acts as the trustee, managing the property and assets within the trust.

Upon the grantor’s death or incapacity, a successor trustee, designated in the trust, assumes this role. This seamless transition is a significant advantage, ensuring the continuous management of the estate without interruption.

What Can You Protect with a Living Trust?

A living trust in Minnesota is a versatile tool, capable of protecting a wide range of assets and addressing the common fears of asset mismanagement and undue taxation. 

If you’re worried that your family will spend all the money within 6 months of receiving their inheritance, then a trust may be the right move. Or perhaps you just want to preserve your estate from probate and the long arm of the IRS.

You can preserve the following with a living trust: 

  • Real Estate: A living trust effectively shields real estate, ensuring direct transfer to beneficiaries without probate delays and costs.
  • Bank Accounts and Investments: You can put bank accounts and investments into a living trust streamlining the transfer process after passing.
  • Family Heirlooms: You can include family heirlooms in a living trust, ensuring their safe and intended transfer.
  • Business Interests: You can safeguard business interests and intellectual property in a living trust. This may be vital for business owners planning for smooth succession.

Other benefits of a living trust:

  • Complex Asset Management: Manages complex assets according to specific wishes, maintaining control over distribution.
  • Provision for Minors and Dependents: Offers financial security and responsible management for minor children or dependents with special needs.
  • Confidence: Guarantees confidence with the knowledge that diverse assets are protected from probate and will be handled as intended, minimizing legal complications.
5 assets you can preserve with a living trust

How to Create a Living Trust in Minnesota

Creating a living trust in Minnesota involves a few key steps.

Each step is important because it will ensure your trust is valid and effective. Working with an attorney is critical when creating a living trust.

However, we also recommend that you seek the advice of your wealth manager when doing your estate planning. 

  1. Decide on the Type of Trust: Choose between a revocable or irrevocable trust based on your financial goals and needs.
  2. Review Your Assets: Identify and list all property, accounts, and valuables you plan to include in the trust.
  3. Choose a Trustee: Select a trustee to manage the trust. This could be yourself, a trusted individual, or a professional entity.
  4. Select Beneficiaries: Determine who will benefit from the trust – your beneficiaries.
  5. Draft the Trust Document: Work with an attorney to create the trust document, ensuring it meets legal standards and reflects your wishes.
  6. Sign the Document: Sign the trust document in the presence of a notary to authenticate it.
  7. Fund the Trust: Transfer your assets into the trust to officially fund it, thereby establishing the trust’s control over the assets.
How to Create a Living Trust in Minnesota

Living Trust Pitfalls

While a living trust may be a great option for many families, it’s not the right choice for everyone.

These are some of the pitfalls that people may encounter when creating a living trust. It’s important to ensure you don’t make any of these mistakes.

Improper Funding of the Trust

A living trust is effective only if your assets are properly transferred into it. Failure to title your assets in the name of the trust means they may still go through probate.

Choosing the Wrong Trustee

The trustee has significant control and responsibility. Choosing an unreliable or inappropriate trustee can lead to mismanagement of the trust.

Ignoring the Need for a Pour-Over Will

A pour-over will ensure that any assets not included in your trust at the time of your death are transferred into it. Without one, these assets may be subject to probate.

Assuming a Trust Completely Avoids Taxes

While trusts can provide tax advantages, they do not completely eliminate taxes. It’s a misconception that placing assets in a trust will free them from estate taxes.

Living Trust Pitfalls

Who Shouldn’t Use a Living Trust

While a living trust may be useful for anyone with substantial assets, it’s not right for everyone. This is a shortlist of who should think twice about using a living trust.

1. Individuals with Simple Estates: If your estate is straightforward and below the threshold for estate taxes, the cost and complexity of a living trust may not be justified.

2. Those Who Can’t Maintain a Living Trust: A living trust requires ongoing maintenance and attention. If you’re not prepared to manage it, a trust can become more of a burden than a benefit.

3. Young Families with Limited Assets: For young families just starting out, the cost of setting up and maintaining a living trust might not be the best use of limited resources.

4. People Who Prefer Court Supervision: Some individuals might prefer the oversight that probate court provides, especially if they have concerns about a trustee managing their estate without external checks.

Who Shouldn't Use a Living Trust

Estate Planning and Living Trusts

When it comes to estate planning, living trusts are a cornerstone strategy. 

They offer a blend of flexibility, control, and protection. A living trust works with other estate planning tools, like wills and powers of attorney, to create a strong plan based on your needs. A living trust allows for more detailed instructions around asset distribution.

But why does this matter?

Having more detailed instructions will potentially avoid family disputes and esnure your wishes are respected. Moreover, living trusts can be designed to address specific estate tax concerns, to ensure more of your wealth goes to your beneficiaries rather than to the IRS. 

In the context of estate planning, living trusts are not just about distributing assets; they’re about creating a legacy. Most likely, you want to ensure that your life’s work and values continue to benefit your family and causes that are important to you, even after you’re gone. 

A living trust is just one tool that allows you to leave a positive legacy.

When it comes to estate planning, living trusts are a cornerstone strategy. 

Should Your Financial Advisor Help You with Your Estate Planning?

Involving your financial advisor in your estate planning is a wise decision.

In Minnesota where financial and estate laws can be complex, it’s critical that you work with your wealth management team to create an estate plan that protects your family.

Your financial advisor plays a crucial role in understanding your overall financial picture, which is essential for effective estate planning. They can offer valuable insights into how your estate plan might impact your financial goals and retirement planning. 

Additionally, a financial advisor can help identify potential tax problems and suggest ways to reduce estate taxes. 

