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probate law

What Is Probate? Part 1: Bad Probate

What is Probate? Probate is simply a legal process that any estate with an asset worth more than $75,000 must go through. Inevitably, you’re going to hear from Forbes and Motley Fool and The Wall Street Journal and your preferred regional newspaper about how horrible it can be. And, we’re not going to lie to you, many times it is horrible.

We don’t believe in pulling the wool over your eyes. We want you to make the most informed decision that you possibly can. That’s why we’re going to explain to you what can happen if you don’t do appropriate estate planning. And then we’re going to explain what you need to do to avoid making probate a difficult, expensive and painful process.

How Much Does Probate Cost?

Let’s start out by explaining the why. There is no hard and fast answer to how much probate costs. We’ve seen estimates from as low as 2% to as high as 10% of your estate.

That may not seem like a lot on it’s face but remember that includes all your assets that don’t have beneficiaries listed on them. So, that excludes things like your IRAs, 401(k)s and life insurance. What it includes though is your house, any land you own, any stocks that you own, your cars, and any of your personal property.

Probate Court

Again, that may not seem like a lot, but it WILL start adding up. Take for example this scenario…. the median cost of a house in the state of Minnesota is roughly $250,000. Depending on where you live that could be substantially higher or lower, of course, but we’ll use that as a starting point. Add in your two vehicles at $15,000 each and the value of your personal property (jewelry, lawn equipment, clothes, etc.) at roughly $50,000. Assuming you don’t have any bank accounts or investment accounts of any value, your estate is suddenly worth $330,000.

Between court fees, attorney fees, executor fees and various other expenses, your estate could be reduced by between $6,500 and $23,000. Now, depending on where you’re at in your life, that could have some pretty sobering effects. If you have minor kids, that means they will get that much less to support them. If you’re plan is to donate your money to charity or church, they will get that much less to do their good deeds. Whatever it is you want, the person or people that you want to benefit, will get much less benefit. Add to that, there’s always the potential of infighting about who should get what and it doesn’t lead to a pretty picture. You can calculate the size of your estate on your own and use this chart to approximate the cost of your own situation.

Probate Cost Chart

Value of EstateLow RangeMid RangeHigh Range
$50,000$1,000$2,500$3,500
$75,000$1,500$3,750$5,250
$100,000$2,000$5,000$7,000
$150,000$3,000$7,500$10,500
$200,000$4,000$10,000$14,000
$300,000$6,000$15,000$21,000
$400,000$8,000$20,000$28,000
$500,000$10,000$25,000$35,000
$750,000$15,000$37,500$52,500
$1,000,000$20,000$50,000$70,000
$1,500,000$30,000$75,000$105,000
$2,000,000$40,000$100,000$140,000
$3,000,000$60,000$150,000$210,000
$4,000,000$80,000$200,000$280,000
$5,000,000$100,000$250,000$350,000
$6,000,000$120,000$300,000$420,000
$7,000,000$140,000$350,000$490,000
$8,000,000$160,000$400,000$560,000
$9,000,000$180,000$450,000$630,000
$10,000,000$200,000$500,000$700,000
$15,000,000$300,000$750,000$1,050,000
$20,000,000$400,000$1,000,000$1,400,000

That may not be fair, but that’s the reality. This is what we call “THE BAD PROBATE”.

So, now that we have also sufficiently worried and scared you, what can you do? Like we said, it doesn’t have to be that way. Proper planning and continual planning will help to avoid some of those headaches. So, what does that mean?

Avoiding Probate

Proper planning is different for every person and family. To start out with, you need to get all your estate planning documents in order. This is going to include a will and maybe a trust. A good estate plan will also include a financial power of attorney and health care directive. They won’t do anything in terms of the probate but should be included. Depending on your situation and your goals, you may also need to have a trust. Additionally, you’ll need to make sure that all the beneficiaries on your life insurance and retirement accounts.

Additionally, you should review your plan every 3-5 years to make sure it still meets your wishes and evaluate your current situation. You may or may not need to change anything, but, at the very least, you should review it.

