Month: May 2014

Is A Wisconsin Revocable Living Trust The Best Way to Avoid Probate and Transfer Assets Upon Death?

One common objective among people planning their estates is avoiding probate, and many of the people who seek to avoid probate use a revocable living trust to accomplish that end. A living trust can be an enormously beneficial tool in the planning and distribution of your estate in Wisconsin. On the other hand, it may be an unnecessary step, since many Wisconsin laws allow you to avoid probate through other estate planning means that may be more appropriate for your unique set of circumstances.

Alternatives to creating a living trust: “transfer on death” designations

If you do decide to create a living trust, the next step is to place assets under control of that trust so that they will avoid probate when you die. Obviously, the largest asset many people own is their home. For several others, the next most prominent assets they own may be their financial accounts and their vehicles. Depending on your situation, however, you may not want to place these assets in your trust. Consulting an attorney experienced in handling estate planning options in Wisconsin is crucial to ensure the choices you make in this regard are appropriate for your own personal circumstances.

You may want to fund your home into your living trust through the creation of a deed that transfers legal ownership of the property from you as an individual to you as the trustee of your living trust. However, Wisconsin law also allows people to create a “transfer on death deed,” which operates exactly as the name implies, and similarly avoids probate. In some situations, a transfer on death deed may make sense for your real estate assets if, for example, you still have a mortgage on your home or if you are considering applying for Medicaid.

With your financial accounts, funding them into your trust usually just involves filling out a proprietary transfer form available from the institution holding the account. Similar to real estate though, you may transfer many of these assets without probate by using “transfer on death” or “pay on death” designations. These accounts can include bank accounts, securities accounts, and certificates of deposits, among others. Similarly, your life insurance also avoids probate due to the death beneficiary on it, without the need of a living trust.

Vehicles can be transferred by filling out a form at the DMV. You may discover, though, that titling your vehicles makes dealing with your auto insurance company more difficult. If you have only vehicles with modest resale values, you might consider bypassing the step of placing them in your trust altogether as well.

Another Reason for Regular Plan Maintenance: US Supreme Court Case Regarding Inherited IRA May Create Need for Additional Trust Planning

A Wisconsin woman finds herself at the center of a highly significant case regarding estate and retirement planning, with the US Supreme Court recently wrapping up oral arguments in the case. The dispute involves an individual retirement account the woman’s mother left to her as an inheritance, and whether the account qualifies as “retirement funds” that are protected from the daughter’s creditors in bankruptcy. Depending on the outcome, the Supreme Court’s ruling may create a need for some some people seeking to leave their retirement accounts as inheritances to explore additional estate planning options to ensure the protection of those assets.

Ruth Heffron set up an IRA in 2000, placed $293,000 in it, and named her daughter, Heidi Heffron-Clark, as the sole beneficiary. A year later, Heffron died. In 2010, Heffron-Clark and her husband declared bankruptcy. While previous courts had generally ruled that inherited IRAs qualified for the “retirement funds” protection afforded by the Bankruptcy Code, the 7th Circuit Court of Appeals decided the opposite in Heffron-Clark’s case, concluding that the Bankruptcy Code’s retirement funds protection only existed as long as an IRA was going toward the retirement of the original account owner. Once the owner dies, the money ceases being retirement funds and becomes just a “time-limited tax-deferral vehicle”. That meant that, in Heffron-Clark’s case, the IRA her mother left to her stopped qualifying as retirement funds the moment the mother died.

The 7th Circuit’s ruling runs contrary to some previous federal appeals court rulings on the topic. If the Supreme Court adopts the same position as the 7th Circuit, it would substantially alter the current understanding about the extent of the protection afforded to retirement accounts. Retirement funds transferred to beneficiaries as a result of the death of the original account owner may have no protection at all from the beneficiaries’ creditors. …

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