For the legal drafting of documents such as a living trust, you should work with an estate planning attorney. The collaboration between your financial advisor and your attorney can ensure that your financial strategy and estate plan are integrated. This will ensure your assets are preserved and you get the benefit of confidence regarding your assets and legacy. 

No more tossing and turning at night or worrying about what will happen in the future. 

Involving your financial advisor in your estate planning is a wise decision.

Estate Planning Basics

Estate planning is a critical process for ensuring that your assets are managed and distributed according to your wishes after your passing. However, it’s a complex field, and mistakes can be costly. Understanding these pitfalls, especially regarding living trusts, is essential for effective estate planning.

Common Estate Planning Mistakes

1. Not Having an Estate Plan: One of the most common mistakes is not having any estate plan at all. This oversight leaves the distribution of your assets up to state laws and can result in unintended beneficiaries.

2. Failing to Update the Estate Plan: Life changes such as marriage, divorce, the birth of children, or the acquisition of significant assets necessitate updates to your estate plan. Failing to do so can lead to conflicts and confusion.

3. Overlooking Potential Tax Implications: Many people fail to consider the tax implications of their estate plan. Without proper planning, a significant portion of the estate might go towards paying taxes rather than to your intended beneficiaries.

4. Not Planning for Disability or Incapacity: A comprehensive estate plan should include provisions for your own care and management of your affairs if you become unable to do so yourself.

Common Estate Planning Mistakes

Final Thoughts about Living Trusts for Minnesotans

A revocable living trust offers a flexible and efficient way to manage and protect your assets, both during your lifetime and after your death.

It provides a strategic solution for estate planning, allowing for the smooth transfer of assets while minimizing legal complications and tax implications. Whether you are planning for your own future or for the security of your beneficiaries, a living trust can be a key element of a well-structured estate plan.

​​Advantages in Estate Planning and Probate Avoidance

One of the primary benefits of a living trust in estate planning is its ability to bypass the probate process.

Probate can be lengthy and costly, with legal fees consuming a portion of the estate. Assets held in a living trust transfer directly to the beneficiaries, avoiding probate and ensuring privacy. This is particularly important in Minnesota, where probate laws can be complex.

Asset Preservation and Planning Flexibility

Living trusts provide a structured way to transfer assets like real estate, financial accounts, and personal property.

This not only simplifies the distribution process after death but also offers protection against potential legal challenges or creditors. For estate planning, it is crucial to have a thorough understanding of how to effectively use a trust to safeguard assets.

Financial and Tax Considerations

While a living trust offers many benefits, it’s important to review its impact on your financial situation.

Consultation with an attorney and financial advisor is recommended to ensure the trust aligns with your overall financial goals, including tax planning. A trust can be designed to minimize estate taxes, providing a tax-efficient way to transfer assets to beneficiaries.

The Importance of Legal Guidance

Creating a living trust requires legal expertise.

An experienced estate planning attorney can guide you through the process, from drafting the trust document to funding it with your assets. This legal guidance is crucial to ensure that the trust is valid and meets your specific needs.

Assets held in a living trust transfer directly to the beneficiaries, avoiding probate and ensuring privacy.

Summary of Key Points:

  • A revocable living trust in Minnesota allows flexible management of assets, aiding in efficient estate planning and asset protection.
  • It bypasses the often lengthy and costly probate process, directly transferring assets to beneficiaries while maintaining privacy.
  • Living trusts offer a structured way to transfer diverse assets, providing protection against legal challenges and creditors.
  • Regular financial reviews and consultations with professionals are essential to align the trust with overall financial and tax goals.
  • Creating a living trust requires the expertise of an estate planning attorney to ensure legality and alignment with specific needs.

Connect with a Financial Advisor Online or In Person

SPEAK WITH AN ADVISOR

If you need a wealth management team to help you achieve your big-picture goals, we recommend scheduling a call with a financial advisor at 360 Financial.

360 Financial is one of Minnesota’s best independent wealth management firms with over 30 years experience. We work with clients in Minnesota and across the US. If you’d like to work with a team that always puts your best interests first and is committed to helping you create a lasting legacy, please get in touch. 

Schedule a 15-minute Call

About the Author

Mike Rogers

Mike Rogers

Mike Rogers is the founder and president of Minnesota-based financial advisory firm 360 Financial. As the founder, Mike’s priority is that 360 Financial always serves the clients with empathy, integrity, and honesty. This customized, client-centric approach allows the firm to help clients decipher between the things they can control and what truly matters.

In other words, Mike understands that money is not the end-all-be-all; instead, it’s the “how” that fuels the “why” to the question: “What’s important to you?”

Other Articles and Guides 

What Happens to a Family Trust in a Divorce

Family Trusts During Impending Divorce in Minnesota

Schedule a Call

At 360 Financial, our clients come first. You deserve personalized attention. You’ll be happier and more confident in your financial future when you have an advisor who always puts your needs and best interest first. Schedule a 15-minute introductory call with a 360 financial advisor to see how we can help with your retirement, succession, tax, and estate planning.

Schedule a 15-minute Call

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Investing involves risk including loss of principal. No strategy assures success or protects against loss.

Does Minnesota Have an Inheritance Tax?

Does Minnesota Have an Inheritance Tax?

Whether there is a capital gains tax on inherited property in Minnesota depends on how the money is inherited.

By Michael Urch, CFP® Senior Wealth Manager

As a CERTIFIED FINANCIAL PLANNER,™ Michael advises his clients on insurance planning, investment planning, retirement income planning, tax planning, and estate planning.

INHERITANCE IN MINNESOTA

Does Minnesota have an inheritance tax?

No, at this time, Minnesota doesn’t have an inheritance tax.

Could that change? Will Minnesota have an inheritance tax in the future?

Laws could always be changed, but MN is one of the few states with an estate tax. It would be surprising to have both an estate tax and an inheritance tax.

