Inheritance

Estate Planning and Divorce: How Do I Make the Right Moves?

Divorce Estate Planning
Estate planning changes to make at the time of your divorce

Getting divorced is a complicated process, even for couples without any minor children. This is because it requires dividing up a partnership, so each individual can go his or her own way. While there are many details to iron out in terms of dividing assets, one thing that often gets overlooked, is how your estate plan will be affected. The Journal Enterprise explains in its recent article, “5 Estate Planning Moves If You Are Getting Divorced,” that the following tips will help you get your estate planning in order as you divorce, so your final wishes will be carried out later.

Medical Power of Attorney. This is also called a healthcare proxy. This person is named to make decisions on your medical care, if you’re ill or injured and can’t state your medical care decisions. Unless you make the change, your ex-spouse will have this right.

Financial Power of Attorney. Like a healthcare proxy, this is someone you select to take charge, if you become incapacitated. This person has authority over your financial decisions, and it means they have the authority to pay your bills, access your bank and investment accounts, collect and cash your paychecks and make financial decisions for you. You want to be certain that your assets are protected, and your financial obligations are met, while you’re unable to act on your own behalf. Most people name a spouse, but if you get divorced and don’t switch this designation, your spouse will still be your financial power of attorney and will retain access to your finances.

Create a List of Things to Change After Your Divorce. A divorce can freeze some assets and accounts, which remains in effect until it’s finalized. Therefore, you won’t be able to change the beneficiary on life insurance policies, pensions and other types of accounts. Ask our estate planning attorneys to find out exactly what accounts will be affected. Once you know which ones are frozen, you should make a list to ensure you won’t neglect to change them, when the divorce is finalized.

Modify Your Will. In some states, you may not be permitted to create a new will, but our experienced attorneys should still be able to help you make the necessary changes. You’ll want to review your heirs. If you do have minor children and you have sole custody, you may want to designate another person as their guardian. If you named your spouse as executor of your will, you may want to consider changing that.

Modify Your Trust. You may have a revocable living trust, in addition to a will. One of the advantages of a revocable trust is that it doesn’t go through probate, so your heirs get a bigger inheritance more quickly. If you have a revocable trust, talk to our Madison area estate planning attorneys about changing it after your divorce.

If you don’t make these estate planning changes at the time of your divorce, your assets may not go to the right beneficiaries, or your ex-spouse may end up with rights you didn’t intend. If you’re concerned about what happens to your estate plan after you’ve divorced, we invite you to request a consultation with one of our experienced estate planning attorneys who can guide you through the process.

Reference: Journal Enterprise (March 20, 2019) “5 Estate Planning Moves If You Are Getting Divorced”

How Do Family Relationships Mess Up Estate Planning?

Estate planning for blended families
Estate planning can help keep the peace in a blended family.

According to a recent Key Private Bank poll of financial advisors, 80% said that working through family issues is the most difficult aspect of estate planning.

With more and more blended families, the issues of equitable distributions among family members becomes even more complex. The interaction between parents, children, step-parents, and step-children can be tense in the estate-planning process—especially when a plan is put into action after a parent or step-parent’s death or disability.

Although these family dramas get in the way in many cases, there’s something you can do about it.

Having open family conversations about estate plans and wishes is the key. This can be hard because parents are afraid that sharing their wishes will cause conflict.

However, discussing your goals and how you’d like to share your wealth with your heirs, is only part of the story. You also have to update your documents to reflect your wishes. Review how your assets are titled and understand who is inheriting your wealth. From an estate planning perspective, you want to avoid probate and maintain control over the disbursement of your assets.

Probate is the process that states use to settle the estates of a deceased persons, who have not made arrangements to avoid probate. These proceedings are made a matter of public record, so there is no family privacy. It can also be expensive and time-consuming, and in some states can take a while, until beneficiaries get their shares.

Remember that retirement accounts like IRAs, 401(k)s and pension plans have named beneficiaries, so those assets pass directly outside of the probate process. The same is true for life insurance and annuities. These specific beneficiary designations—whether through “payable on death” or “transfer on death” accounts—will supersede any provisions in a will or trust. That’s why account holders and insurance policy owners should look at their beneficiary designations to be certain that the assets will transfer, according to their wishes.

Are you concerned that your family relationships will cause issues after you’ve passed? Our experienced, Madison area estate planning attorneys invite you to request a consultation to discuss how to keep peace in your family.

Reference: CNBC (March 18, 2019) “This is the No. 1 issue keeping you from inheriting that windfall”

Estate Planning For Aging Parents: Are Mom’s Affairs in Order?

Estate planning for aging parents
Discussing estate planning with your aging parents now will ease many transitions you are likely to face in the coming years

A few simple steps now, will greatly ease many of the transitions you are likely to face in the coming years with your parents. Estate planning for aging parents will help with the changes they face. What can you do to make sure your mother’s (or father’s) financial affairs are in proper order?

The Monterey Herald’s recent article, “Financial planning: Making sure Mom is taken care of,” says to first make sure that she has her basic estate planning documents in place. She should have a will and an Advance Health Care Directive. Talk to our experienced estate planning attorneys to make sure these documents fully reflect your mother’s desires. An Advance Health Care Directive lets her name a person to make health care decisions on her behalf, if she becomes incapacitated. This decision-making authority is called a Power of Attorney for Health Care, and the person receiving the authority is known as the agent.

Based on the way in which the form is written, the agent can have broad authority, including the ability to consent to or refuse medical treatment, surgical procedures and artificial nutrition or hydration. The form also allows a person to leave instructions for health care, such as whether or not to be resuscitated, have life prolonged artificially, or to receive treatment to alleviate pain, even if it hastens death. To limit these instructions in any specific way, talk to our attorneys.

