Probate and Estate Planning Terms

Bond

In some instances, the probate court will require that a bond be posted by the personal representative. The idea of the bond is to make sure (through an insurance company in most cases) that any losses – caused by the personal representative's breach of their duties – will be repaid. A bond is not required in most Minnesota probate administrations.

Estate Planning

Estate planning is the use of legal documents to facilitate the orderly disposition of your assets upon your death. It also includes planning for incapacity, care of your minor children, minimizing tax liability, and maximizing the value of your assets.

Health Care Directive

A health care directive is another very useful tool in planning for incapacity and should be a part of all estate plans. A health care directive is a written document that makes known your health care wishes to family, friends, and doctors. It allows you to name someone (health care agent) who will have the legal authority to make health care decisions for you – based on your wishes – if you become unable to communicate your healthcare wishes. It also allows you to specify your wishes in certain medical situations and also your wishes for things such as funeral arrangements and organ donation. Minn. Stat. § 145C contains the suggested form.

Intestacy

If a person dies without a valid Will, they are said to have died “intestate”. When a person dies intestate, their property passes to the people and in the amounts designated by Minnesota law. The Minnesota intestacy statute begins at Minn. Stat. § 524.2-101. In effect, the statutes create a Will for those that die without a Will. The intestacy statutes also aid in distributing property that is not included in a decedent's Will. There is no ability for non-family members to inherit by intestacy – an important reason to create a Will.

Letters

The “Letters” are documents issued by the court after the court approves the Probate Petition or Probate Application. The Letters give the Personal Representative official authority to act on behalf of the decedent's estate and are needed to carry out many of the PR's duties. Letters can be “testamentary” or of “general administration”. Letters Testamentary simply means that the personal representative was nominated by the decedent's Will. Letters of General Administration means that the personal representative was not nominated by the decedent, most likely because the decedent died without a Will.

Non-Probate Property

Non-Probate property is property that has someone else's name (besides the decedent's) attached to the property that directs where the property will go when the decedent dies. Examples of this kind of property include: life insurance, joint tenancy property, P.O.D. accounts, property in trusts, retirement accounts, etc. Note that property with a designated beneficiary will actually be probate property if the designated beneficiary is the decedent's estate.

Personal Representative

The personal representative (formerly called “executor”) is the person that administers the decedent's estate, winds up the decedent's financial affairs, pays the decedent's debts and taxes, and distributes the balance of the estate to the beneficiaries. Personal representatives are appointed by the court and are often nominated in a decedent's Will. Unless otherwise qualified, it is a good idea for the personal representative to hire an attorney to assist in the administration of the estate. Probate is a time-sensitive process that requires close supervision and attention to detail.

Power of Attorney

A power of attorney is a signed document giving another person (agent) the legal authority to act on your behalf with respect to your assets. A power of attorney should be included in every estate plan as it can be used for a wide variety of tasks and is especially useful in planning for incapacity. Minn. Stat. § 523.23 contains Minnesota's standard power of attorney form.

Probate

Probate is a judicial process triggered by the death of someone who owned probate property. Probate determines the validity of a Will (or that there is no Will) and the identity of the beneficiaries. If the decedent died without a Will (intestate), then Probate determines the identity of the heirs. Probate has four main components: (1) application process; (2) collecting and managing the assets; (3) paying debts of the estate; and (4) distributing the balance to the beneficiaries. Probate protects the interests of the estate's beneficiaries and creditors by ensuring the orderly distribution of assets and payment of debts/expenses. Probate typically takes 6 to 9 months from start to finish.

Probate Property

Probate property is generally property that owned in a decedent's name alone, such as personal property, bank accounts, automobiles, stocks, etc. Other probate assets include property that passes by beneficiary designation (i.e. life insurance) where the named beneficiary is the decedent's estate. Probate property passes according to a person's Will if a person has a valid Will. If a person does not have a valid Will, probate property passes according to the Intestacy statutes.

Trust

Generally speaking, a Trust is a tool for protecting and managing the distribution of your assets. Property is transferred to the Trust by titling the property in the name of the Trustee. The Trustee manages the property according to the terms of the trust for the benefit of the trust's beneficiaries. A trust is generally more expensive to create than a Will, but can also serve many more purposes than a Will and in effect, “pre-probates” whatever assets you transfer to the trust.

Will

A Will is a signed written document that, among other things, serves three main functions: (1) directs the disposition of your property at your death after payment of expenses, taxes, and debts; (2) names a Personal Representative to supervise your estate and carry out your distribution instructions; (3) nominates a Guardian if you have minor children. Wills only become effective after your death and after the Will has been admitted to probate. Wills only direct the disposition of probate property.