Is there a capital gains tax on inherited property in Minnesota?

Whether there is a capital gains tax on inherited property in Minnesota depends on how the money is inherited.

If the money inherited is part of someone’s estate, it usually receives a step-up in basis. This means there would be no capital gains realized if the property were sold on the date of death. 

However, if the money inherited is in some kind of irrevocable trust, such as a marital trust, then it may not be eligible for a step up in cost basis. In this case, there would be capital gains on the inherited property – but not until it is sold.

ESTATE TAX

What is the difference between estate tax and inheritance tax?

Different entities are taxed by an estate tax versus an inheritance tax. An estate tax is paid by the estate of the deceased. An inheritance tax is paid by the heirs of the estate.

Does Minnesota have an estate tax?

Yes. $3,000,000 of your estate is excluded from estate tax.

However, money above and beyond $3,000,000 is taxed at between 13% and 16%.

Unlike the Federal estate exclusion, the MN estate exclusion is not portable. If one spouse does not use up their $3,000,000 exclusion, the surviving spouse doesn’t get to use it – it is just $3,000,000/individual.

How can one avoid Minnesota estate tax?

With trust planning, MN residents can reduce the size of their estate either by placing it in trusts outside of their estate while living.

This can be with irrevocable trusts or potentially charitable trusts. Life insurance can also be used as a tool when estate planning for large estates.

You can also just move to a state without estate taxes, which is a more straightforward strategy that I see often.

Connect with a Financial Advisor Online or In Person

SPEAK WITH AN ADVISOR

If you need a wealth management team to help you achieve your big-picture goals, we recommend scheduling a call with a financial advisor at 360 Financial.

360 Financial is one of Minnesota’s best independent wealth management firms with over 30 years of experience. We work with clients in Minnesota and across the US. If you’d like to work with a team that always puts your best interests first and is committed to helping you create a lasting legacy, please get in touch. 

Schedule a 15-minute Call

About the Author

Michael Urch

Michael Urch

As a CERTIFIED FINANCIAL PLANNER,™ Michael advises his clients on insurance planning, investment planning, retirement income planning, tax planning, and estate planning. He prides himself on being a professional advisor who puts planning before products. This is one of the reasons he was attracted to 360 Financial’s client-focused culture. Michael likes to start with each client’s “why.” By understanding what’s truly important to them, the “what” of investment and planning strategies can be custom-designed to support their long-term ambitions.

Other Articles and Guides 

Is An Inheritance Marital Property in Minnesota?

How Many Steps Are in the Financial Planning Process?

Retirement Planning for Self-Employed People

Schedule a Call

At 360 Financial, our clients come first. You deserve personalized attention. You’ll be happier and more confident in your financial future when you have an advisor who always puts your needs and best interest first. Schedule a 15-minute introductory call with a 360 financial advisor to see how we can help with your retirement, succession, tax, and estate planning.

Schedule a 15-minute Call

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Is an Inheritance Marital Property in Minnesota?

Is an Inheritance Marital Property in Minnesota?

Is an inheritance marital property in Minnesota? In this post, we’ll cover whether your inheritance will be considered marital property if you live in Minnesota. Keep in mind that you should seek the advice of an estate planning attorney when dealing with complex legal matters.

By Michael Urch, CFP® Senior Wealth Manager

As a CERTIFIED FINANCIAL PLANNER,™ Michael advises his clients on insurance planning, investment planning, retirement income planning, tax planning, and estate planning.

Is an inheritance marital property in Minnesota?

An inheritance is not generally considered marital property. Through divorce proceedings, any assets that are inherited are considered to be the property of the heir (not their ex-spouse-to-be).

If an inheritance is spent during a marriage, or if it is put into joint accounts during marriage it can become difficult to differentiate them from other marital assets. Keeping inherited accounts in your own name is one way to help keep them segregated from marital assets.

What are non-marital assets in Minnesota?

In most cases, non-marital property falls in one of three categories:

1) It was yours prior to the marriage, and you brought it into the marriage

2) It is from an inheritance received before or during a marriage by one spouse but not the other

3) It is from gifts that were received before or during a marriage by one spouse but not the other 

Can my husband or wife get any of my inheritance?

If your inheritance is spent or commingled, yes.

Is a house owned before marriage marital property in MN?

A house owned before marriage could become marital property. For example, if the mortgage is paid off during marriage and significant improvements are paid for during marriage, it may be partially considered a marital asset.

How does co-mingling of assets affect inheritance in Minnesota?

When money is co-mingled, it can become difficult to tell what money is marital and what money is non-marital. For example, if money is placed in a joint bank account where a lot of various deposits and withdrawals are taking place, whose money is being spent? It can be difficult to tell if it is joint or individual money spent.

What should I do to protect my inheritance before or after getting married?

You could consider a prenuptial agreement if this is a concern for you. It is also beneficial to keep your own assets in your own name and avoid commingling them with your spouse’s money.

What should I do to protect my inheritance if I’m getting divorced?

You should work with a divorce attorney to make sure it is clear what money is yours by inheritance.

Is working with a financial advisor important when managing an inheritance? 

Absolutely. Especially if you receive an inheritance without experience managing significant investments. Having a trusted professional can help ensure you are not making any mistakes with your inherited dollars.

Connect with a Financial Advisor Online or In Person

SPEAK WITH AN ADVISOR

If you need a wealth management team to help you achieve your big-picture goals, we recommend scheduling a call with a financial advisor at 360 Financial.

360 Financial is one of Minnesota’s best independent wealth management firms with over 30 years of experience. We work with clients in Minnesota and across the US. If you’d like to work with a team that always puts your best interests first and is committed to helping you create a lasting legacy, please get in touch. 

