General

o FOR THE LOVE OF GOD, DONT MENTION INSURANCE POLICIES IN A WILL!!

Put it in your trust if in your estate, its subject to creditors.
o Cars just sign on the back of title that youre authorized to transfer title and
youre good.
o Homes can use transfer-on-death deed must be recorded during life
(designated beneficiary has no lifetime rights/responsibilities)
o Power of appointment:
General paid to estate
Limited not paid to estate
o Step-up in basis cost basis is normally the price paid (but things appreciate
over time).
A step-up in basis means the cost basis is reset when you inherit something
to the fair market value at that time so it limits capital gains taxation if you
decide to sell it.
Docs dealing w/ estate planning:
o Living Docs:
Health Care Directives
Power of Attorney
o Post-Mortem:
Will
o Living and Post-mortem Docs:
Rev. Trust
Irrev. Trust (including all testamentary trusts)
Numbers:
o Federal Estate Tax $5.45M
o GST Tax $5.45M
o Lifetime Gift Exclusion $5.45M
o Annual Gift Exemption $14k
o MN Estate Tax $1.6M
Chap. 1 Working w/ Clients
Probate:
o Testate
o Intestate
Non-Probate
o POD/TOD
o Life Insurance
o Inter Vivos Trust
o Joint Tenancy
o Retirement Accounts/Benefits
Chap. 2 Fundamentals of Will Drafting
Drafting Wills:
o Close the class!! (e.g., 50% to my grandchildren to my grandchildren who
are living and survive me.)
o If youre a youngish couple who may have an after-born child, do not close the
class, but name all of your children.
o If you gift a specific gift, provide a contingency (e.g., if I no longer own x gift
shall lapse or Johnny will receive cash value.)

Estate Planning and Administration 1

When giving tangible property, writing a list is preferable (especially in blended

families).
o Heirs at law: related by blood, not your spouses family
o Parents: Mother, definitely. Father, maybe.
If you carry the child (mother), its yours; also by adoption.
If youre married and your wife carries, its presumed to be yours; also
adoption.
Chap. 3 Young Adult
o Greater chance of death b/c of riskier behaviors typically dont think about
dying.
o POA and HCD are important docs.
o Even if they only have a 401k and life insurance policy, still might want to direct
where personal property goes and keep it out of their parents estates.
o Keeping bank accounts out of the estate:
Authorized user(s)
Pay-on-death designation
Joint owners not a great idea.
o Planning for incapacity guardianships/conservatorships (POA is much cheaper
and easier than conservatorship).
Rev trust is another good option.
o

Chap. 4 Wealthy Young Adult Contemplating Marriage

What happens in the ante-nuptial agreement?
o (1) Defining property:
Separate before marriage; gifts and inheritance; defined separate
Marital acquired during marriage; co-mingling; agree to retitle
o (2) Determine rights at death:
May waive elective share
May act as a will (specific devises but kinda stupid)
Requirements: substantial fairness; disclosure!; legal counsel; signed 72 hrs
pre-marriage.
Chap. 5 Young Married Couple (w/o children)
o One of the harder estates to plan We want it to go to each other
But what happens when the other spouse dies?
o Go to Hs nieces/nephews, to Ws. EXCEPT!!
(1) not a closed group; and
(2) 2d spouse can (and will) change it after death.
o Other options:
(1) Irrev trust @ death
(2) A/B trust
(3) Beneficiary designations, POD/TOD into the trust by naming the
trust as the BD
o BUT if you dont name a natural person tax deferment associated
w/ retirement account is gone (See, chap. 7 for language).
o Revocation by divorce: in MN, statute takes divorced spouse out of your
estate plan
EXCEPT!! ERISA Plan 401k beneficiary designation must be changed.

Estate Planning and Administration 2

Retirement Account! if you name your spouse as beneficiary and dont take
anything out (other than the mandatory minimum at age 59.5-70.5) you can roll
it over to your spouses account.

