Month: October 2012

Your Wisconsin Trust May Need a Trust Protector

Many people are aware of the potential benefits of creating a trust instrument as part of your estate planning arsenal. A variety of trust tools, both revocable and irrevocable, are available to help you protect the financial interests of your loved ones, avoid probate, take advantage of favorable tax laws, and more. A basic trust requires a grantor, at least one beneficiary, assets, and a trustee. A trustee is the individual or company that is responsible for the care and maintenance of any assets placed in a trust. Additionally, a trustee is normally tasked with investing trust assets in order to accumulate additional wealth. Unfortunately, sometimes a trustee simply cannot be trusted.

Whether a trust is small or large, the potential exists for a trustee to artificially inflate the fees that are paid to the trustee. One way for a trustee to inflate fees is to engage in litigation with a beneficiary or encourage disputes between beneficiaries because a trustee will normally be paid to attend any litigation out of the trust assets. Another way trust fees may be inflated is by hiring suspect or closely related investment advisors to manage the corpus of the trust. Inflated investment advisor fees are reportedly common where a grantor selects a trust company that is also affiliated with a financial investment firm as neither organization has an incentive to negotiate for reduced fees. Too often, even unnecessary fees cannot be recovered from a trust company due to liability releases that were signed by the grantor.

Despite the potential for questionable trustee behavior, there are ways to reap the benefits of creating a trust while protecting the trust assets. To do so, some trusts utilize what is called a trust protector. A trust protector is responsible for trustee oversight and has the ability to terminate a trustee that has engaged in misconduct. A trust protector may then replace the trustee with a successor trustee named in the original trust instrument. Normally, in order to ensure impartiality, a trust protector or someone close to the protector may not be named as the successor trustee.

Many of the trust instruments that are commonly used today will have a provision for a trust protector. Others, such as a trust that is created for a grantor’s benefit during his or her lifetime may also benefit from a trust protector provision. This is due to the fact that a successor trustee will take over management of the trust for the grantor’s heirs following his or her death. Because heirs may disagree or harbor grudges against one another, it may also be smart to include a trust protector provision where a beneficiary is named to act as the trustee. A trust protector has the ability to ensure the trustee acts for the benefit of all beneficiaries.

There is a lot to think about when creating an estate plan. For more information regarding how to include a trust in your comprehensive estate plan, you should contact an experienced Wisconsin trusts lawyer.

Cohabiting In Lieu of Marriage May Affect Your Wisconsin Estate Plan

Americans over 60 are increasingly choosing to live with a romantic partner in lieu of marriage. According to the 2008-2010 American Community Survey conducted by the United States Census Bureau, approximately 1.2 million Americans over the age of 60 are single and cohabiting with a partner. That number is about 14 percent higher than reported in the previous 2005-2007 survey. According to experts, the choice to cohabit is often driven by financial concerns. Still, cohabitation may result in serious estate planning implications.

There are pluses and minuses of re-marrying from a financial and estate planning perspective. People should have all the facts when making these important choices.

Although a widow or widower may opt to forgo marriage in order to maintain access to a deceased spouse’s Social Security benefits, remarriage after age 60 will not affect an individual’s ability to receive federal retirement benefits. Additionally, an individual retirement plan through an employer or other entity will issue payments to whomever is designated as a beneficiary. Naming a significant other who is not a spouse, however, will normally require a loved one to withdraw all of the funds in an account within five years of your death. Additionally, your named beneficiary will be required to pay income tax on the distribution. If a beneficiary is not a spouse, he or she may be able to make withdrawals pursuant to his or her own life expectancy so long as the first withdrawal is made prior to the end of the first calendar year following your death.

Unmarried couples should also consider the consequences of living in a property that is titled in only one member of the couple’s name. If the owner dies and leaves the property to his or her partner, the significant other would not qualify for a marital deduction. After this year, that means any property or other assets transferred to an unmarried partner in excess of $1 million would be subject to a hefty estate tax. In fact, if a couple does not properly plan ahead, the property may need to be sold in order to pay the estate taxes. By creating a carefully planned trust instrument, you may be able to eliminate such harsh tax consequences.

