Revoking a trust is not something that happens all the time, but it is not unheard of either. Before revoking a trust, it is important to read over the trust carefully and determine how the trust should be revoked.
Unless there is case law or legislative authority on point, Minnesota law tends to follows the Restatement of Trusts (second). See Conn. Gen. Life Ins. Co. v. First Nat’l Bank of Minneapolis, 262 N.W.2d 403, 405 (Minn.1977) (citing Restatement, Trusts (2d) § 330; In re Syverson Trust, 2003 WL 22016795, *3 (Minn. App. 2003), review denied (Minn. Nov. 18, 2003). Under Minnesota law, if a trust specifies a manner in which the trust is to be revoked, the trust may only be revoked in that manner. Id.
For example, if a revocable trust provides that the trust must be revoked using a written instrument that is delivered to the trustee, the trust cannot be revoked by executing a will. See Conn. Gen. Life Ins. Co., 262 N.W.2d at 405. This is true even if the will specifically mentions the trust.
Hence it is important to read over the trust and determine exactly how it should be revoked. If the trust is not revoked in accordance with its terms, a court could find that the revocation is invalid and restore the trust.
Where the power to revoke the trust has been reserved but no method of revocation of trust is specified, the person who created the trust can revoke it using whatever method he or she likes, as long as it “sufficiently manifests the intention of the settlor to revoke the trust.” Restatement, Trusts (2d) § 330, comment i.
Finally, it is important to review the document to make sure the trust maker has the power to unilaterally revoke the trust. Under Minnesota law, “[a] settlor may not unilaterally revoke a trust unless the settlor expressly reserved such power when the trust was created.” Thomas B. Olson & Associates, P.A. v. Leffert, Jay & Polglaze, P.A., 756 N.W.2d 907, 917 (Minn. App. 2008), review denied (Minn. Jan. 20, 2009). However, the trust can be revoked by the consent of all the beneficiaries and the settlor, even if the power to revoke was not reserved. Matter of Schroll, 297 N.W.2d 282, 285 (1980). If one or more of the beneficiaries are unborn, incapacitated, or otherwise unascertainable, the trust may not be revoked or modified without their consent. Id. at 285-86.
Hence it is tremendously important that someone carefully review his or her trust before revoking it. The trust must be revoked in a manner that conforms strictly to the method described in the Trust. If the power of revocation is not reserved, revocation may be impossible or extremely difficult.
Sometimes older adults need help finding an estate planning attorney. They might ask one of their children or a close friend for advice or for a referral. They might need a ride to the attorney’s office or help organizing their assets. While family and friends are usually willing to help, their good intentions may lead to complications down the road. Although friends and family are often well-meaning, their involvement with someone else’s estate plan may have the appearance of undue influence to dissatisfied family members. Undue influence occurs when someone pressures or influences another to such a degree that the person is a “mere puppet” of the influencer. If a will or trust is a result of undue influence, courts will hold that it is not a valid testamentary instrument.
Courts typically examine several factors to determine whether a will or trust was created through undue influence. These factors include whether there was (1) an opportunity to exercise undue influence, (2) active participation by the party exercising the influence, (3) a confidential relationship between the person and the party exercising the influence, (4) a disinheritance of those who would have been remembered in the person’s will or trust, (5) a singular benefit to the party exercising the influence, and (6) a person exercising influence or persuasion.
So what do you do when mom and dad ask you for help with their estate plan? Here are some suggestions:
1. Avoid Participation as Much as Possible. Avoid driving them to appointments or helping them collect information about their property. Do not witness any of the documents they sign. If asked how they should dispose of their property, you should tell them that you can’t give advice on the subject and that they should talk with their attorney. You should not attend meetings about their estate plan, and you should avoid all contact with their attorney, if possible.
2. Do Not Find an Attorney for Them. There are attorney referral services that can refer your parents to an estate planning attorney in their area so it doesn’t look as if you chose their attorney for them.
3. Don’t Ask. Parents may occasionally disclose information about their estate plan, but it is important not to follow-up or ask questions. This gives the appearance of an improper interest in their estate plan.
There are other steps that can be used if undue influence might be an issue in the future. An attorney might video tape a couple declaring that the estate plan they created was not the result of anyone’s suggestion or influence. This may be used as evidence against a charge of undue influence.
Naming death beneficiaries on life insurance policies, bank accounts, and retirement accounts is a big part of many estate plans. The recent case of In re Estate of Butler helped stabilize the law in this area and put many estate planning attorney’s minds at ease.
In that case, Patrick W. Butler designated one of his daughters the death beneficiary on several CD accounts, but his will divided his estate equally among his children and stepchildren. The children and stepchildren claimed that the will showed Mr. Butler did not want the CD’s to go to one daughter, but that he wanted them divided equally among his children and step children. The will did not specifically reference the CDs. A jury found there was sufficient evidence to conclude by clear and convincing evidence that Mr. Butler intended the CDs to be divided equally among his children and stepchildren.
The Minnesota Supreme Court reversed this finding because there was no evidence specifically referred to the CDs, including the will, showing Mr. Butler wanted the CDs divided equally among his children.
If the Supreme Court had not reversed, this would have dramatically changed the way estate planning is done in Minnesota. Thousands of people would need to redraft their wills to specifically address accounts, insurance policies, or retirement plans that had a beneficiary designation scheme differing from that articulated in their wills. Thankfully, this result was avoided by the Supreme Court’s decision. Now individuals can name death beneficiaries without fear that their will could be used to overturn who their named beneficiaries are. The entire opion can be found here.