Chap. 6 Unmarried Couples

o What do you do for a couple who isnt married (doesnt plan to ever get married)
who comes in to plan their estate?
Option 1:
o Each have a rev trust put the other on as beneficiary for income and
discretionary principle (HEMS)
o Also do a will:
Put anything in the trust that you missed.
Guardianship of any children
o Everyone needs a POA and HCD
Option 2:
o Crummey Trust PLAT/SLAT (Partner/Spousal Lifetime Access Trust)
Partner/spouse puts in up to $14k (irrev).
Other partner/spouse has present interest to complete the gift.
o But marriage entitles you to:
Spousal share of an intestate estate
Spousal homestead, exempt property, and family allowances
Spousal elective share
Unlimited marital deduction for wealth transfer tax purposes
Gift splitting for federal wealth transfer tax purposes
Social Security survivor benefits
Spousal benefits under employer benefit packages
Priority (in absence of designation) of personal rep, conservator, health care
decisions
Chap. 7 Married Couple (w/ Young Children)
o Guardians and Trustees best not to share duties here
If you really want to, also name a neutral 3rd party as co-trustee
Also, 3 is a better number than two need a tie-breaker
If its an individual, give them the ability to add another to grant discretionary
distributions
o Consider a directed trust? MN 501C.0808
Investment trust in which trustee is directed by other participants in
executing the trust.
o DECANTING A TRUST MN 502.851
Allows trustee to change certain by pouring the assets from the old trust to
a new one.
o Conduit trust have your 401k w/spouse as beneficiary and trust as contingent
beneficiary
Trust has language telling trustee what to do (act as pass-through entity)
(1) Who beneficiaries of the trust are
(2) Distribute over life; required minimum doesnt stay in trust, but passes
through and claimed as income.

Estate Planning and Administration 3

Chap. 8 Gifts from Grandparents

o GST Tax:
If you transfer mom daughter granddaughter; you get taxed at each
level
If you try to skip generations (i.e., mom granddaughter), you are taxed plus
add on an addition tax b/c youve skipped over the taxation of the daughter.
o How to structure a transfer gift to a minor:
Cant give a gift outright to a minor, so you put it in trust
But to have your annual exclusion ($14k) it needs to be a present interest,
SO
(1) Put it in a Crummey Trust:
o Have the ability to w/draw w/in a certain amount of time so its a present
interest and qualifies for the annual exclusion.
o Must give notice that contributions (up to $14k) were added to trust and
have ability to w/draw it.
o Can have multiple beneficiaries.
o The 5 and 5 exception to get around the lapse, you need to have
hanging power language (i.e., lapsed gifts can carry over to the following
year).
(2) 2503(c) Trusts (Springing) Minors Trust
o Only do this for ONE grandchild at a time
o State that it is a HEMS trust
o If you do it as is, they have the ability to take all of it at 21
o But, converting it into a springing minors trust, it becomes a Crummey
Trust when they turn 21.
o Retirement Accounts (Deferred Tax)
Basics:
o May start taking Required Minimum Distributions at 59.5, but must start at
70.5.
o If you w/draw money from your IRA before you reach 59.5, pay 10% tax.
Options:
o (1) Rollover as if it were originally part of their own IRA (at spouses death)
o (2) Cash-in
o (3) Inherited IRA have to start taking RMD a year after decedents death
o (4) 5 year withdrawal
o (5) Name trust as beneficiary BUT need conduit language stating that
the trust has an age or the money that rolls into it becomes immediately
income taxable.
o (6) UTMA (Uniform Transfer to Minors Act) a custodian manages assets.
Taxed at kids level, but the kid gets the account outright at 18 or 21.
o (7) Coverdell ESA
Benefit can be used for grade school and high school as well as
secondary ed.
But, can only put in $2k/year.
o A/B Trusts planning for GST ($10M estate)
Marital Trust
o QTIP split in half
$3.85M (GST tax-exempt invest for growth, pay income to spouse)
o Elect portability for this portion.
$4.55M (non-exempt pay out of here first)

Estate Planning and Administration 4

o Pay estate taxes from this bucket

Credit Shelter/Family Trust
o $1.6M (MN estate tax limit)
o After 2nd spouse dies, breaks into 2 trusts:
Descendent A
Descendent B

