This article discusses some of the legal documents that can assist in planning for the physical care of a minor child in the event of a parent’s death or incapacity. Minnesota law provides that a parent may appoint a guardian over a minor child by will, designation of standby guardian, or certain other signed writings executed in the same manner as a health care directive. Wills are still the most common document used, but appointing a Standby Guardian seems to be increasingly popular. After reading this article you will have a general understanding of how both documents work to aid in the succession of a child’s care.

I. Using Wills and Trusts

The most common way parents plan for the care of their children is still through the appointment of responsible persons within a will. Traditionally, a will is used to name the person or persons that should take physical custody of the child if something should happen, and a trust is used to direct how assets of the parent should be managed – including for the benefit of the child. The person responsible for the child’s physical care is called the “guardian” and the person responsible for the management of the trust is called the “trustee.” It is not uncommon for parents to choose the same person to serve in both roles.

Under standard procedures, a guardian named in the will is able to obtain court confirmation fairly quickly after both parents pass on. The nominated guardian must first file the will with the proper county court (if it has not already been filed) and an acceptance of appointment. The nominated guardian is then required to provide a legal notice containing certain statutorily required information to the child if the child is older than age 14; the notice must inform the child that the child may object to the appointment. If someone else has physical custody of the child, the nominated guardian must also provide the notice to such person. If nobody has objected, the nominated guardian will then be granted Letters of Guardianship. If an objection is filed, a hearing will be held and the court will determine who may serve as guardian.

II. Using a Designation of Standby Guardian and Custodian

Minnesota law permits parents may petition for court confirmation of guardians and custodians prior to the death or incapacity of a parent, removing the need for a nominated guardian to seek approval from the court after something has happened. [1] Ostensibly, a will could be used for this purpose, but filing the will in this manner would make it a public document, meaning its provisions could be read by anyone that cared to look.
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A separate document, known as a Designation of Standby Guardian and Custodian (“Designation”), should be used instead for a preemptive filing. The Designation allows the parent to maintain an increased degree of privacy relating to financial matters by avoiding unnecessary disclosure of information contained in the will. More importantly, filing the Designation prior to the triggering event allows the parent to proactively address possible challenges by family and friends who may object to the appointed guardian/custodian. By seeking court approval while alive, the parent may participate in a hearing should it be necessary.

If the parent creates a Designation, but fails to secure court approval prior to passing away, the Designation is still valid, though with limitations. A person appointed in a Designation not previously approved by the court automatically has authority to act for 60 days following the triggering event. The nominated person must seek court approval to extend the Designation for any period greater than 60 days.

The Designation of Standby Guardian should not be confused with the Designation of Temporary Guardian. Designation of Temporary Guardian is a document that parents may use to appoint someone to look after children while the parent is unable, for example, due to a trip overseas. The Designation of Temporary Guardian, however, is limited to 24 months in duration; the Designation of Standby Guardian has no such limitation.

III. What a Will and Designation May NOT Do

None of the documents discussed above may be used to deprive a parent of parental rights and responsibilities. Only a court may determine that another person may serve as guardian/custodian if the other parent: (1) still wishes to serve, (2) has parental rights, (3) known whereabouts, and (4) the ability to take care of the child. Furthermore, the above documents, on their own, do not relieve the responsibility of a parent to support a minor child, and the appointed person has the right to sue an absent parent for child support if the parent is neglecting their responsibilities.

IV. Summation

Appointing a guardian and/or custodian in the manner discussed above is a simple and useful way to reduce friction in the succession of caregivers for minor children. Without any such document, a would-be guardian must engage in a much more formal, drawn-out, process, involving the preparation and filing of a legal petition, the court-appointment of an attorney to represent the child, the appointment of a designated visitor to evaluate the home and suitability of the proposed guardian, and a hearing to confirm the appointment. Appointment of a guardian – be it through a will or use of a Standby Guardian Designation – is, in contrast, much simpler, faster, and easier for everyone involved.

[1] Minn. Stat. §§ 524.5-202 and 257B.03 deal with the appointment of standby guardians and custodians, respectively. Though largely overlapping in the powers and rights they relate to, it is worth noting that guardian and custodian are distinct legal concepts. For example, there are some instances when a guardian may exercise the power of contract with regard to a minor’s property, but a custodian may not. For the purposes of this article, the distinctions between the terms are largely irrelevant.

This article does not constitute legal advice, nor does it constitute the initiation of an attorney/client relationship. Please consult an attorney licensed in your jurisdiction for assistance applicable to your specific facts and circumstances.

