Month: September 2012

Creating a Wisconsin Trust to Benefit Children With Special Needs

All parents should have a comprehensive plan in place to provide for their children in case of their own unexpected death or incapacitation. Parents should consider both the future financial well-being of their family and who will act as a guardian in their absence. Although creating a financial and estate plan is important for all parents, having such a plan in place is absolutely crucial for the parents of a child with special needs.

Understandably, it may be easy for the parents of a special needs child to get caught up in their daily routine and overlook their financial and end of life planning. Coping with issues that may be associated with Down syndrome, autism, cerebral palsy, and many other disabilities can often be overwhelming. Still, one of the best financial decisions the parents of a disabled child can make is to create a special needs trust.

A special needs trust is designed to cover living and other expenses for a specific child without placing the funds inside of the trust within the child’s control. Such a trust also allows a disabled individual to inherit or be financially cared for without losing access to important benefits like Supplemental Social Security Income or Medicaid coverage. In order to establish a special needs trust, one or more trustees must be selected to manage the trust. Although parents typically serve as the initial trustees, they must be sure to select a trustworthy individual to take over the management of their child’s trust after they die.

Because of the flexibility of a special needs trust, many parents of disabled children choose to use such a legal instrument while they are alive and as part of their estate plan. Large gifts or family inheritances may be placed in the trust at any time. Additionally, parents often choose to purchase additional life insurance policies that are paid directly into a special needs trust. By doing so, parents can provide out-of-pocket medical and other expenses for their disabled children long after they are gone.

There are many benefits to using a trust as a Wisconsin estate planning tool. A wide variety of trust instruments are available for your use depending on your specific needs. Because revocable living and other trusts are not subject to probate in Wisconsin, you have the ability to save your loved ones both time and expense by creating and properly funding a trust. If you are considering establishing a special needs or other trust, you should contact a knowledgeable Wisconsin trusts attorney.

Preserving Your Wealth Using a Disclaimer Trust in Wisconsin

As autumn approaches, many Americans with a high net worth are wondering whether Congress will act to keep the current federal estate tax exemption of $5.12 million per individual from returning to $1 million at the end of the year. Additionally, estate taxes above the exemption are slated to rise to 55 percent from the current rate of 35 percent. Although many believe Congress will act to extend the current exemption or at least raise the tax ceiling above $1 million following the presidential election, there is one simple step a married couple can take to preserve their combined wealth now.

A married couple with a moderately high net worth may choose to establish a disclaimer trust in order to pass on a larger portion of assets without paying estate taxes. A so-called “wait and see” trust can offer such individuals a simple and flexible approach to maintaining control over assets without the hassle of extensive paperwork and tax filings. A disclaimer trust allows a surviving spouse to refuse a portion of a deceased spouse’s assets in an effort to preserve his or her federal estate tax exemption. Instead of gaining access to all assets through the marital exemption, a portion of the decedent’s assets are instead placed into a trust that is considered to be part of his or her estate. By using such a trust instrument, assets may pass tax free to the couple’s children or other heirs upon the death of the surviving spouse up to the couple’s combined estate tax exemption. Additionally, the surviving spouse maintains the option to benefit from any income generated by a disclaimer trust and access the principal of the trust if it becomes necessary.

If the estate tax ceiling is raised to a desirable level before one member of a married couple dies, no action may be required on the part of a surviving spouse. If instead the level returns to $1 million, a surviving spouse has the ability to avoid up to $550,000 in federal estate taxes for the couple’s heirs by using a disclaimer trust. For the “wait and see” trust to be effective, however, a surviving spouse must disclaim any assets within nine months of his or her partner’s death. Additionally, the survivor may not accept any of the disclaimed assets, even unintentionally. In order to avoid potential disclaimer trust mistakes, a surviving spouse should contact an experienced trusts attorney for advice.

Handling a Deceased Spouse’s Credit Card Debt in Wisconsin

When a spouse dies, most people are understandably overcome by grief. Unfortunately, in Wisconsin, a surviving spouse may also be burdened by their deceased loved one’s credit card debt.

In most states, when a credit card debt is in only one spouse’s name, the debt will be paid out of the estate. Any credit card debt that exceeds the assets in the estate is never paid and a spouse cannot be forced to pay the debt.

Wisconsin, however, is one of ten marital property states. This means any debts incurred by either spouse are generally deemed to be jointly held. According to Wisconsin law, a surviving spouse will generally be held responsible for the individually acquired credit card debt of a deceased spouse.

Important exceptions do exist. For example, a surviving spouse may not be held responsible for a debt that was acquired by their deceased spouse before or during the marriage if used to pay an obligation that preceded the marriage. In some cases, a surviving spouse may only be required to pay those debts he or she directly benefited from such as utility or healthcare payments. A surviving spouse is always responsible for any outstanding debts related to a jointly held credit card.

After one member of a married couple passes away, the executor of his or her estate must provide notice of the death to all creditors, including credit card companies. A copy of the notice letter should be maintained in the executor’s records.

The Credit CARD Act of 2009 provides that no late or annual fees may be charged by a credit card company while a decedent’s estate is being settled. In addition, the estate is also provided with 30 days during which to pay the final outstanding balance on a credit card without incurring additional interest charges. If you are contacted by your deceased spouse’s creditors, you should refer them to the executor of your spouse’s estate. If you are the executor, you should not discuss the debt until you determine what assets remain, whether the debt is valid, and whether you are responsible for the debt. If your spouse died with outstanding credit card debt, you should contact an experienced wills, trusts, and estates lawyer to assist you in settling your spouse’s estate.

