After 20 years on the bench as one of Hennepin County’s probate referees, Bruce Kruger is retiring. Today, the court sent an announcement of his upcoming retirement party for attorneys and colleagues. The party is scheduled for July 30th from noon to 2:00 p.m. in Courtroom 457. No RSVP is required.

Earlier this year, Hennepin County was seeking to fill two, part-time referee positions. Perhaps this news is the reason.

Referee Kruger will be missed. I found him to be tough, but fair. Whenever I had a probate with feuding relatives, I was always glad to draw Kruger at the hearing. He would get to the core of the matter and had no tolerance for petty bickering that so often accompanies family feuds.

Though his demeanor in the courtroom could be gruff at times, I’ve found him to be personable. Once I met him in his chambers along with opposing counsel for a pretrial hearing. He swiftly guided us to a resolution and then he spent at least another 30 minutes just shooting the breeze with us. If I recall correctly, we talked about fishing, sports, and a few probate “war stories.” He didn’t seem to be in a hurry and, as a younger attorney, I relished the opportunity to get to know a referee whom I appeared before frequently. It seemed the chat would have lasted even longer, but the opposing counsel was in a hurry to go somewhere.

On another occasion in his courtroom for an initial formal hearing, Referee Kruger asked my client whether the decedent’s will had a “written list.” The client responded that, yes, there was a written list. This was news to me since I had never seen it. Obviously, Kruger wanted the written list and the client responded that it was at home. With the signing of the Order appointing my client as the PR suspended, my client and I went out into the hallway to discuss this written list that I hadn’t seen. I discovered that she had misunderstood the question and thought Kruger was referring to “the written list” of inventory of all the decedent’s belongings that my client had prepared. I sheepishly led my client back into the courtroom to correct the record, expecting that somehow I’d be reamed for it as I had seen another judge do in a certain county to the north. To my surprise, Kruger was gracious and thanked us for coming back in to correct the record so quickly. We were thankful as well, since the Order wouldn’t have issued without it.

Joel A. Schoenmeyer, a Chicago-area attorney, is publishing a series of excellent blog posts regarding implications of the estate tax law changes on his Death and Taxes Blog. These posts are helpful primers for understanding what is going on this year.

The series is entitled, “5 Things You Need to Know About the Estate Tax in 2010” and the posts he has published so far are linked below:

1. Capital Gains
2. Retroactivity
3. Trust Problems
4. State Estate Taxes
5. 2011 and On

Updated on 1/27/2010

There has been some confusion in the Minnesota probate sphere concerning the effective date for the new asset limit for the Affidavit of Collection process.

For a recap of the issues, see here and here.

Multiple sources have confirmed that the effective date is 12:01 a.m. on August 1st and that the new asset limit is not currently in effect. Since the bill that was passed listed no effective date, the default date for non-appropriation bills is August 1st.

Practice Tip: If you have an estate that has more than $20,000 but less than $50,000 of probate assets, consider waiting until August 1st to take advantage of the new statute. Also recall that the successor need not present the affidavit in duplicate (a requirement under the old/current statute).

Special thanks to Tom Holker of Holker Law Offices for his work on verifying the effective date with the House Clerk.

“Small” is now bigger thanks to Governor Pawlenty’s approval of H.F. 265. The new law makes changes to Minnesota’s probate code.

Among other things, the bill revised Minn. Stat. 524.3-1201, the procedure for collecting personal property of a decedent by affidavit. Changes to this statute include:

• The asset limit increases from $20,000 to $50,000.
• The successor no longer has to present the affidavit in duplicate (once upon a time there were no photocopiers).

It appears that the law will be effective August 1, 2009. The statute itself does not limit the application of this procedure to those dying after August 1st, so presumably it will be “retroactive” in the sense that it could transfer property to the successor even if the decedent died prior to the effective date.

The obvious advantage of the increase to the asset limit is that more “small estates” will avoid probate.

However, with the increase in the asset limit, more problems will occur. For example:

• Creditors will have a more difficult time asserting claims against the estate and collecting on their bills since the procedural protections present with probates (e.g. filing claims statements, demanding notice, requesting bond, etc.) do not exist with the affidavit procedure.
• Successors will distribute the property improperly (both intentionally or unintentionally), creating inequalities in the distribution. Among dishonest and feuding family members, this will result in a race to get an affidavit to claim the property and gain control over the assets.
• Successors will distribute the property prior to paying lawful claims against the estate and will face liability from creditors or will ignore superior claims, such as exempt property under 524.2-403.
• Attorneys will need to increase the amount of “educating” they do for potential clients who think they “just need a form” to get the assets. “The form” cannot transfer real property.

