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Mistakes can burden estate planning in Minnesota


Poor estate planning can cause financial consequences and potential litigation for heirs and beneficiaries in Minnesota. Some typical mistakes have complicated inheritance.

For example, the failure to place a see-through provision in a trust can impose high tax liability on an estate when assets, such as an individual retirement account, are passed to beneficiaries. Assets such as an IRA are subject to higher tax rates.

A see-through trust meets certain legal requirements and becomes a named beneficiary of assets such as an IRA. A see-through trust allows the IRS to treat the trust's beneficiary's as if they were the asset's direct beneficiaries. Their life expectancies are used to determine the IRA's required minimum distributions and allow taxing of the distributions at the lower tax rate governing individuals.

An incomplete trust schedule is another complication. These schedules, usually known as a Schedule A, are attached to the trust document and contain important information such as an inventory of assets transferred to the trust. It is important that this schedule is complete and accurate.

To avoid the complications and expense of probate proceedings, assets should be designated as payable on death (POD) or transfer on death (TOD). POD and TOD designations should be placed on all checking, money market, savings and CD accounts.

Estates may be overly-complicated with too many bank accounts. The Federal Deposit Insurance Corporation (FDIC) limits its insurance to $250,000 per depositor. Bank accounts should be consolidated if a depositor has more than they need to assure that they are protected.

Finally, a trusted family member should have access to key documents. It's a good idea for a designated person to have a checklist with the location of the birth certificate, Social Security card, marriage license, prenuptial agreements, records of military service, burial instructions, cemetery plot deed or cremation instructions, mortgage documents, bank and credit statements, personal financial records and keys to the person's safe deposit box.

Working with an experienced attorney can help ensure that these mistakes are not made. A lawyer can help avoid probate proceedings and other difficulties for heirs and beneficiaries.

Source: The Kiplinger Report, "Some of the biggest estate-planning mistakes people make," Andrew McNair, May 25, 2017

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Mason & Helmers
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