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The Wealth & Wisdom Blog

Information on Estate Planning, Estate and Trust Administration and Unique Asset Planning

Estate Planning for a Blended Family

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Many of our married clients have children that are not the children of both the husband and wife.  Knowing many of these families personally, I know the joy that the parents have in treating both their own children, as well as their step-children, as equal members of the household.  While many of our married clients come into a marriage with the idea that all assets are “ours” rather than “mine or yours,” the law does not necessarily view the assets in this manner, and so married couples should be aware of the following legal issues.  Unfortunately, these rules could serve to disrupt an estate plan that both the husband and wife had agreed upon during their joint lifetimes.

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Marital Trust Planning

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You can provide for your spouse through either an “outright” gift of all your assets, or through a plan to allocate your assets to a “marital trust” for his or her benefit.

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Outright vs. Testamentary Gifts

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You can choose to benefit a child or other beneficiary through one of two means: (1) through an “outright” gift, or (2) to an ongoing “testamentary trust” for the benefit of the child or other beneficiary.  We assist our clients understand the pros and cons of each approach, as it is critically important to understand the legal implications to your beneficiary of this decision.

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The Benefits of a Revocable Trust

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To accomplish your estate planning objectives, you could implement a plan through one of two different legal documents.  You could utilize either a traditional Will, or you could utilize a plan focused on the use of a Revocable Trust, also sometimes referred to as a “Living Trust.”  In comparison to using a Will, implementing a plan based upon a Revocable Trust has the following advantages over a Will:

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Minnesota Estate Tax Rules

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Minnesota imposes an estate tax at death on the assets of anyone who, at the time of his or her death, either (i) was a Minnesota resident or (ii) owned real estate or business assets physically located in the State of Minnesota. The key points about Minnesota estate taxes are as follows:

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Utilizing a Tax Savings Trust for Married Clients

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In order to minimize the incidence of Minnesota estate taxes following the death of the surviving spouse, a married couple residing in Minnesota who own assets in excess of $3.0M should include specific provisions in their estate plan during their joint lifetimes. Through the creation of a “Tax Savings Trust” following the first death between a married couple, it is possible to make use of both exemptions following the second death.

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The Step Up In the Income Tax Cost Basis

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Under federal income tax law, a capital gains income tax is imposed on the difference between the price for which an investment is sold and the price for which the investment was originally purchased. For example, if Joe purchases a stock for $10, then sells it at $110, Joe will owe a capital gains tax on the difference of $100.  Keep in mind that if Joe currently holds the stock, no capital gains tax is imposed until Joe actually sells his stock.   (more…)

Tax Impact of Lifetime Gifts under Minnesota Estate Tax Laws

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Minnesota imposes a state-level estate tax on assets when a Minnesota resident, or a non-resident holding property located in MN, dies with assets in excess of the exemption amount.  The exemption amount is currently $3.0M.    (more…)

This blog is intended to provide the reader with assistance in understanding various estate planning and trust estate planning concepts. In an effort to keep things as digestible as possible, I have tried to keep each blog post as short as possible.  As a result, an astute reader would see that I often fail to address various exceptions to rules or principals, or how various principles relate to one another.  There are a number of moving parts associated with various planning structures summarized on this blog.  In order to achieve your estate planning objectives, it is important that you receive the assistance of an experienced estate planning attorney.  Otherwise, your family may be in a worse position for your having attempted these strategies on your own.  Until we form an attorney-client relationship, you should be aware that your visiting this blog has not formed an attorney-client relationship, and none of this information can be taken as legal advice.  To contact my office about scheduling an appointment, contact us at 612-465-0080.