Estate planning is a key part of ensuring that your assets are properly distributed after you’ve died. One of the many estate planning options available is to create a living trust in which you can put your assets and property. However the process for creating a living trust can vary from state to state, and Minnesota is no exception. If you’re just starting the process of planning your estate, a financial advisor could help guide you on important decisions for your family’s needs and goals. Here’s what you need to know about creating a living trust in Minnesota.
How to Create a Living Trust in Minnesota
Here are six steps to create a living trust in the North Star State:
- Pick what kind of trust you want to create: If you’re single, a single living trust is usually the best idea. If you’re married, you should strongly consider a joint living trust, in which both you and your partner can place assets and property.
- Figure out what type of property you plan on placing in your living trust: You can place almost all of what you own in your living trust, from land and houses to jewelry and even stocks and bonds. Make sure you have the proper ownership documentation available certain assets.
- Decide who will be the trustee of your living trust: Many people pick themselves as a trustee, but in this case, you’ll also need to name a successor to take over when you die. Regardless, your trustee should be someone you feel can properly distribute the contents of your living trust to the appropriate beneficiaries.
- Create the living trust document: You can do this yourself through a computer program or with the help of a lawyer.
- Sign your living trust in front of a notary: You can find notaries in your area online or through your state’s database.
- Place your assets and property into the living trust: The paperwork necessary to complete this final step can be tricky, so it’s recommended you work with a lawyer.
What Is a Living Trust?
A living trust is a legal document that allows you to grant ownership of your property and assets to certain beneficiaries after you’ve died. As part of this arrangement, a trustee is in charge of managing the trust’s contents, following the instructions left in the trust and distributing the appropriate assets and property to the correct parties. You can be the trustee of your own trust, or you can nominate a friend or trusted relative to the role.
Living trusts can be revocable or irrevocable. If you create a revocable living trust, you’ll be able to remove property and assets and modify anything else as you see fit. An irrevocable trust cannot be altered once property or assets are placed in it without express permission from all parties named in the trust.
With a revocable trust, you personally owe taxes on everything placed in the trust, as it’s still under your ownership. On the other hand, an irrevocable trust is taxed as a separate entity.
How Much Does It Cost to Create a Living Trust in Minnesota?
The cost of creating a living trust depends on whether you do it yourself or hire an attorney to help you. You can use software to put together one yourself for usually less than a couple hundred dollars, and an attorney often costs more than $1,000. While using an attorney is more expensive, there are risks to DIY estate planning, so consider all the factors before deciding to try it yourself.
If you do decide to seek the help of an attorney, make sure you use a trust specialist and not just a general estate planning attorney. Many estate planning attorneys only help with wills and probate, so it’s helpful to work with one who focuses on trusts.
Why Should You Get a Living Trust in Minnesota?
One of the biggest reasons that living trusts are so popular is that they basically allow your beneficiaries to skip probate. Probate is the process of proving a will, and it can be time-consuming, stressful and expensive.
That said, Minnesota is one of only several states in the nation that uses Uniform Probate Code. This standardizes the probate process and avoids some of the headaches associated with it. So in many cases, creating a living trust in Minnesota may be more trouble than it’s worth.
Another reason to get a living trust is that it makes leaving property or assets to a minor far easier. With a living trust, you can specify that the successor trustee hold onto certain assets until a minor beneficiary reaches a certain age. A living will also allows you to avoid conservatorship should you become incapacitated, given that you’ll already have a successor chosen.
Who Should Get a Living Trust in Minnesota?
You don’t need to be wealthy to get a living trust, but it’s important to consider the amount and complexity of your assets before deciding to create one. If your estate is fairly straightforward, a living trust may not be the best idea. This is especially true in Minnesota because of the state’s participation in Uniform Probate Code. If your estate is complicated and you have lots of different kinds of assets and property, a living trust may be a viable choice.
Living Trusts vs. Wills
You’ll almost certainly need to create a will even if you do decide to go for a living trust. This will help take care of property that you don’t include in your living trust. It may also review other instructions that pertain to your estate.
Neither of these should be confused with a living will, which dictates what medical action should be taken if you become incapacitated. A will can also perform the following functions:
- Name an executor
- Provide instructions on how to pay outstanding taxes and debts in your name
- Establish guardianship for children
- Select managers for children’s property
The following chart can help you better understand the difference between a will and a living trust:
|Living Trusts vs. Wills|
|Names a property beneficiary||Yes||Yes|
|Allows revisions to be made||Depends on type||Yes|
|Avoids probate court||Yes||No|
|Requires a notary||Yes||No|
|Names guardians for children||No||Yes|
|Names an executor||No||Yes|
Living Trusts and Taxes in Minnesota
A living trust isn’t likely to affect your taxes in Minnesota. However, Minnesota does have an estate tax of 13% to 16% for estates worth more than $3 million. There is no inheritance tax, though.
You should also know about the federal estate tax, which is applied to estates worth more than $11.7 million in 2021 and $12.06 million in 2022. These taxes apply to all estates regardless of whether they have a living trust or not.
A living trust can save your loved ones the trouble of going through the probate process, along with providing other benefits as well. Creating a living trust takes planning, time and money, but it can certainly be worth it for the right person. So do your research and see if a living trust makes sense for your situation. Don’t forget to consult with an attorney and your financial advisor before beginning the process.
Tips for Estate Planning
- Estate planning is often complex. A financial advisor can help you make sure that you have all your bases covered. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- In planning your estate, it’s important to know that you have enough saved for retirement. Use SmartAsset’s free retirement calculator to make sure that you’re adequately preparing for the future.
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