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Testamentary trusts and probate issues


Administering an estate through probate in Minnesota may add complications, expense and lead to probate litigation. There are avenues to simplify this process and avoid legal battles over probate issues.

Assets of an estate may be poured into an unfunded revocable trust. This simplifies probate because trust executors may transfer the probate assets to themselves as the trustee, and privately conduct trust administration within the trust.

Accounting to the court is comparatively brief after the inventory is filed. The trustee, instead of the will executor, pays the estate's liabilities. Distribution of all assets is reported to the trustee as the will's sole beneficiary.

This simplified method may be used instead of a more-costly revocable trust and names all the true beneficiaries in that trust. This process leaves all the assets to a testamentary trust, allows for the appointment of the same individual as executor and trustee and requires that the trustee resolve of the estate's liabilities.

It's also easy to prove accountings. Because the executor does not make disbursement, there is no need to submit documents such as canceled checks and bank statements. Distribution of the entire estate to the trust is proved by a receipt signed by the trustee even if numerous beneficiaries receive shares from the trust. This method also avoids accounting of publicly-traded investments, their dividends and interests and other certain investment transactions after their distribution into the trust.

Another advantage is that the trust can be the beneficiary of life insurance policies or transfer on death accounts because it is too complicated for financial institutions to accept designation of beneficiaries. Probate over these proceeds may be avoided through this designation.

However, trustees must still submit a complete accounting to the trust's beneficiaries. This trust should not be utilized if the entire estate is left to a single executor.

There may be disadvantages. This approach may seem over-complicated by placing a person between the executor and the trustees. Tax returns may have to be filed for the estate and the trust. Trusts must also comply with calendar year reporting and fiscal year reporting consequences. Also, despite complications and expense, probate has the protection of court supervision.

An attorney can help provide options to resolve estates and prevent a probate dispute. This can help further the testator's intent and protect their heirs.

Source: WealthManagement.com, "Using a testamentary trust to simplify probate," Walton Davis, June 6, 2017

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