Let your dying wishes be known by estate planning — before it's too late

After Prince died in 2016, it took a six-year court case to decide who would inherit what parts of the music legend's worldly possessions.

Because he didn't have a will.

While it would be difficult to top what a lawyer called the most complicated probate case in Minnesota history, no family wants to go through the turmoil of fighting about loved ones' property once they're gone.

That's where estate planning comes in, so when you die, there is a plan for all your stuff. And as with any financial plan, the most important step is the beginning.

"It's easier to get started than you think," said Philip Ruce, estate planning director at Stone Arch Law Office in Minneapolis. "And it's going to be easier to get completed than you think."

Estate planning essentially involves taking inventory of assets and liabilities and deciding how your survivors deal with those upon your death. The main vehicles for making those plans are wills and trusts, but many estate plans also include health care directives, or living wills, that guide end-of-life decisionmaking. They should also include funeral plans.

"The last time I checked, the death rate was still 100 percent," said Jimmy Olson, owner of Olson Funeral Home & Cremation Service in Sheboygan, Wis. "Everyone needs to plan. Prepaying might not be in everyone's wheelhouse, but finances aside, you need to have a plan and have a conversation with your family."

Here's how to plan for what happens (at least here on Earth) after your demise:

Probate is the legal process that dictates what happens to your assets when you die, and who makes those decisions. Without a will or other legal directive, a court-appointed representative will deal with your estate according to the law.

"Your property is gathered and inventoried, your debts are paid, and everything left over is divided among your heirs," the Minnesota Attorney General's Office explained.

By default, estates pass on to spouses. If they are not alive, children receive any inheritance or obligation in equal share. Lacking children, assets might go to parents, siblings, nieces, nephews or other relatives. Blended families can make the process more complex.

"Sometimes, relatives cannot be located or traced," said the attorney general's guide to probate. "In this case, assets of the estate that cannot be distributed are deposited with the county treasurer until claimed."

A will overrides those default inheritances and names an estate executor who oversees the process, often a trusted family member, attorney or accountant. But a probate court must still approve wills even if there are no disagreements about the document's instructions. That can take many families by surprise and lead to frustrating delays and costs.

"Minnesota's probate process is not as expensive as other states, but it's still thousands of dollars," Ruce said. "It also takes a long time, especially after COVID. We can't get a court hearing for probate, which means we can't get authorization to sell a home for six months."

That's why many estate plans now rely on a revocable trust, which can avoid the probate process. It's more work on the front end, Ruce said, but avoids adding unnecessary complications for grieving heirs.

Ruce fields requests for "just a basic will" all the time. But every one he's worked on has had at least one wrinkle.

A will contains instructions for real estate, personal property and other assets that aren't otherwise automatically pointed at a beneficiary (such as retirement savings and life insurance) and names an executor to oversee the paying of debts and inheritances. You can also include plans for guardianship of children, elders and/or pets.

Ultimately, a will is a "love letter to a judge," Ruce said, as they are typically the final authority on settling estates.

With or without a will, an informal probate filing can avoid going before a judge, but a county's probate registrar must approve plans for the estate, according to the state Attorney General's Office.

"The registrar will issue a statement of probate and appoint a personal representative," the office says. "In the informal process, the personal representative may pay debts and inheritances and may otherwise administer the estate without the court's supervision."

Many estates are too complex for that process, which leads to a court-administered probate proceeding, all of which is public.

To avoid probate entirely, a trust — specifically a revocable living trust — has become a popular vehicle for estate planning.

Ruce said a revocable trust is like a Ziploc bag. During your life, it remains open, and you can put assets in and take them out as you wish, while also making changes to beneficiaries, i.e., who inherits what.

Your death zips the bag shut to become an irrevocable trust, and a trustee deals with everything inside according to the trust's instructions.

A trustee is typically someone who you would have named your estate executor in a will, such as a spouse, financial adviser or trust company. It doesn't require court supervision or probate filings, so long as you placed all of your assets into the trust before or at death.

It's more work, and potentially expensive, to set up and maintain trusts, Ruce said, but he said many of his clients find the benefits of a trust outweigh the drawbacks of a will and probate process.

Wills and trusts both require upkeep, as every few years you'll need to update them based on changes in your life, like adding a grandchild as a beneficiary, for example.

Even with a detailed plan, disputes can arise among heirs.

Minnesota food business magnate Jeno Paulucci and his wife changed their wills just weeks before each died a few days apart in 2011, prompting a bruising court battle that took nearly eight years to settle.

Millions drained from the estate to pay legal fees through that time, and a no-contact order between some of the heirs was part of the final settlement.

"We know money isn't love, but it can feel that way in an estate plan," Ruce said. "The questions people need to be asking: What are the things that need to go to the right people?"

Ruce recommended working with professionals for estate planning, as simply filling out document templates can leave blind spots: "People don't know what they don't know."

Minnesota's estate tax applies to assets beyond the first $3 million, so an estate valued at $4 million would have $1 million subject to an estate tax, though many other factors can affect the final tax due.

The federal estate tax kicks in after $12.9 million.

While just the word "estate" can evoke opulence, estate planning isn't just for wealthy individuals, Ruce said, though anyone potentially facing an estate tax will want extra help finding the best possible outcome for their heirs.

Bottom line, he said: Don't put it off until it's (literally) too late.

"Two things we hear a lot are: 'I didn't think of that,'" Ruce said. "And, fortunately: 'That was easier than I thought it was going to be.'"