Again, probate can be a scary process for those you leave behind. It doesn’t have to be though. Leaving instructions for what you want done should make you sleep easier at night. You can know that your wishes will be known and followed, and you can also know that you’ve made things easier on those you care most about.

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real estate law

Estate Planning for Farmers

Everything about farmers is unique. Farming is unlike any other business. As many farmers will say, farming is not just a job, it’s a way of life. That means that farming is a way of life through thick and thin. With farming you don’t just go to work and go home when the job is done. You live at your job. You live in the same place you work. But the truth is, most farmers would never change their way of life unless they absolutely must. In addition to that, they want to pass it on to their kids. And they want their kids to pass it on to their grandkids. Or, at the very least, they want the land to stay within the family.

Farming Finances

The finances of farming are also very unique. Often the assets of a farm far outweigh the income of a farm. Speaking from an estate planning perspective, this creates a unique estate planning situation. According to the USDA’s Census of Agriculture, the state of Minnesota in 1997 had 78,755 farms. In the latest census in 2017, the state had 68,822 farms and this number keeps shrinking.

Aside from the obvious that more and more people are leaving the profession, it also means there is a lot of wealth transfer that has happened over the last 20+ years. Additionally, the average age of farmers is 58 years old according to the same census. That means there will be a lot more wealth transfer in the coming years.

Watch This Month’s Video To Learn More

Kiecker Law Video Series Ep. 2 – How Do I Transition the Farm to my Children?

Real Estate Planning for Farmers

When we talk about estate planning in farming, there are so many factors to consider. Everything from the amount of land to the value of the machines to the amount of cash in the bank to which, if any, kids want to take over the farm to how you want to divide up the assets and money. In a certain sense, this is just like any other business owner. In another sense, it’s completely different. Again, farmers are unique.

As mentioned before, farming isn’t just a job. It’s a way of life. If you want to pass the farm on to one kid, but not the other, the estate plan could be written many different ways. You may want all the kids to be treated the same financially, but that means the estate plan must be written a specific way. If you want the kid that is taking over the farm to be treated differently than the others, you must write the estate plan in a different way. If you want to give the farm away, you can do that, but you need to do it a specific way.

Succession Planning for Farmers

So, what does that mean? It means that there is no one-size-fits-all answer. It means that when you’re considering the succession planning of your farm, you need to be aware of all the options that are available. There are many different outcomes that you may want and there is likely a way to accomplish each of those. Each one of those solutions is unique. Proper planning is essential to accomplishing the outcome that you desire.

To be sure, the legal system has set up a plan for you if you don’t do your planning. Likely, no one will be happy with that one-size-fits-all solution. It will likely lead to many arguments and many people that are upset with each other. Again, we know farmers are unique. We know that each situation is unique. Make sure that your plan is also unique. 

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Special Needs Trust Planning Seminar

Earlier this month, we posted a blog about some situations that your child may need to have a special needs or supplemental needs trust (we will refer to it as a special needs trust for this post). What we would like to do now is explain some of the consequences for not having one when it is necessary. There are two times that a trust would typically come into play. The first is one we hope doesn’t happen, but feel very strongly that everyone should plan for. That situation is if disaster hits and you as the parents of your child pass away. The second is when the inevitable happens and your child turns 18, or for some of you has already turned 18.

Special Needs Trust Introduction

We will tackle each of these scenarios separately. If something would happen to both parents of your child, presumably, your child would receive an inheritance. That could be anything from life insurance to your retirement accounts to other physical assets like your house. As soon as that happens, your child has “income”. The state would then be able to count that as income when determining whether your child is eligible for aid or not. It’s entirely possible that this would put them over the threshold and force them off of state aid, even if only for a year. If that happens, we all know how difficult it can be to get those same services back. The other part of the special needs trust that’s extremely important for your minor children is to appoint someone to be the guardian for your child that has the ability to care for them as well as to appoint someone to handle the finances. This could be the same person, but it may not be. You may have someone that you trust to take care of your kids, but doesn’t know how to balance their bank account. Or someone that is really good with money (and cares about your child), but wouldn’t know the first thing about how to keep a hectic schedule of shuttling kids from therapy to school to any other event. That’s OK, a special needs trust can help you define who does what.

