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Don't forget to fund your trust when estate planning

There are so many different kinds of trusts available to people in St. Paul, that it may seem like there is a trust out there to meet every person's needs. These trusts can name beneficiaries, whether it is a person's loved one or a favorite charity, and are meant to distribute a person's assets to their beneficiaries. However, are those trusts always effective? For a trust to do what a person wants it to do, there must be funds in it. An unfunded trust is like an empty box -- you may have the vessel, but there's nothing in it to give away once you die.

Sometimes, a person's trust will be funded upon the happening of a particular event. For example, some people might have a trust and a pour-over will. Once the person dies, their probate assets will "pour" into the trust (although this means that, despite the trust, the assets will still go through probate). Or, in an Irrevocable Life Insurance Trust, the life insurance policy has language that funds will only be distributed to the trust once the policyholder passes away and the proceeds of the life insurance policy are doled out.

Too young for estate planning? Think again

When some people in Saint Paul think of estate planning, they imagine an elderly person, wrinkled and frail, dictating to an attorney what their last wishes are. However, since death is no respecter of age, it is best for even young people to be prepared for the inevitable through estate planning.

For example, while parents are authorized to take care of all financial and health care issues for their minor child, once that child turns 18, they are considered adults and have the exclusive right to manage their own financial and health care affairs. If they do not have an estate plan and become incapacitated due to an illness or injury, parents might not be able to obtain medical information on their adult child due to the Health Insurance Portability and Accountability Act rules. However, if a young adult designates their parents as the decision makers in their health care and financial powers of attorney, then the parents can make these important decisions if their adult child no longer has the capacity to do so.

Homeowners underwater may benefit from a short sale

Sometimes, a homeowner in Saint Paul is in a situation where they place their home up for sale but the only offers they receive amount to less than what the homeowner owes on their mortgage. If they decide to accept such an offer, it is known as a "short sale."

As the name implies, in a short sale, the lender agrees to let the homeowner pay less than what is owed on their mortgage. Short sales aren't entirely uncommon. In early 2016, just over 5 percent of all single-family and condominiums sold were sold through short sales. Especially since the 2008 housing bust, many homeowners found that when they put their homes up for sale, the only offers they received were less than what they owed on their mortgage.

Contribute to a favorite cause through a charitable trust

Many people in Saint Paul have a favorite charity, whether it is a school, a museum, a hospital or a non-profit organization. In fact, Charity Navigator reports nationwide that, in 2016, almost $400 billion was given to charities. While some people simply write a check or give supplies to their favorite charity during their lifetime, others choose to set up a charitable trust to benefit their favorite charity after they pass on.

When it comes to making a charitable trust, it is important for one's goals to be outlined. For example, some people may want to make a lump-sum gift, while others prefer to give numerous donations over the course of time or to a number of causes. Also, it is important to make sure family members understand your intentions when it comes to setting up a charitable trust.

Attorney Abraham Schwager to Deliver Upcoming Talks on Estate Planning and Charitable Giving

Top 10 Mistakes to Avoid in Estate Planning

This coming Monday, July 31, attorney Abraham Schwager of Chandler and Brown, Ltd., will deliver an online seminar (a live video webcast) on the top 10 mistakes to avoid in estate planning for the National Business Institute.

As per the program description, Abraham will discuss how to "control chaos and prevent pitfalls" in estate plans.

Among other points, Abraham's discussion will include:

Plan early in case of emergencies

Drafting a will and considering heirs are not the only components of Minnesota estate planning. Plans should also include the possibility that anyone may be unable to deal with their daily affairs because of an incapacity from a serious injury, illness, mental impairment, age or substance abuse.

Incapacity can impair the ability to make sound financial and personal decisions. It may limit the ability to engage in daily activities, make health care decisions, pay bills, manage property or sell assets.

Don't put off estate planning while awaiting tax reform

President Donald Trump and the United States Congress have made proposals for tax reform, including the possibility of reforming the estate tax. Currently, assets above the $5.49 million exemption for individuals are subject to a 40 percent estate tax. With the uncertainty as to the future of the estate tax, wealthy individuals in Saint Paul may be holding off on making estate planning decisions.

For example, a person can use trusts to reduce the size of the estate that is subject to the estate tax. However, some individuals are waiting to see if the estate tax will be repealed before creating a trust, which could be complicated. Other individuals might also wonder if they should transfer some of their assets to others by gifting them as a way to reduce the size of their estate. However, it is important to keep in mind that the $5.49 million tax exemption is applicable to any gifts made. A gift tax will be levied on the amount of gifts made above the exempt amount.

Home prices in the Twin Cities on the upswing, but supply is low

Buying a home in the Twin Cities has become increasingly difficult. Some residents find that affordable homes are often in deplorable conditions, so those that have been well kept go quickly. In fact, the Minneapolis Area Association of Realtors has stated that the city is seeing a record low in the number of homes being sold. The median price for the sale of a house in June was $250,000.

One realtor from St. Louis Park has claimed that finding a "starter home" is difficult, especially if the buyer is looking to purchase a home for under $200,000. Homes in that price range tend to be in lower and moderate income areas of the city, and, even in those areas, home prices are increasing.

Don't forget about your digital assets when estate planning

The Internet has overtaken so many facets of our lives, that we may not even realize how pervasive it is. People in Minnesota do their banking and pay bills online, save documents and photographs in the "cloud," own their own online businesses through Etsy, and stay in touch with their loved ones over Facebook. And these are only a few examples of the many types of digital assets a person may have.

Many people in Minnesota with digital assets may have already created an estate plan or are thinking of doing so. What is important to keep in mind is that these days an estate plan should include provisions regarding one's digital assets. After all, estate planning is meant to simplify the management of one's property once one passes away. Without the necessary information, the executor of one's estate could be ill-prepared to deal with the deceased's digital assets.

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