Schedule a 15-minute Call

About the Author

Michael Urch

Mike Rogers

As a CERTIFIED FINANCIAL PLANNER,™ Michael advises his clients on insurance planning, investment planning, retirement income planning, tax planning, and estate planning. He prides himself on being a professional advisor who puts planning before products. This is one of the reasons he was attracted to 360 Financial’s client-focused culture. Michael likes to start with each client’s “why.” By understanding what’s truly important to them, the “what” of investment and planning strategies can be custom-designed to support their long-term ambitions.

Other Articles and Guides 

How to Avoid Probate in Minnesota

Guide to Minnesota Inheritance Tax

Learn about Estate Planning in Minnesota

Living Trusts in Minnesota

Schedule a Call

At 360 Financial, our clients come first. You deserve personalized attention. You’ll be happier and more confident in your financial future when you have an advisor who always puts your needs and best interest first. Schedule a 15-minute introductory call with a 360 financial advisor to see how we can help with your retirement, succession, tax, and estate planning.

Schedule a 15-minute Call

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Family Trusts During Impending Divorce Minnesota

Family Trusts During Impending Divorce in Minnesota

If you’re dealing with family trusts during an impending divorce, it’s important to understand the basics of how Minnesota law treats these trusts in divorce scenarios. Being well informed will help you to protect your assets and ensure a fair division. Please note that this article is general in nature, and it’s important to seek professional financial and legal advice when going through a divorce.

By Mike Rogers, AIF®, Founder and President of 360 Financial

Mike Rogers is a fiduciary financial advisor with over 30 years of experience in the financial services industry as an investment advisor, wealth manager, and financial planner. He founded 360 Financial in 1995 and holds series 7 and 63 security registrations with LPL Financial.

How does a divorce affect a family trust in Minnesota?

Navigating the complexities of a divorce can be challenging, and understanding the interplay between family trusts and divorce proceedings in Minnesota can add another layer of intricacy. 

Before we dig into the details, please note that this post isn’t a substitute for professional advice. We recommend you speak with an attorney about your trust. In addition, please make sure you have a financial advisor who can help you through this difficult financial transition.

Table of Contents

  1. How do I protect myself in the division of assets in a Minnesota divorce?
  2. Is my spouse entitled to my inheritance in Minnesota?
  3. What are non-marital assets in a divorce in Minnesota?
  4. Navigating Family Trusts and Assets During Divorce in Minnesota

Navigating the Complexities of a Divorce Can Be Challenging

Marital or Non-marital Property

In Minnesota, a family trust’s susceptibility to divorce proceedings largely hinges on whether the trust’s assets are categorized as marital or non-marital property. Generally speaking, family trusts that were established before marriage and funded with assets owned before the marriage (or with gifts and inheritances received individually during the marriage) are typically considered non-marital. This means they often remain untouched during a divorce.

However, if marital funds or assets were contributed to a trust during the marriage, then those contributions and any growth associated with them might be considered marital property. In such cases, they could be subject to division during the divorce process.

Who Controlled the Trust May Matter

Another crucial factor is the discretion and control over the trust. If one spouse has significant control or discretion over the trust’s distributions or operations, a court might look more closely at its assets, even if it was originally intended as a separate property trust.

It’s also worth noting that, in some situations, the income generated by a trust (even if the trust itself is considered non-marital) could be considered when calculating spousal maintenance or child support obligations.

Given these complexities, it’s essential for individuals in Minnesota facing a divorce to consult with an attorney well-versed in both family law and trusts. They can provide guidance tailored to one’s unique situation, ensuring the most equitable and fair outcome.

Family Trusts Minnesota

How do I protect myself in the division of assets in a Minnesota divorce?

Protecting your interests during the division of assets in a Minnesota divorce involves both understanding the state’s laws and adopting proactive strategies.

Here are 7 ways you can safeguard your assets before you get divorced:

1. Understand Marital vs. Non-Marital Assets

In Minnesota, assets acquired during the marriage are generally considered marital property and are subject to division. However, assets acquired before marriage or received as gifts or inheritances during the marriage are usually deemed non-marital and typically remain with the original owner. Familiarizing yourself with these definitions can help you identify which of your assets may be at risk.

2. Maintain Clear Documentation

Keeping clear and thorough records of your assets is vital. This includes documentation that proves when and how you acquired an asset, especially for those you consider non-marital. Bank statements, purchase receipts, or inheritance documents can serve as valuable evidence.

3. Avoid Commingling of Assets

If you have non-marital assets, try to keep them separate from marital assets. For instance, if you inherit money, avoid depositing it into a joint bank account. Once non-marital assets are mixed or “commingled” with marital assets, distinguishing them can become challenging, and they may become subject to division.

4. Prenuptial and Postnuptial Agreements

If you’re already married and didn’t sign a prenuptial agreement, it’s not too late to consider a postnuptial agreement. These legally binding documents can specify how assets will be divided in the event of a divorce and can offer significant protection.

5. Engage a Knowledgeable Attorney

A seasoned family law attorney, particularly one familiar with Minnesota’s specific regulations, can be your most valuable asset. They can offer tailored advice, ensure you don’t overlook any critical details, and represent your interests during negotiations or court proceedings.

6. Stay Transparent and Honest

While it’s natural to want to protect your assets, attempting to hide or undervalue them can backfire significantly. Courts do not look favorably upon dishonesty, and you could end up in a worse position if caught.

7. Consider Mediation

Mediation, where a neutral third-party assists the couple in reaching a mutually satisfactory agreement, can be a constructive way to address asset division. It often results in more personalized solutions and can be less adversarial than traditional court proceedings.

Family Trusts During Divorce in MN

Is my spouse entitled to my inheritance in Minnesota?

