Farm Horizons, June 2016
Lessons learned from Prince
By Myron Oftedahl
After reading the headline, most of you are probably scratching your heads and wondering if Myron has really gone over the edge, but bear with me.
I think that, by now, all of you are aware that Prince died without a will.
Personally, if you have the same financial and legal advisors that Prince did, I would stop reading right now and fire them. Yup, just like Donald does on the TV show, “You’re fired!”
OK, now you can start reading again. For someone with as large of an estate like that to die without a will is inexcusable. Maybe he did it on purpose; we may never know. You could argue that he was a private person. That may be true prior to death, but especially because he died intestate, his estate will become a very public one.
If you are not aware of the estate process when you die without a will, it goes like this. The State of Minnesota has a plan for you. If there is no will, the estate property will be distributed according to the state’s intestate succession laws.
So, here is how your property will be distributed. First, it goes to your spouse. No spouse? Then, to your children; no living children, then to your grandchildren. If there is no one in that level, then it goes to your parents. If no surviving parents, then to your siblings, then nieces and nephews, and then grand-nieces and grand-nephews. If there are still no surviving heirs, then it moves to grandparents, then aunts and uncles, then first cousins once and twice removed. If, after moving through that whole list there are no surviving heirs, it all goes to the State of Minnesota.
So, you can see the kind of mess Prince left for his heirs, and it will probably keep a bunch of attorneys and the court system happy for quite a while.
Is that what you want for your estate and farming operation?
Let’s look more closely at what a will does and doesn’t do, and the estate process.
A will is a legal document that allows you to transfer your property upon death. You do not legally need a will, but it allows you to control how your estate will be distributed. You must be at least 18 years old and of sound mind, it must be in writing, signed by you and two witnesses, and you must intend for the document to operate as a will. In the will, you can spell out how your estate will be distributed and who the executor will be.
By having a will, certain items do not need to be probated. Probate is the legal process of settling your estate; property is inventoried, debts are paid, and whatever is left over is distributed to your heirs. Probate must be initiated within three years after the decedent’s death.
Some specific items that are not subject to probate are joint tenancy property, joint bank accounts, payable-on-death accounts, and life insurance proceeds.
Payable-on-death accounts are typically bank accounts, either checking or savings. There is a version of a payable-on-death deed or title transfer also. Life insurance proceeds usually have a designated beneficiary that the value of the policy will go to. You need to have a designated beneficiary listed, or it goes to your estate and that is what we are trying to avoid with life insurance.
In probate, the executor may pay debts and distribute the inheritance and manage the estate. Probate can be either informal or formal, which often depends on the size and complexity of the estate. In a formal probate, the judge will appoint a personal representative or executor, and the judge will be a part of the process.
Now that I have taken you on a tour of the estate process, you can, and need to make some decisions. Who do you want your estate to go to? How involved do you want a judge to be in your estate? Who would be your choice for an executor? It is a good idea to name a primary and a second choice, in case the first choice is not available. How much planning do you want to do, or need to do for managing the estate tax liability? How much of your estate/probate do you want to be public? How will this impact the farm operation? How will this impact your family and heirs?
Or, do you wish to take the same road as Prince, and die without a will? Remember, the State of Minnesota has a plan for you, and you or any heirs may not like that plan. It is your choice.
Contact me for more information concerning what you need to know and do before you go to an attorney. By doing, this you can save yourself considerable attorney fees.
Have a profitable day.