What Happens in Minnesota If You Don’t Have an Estate Plan?

Creating an estate plan is one of those items that should be a top priority. However, many people find even the thought of the process to be intimidating. Many of the terms that are used in the estate planning world can seem tough to understand. There are too many generic websites out there, advertising on television and promising you a "cheap will" for a low price that seem like the easiest way to just get this crossed off your list.

But the bigger question to ask is, What happens if I don't have an estate plan? Without an estate plan, your legacy is left to the default processes laid out in the local law, administered by a special court called a Probate Court. The legal term that we use? "Intestate Succession" and the way it distributes your assets may not be the way you'd like to leave your legacy behind.

The legal process you leave behind without an estate plan can be time-consuming and expensive. If your family has never had to maneuver through the court system before, it can be stressful and intimidating.

You can opt out of all of this by simply creating an estate plan, but it's important to understand what happens if you don't have one as well.

What Is an Estate Plan?

An "estate plan" is the term that we use to describe your legal documents that specify how your assets and affairs are managed if you become incapacitated and after you have passed away. They key to protecting your legacy is to understand each of the documents and determine what documents are best used for your estate plan. Common documents in an estate plan include:

A will: Specifies how your property will be distributed and appoints guardians for minor children.
A trust: Allows you to manage and protect assets for specific beneficiaries.
A power of attorney: Designates someone to handle financial and legal matters if you are unable to do so.
Health care directives: State your preferences for medical treatment and appoint a health care proxy.
HIPAA Authorization: Allows your loved ones access to medical records to make informed decisions when you are unable to speak for yourself.

If you have young children, you may have other documents like a Temporary Guardianship Designation. You may also want to consider a Living Will if you don't want to be kept alive if you are in a vegetative state.

Intestate Succession in Minnesota

Another legal term to understand is "Intestate" - when someone dies without a will in Minnesota. When this happens, it is left to the local Probate Court to distribute your estate in the way that your local lawmakers have written, without regard for your personal wishes.

How Assets Are Distributed

The place that the Probate Court will start will be to look at your surviving relatives:

If you are married with no children: Your spouse typically inherits the entire estate.
If you are married with children from the same spouse: Your spouse inherits the first $225,000 of the estate and half of the remaining balance. Your children inherit the other half.
If you have children from a previous relationship: Your spouse inherits the first $225,000 and half of the remaining balance, while your children from the other relationship inherit the remaining portion.
If you have no spouse or children: The estate goes to your closest living relatives, starting with parents, then siblings, and further extended family members.

Potential Complications

When they put the laws together, the lawmakers in St. Paul aimed to make things as fair as possible, but there can be complications that your family may face:

Unequal asset division: Children from previous relationships may receive less than intended, leading to family disputes.
Stepchildren and unmarried partners: Stepchildren and unmarried partners are not entitled to inherit under intestacy laws, no matter how close you are with them.
Court involvement: The probate court oversees the administration of your estate, which can be time-consuming and costly for your loved ones.

The Probate Court Process in Minnesota

If you die without a will, the Court in Minnesota that your loved ones will be dealing with is called the Probate Court. In this situation, its job is to supervise your estate, and direct how your debts are to be paid and your assets distributed. A quick overview of the process:

Appointment of a Personal Representative: The court appoints a person to manage your estate. (If you had a will, you would have chosen this person yourself).
Inventory of Assets: The administrator identifies and values all assets, including real estate, bank accounts, and personal property.
Debt Settlement: Outstanding debts, including taxes and medical bills, are paid from the estate.
Asset Distribution: The remaining assets are distributed according to Minnesota’s intestate succession laws.

This process can take months or even years, depending on the complexity of the estate and any disputes that arise.

Why It's Risky to Go This Route

While intestate succession provides a safety net, it is not ideal for most families. Here are some of the key risks:

Loss of Control

Without an estate plan, you lose the ability to decide who inherits your assets, who manages your estate, and how your property is distributed. Minnesota’s laws may not reflect your preferences, leaving loved ones without the support you intended.

Family Disputes

Intestate succession can lead to family disagreements, especially in blended families or when significant assets are involved. Inheritance disputes can strain relationships and drain resources through legal battles.

Financial Burden

The probate process can be expensive, with legal fees, court costs, and administrative expenses reducing the value of your estate. Additionally, delays in distribution can create financial hardships for your family.

Lack of Protection for Minor Children

If you have minor children, the court decides who will care for your children, potentially trusting their care to someone you would never even want around your kids.

Benefits of Creating an Estate Plan

In case you can't tell, there are clear benefits to creating an estate plan vs. leaving it to the local Probate Court to manage your legacy. Here are some of the benefits my clients most commonly focus on:

Customized Asset Distribution

With a will or trust, you can specify who inherits your assets, ensuring that your family and loved ones are provided for as you see fit. You can also include provisions for stepchildren, friends, or charities.

Avoiding Probate

Using tools like trusts, you can minimize or eliminate the need for probate, saving your family time and money. Assets held in a trust pass directly to beneficiaries, bypassing court involvement.

Appointing Trusted Individuals

Estate planning allows you to name individuals you trust to manage your affairs, such as a personal representative, guardian for minor children, or power of attorney.

Reducing Taxes and Expenses

Proper planning can reduce estate taxes and administrative costs, preserving more of your wealth for your beneficiaries. Strategies like gifting or establishing charitable trusts can also provide tax benefits.

Protecting Privacy

This is one of the primary drivers - probate is a public process, meaning your estate details become part of the public record. An estate plan that utilizes a trust can keep your financial matters private.

How to Get Started With Estate Planning

Getting started is often easier than you think it is. Here's three quick steps to get your estate plan process rolling:

Take Inventory of Your Assets: List all your assets, including real estate, investments, retirement accounts, and personal property.
Identify Your Goals: Determine how you want your assets distributed and identify individuals to manage your affairs.
Consult an Attorney: An estate planning attorney can help you draft the necessary documents and ensure compliance with Minnesota law.

Life changes, such as marriage, divorce, or the birth of a child, may require updates to your estate plan. So even after you've get everything in place, don't forget to periodically review your estate plan and make sure you've got everything in place. Making changes is often a fast and easy process with the help of your attorney.

Do You Need an Estate Planning Attorney?

If you need a full estate plan, let's schedule a Legal Strategy Session online or by calling my Edina, Minnesota office at (612) 294-6982 or my New York City office at (646) 847-3560. My office will be happy to find a convenient time for us to have a phone call to review the best options and next steps for you to work with an estate planning attorney to get your plan prepared and implemented.