One of the most fundamental parts of estate planning involves appointing someone to make medical decisions on someone’s behalf in the event that he or she is unable to. For instance, a healthcare directive usually names someone who can make medical decisions for someone in case he or she has a stroke, coma, etc., and is unable to make these decisions.
A closely related document is the POLST Form. This document defines many end-of-life medical preferences, and should always be completed with a healthcare professional. Taking time to fill out this form with your physician can save your family members a lot of heartache and stress because they will know your wishes and do not have to agonize over important decisions. The POLST form must be signed by a physician, nurse practioner, Doctor of Osteopathy, or physician’s assistant (when delegated).
When parents hire a baby sitter, they usually leave a list of written instructions that help the sitter in caring for their children and in knowing what to do if there is an emergency. These instructions also help the parents—giving them peace of mind when they know that their children—their most precious possessions—will be protected.
My wife and I have found that the more detailed the instructions we provide a baby sitter for our two children, the better. For example, in the evening our three-year-old always brushes her teeth, reads one book, and then it’s lights out. This sequence is important because it ensures that her daily routine will not be disrupted, and that both she and the baby sitter know what to do.
So it is with wills and trusts. Just as a set of instructions is for the baby sitter, a will or a trust is a set of instructions for those who will handle your affairs after your death. Wills and trusts dictate how your money will be spent, how people should be treated, and what your priorities are. These instructions have the same ends as baby sitter instructions—to care for loved ones.
Many couples leave detailed instructions for baby sitters when they are going out for only a few hours. How many people leave instructions for their loved ones when they are going to be gone forever?
We are frequently asked how to put children’s names on the title of the parents’ house, as a means to avoid probate. At first blush, this seems like a quick and easy way to pass title to children. However, we call your attention to several problems in doing this:
1. Judgments and divorce against your children could result in liens or court ordered sale of property.
2. If the value of the share you give each child exceeds $13,000.00 per giver or $26,000.00 per couple, you must file a federal gift tax return and you may have a gift tax to pay.
3. You must obtain you children’s consent to make any improvements to your home.
4. If you need to borrow money to make those improvements, your children’s credit history may be used to determine what loan rate you qualify for.
5. If you want to sell the house or take out a mortgage on it, your children and their spouses must also sign.
6. If you sell your home and your children let you keep the money, they must file a federal gift tax for the share they give up (if the amount exceeds $13,000.00 per giver or $26,000.00 per couple)
7. If you sell your home for more than you originally paid, your children will owe capital gains tax on their share of the profit, even if they give you all the money.
8. You cannot change your mind and take a name off the title on your own.
9. If the children are under 18 years of age when you sell, mortgage, or die, they will need a guardian appointed by the court.
Get help from an attorney who can go over these and other factors. It certainly is better than having strangers take over your home or paying thousands of dollars in taxes needlessly.
When someone dies, what happens to his or her bills? What are the duties and responsibilities a Personal Representative has to the decedent’s creditors?
When someone dies, his or her obligations to creditors survive. Creditors, such as utility companies, credit card companies, and telephone companies can enforce their claims against the estate. A Personal Representative must notify creditors of the decedent’s death and give them an opportunity to satisfy the debts owed to them. This is a legal duty of the Personal Representative.
In Minnesota, a Personal Representative must notify creditors by publication. The Notice of Claims must include the Personal Representative’s name and address, and other information. After the Notice of Claims is published, creditors have four months to file their claims with the court.
Notice by publication is simple and straightforward, but it is not the only notice that is required. The Personal Representative is also required to give notice where:
1. The Personal Representative knows about a claim that arose during the decedent’s life
2. The decedent’s financial records known and available to the Personal Representative
clearly show that a claim arose during the decedent’s life
3. A reasonably diligent search of the decedent’s financial record known and available to the
Personal Representative would have revealed the claim.
If, for example, the Personal Representative opens the Decedent’s mail and finds an energy bill that accrued during the decedent’s life, he or she should provide the energy company with a copy of the Notice of Claims.
Our office makes handling creditor’s claims easy and stress-free. The Personal Representative simply sends us the bills and we prepare the checks for signing. The Personal Representative signs the checks and we mail them to the creditors.
All the bills must be accounted for in the estate’s Final Account, which is filed with the probate court at the end of the probate. Since all the bills are managed at our office, the Personal Representative is not scrambling to find every bill he or she has paid, which we have learned can end up being more COSTLY to the estate than keeping everything in good order from the beginning. This makes closing the estate and filing the Final Account a hassle-free and efficient process. It saves money for the estate and time for the Personal Representative.
Sometimes, an individual living in one State may own property in another. For example, someone may live in Minnesota and own a cabin in Wisconsin. What happens to this property during probate?
If someone resided in Minnesota and owned a cabin or vacation home in another State at the time of death, the personal representative will usually have to begin a probate proceeding in Minnesota and the other State. This typically involves retaining another attorney who is licensed to practice in the State where the property is located. Unfortunately, this usually means there will have to be two probates with two separate costs, expenses, and attorney’s fees. Under certain circumstances, property in Wisconsin can be transferred without another probate, but using an attorney licensed in Wisconsin might be necessary.
If properly drafted, a revocable living trust prevents the necessity of hiring an out-of-state attorney and starting a probate in another State. The trustee simply follows the trust’s instructions about what is to happen to the property. Hence revocable living trusts are often advantageous where an individual owns property in another State.
This is the John E. Trojack Law Office, P.A.’s first blog post!