Many Wisconsin Property Owners Would Benefit From a Revocable or Other Trust

Although nearly all property owners choose to protect their investment in the event of an unexpected catastrophe by purchasing insurance, many fail to consider protections from potential legal hazards. If you have real property that you plan on leaving to a child or other heir, you should review your estate plan carefully. By placing your home or other property into trust, you have the opportunity to avoid probate and speed the transfer of your assets to your heirs.

There are many types of commonly used real estate trusts. A Qualified Personal Residence Trust (QPRT) is an irrevocable instrument that is usually created for a fixed term. Once the term expires, the property placed into the trust passes on to the chosen beneficiaries. In order to alter a QPRT, a property owner must first obtain the consent of each of the trust’s beneficiaries. Once the term of the trust expires, the property owner is required to pay rent to the beneficiaries as long as he or she lives on or uses the property.

A significant benefit of using a QPRT trust instrument is that the taxable value of a property is set at the time the trust is created. With property values across the nation down, this type of trust may become increasingly attractive to many property owners. Additionally, if the current gift tax exemption of $5 million returns to $1 million at the end of 2012, a QPRT may be especially attractive to individuals who would like to pass on highly valued real estate.

A revocable or living trust offers more flexibility than a QPRT because it may be changed at any time without the consent of a named beneficiary. Such trust instruments may also be customized to fit the needs of any individual. Additionally, a revocable trust can help your heirs avoid going through the probate process in multiple states if you own property in more than one part of the nation.

Each individual’s situation is unique. For example, you may be best served by creating a revocable living trust for your home while another individual would be best served by a QPRT. Careful advance planning including the use of trusts may reduce or eliminate the need for your family to wait for the often lengthy probate process to conclude. An experienced Wisconsin trusts attorney can help you evaluate your situation and create an estate plan that is right for you and your loved ones.

Estate Planning for Deployed Military Members in Wisconsin

Service men and women facing deployment obviously have a lot to think about. With proper legal and financial planning, members of the military who are headed overseas can gain valuable peace of mind for themselves and their family members at home.

All service members should act before they leave to ensure that while they are deployed their financial matters will be taken care of. Although some of this can be done through automatic payments, it is often a good idea to select a trustworthy person to act under a power of attorney as well. The person designated in a power of attorney document is called an “attorney-in-fact.” By assigning an attorney-in-fact, deployed members of the military will have an agent who can handle important and distracting monetary matters in their absence.

Trustworthiness is key for an attorney-in-fact. As a military JAG Attorney, Dan Krause has seen cases in which a Soldier has appointed a girlfriend or a brother or friend, or a brand new spouse as attorney-in-fact, and the results were catastrophic. For young service members, it is best to appoint a parent, or a spouse, if the marriage is a long-standing one (5 years or more), or a sibling only if they are mature and in a stable family situation. Never appoint anyone in a power-of-attorney who you suspect of having a drug or alcohol problem or a fondness for gambling.

Additionally, all members of the military, but especially those with children, should ensure they have a life insurance policy in place. It is important to note that many life insurance policies will not pay for those individuals killed due to an act of war or while engaged in the line of duty. Because of this, any service member facing deployment should carefully examine his or her life insurance policies. They should also be sure to maximize the SGLI (Servicemembers Group Life Insurance) which is currently $400,000 coverage for all service members as long as the service member has not reduced or declined the coverage. A disability policy should also be considered in case of a catastrophic injury.

Many Soldiers, Sailors, Airmen and Marines have life insurance for their children, to provide a home, education and health care if something happens to them. Unfortunately there are some serious problems with naming beneficiaries for this purpose. Trustees (NOT parents or the children) must be named to properly protect the money and the children. I will cover this issue in a future post. Just remember, you should discuss your children’s insurance money with a competent estate planning attorney.

A soon-to-be deployed service member should carefully evaluate his or her estate plan. He or she will have at least one, and possibly more chances to speak with a JAG attorney at SRP sites before he leaves the United States on deployment. These dedicated uniformed attorneys at SRP sites have limited time to meet with each person and prepare wills and powers of attorney. The military attorney also may not have the extensive experience needed for every situation. The JAG attorneys preparing documents at SRPs are also not liable under law for mistakes they might make.

Attorney Dan Krause has more than 11 years’ experience as a JAG attorney in serving Army Soldiers in their pre-deployment planning. He also has experience as a civilian attorney focusing on estate planning in Wisconsin, and is fully insured for malpractice. Mr. Krause is free to spend as much time as necessary with each person.

It is always a good idea to draft a will and a health care power of attorney prior to deployment. A member of the armed forces should also consider creating a living trust in order to speed the transfer of any assets to loved ones if tragically killed in the line of duty. In addition, estate planning documents should be coordinated with a service member’s life insurance policy and beneficiary designations. By engaging in thorough estate planning prior to an overseas deployment, a military member may protect his or her family’s financial well-being even while away.

Perhaps the most important thing a military parent or spouse in Wisconsin can do to shield family members from financial ruin is to consult with an estate planning attorney. For a soon-to-be-deployed member of the military, it is essential to create or update estate planning documents prior to leaving the country. By taking care of this before you are deployed, you remain in control of your financial and other matters. Additionally, it is always a good idea to have an experienced Wisconsin estate planning attorney review your estate plan on a regular basis.

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