In Minnesota, a probate is generally required of a solvent estate only if the estate’s probate assets exceed $75,000. [1] Accordingly, estate planning that aims to avoid probate must utilize strategies reducing the probate estate – often by transforming probate assets into nonprobate assets. The following is an introduction to some of the strategies we use to help our estate planning clients avoid probate. Please note that these strategies are often used in conjunction with others, and avoiding probate is only one goal of estate planning. Other estate planning functions, not discussed in this article, include reducing transfer and income taxes, protecting assets from creditors (client’s and their beneficiary’s), and providing for loved ones in a responsible manner.

First of all, a brief primer on essential terminology. All assets may be characterized as either probate or nonprobate. A nonprobate asset is one that will transfer to successors upon the owner’s death without the need for court involvement. Typical nonprobate assets include property owned jointly (e.g., a home owned by a married couple), property automatically passing through a beneficiary designation (think IRA or life insurance policy), property containing pay-on-death/transfer-on-death instructions,  and property transferred to a trust or business entity. A probate asset is, conversely, an asset that may require the assistance of a court for its transfer. Probate assets commonly include cars, bank accounts, and real estate owned by an individual or a surviving spouse.
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Now that you understand the difference between probate and nonprobate assets, lets explore some specific tools.

Joint Tenancy

If you bought your home while you were married, you likely own the home in joint tenancy together with your spouse. Joint tenancy, which should be distinguished from the similar sounding tenancy-in-common, includes an automatic right of survivorship, meaning that when the first joint tenant passes, the second owns the home automatically. No probate will be needed, though the surviving joint tenant will need to file an Affidavit of Survivorship with the county.

A probate will, however, be required upon the second spouse’s death, if other measure’s aren’t taken to remove the home from the probate estate. Court involvement is also generally required if real property is owned as tenants-in-common, which is a different form of ownership.

Beneficiary Designations

IRAs, 401ks, life insurance policies, and most other assets permitting beneficiary designations, pass to the designee under the terms of the asset’s governing instrument, and are, hence, nonprobate assets. As long as the owner has named beneficiaries, the asset will transfer to the entity indicated, and no probate is needed. The personal representative or executor may, however, reach some of these assets if there are inadequate assets to otherwise satisfy debts of the estate.

Asset owners may name an individual, a group of people, an organization, a trust, or even their estate (though naming the estate would require a probate of the asset – there are some instances where this approach is advisable).There are numerous factors to consider when determining the proper beneficiary for an asset, most of which are beyond the scope of this article. Some are obvious, for example, whether a contemplated beneficiary is mature enough to handle a large cash distribution. Others are not, for example, ensuring that an IRA’s required minimum distributions are stretched out over as long a period as possible. Because the consequences of chosen beneficiary designations are not always obvious, it is prudent to consult with a professional. 

Pay On Death Designations

Most banks permit that an account holder may direct what happens to the account following his or her death. These pay on death designations function a lot like beneficiary designations, and accounts may be left to just about anyone the account holder chooses. As with beneficiary designations, however, there are pitfalls waiting to trap the unwary. For example, if you leave the account to an adult child, instructing that he should distribute the account evenly between himself and his siblings, he may not legally have to follow your instructions. Furthermore, if the child makes the distributions as indicated, the transfers may count as taxable gifts.

Transfer on Death Deeds

As of 2005, Minnesotans may use a Transfer on Death Deed to designate who should receive their home after death. Transfer on Death Deeds are an excellent mechanism for removing real property from the probate estate, but should be limited to an individual beneficiary to avoid the complications that may result from shared ownership. When leaving the home to multiple beneficiaries, or when desired instructions for the home are complex, it is generally preferable to name a trust as the beneficiary.

Living Trusts

Trusts are a tried and true method for avoiding probate. Living trusts, as opposed to testamentary trusts, are created and funded while the creator of the trust (the “settlor”) is alive. The trust is a legal entity distinct from the settlor, and property transferred to the trust is, generally, no longer part of the settlor’s probate estate (though it may be part of the taxable estate). When the settlor dies, the trust’s agent (“trustee”) must transfer, hold, or invest the property according to the terms of the trust agreement.

Business Entities

Family Limited Partnerships (“FLPs”), and similar business entities,  function a bit like living trusts. While alive, property is transferred to a separate legal entity, thus removing it from the transferor’s probate estate. When the transferor passes on, the property may be distributed in the manner dictated by a governing instrument, or by managing partners. A properly structured and administered business entity also has the added benefit of reducing transfer taxes through valuation discounts applicable to gifts of noncontrolling interests. These entities, however, are expensive to set up and manage, and are therefore generally only used for large estates.

[1] Prior to 8/1/2016 the threshold was $50,000, not $75,000.
This article does not constitute legal advice, nor does it constitute the initiation of an attorney/client relationship. Please consult an attorney licensed in your jurisdiction for assistance applicable to your specific facts and circumstances.