Medicaid eligibility may also affect whether aging individuals choose to remarry. While a spouse’s income and other assets are considered when determining Medicaid eligibility, those of someone you cohabit with will not. Additionally, although some employer health insurance policies extend to live-in partners, purchasing a life insurance policy or creating a trust to pay for health insurance coverage through a decedent’s estate may make it easier for a less wealthy partner to maintain insurance coverage following a loved one’s death.

Whether married or cohabiting, everyone should create an advanced health care directive or living will that outlines exactly what medical measures should and should not be taken if they become incapacitated or otherwise unable to communicate. Additionally, anyone who lives with an unmarried partner and would like that partner to make medical decisions for them in the event of unexpected incapacitation is advised to create a health care power of attorney.

Additionally, an unmarried partner would normally have no say in burial arrangements and how remains are handled (burial or cremation, etc.). This can be changed if a person creates a document appointing them as the agent for dealing with remains.

Your estate plan and financial goals often change as you enter new stages of life. For those over 60, it is especially important to maintain an up-to-date estate plan that addresses your individual living situation. By doing so, you have the ability to provide for your loved ones and remain in control of how your assets are transferred. Because your end of life wishes may change, you should have an experienced Wisconsin attorney review your estate plan on a regular basis.

Using an Irrevocable Trust in Wisconsin to Accomplish Your Gift-Giving Goals

As 2012 draws to a close, many people are opting to use the current gift tax exemption of $5.12 million for individuals and $10.24 million for couples to provide loved ones and other heirs with a portion of their inheritance tax-free. To utilize the higher gift tax exemption before it expires at the end of the year, however, a gift giver must relinquish control of the assets immediately. In order to accomplish their tax and estate planning goals, many people have chosen to create an irrevocable trust through which to transfer assets. Because the nation’s Internal Revenue Service will disallow any gift tax exemption where a grantor either directly or indirectly retains control over the assets, many important decisions such as exactly who will benefit from the trust and under what circumstances must be made well in advance of establishing an irrevocable trust.

Although a trust grantor may place requirements upon those who will benefit from an irrevocable trust, there are limits. For example, any request that would be considered contrary to public policy would normally be voided by a court. Discouraging marriage, mandating a divorce, or attaching criminal behavior requirements will normally not be allowed. Ambiguous trust provisions or those that are deemed impossible to satisfy will also generally be ignored by a court. Still, an irrevocable trust can usually be used to bypass the future partners of a spouse or impose seemingly odd requirements such as spelling a surname in a particular way. In Wisconsin, which irrevocable trust provisions will stand and which will fail is determined by state law.

Courts generally provide a fair amount of leeway with regard to many other considerations such as who will benefit from a trust. Despite this, it is important to be aware of often changing social norms and be sure to fully define who qualifies as a spouse and what constitutes a descendant where such terminology is used. For example, whether a trust grantor chooses to include domestic partners and, if so, whether a partnership must be registered should be addressed. Likewise, when a grantor uses the term “descendants,” he or she should state whether adoptees or stepchildren will qualify. Exactly how trust shares will be divided should be also included in the trust instrument. Additionally, a spendthrift provision that protects trust assets from most creditors should be incorporated into the document.

Some irrevocable trust grantors choose to include incentive provisions such as income matches or payment for stay-at-home parents. Although the sentiment is often well placed, such a tactic can backfire if the contemplated beneficiary chooses to follow a different life path. Trusts that provide for an asset such as a family vacation spot or other jointly owned property may be well intentioned, but it is a good idea for the gift giver to ensure the trust contains enough assets to properly maintain the property. Similarly, a well-funded irrevocable trust may be utilized to provide care for a treasured pet that happens to outlive the grantor. Regardless, a trust grantor should be wary of creating a trust that contains harsh or inflexible provisions that will not accomplish his or her true gift-giving goals.

Your Wisconsin Estate Plan Should Include Much More Than a Will

The question of who will inherit your money or property when you die is an important one. Too often, individuals who seek to plan their estate believe that merely writing a will is enough to ensure their end of life wishes are followed. Although creating your will is a significant first step in the estate planning process, it is important to realize that a number of other legal instruments may override the provisions of your will.