In Minnesota, inheritances are generally viewed through the lens of marital and non-marital property distinctions.

Typically, an inheritance received by one spouse, whether before or during the marriage, is considered non-marital property. This means that it is usually not subject to division during a divorce and remains the sole property of the spouse who received it.

However, there are situations where this clarity can blur:

1) Commingling of Assets: If the inheritance is mixed or “commingled” with marital assets, its designation as non-marital can be jeopardized. For instance, if you deposit your inheritance into a joint bank account or use it to purchase joint property, it might become difficult to distinguish it from marital assets, and it could then be subject to division.

2) Contribution to the Marital Estate: If your inheritance was used in a manner that benefits both spouses or the marital estate such as renovating a jointly-owned home, it might be argued that at least a portion of the inheritance has become marital property.

3) Growth and Income from the Inheritance: While the principal amount of the inheritance (the initial amount) might remain as non-marital property, any income or growth generated from it during the marriage might be viewed as marital, depending on how it’s managed or invested.

To ensure your inheritance remains protected in a divorce:

  • Keep thorough and clear documentation of the inheritance’s source and any related transactions.
  • Consider keeping the inheritance separate from marital assets.
  • If you wish to use the inheritance for joint purposes, consider discussing it with an attorney to understand potential implications.
  • Regularly consult with a knowledgeable family law attorney in Minnesota, especially if you foresee potential disagreements or complications regarding the inheritance during divorce proceedings.

What are non-marital assets in a divorce in Minnesota?

In Minnesota, as in many states, the distinction between marital and non-marital assets plays a pivotal role during divorce proceedings, determining how property is divided between the spouses. Here’s a breakdown of what constitutes non-marital assets in the context of a Minnesota divorce:

1 – Pre-Marital Ownership 
Any asset that a spouse owned before entering the marriage typically remains that spouse’s non-marital property. For example, if you had a savings account or a piece of real estate before marrying, those would be considered non-marital assets.

2 – Inheritances 
Assets that one spouse inherits, whether before or during the marriage, are generally considered non-marital property. This remains true as long as the inherited assets are kept separate from marital assets.

3 – Gifts 
Gifts given to one spouse, excluding gifts between spouses, usually fall under non-marital assets. For instance, if a friend or a family member gifted you a piece of jewelry or a sum of money, it’s typically considered your non-marital property.

4 – Exclusions Defined by Agreements 
Prenuptial and postnuptial agreements can specifically define certain assets as non-marital. These agreements, when legally sound and valid, can be powerful tools in keeping specified assets outside the marital pool.

5 – Certain Personal Injury Settlements 
If one spouse receives a settlement for personal injuries, the portion meant to compensate for pain, suffering, or personal losses (rather than lost wages or medical expenses) may be considered non-marital property.

6 – Property Acquired After a Legal Separation
If assets are acquired after a couple legally separates (but before the divorce is finalized), those assets might be deemed non-marital, depending on the specifics of the legal separation agreement.

A significant point to remember is the potential for non-marital assets to become “commingled” with marital assets, making them difficult to distinguish and potentially transforming them into marital property. For instance, if you deposit an inheritance (a non-marital asset) into a joint bank account, it can become commingled with marital funds.

To protect the status of non-marital assets during a divorce in Minnesota, it’s crucial to maintain clear documentation and separation of these assets from the marital pool. Consulting with a Minnesota family law attorney can provide insights tailored to your situation, ensuring a fair and clear division of assets.

Protecting yourself and ensuring a fair division of assets during a Minnesota divorce might seem overwhelming. 

The key is understanding your rights and being well-prepared. One approach is to maintain clear records of your financial assets and contributions. Legal counsel is invaluable in these circumstances, providing insight into the state-specific nuances of asset division. It’s beneficial to be proactive and consult an attorney early on to avoid potential pitfalls.

In the realm of divorces in Minnesota, the term “non-marital assets” carries significant weight. These assets, in general, remain with the original owner after the divorce is finalized. However, it’s vital to maintain documentation proving the origin of these assets, as challenges can arise. Instances where non-marital assets get mixed with marital ones can complicate matters, making their clear distinction all the more crucial.

Remember, every situation is unique, and having expert guidance can be invaluable in navigating the complexities of inheritance during a divorce.

Connect with a Financial Advisor

If you need a wealth management team to help you achieve your big-picture goals, we recommend scheduling a call with a financial advisor at 360 Financial.

360 Financial is one of Minnesota’s best independent wealth management firms. We work with clients in Minnesota and across the US. If you’d like to work with a team that always puts your best interests first and is committed to helping you create a lasting legacy, please get in touch. 

Schedule a 15-minute Call

About the Author

Mike Rogers

Mike Rogers

Mike Rogers is the founder and president of Minnesota-based financial advisory firm 360 Financial. As the founder, Mike’s priority is that 360 Financial always serves the clients with empathy, integrity, and honesty. This customized, client-centric approach allows the firm to help clients decipher between the things they can control and what truly matters.

In other words, Mike understands that money is not the end-all-be-all; instead, it’s the “how” that fuels the “why” to the question: “What’s important to you?”

Other Articles and Guides 

3 Three Tips for Preserving Your Wealth

Retirement Planning for Self-Employed People

Schedule a Call

At 360 Financial, our clients come first. You deserve personalized attention. You’ll be happier and more confident in your financial future when you have an advisor who always puts your needs and best interest first. Schedule a 15-minute introductory call with a 360 financial advisor to see how we can help with your retirement, succession, tax, and estate planning.