Finally, expect the unauthorized practice of law to increase. I’ve heard of certain enterprising and devious financial planners preparing these affidavits for family members of deceased clients. They, of course, have self-interested benefits in doing so. By helping them obtain the assets “without the high cost of getting an attorney involved,” they can also “help them invest the assets.”

As always, successors will do well to obtain competent legal counsel prior to taking action. Though the procedure seems simple at first glance, there are many pitfalls in using the procedure.

Minnesota Governor Tim Pawlenty has signed S.F. No. 802, which increases court filing fees (357.021, subd 2). The filing fees that affect probate cases include the following:

• The filing fee increases from a base of $240 to a base of $310
• Certified copies increase from $10 per copy to $14.
• Other copies increase from $5 to $8.
• Motion fees increase from $50 to $100.
• Depositing a will increases from $20 to $27.

In a phone call today to Hennepin County Probate Court, I was told that the filing fees remain the same for now until further notice, but that a change probably wouldn’t be effective until July 1st. I’m assuming that since Hennepin Probate charges $252 (the standard filing fee plus a fee for the county law library fee) currently for a probate filing, the new fee will be $322.

I’ll post an update as I hear more information.

Forbes has made available an intestacy calculator online. I haven’t tested it enough to determine whether it is accurate. However, it appears to generally give the right answers, though the calculator is rather simplistic. For example, it doesn’t calculate the spousal elective share nor take into account the descent of the homestead, both of which are quite complex under Minnesota law.

Forbes has published a helpful map showing states that still have an estate tax (like Minnesota), their exemption levels, and their tax rates. See the image below or click here for the link an an explanation of the color coding.

Source: Forbes.com at http://images.forbes.com/media/2009/01/19/statetaxmap_565×381.gif

The Wall Street Journal has an article today on Obama’s plans to keep the federal estate tax. Here are the highlights:

• The Senate Finance Committee Chairman, Max Baucus, will “move in the next few weeks” on addressing the estate tax. It is expected that he will advocate reversing current law, which would eliminate the estate tax in 2010.
• Democrats in favor of estate taxes believe that it will be harder politically to implement their plans if the estate tax is allowed to disappear in 2010. As a result, there is some urgency in addressing the issue this year.
• Obama will likely reveal his estate tax proposal in February when he releases his budget proposal.
• During his campaign, Obama’s plan kept exemption levels at $3.5 million (this year’s level) with a maximum rate of 45%.
• If the estate tax is repealed, the Joint Committee on Taxation estimates the loss to the government would be $500 billion over 10 years.

As a reminder for estate planners, two new numbers you should be aware of in 2009:

• The federal estate tax exemption amount is now $3.5 million (Minnesota’s remains unchanged at $1 million).
• The annual gift tax allowance is now $13,000 (the lifetime gift tax exemption is frozen at $1 million).

This summer the Commissioners on Uniform State Laws convened to finalize 2008 amendments to the Uniform Probate Code for recommendation to the states. You can view the 2008 approved amendments (red-line version) by clicking here.

It will be interesting to see whether Minnesota’s legislature adopts any of the new amendments. I’ve heard rumblings that “change is on the way” for parts of Minnesota’s probate code, but I don’t know anything specific. I would think that first up for change would be adjusting some of the amounts listed in the statutes for inflation.

One of the most interesting amendments to the UPC is that a will could either be signed by two witnesses or notarized. The comments to that amendment cite reduction in “confusion and chance for error” if all estate planning documents (e.g., power of attorney, health care directives) were executed with similar formalities. The comments also state that lay people often mistakenly assume that a notarized (but not witnessed) will is valid anyway.

Let me be clear that I’m speaking of the UPC here, not Minnesota’s version. No changes like this have been made to the Minnesota statutes– Minnesota still requires two witnesses. I hope that Minnesota does not end up adopting the notarized will amendments. Challenges to the testamentary capacity of the testator would certainly increase. It would be exchanging reduction in “confusion and chance for error” for increased litigation.