How your property or financial instruments are titled will take precedence over your will. For example, if you own your home jointly with a right of survivorship going to a spouse or other individual the property will transfer to your co-owner no matter what your will states. Additionally, named life insurance beneficiaries will always receive the insurance money regardless of the provisions contained in your will. A bank account, savings bonds, and any retirement accounts will also transfer to your named beneficiary after you die.

Only those assets you own individually that do not have a named beneficiary may pass by will. Still, it is important to tell your estate planning attorney about all of your assets and discuss with him or her exactly who you would like to receive those assets after your death. Your lawyer can help you decide if named beneficiaries are the best way to plan, and can help you change them if you wish.

Through a will, the parents of minor children have the ability to specify who will have guardianship of their children if they both die. Also, your personal representative (also known as an executor) is named in your will. A personal representative is a trusted individual who is tasked with carrying out your wishes throughout the sometimes lengthy probate process. Through probate, a court will oversee the payment of your debts and the transfer of your assets according to the provisions included in your will. Many people choose to avoid probate by transferring assets into a revocable living trust. A knowledgeable Wisconsin wills and trusts attorney can discuss the probate process with you in more detail.

Protecting the financial health of your family members and other loved ones after you die is important. In order to avoid mistakes and ensure your wishes are followed, you are advised to consult with an experienced estate planning lawyer on a regular basis.

Considering Some Tough Wisconsin Estate Planning Questions

Facing your own mortality can be difficult and creating a thorough estate plan normally requires answering some tough questions. Many individuals do not wish to think about their own unexpected incapacitation, end of life provisions, and a host of other subjects that make many people squirm. Still, considering some of the following issues can provide you and your loved ones with invaluable piece of mind.

One of the most important tasks for parents who are planning their estate to is to select a guardian for their children in case they both happen to pass away. Too often, parents who are unsure who to choose simply put the question off. Unfortunately, doing so will generally leave the decision up to a judge you may have never met.

It is also vital that you disclose all of your descendants and other important relationships to your estate planning attorney. If you have secret children from a previous relationship or a long-term significant other that your spouse is unaware of, this can potentially have a dramatic effect upon your estate plan. By explaining the situation to your lawyer ahead of time, even if in private, you have the ability to save your loved ones great emotional and financial costs in the future. Civil unions, domestic partnerships, and divorces that were never finalized may also affect your estate plan. Unfortunately, your attorney cannot assist you in planning for your end of life obligations if he is unaware of a legally significant relationship.

Another often overlooked question involves who will care for your pets. To many, pets are a valued member of the family. Someone with a number of animals who have a long life expectancy may need to create a trust in order to provide the financial resources required for their care. Others may simply need to ask a trusted friend or relative to care for a beloved dog in their absence. A capable estate planning lawyer will explain your options based upon your individual circumstances.

Although unpleasant to contemplate, another question when planning your estate involves who you would like to inherit if everyone in your family is killed. Is there a particular charity that you would like to leave your assets to? What about more distant relatives?

Technology has created a number of new questions to consider when planning your estate. For example, have you preserved fertilized embryos or other genetic material for later use? How any children who are born posthumously are financially cared for and whether preserved genetic material ought to be destroyed in the event of your death are important factors to consider. Unfortunately, litigation often results when individuals fail to plan for such scenarios.

You should also consider end of life measures when creating your estate plan. A health care directive that names a health care agent and states when to cease medical intervention should be created. Individuals should also discuss their wishes with their health care agent. Too often, loved ones are allowed to linger for much longer than they would have wished simply because their designated agent was unsure when it was time to cease medical intervention.

In order to fully protect your loved ones, it is essential to create comprehensive estate planning documents prior to your death. By doing so, you remain in control. Relying on the courts to determine your intent following your death can be expensive and time consuming. Because state and federal tax laws and your end of life wishes may change, you should establish a relationship with a skilled Wisconsin estate planning attorney and review your estate plan regularly.

Scroll to Top