Setting Goals for Your Estate Planning

Determining what estate plan is best for you generally starts with you determining what your goals are for your estate plan. Some examples of common goals are: avoid estate taxes, make certain a disabled/special needs child is taken care of and that child’s inheritance does not go to the government, avoiding creditors, or creating a legacy through charitable giving. Of course, the goals are personal to each client. But, the goals of the client are the starting point in determining what estate plan best suits you.

Consider the following hypothetical goal and the different options.

Hypothetical Goal #1: Your goal is for your significant other to receive the homestead that the two of you share upon your death. You do not have any  estate tax issues.

Option #1: Execute a quit claim deed so that the homestead is now owned by you and your significant other as joint tenants with rights of survivorship. As a general rule this option is not advisable since your significant other now owns the home. As a result, if your relationship ends, you are going to have to buy out your significant other’s interest in the home if your significant other agrees to leave. Most likely, the amount of money that you have to pay your significant other will be litigated absent agreement of the two of you. If your significant other refuses to leave the home, then you will have to go to court and request a partition of the property, which will likely include a buy-out.

Option #2: You leave the homestead to your significant other in your will or a trust. As a general rule this option is not advisable because the homestead is subject to creditors. A homestead is exempt from creditors in Minnesota if it is transferred or bequeathed to a spouse or your children. Since your significant other is neither your spouse nor your child, the homestead is not exempt from creditors. So, if there are creditors and you choose this option, your home will be sold to pay off the creditors and it will not go to your significant other.

Option #3: You do nothing. As a general rule this option is not advisable because the Minnesota legislature has determined who gets your property upon your death, and your significant other is not on that list. The list is first to spouse, and if no spouse, to your children, and if no children, to your parents, and if your parents are deceased, to your siblings and so forth through your lineage.

Option #4: You do a Transfer on Death Deed (TODD) to your significant other. Generally, this option is advisable because a TODD, immediately upon your death, transfers the homestead to the person to whom is named on the TODD. The TODD avoid creditors (with general exceptions including for medical assistance) and your estate planning goal is achieved.

In this hypothetical, we would also generally advise a will (which does not contradict the TODD), a power of attorney and a health care directive.

Spangler and de Stefano, PLLP assists business owners and individuals with their estate planning.

The material contained herein is for informational purposes only, and is not intended to create or constitute an attorney-client relationship between Spangler and de Stefano, PLLP and the reader. The information contained herein is not offered as legal advice and should not be construed as legal advice.