Schedule a 15-minute Call

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Last Will and Testament Minnesota: A Simple Guide to the Basics

Understanding Your Last Will and Testament in Minnesota: A Simple Guide

By Mike Rogers, AIF®, Founder and President of 360 Financial

Mike Rogers is a fiduciary financial advisor with over 30 years of experience in the financial services industry as an investment advisor and financial planner. He founded 360 Financial in 1995 and holds series 7 and 63 security registrations with LPL Financial.

 

Last Will and Testament Minnesota

This post will give you a brief overview of what you need to know about your last will and testament in Minnesota.

 

Table of Contents:

  1. Basics of Minnesota Wills
  2. The Role of Executors in Minnesota Wills
  3. Minnesota Inheritance Laws
  4. How to Include Minor Children in Your Will in Minnesota
  5. The Importance of Witnesses in Minnesota Will Creation
  6. Disputing a Will in Minnesota: Grounds and Processes
  7. Minnesota Estate Taxes and Wills
  8. Including Digital Assets in Wills
  9. Attorney’s Role in Drafting Wills
  10. Changing or Revoking Wills in Minnesota
  11. Checklist for Creating Your Last Will and Testament in Minnesota
  12. Financial Planning and Estate Planning in Minnesota

 

Basics of Minnesota Wills

A will is a legal document that outlines how you’d like your assets distributed after your death. In Minnesota, anyone who is at least 18 years old and of sound mind can make a will. To be valid, it must be in writing, signed by you or another person at your direction and in your presence, and witnessed by two people.

 

The Role of Executors in Minnesota Wills

The executor is the person you nominate in your will to carry out your wishes after your death. Their responsibilities include collecting your assets, paying off debts and taxes, and distributing the remainder of your estate as you specified in your will.

If you need help with estate planning in Minnesota, we recommend you speak with your financial advisor and estate planning attorney, particularly if you have a complex situation. 

 

Minnesota Inheritance Laws

If you die without a will in Minnesota, your assets will be distributed according to state intestacy laws. Generally, your spouse and children will inherit your estate. If you’re unmarried and childless, your parents or siblings may inherit. (+)

If you die without a will, MN courts will be tasked with determining who receives your assets upon your death.

 

How to Include Minor Children in Your Will in Minnesota

In Minnesota, you can’t directly leave assets to children under 18. You can, however, appoint a guardian and establish a trust in your will to hold and manage the assets until they reach adulthood. (+)

 

The Importance of Witnesses in Minnesota Will Creation

In Minnesota, your will must be witnessed by two people. They must see you sign your will or be told by you that it’s your signature. The witnesses must be “disinterested,” meaning they’re not beneficiaries in the will.

To ensure that your will is set up properly and legally, work with an Estate Attorney to complete it.

 

Related Post – A Simple Guide to Intestate Succession Minnesota

 

Disputing a Will in Minnesota: Grounds and Processes

Wills can be disputed on several grounds, such as the testator not being of sound mind or the presence of undue influence or fraud. Disputes must be filed in probate court after the will is admitted to probate. (+)

When you list a beneficiary on a retirement account, that asset will skip the probate process. This is also true of listing transfer on death instructions on a brokerage account and a payable on death instructions on a bank account. In addition to a will, consider listing these beneficiaries to have the advantage of skipping probate.

 

Minnesota Estate Taxes and Wills

Minnesota has an estate tax, and it applies to estates valued over a certain amount. It’s important to consider potential estate taxes when creating your will and planning your estate. The estate tax rate in Minnesota ranges from 13% to 16%, and as of 2022, it applies to estates worth more than $3 million.

If you have an estate that is currently (or is expected to be) worth more than $3,000,000, speak with a financial advisor and estate attorney about how to best structure the inheritance.

 

Including Digital Assets in Wills

Digital assets like social media accounts, emails, and digital currencies can be included in your will. You should provide detailed instructions about what should happen to these assets after your death.

It is a best practice to keep the information about how to access these accounts in a secure place, where trusted individuals can access them after your death.

 

Attorney’s Role in Drafting Wills

An attorney can provide valuable guidance when drafting your will. They can ensure your will complies with Minnesota laws, advise on complex situations, and help prevent disputes after your death.

A financial advisor can be helpful in guiding the conversation about your legacy and helping with your estate attorney. When you are creating the legal documents that are part of your estate plan (wills, trusts, power of attorneys and healthcare directives), you will want to consult with an attorney.

 

Changing or Revoking Wills in Minnesota

You can change or revoke your will at any time while you’re of sound mind. Changes can be made by creating a new will or making a codicil, which is an amendment to your will. To revoke a will, you can create a new will that states that it revokes the old one or physically destroy the old will.

While this article should give you a basic understanding of the will-making process in Minnesota, it’s always advisable to consult with an attorney when creating, amending, or revoking a will to ensure all legal requirements are met.

 

Checklist for Creating Your Last Will and Testament in Minnesota

1 Determine your assets:
List all your assets, including real estate, bank accounts, investments, retirement funds, insurance policies, and personal property like jewelry or vehicles.

2 Identify your digital assets:
Include digital assets like social media accounts, digital currencies, and digital copyrights.

3 Decide on beneficiaries:
Your beneficiaries can be individuals, charities, or organizations.

4 Select a personal representative:
Choose a trustworthy person to execute your will. You can also use a professional executor.

5 Appoint a guardian (if applicable):
If you have minor children, decide who will care for them if you die while they’re still minors. You can also choose contingent guardians if your primary choice is unable or unwilling to fulfill the role for some reason.

6 Set up a trust for minor children (if applicable):
If you have minor children or grandchildren, consider setting up a trust for their inheritance.

7 Understand Minnesota Inheritance Laws:
Ensure your will complies with Minnesota’s inheritance laws, especially if you’re disinheriting a spouse or child.

8 Consult an attorney:
It’s very important to consult with an attorney if you’re creating a will with any level of complexity. You want to ensure all legal requirements are met and your wishes will be accurately represented.