Chap. 9 Remarriage (w/ Children)

o What estate planning issues are important to address w/ a blended family?
Avoid disinheriting children from a prior marriage
Balance providing for a spouse w/ providing for children from a prior/current
marriage
Planning for estate taxes and income taxes
Provide for special property for spouse/children
Managing emotions
o Marital deduction
Spouses can transfer unlimited amount of assets during life and at death w/o
triggering tax
The amount passing to surviving spouse at death is deducted from gross
estate of decedent
In comes the QTIP Trust
o QTIP Trust (Qualified Terminable Interest)
Provides an unlimited marital deduction for qualified property put into the
trust.
Can be used in an A/B Trust, but isnt necessarily
o In an A/B Trust you can elect QTIP or do General Power Appt. (you can take
it all now)
o What makes a QTIP Trust?
Spouse is only beneficiary
ALL income to the spouse
Principle depends on the intention of the person drafting it
NEED to put in a provision saying how taxes shall be paid
o Recapture provision taxes attributable to QTIP property get paid from
the QTIP
26 USC 2036 if you have a retained life estate (income interest) in
something it becomes part of your estate!!! Dont do it!
o Taxes on QTIP Trust
Apportionment who pays?
o Residue of estate estate tax is paid from the residue of the probate
estate or trust assets BEFORE estate or trust distribute to the beneficiaries
o Apportion estate taxes to beneficiaries
o QTIP trust and estate taxes.
o Elective Share spouse can always get homestead and certain percentage of
augmented estate
Spouse can consent to waive their rights
ERISA 401(k), 493(b), 403(b) accounts MUST name spouse as beneficiary
unless spouse signs off.
Look-through language (trust as beneficiary) my spouse shall be named the
sole beneficiary of this trust.

Estate Planning and Administration 5

Chap. 10 Business Entities

o LLC and Partnership taxation:
Has its own value based on whats in it.
Can take a step-up in basis ONLY if you make a 754 election
No (well, extremely few) barriers to creditors w/ sole member LLC
o Look-through entity
o File a tax return for them separately
o S Corp
Only put an operating company in an S Corp
NO REAL ESTATE!! There is no step-up in basis on an S Corp
PLUS!!! Once you put money into a Corp you DO NOT get it back until you
have a sale.
o 401(k) are governed by ERISA sponsored by workplace (better protection as
long as youre still working)
o IRA (Protection up to $1M
o Requirements for Naming a trust as beneficiary
(1) Trust must be irrevocable or become irrevocable at the death of the
participant
(2) Trust must be valid under State law
(3) Beneficiaries of the trust (or at least the eldest beneficiary) must
be identifiable
(4) A copy of the trust (or a trust certification) must be provided to the plan
administrator no later than October 31 of the year after the year of death.
[Third requirement is the most difficult to satisfy]
o Entity valuation
Willing Buyer and Willing Seller Test
o For gift and estate tax purposes, the fair market value of property
transferred to another party is measured on the date of the transfer as
the price at which the property would change hands between a
[hypothetical] willing buyer and a willing seller, neither being under any
compulsion to buy or sell and both having reasonable knowledge of
relevant facts.
Methods for valuing closely held entities
o Market method
o Income method
o Net asset value method
o Entity discounts
Discount for lack of marketability
Discount for minor interest/lack of control
Discount for built-in gains taxes
Discount reduces the clients fair market value in the property, reducing the
estate tax liability But the discount also reduces the clients step-up in cost
basis, which can result in a greater capital gains tax liability if the property is
later sold and capital gains taxes are owing**
Chap. 11 Wealthy Married Couple
o DSUE (Deceased Spousal Unused Exclusion)
Deceased spouses unused exclusion goes to living spouse