The other scenario is when your child turns 18 and is no longer considered a minor. At this point, your child may be able to earn a living and income. They may also still need medical aid through the state. They may still be susceptible to people trying to take advantage of their generosity in a financial sense. No matter the scenario, if your child is considered special needs as an adult, a special needs trust may come into play. The same reasons apply though. Your child may still need medical assistance. You may need to watch over their finances. You will know what is best for your child, but the rules change when your child turns 18 and, often times, a special needs trust is the vehicle to help you care for them.

Register For The Seminar Now

Whether it be for purposes of making sure your child has an appropriate guardian or to make sure your child’s finances are protected, a special needs trust can help you and your child. Later this month, Omni Kiecker, Esq. will be giving a talk on supplemental and special needs trusts. She has written the book (Financially Caring for Your Disabled Child: A Guide to Understanding the Minnesota Supplemental Needs Trust) to help Minnesota parents in their fight to help their children. The talk will be on Wednesday, September, 25th at 4:30 pm in the Sakatah Room of the Greater Mankato Business Development Building. If you would like to join us, please register for the event and let us know you’d like to attend.

Estate Planning: Supplemental For Parents With Special Needs Children

FREE Admission Registration Open Now
Date and Time:
Wed, September 25, 2019
4:30PM CDT

Location:
1961 Premier Dr
Sakatah Trail Room
Mankato, MN, 56001

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Estate Planning for Parents With Special Needs Children Seminar

Later this month, we are going to be holding a seminar on a subject that is very close to our family’s heart. Our son was diagnosed as autistic and has ADHD. He is a very bright young man, but he sometimes has an amazingly kind heart and can get taken advantage of by other people that aren’t as innocent as he is. He shows amazing care for others and would give someone his very last cent if they asked for it. That’s why we, as parents, leverage a supplemental needs trust for him now and in the future.

So, you may ask, what exactly does a supplemental needs trust mean? A supplemental needs trust is a financial vehicle that has the ability to financially protect your child when parents aren’t able to do it any longer. It has the ability to protect state aid that your child may receive. It also grants the ability for you or someone you trust to keep watch over your child’s finances so that they don’t get taken advantage of. Essentially, a supplemental needs trust adds a separate level of protection for disabled people.

Say for example, there is a family that has a child that is disabled and another child that isn’t. The child with Autism receives state aid for therapy and additional classes to help them. This family could have a number of scenarios that come into play in which the parents would want to treat both of their children the fairly, but need to treat them differently. If the parents pass away in a car accident and need the children to be cared for. Presumably, the parents had life insurance to help take care of their children. Unfortunately, that life insurance COULD qualify the disabled child out of state aid. In essence, not only did the child lose their parents, the money turns into something that works against them when it comes to getting aid. Add to that, the children are now being treated differently and, probably, unfairly.

Another less tragic example is of grandparents that may want to help their disabled grandbaby. They have done very well in their professional life and can afford to help financially support their grandchild. There are limits to that, of course, and what the grandparents don’t want to happen, is for their gift to hurt their grandchild. They don’t want their grandkids to get taken advantage of financially. They also don’t want their grandkids to lose the help that they are receiving from the state. Grandma and Grandpa just want what’s best for their family.

As previously mentioned, we are holding a seminar later this month on Wednesday, September 25th at 4:30 pm to discuss just this subject. You can get your tickets here or contact Jeff at [email protected] or call (952) 843-8546. If you’re reading this blog, many of you know that Omni has written the book on supplemental needs trusts in Minnesota. Her book held the #1 Best Selling New Release on Amazon for her book Financially Caring for Your Disabled Child: A Guide to Understanding the Minnesota Supplemental Needs Trust. This seminar will focus on the same principles and explain how this subject may affect your family.

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