9 Sign your will:
Sign your will in front of two disinterested witnesses who must also sign the document.

10 Secure your will:
Keep your will in a safe place and let your executor know where it is.

11 Review and update regularly:
Life changes or significant changes to your assets may mean it’s time to update your will. Regularly review and update your will to ensure it accurately reflects your current wishes.

Remember, while you can create a will independently, working with an attorney can provide you with a more thorough and legally sound document.

 

Financial Planning and Estate Planning in Minnesota

If you need a wealth management team to help you achieve your big-picture goals, we recommend scheduling a call with a financial advisor at 360 Financial.

360 Financial is one of Minnesota’s best independent wealth management firms. We work with clients in Minnesota and across the US. If you’d like to work with a team that always puts your best interests first and is committed to helping you create a lasting legacy, please get in touch. 

Schedule a 15-minute Call

 

About the Author

Mike Rogers

Mike Rogers is the founder and president of Minnesota-based financial advisory firm 360 Financial. As the founder, Mike’s priority is that 360 Financial always serves the clients with empathy, integrity, and honesty. This customized, client-centric approach allows the firm to help clients decipher between the things they can control and what truly matters.

In other words, Mike understands that money is not the end-all-be-all; instead, it’s the “how” that fuels the “why” to the question: “What’s important to you?”

Schedule a 15-minute Call

 

Other Estate Planning Guides: 

Intestate Succession Minnesota: A Simple Guide

Estate Planning in Minnesota

How to Avoid Probate in Minnesota

 

Schedule a Call

At 360 Financial, our clients come first. You deserve personalized attention. You’ll be happier and more confident in your financial future when you have an advisor who always puts your needs and best interest first. Schedule a 15-minute introductory call with a 360 financial advisor to see how we can help with your retirement, succession, tax, and estate planning.

Schedule a 15-minute Call

 

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Intestate Succession Minnesota: A Simple Guide

Intestate Succession Minnesota: A Simple Guide

By Mike Rogers, AIF®, Founder and President of 360 Financial

Mike Rogers is a fiduciary financial advisor with over 30 years of experience in the financial services industry as an investment advisor, wealth manager, and financial planner. He founded 360 Financial in 1995 and holds series 7 and 63 security registrations with LPL Financial.

 

Table of Contents

  1. An Overview of Intestate Succession Laws in Minnesota
  2. What Happens When There’s No Will?
  3. Understanding Your Inheritance Rights Under Minnesota Intestate Succession
  4. How Minnesota Probate Courts Handle Intestate Succession
  5. Impact of Marital Status
  6. The Role of Descendants
  7. Legal Rights of Half-Relatives and Adopted Children in Minnesota’s Intestate Succession
  8. The 120-Hour Rule
  9. Avoiding Intestate Succession: Importance of Estate Planning in Minnesota
  10. Financial Advisors in Minnesota

 

An Overview of Intestate Succession Laws in Minnesota

Intestate succession laws in Minnesota apply when a person dies without a will. These laws dictate how the deceased’s property gets divided among surviving relatives. The closer the relative, the higher the priority.

 

What Happens When There’s No Will?

When there’s no will, Minnesota intestate laws dictate property distribution. The estate goes to the closest relatives. These include the spouse, descendants, parents, siblings, or more distant relatives.

 

Understanding Your Inheritance Rights Under Minnesota Intestate Succession

Inheritance rights vary based on your relation to the deceased. Spouses usually receive the estate first. If there are descendants, they share the estate with the spouse. If there is no spouse or descendants, parents or siblings are next in line.

 

How Minnesota Probate Courts Handle Intestate Succession

Minnesota’s probate courts oversee the intestate succession process. They ensure the fair distribution of the deceased’s property according to the state’s laws. The court assigns an administrator to manage the estate.

 

Related: How to Avoid Probate in Minnesota

 

Impact of Marital Status

Marital status greatly affects intestate succession in Minnesota. The spouse usually receives the entire estate if there are no descendants or parents alive. If there are descendants, the spouse receives the first $225,000 and half of the balance.

 

The Role of Descendants

Descendants play a significant role in intestate succession. Descendants include children, grandchildren, and great-grandchildren. If a spouse survives the deceased, the descendants share the estate with them.

 

Legal Rights of Half-Relatives and Adopted Children in Minnesota’s Intestate Succession

Half-relatives and adopted children have legal rights under Minnesota law. Half-relatives receive half of what full relatives would get. Adopted children receive the same share as biological children.

 

The 120-Hour Rule

Minnesota applies a 120-hour rule in cases of simultaneous death. If an heir doesn’t survive the deceased by 120 hours, they are deemed predeceased. The estate is then distributed as if the heir died first. 

 

Avoiding Intestate Succession: Importance of Estate Planning in Minnesota

To avoid intestate succession, it’s essential to create a will. A will allows you to dictate the distribution of your property. Estate planning ensures your wishes are followed, providing peace of mind for you and your loved ones. According to Gallup, only 44% of Americans indicate that they have a will. (+)

The need for estate planning cannot be overstated.

But estate planning is a lot more than just creating a will. Your financial advisor in Minnesota should be helping you with your retirement and estate planning. They can include reviewing your estate in their annual review meeting. 

 

Wealth Management and Estate Planning in Minnesota

If you need a wealth management team to help you achieve your big-picture goals, we recommend scheduling a call with a financial advisor at 360 Financial.

360 Financial is one of Minnesota’s best independent wealth management firms. We work with clients in Minnesota and across the US. If you’d like to work with a team that always puts your best interests first and is committed to helping you create a lasting legacy, please get in touch. 