Estate Planning and Administration 6

This is free of estate AND gift tax

Have to make DSUE election

Chap. 12 Asset Protection

o The only way you can have 100% protection over an asset is to NOT OWN IT (i.e.,
control)
(1) irrev trust
(2) trustee other than self
(3) no personal distributions
(4) no voting rights (e.g., stock options)
o The RAP how to explain to your clients
A trust cant last forever dont want kingdoms/aristocracies in U.S.
At the time a trust becomes irrevocable, the trust must end/distribute out all
funds 21 years after every person living at that time has died.
Generally ~ 90 years.
o When does taxing occur for GST?
(1) Direct skip (grandparent to grandchild)
o If outside the family 37.5 years
One generation = 25 years.
w/in 12.5 years is considered same generation.
w/in 37.5 years is considered one generation away.
o Spendthrift clause you dont actually own this until its distributed
Protects from creditors
Can still allow trustee to pay mortgage, bills, etc. directly from trust
o Decanting most useful if youve got a person who probably shouldnt get the
assets and you want them locked up in trust
E.g., someone w/ a drug problem; a surgeon who doesnt need the money and
might have a malpractice suit, etc.
o EXERCISE Husband $8M; Wife $8M [Husband and Wife have identical
trusts set up]
**Husband dies**
o $1.6M (MN Estate GST EXEMPT) in family trust [discretionary
distributions and surviving spouse]
o $3.85M (Remaining on Fed. Estate GST EXEMPT) in a QTIP trust [income
to spouse for life, remainder to kids elect portability]
o $2.55M (Non-GST-Exempt) in a QTIP trust [income to spouse for life,
remainder to kids DO NOT ELECT PORTABILITY]
**Now Wife dies**
o Split husbands 3 trusts into separate trusts for daughter and son (6 total
now)
o Trust documents should have merger language so that daughter and son
can merge their trusts that are GST exempt
o LEAVE the non-exempt where it is give them a testamentary general
power of appointment (subject to creditors) where they can put it in their
estates or just give them a full distribution at a certain age.
Chap. 14 Charitable Gifts
o Split interest gifts careful w/ charitable remainder trusts (easy to lose charitable
deduction)

Estate Planning and Administration 7

o
o

o
o
o

Charities pay NO estate tax and NO income tax

A charity is any organization w/ 501(c)(3) status; file w/ the IRS big hassle
When making a charitable donation
(1) Check EIN on charity and make sure its in good standing w/ the attorney
general
(2) Make sure that its actually a charity MALPRACTICE
If the charity is very small, good chance that the charity will be gone w/ the
person running it have a backup option.
Language (specially in smaller estates): I give to [name] church at [address] the
lesser of $Xk or Y% of my estate. Maybe just want to give the residue to
charity?
IRAs are a great thing to give to charity B/C THEY DONT PAY INCOME TAX!!
IRD the taxable portion of an IRA: ~ 1/3 of asset
Use any IRD funds to pay charities first following the trustee to trustee
transfers.
Types of charitable trusts:
Charitable Remainder Annuity Trust (CRAT)
Charitable Remainder UniTrust (CRUT)
o The two above are split interest and must hit 75%/25% threshold to qualify
for charitable deduction.
Charitable Lead Annuity Trust (CLAT)
Charitable Lead UniTrust (CLUT)
General points:
Read the regs ( 664) over and over again big time easy to screw up
Dont transfer anything that gives you a voting right (charities cant vote
shares)
o This happens when people want to give away a business.
o Thats self-dealing, though must give up complete control
Dont allow additional contributions once the moneys in, the moneys in
o Already calculated your deduction amount; dont screw it up.
Family foundations must give out at least 5% of assets annually.

PROBATE
Formal (started by Petition)
o Can be:
(1) Supervised
o USE IF FAMILY ARGUING; more debt than assets; minors
o Use to get authority from court
Request/approve distributions
Sell real estate/car/etc.
Inventory
Final account
Petition for discharge/close of probate
(2) Non-supervised
o Need to file inventory, final account, and discharge of personal
representative
If the PR is a lawyer, you MUST go formal (in Hennepin)
Informal (started by Application)
o No court supervision

Estate Planning and Administration 8

Important note!! If you start formal and realize, OH, SHIT. This needs to be
formal, YOU HAVE TO START OVER!!!
o If youre formal, unsupervised, YOU CAN CLOSE INFORMALLY! Way better than
having to start all over when in doubt, just go formal.
o On application, must name EVERY beneficiary and heir-at-law
Even if theyre not getting anything under the will, they are entitled to notice.
Letters Testamentary vs. Letters of General Administration
o Testamentary gives power to personal representative appointed under a will.
o General Administration gives power to personal representative appointed by the
court.
Torrens vs. Abstract Real Estate
o Torrens Certificate of Title
Includes everyone who has ever owned it
Basically the abstract right there in the document
No need to have title insurance w/ a torrens certificate basically is title
insurance.
o Abstract bunch of documents that chronicle the transactions associated w/ that
parcel of land
o Owners and encumbrance report only $75; do it on all estates!
o Get to know the title examiners sheriff of titles and very knowledgeable
Exemptions:
o Spouses and children have a right to a homestead regardless if there are
creditors of the estate.
That means do not sell the house to pay debts!! (except for medical
assistance)
o One car, without regard to value.
o Family allowance.
o

Estate Planning and Administration 9