 

About the Author

Mike Rogers

Mike Rogers is the founder and president of Minnesota-based financial advisory firm 360 Financial. As the founder, Mike’s priority is that 360 Financial always serves the clients with empathy, integrity, and honesty. This customized, client-centric approach allows the firm to help clients decipher between the things they can control and what truly matters.

In other words, Mike understands that money is not the end-all-be-all; instead, it’s the “how” that fuels the “why” to the question: “What’s important to you?”

 

 

Other Minnesota Estate Planning Articles and Guides

Estate Planning in Minnesota

How to Create Your Last Will and Testament in Minnesota

 

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Generational Wealth and the Gift of Financial Freedom

Those who receive an inheritance with the passing of a loved one are potentially given the gift of financial freedom if they choose to manage the wealth carefully.

Did you know that only about one-third of adults have a prepared will, and about 40% with investable assets of $1 million or more never discuss their estate plans with their children? The reality, however, is that the percentage of squandered inheritances is troubling. Studies indicate that 70% of inheritances are exhausted by the second generation, and a whopping 90% is gone by the third.

There are a variety of causes for the money to deplete so quickly, including spending sprees on unnecessary expenses (fancy toys, expensive clothes, jewelry, and lavish vacations), poor financial decision-making, taxes, and a lack of communication between parents and children.

While family conversations about legacy and inheritance are important first steps in estate planning, discussing money matters can be stressful and emotional, so it’s common for parents to avoid the topic instead. Other reasons that may make parents hesitant to talk to their children about passing down their wealth include:

  • Entitlement – Children may feel as if they are better than everyone else because they are receiving a significant amount of money.
  • Motivation – Knowing that one day they will have money passed to them will affect their motivation to pursue their own financial journey.
  • Wealth managementParents want children to understand how to manage money and if they know money will be given to them one day, they may be inclined to consider what material things they will buy instead of understanding the value of managing their finances.
  • Understanding the value of a dollar – Having to work for your own money forces you to understand the value of a dollar and that money isn’t made easily.

At what age should parents and children discuss estate planning and inheritance?

Children can benefit from understanding the emotionally and financially complex world of financial planning as early as their 20s. They can learn the structure, details, and management of an estate plan and the importance of wealth preservation when it is passed down in the future. Being prepared can help to mitigate problems, challenges, and risks that could appear later on.

Beneficiaries that are intent on making their inheritances work for them can take steps toward financial independence by considering the following:

  • Resist the urge to spend the money and continue living as you were before.
  • Consider safe investment opportunities based on your risk tolerance.
  • Consult a financial professional.

How can parents get started talking to their children about their wealth?

Transparent communication

Parents should be open and honest with their children about their finances. This can open the door for questions and essential conversations on what the parents expect and hope for when it comes to the financial management of their assets.

Share values

Both parents and children can share their values and work to align expectations. Once children understand their parent’s wishes, parents may be more open to discussing inheritance regardless of the children’s age.

Schedule an appointment with a financial professional

Consider scheduling an appointment with a financial professional who can help you manage your inheritance by creating investment and savings strategies and long-term goals.

Create a plan

Preparation is critical when it comes to pursuing any long-term goal or strategy. A financial professional has the skills and experience to help both parents and children understand how to manage their finances now, and design a plan for the future with the knowledge that estate and tax law and the market may be completely different than it is today.

Schedule that appointment today and get a head start on working to preserve your hard-earned wealth for generations.

 

Read More:

How Does Wealth Management Work?

 

 

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

This script was prepared by LPL Marketing Solutions

Sources:

How to Talk to Your Kids About Their Inheritance – Bloomberg

Twilight Of A Golden Age: The Retirement Of A Once-Strong Middle Class | Seeking Alpha

Family inheritance talk: How to help build trust and plan for tomorrow | Wells Fargo Conversations (wf.com)

LPL Tracking # 1-05371057

3 Estate Planning Tips for Small-Business Owners

For business owners, estate planning may seem like another task to do on a long to-do list.

Having a solid estate and succession plan in place may be crucial to your business’s long-term success. If you are incapable of making business decisions, or if you unexpectedly pass away without an estate plan, your heirs may scramble to keep your business afloat.

Here are three tips that may make the estate planning process less stressful.

 

1. Begin With the Basics

When making an estate or business succession plan, start with a workable outline. Do not be afraid to set out a plan that still needs some fine-tuning. Put your ideas in writing. Even simple notes are better than leaving your loved ones without guidance and scrambling while dealing with emotional turmoil.

Some factors to consider when drafting a will and basic estate plan include:

• Who would you like to run your business in your absence? Should this person be a full owner, part owner or simply a manager?
• What framework would you like your heirs or loved ones to use to resolve business-related disputes in your absence?
• Do you want to restrict business ownership to family members or allow others to invest?
Imagining the future of your business helps to make big-picture estate planning decisions.

 

2. Make Your Plans Tax-Efficient

An attorney may help you write a will and a business contingency plan but may not be the best professional to work on tax issues. A financial professional may work with you on the process of succession. The goal is to transfer your business with a strategy that manages the impact of state, federal, and local income taxes on the transaction.

 

3. Discuss Your Intentions with Those Affected

One of the biggest sources of friction in the business transition process may come from the hurt feelings of those involved. Interfamily disputes may come up from miscommunication or unmet expectations. If your child has counted on being tapped to run the business in your absence, only to see that you named someone else to this role, it can be tougher for your loved ones to rally together.

Even if you suspect that this discussion may lead to some conflict, it is important to communicate your intentions and plans with those affected by them. The time to work on these issues is before they are needed, not after it is already too late.

 

Read More:

Multigenerational Estate Planning Tips

Estate Planning in Minnesota

 

 

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
This article was prepared by WriterAccess | LPL Tracking # 1-05233601