Another option is to create a living trust, if the value of her estate is significant. In some states, estates worth more than a certain amount are subject to probate—a costly, lengthy and public process. Smaller value estates usually can avoid probate. When calculating the value of an estate, you can exclude several types of assets, including joint tenancy property, property that passes outright to a surviving spouse, assets that pass outside of probate to named beneficiaries (such as pensions, IRAs, and life insurance), multiple party accounts or pay on death (POD) accounts and assets owned in trust, including a revocable trust.  You should also conduct a full inventory of your parent’s accounts, including where they’re held and how they’re titled. Update the named beneficiaries on IRAs, retirement plans and life insurance policies.

Some adult children will have their parent name them as a joint owner on their checking account. This allows you greater flexibility to settle outstanding obligations, when she passes away. Remember that a financial power of attorney won’t work here, because it will lapse upon your mother’s death. However, note that any asset held by joint owners are subject to the creditors of each joint owner. Do not add your daughter as a joint owner, if she has marital, financial, or legal problems!

You also shouldn’t put your name as a joint owner of a brokerage account—especially one with low-cost basis investments. One of the benefits of transferring wealth, is the step-up in cost basis assets receive at time of death. Being named as the joint owner of an account will give you control over the assets in the account—but you won’t get the step up in basis, when your mother passes.

We invite you to request a consultation with one of our Madison area estate planning attorneys to discuss estate planning for your aging parents.

Reference: Monterey Herald (March 20, 2019) “Financial planning: Making sure Mom is taken care of”

Here’s One Way to Disinherit the Son-In-Law You Hate

Disinherit
Not everyone has friendly family relationships with in-laws.

A family from the United Kingdom has made international news, as a result of an alleged will forgery fueled by a mother-in-law’s disdain for her daughter’s husband. Did she intend to disinherit her daughter to avoid the risk of her son-in-law benefiting from her estate?

When Gillian Williams died in May 2017, it’s unlikely that she expected to be at the center of an international spotlight on her family’s life. She left behind a married daughter, Julie Fairs, who is accused, along with her husband Brian, of falsifying a signature on her mother’s last will and testament. The mother’s own sister testified that her sister would never have left her daughter anything, because of how much she disliked her son-in-law, reports Above the Law in the article “What To Do When You Hate Your Son-In-Law: A Practical Lesson in Estate Planning.”

The matter became public when it went to trial. There’s been a lot of nasty family business being shared. Most people avoid going to trial for will contests, since the underlying emotions come out in full view.

Not everyone has friendly family relationships with in-laws. Frequently, the in-law relationship is prickly at best. There is no law that you must like your son-in-law. However, the law presumes that you like your child enough to include her in your estate, regardless of how you feel about her spouse. That means that if there is no surviving spouse, children are permitted to be the “natural object of your bounty.” In other words, these are the individuals who will receive your assets when you die, based on social and public policy and the law.

There are issues in estate planning, when a person wants to exclude a child because of their dislike of the child’s spouse. You may want to exclude a child out of concern that the spouse will mishandle the money or benefit from the money in a divorce. Sometimes parents can’t get past their dismay over a child marrying against their wishes. Disinheritance is not an unusual punishment. However, increased scrutiny is going to be applied to the review of a will, when a child is excluded.

When one child is disinherited, it colors their relationship with their siblings. The beneficiaries and the executor are left to defend the decedent’s decision. That is not easy to do, unless an explanation of why this happened was done beforehand.

There are options to disinheritance, if the child’s spouse is an issue. A beneficiary’s share can be held in a continuing trust, so the spouse does not have access to the funds. The assets can be protected and preserved, in the event of a divorce or just for general money security. It should be recognized that while inheritances are generally protected in divorce, the second the monies are co-mingled, they become joint property. A trust is often the best way to protect an inheritance in this situation.

Another tactic is for the person to skip a generation and instead make a bequest to the grandchildren. The option works best when the funds are not significant, since the parent may be insulted by the decision to leave a bequest to their children and this could pit the child against their own child (the grandchild).

Dividing the estate among the children in unequal shares can be done so as not to completely disinherit a child, but to leave less money. This also holds the potential for creating bad feelings between family members.

The last will and testament is a very permanent document and may not be the right forum to be used to let feelings be expressed or take a stand about an unfavorable life decision by an adult child. The impact of this decision can also have long lasting effects, including lawsuits and family fighting. It is also likely to create a battle between the child and their spouse.

A conversation with our experienced estate planning attorneys, who have seen this situation many times in their practice, should be able to help sort out the best solution. There may be a way to avoid conflict, or at least to make sure everyone is clear from the get-go, as to what is going to happen in the future, and why.

Reference: Above the Law (March 12, 2019) “What To Do When You Hate Your Son-In-Law: A Practical Lesson in Estate Planning”

Estate Planning and Pets: Should You Plan For Them?

Estate Planning and Pets
Most people leave the care of pets in the hands of friends or relatives and hope for the best.

In one of the most famous pet estate planning cases, hotel magnate Leona Helmsley left $12 million in a trust for her dog, Trouble. The judge reduced Trouble’s inheritance to $2 million. Most of us don’t have the luxury (or the need) to leave our pets $12 million, but to make sure that our pets are cared for, having a legally enforceable trust for a pet, which is allowed in Wisconsin, can provide peace of mind. That is part of the answer to the question posed by the Times Herald-Record in the article “Who’ll care for your pets when you’re gone?”

A will is a document used in a court proceeding called probate, if you die with assets that are only in your name. When the will goes through probate, it becomes a public document. A trust, on the other hand, is a document that does not become part of the public record, unless it was created under a will. Some people use trusts for their beloved pets, to pay for their care and maintain their lifestyle. Some pets lead fancier lives than others!

Most people leave the care of pets in the hands of friends or relatives and hope for the best. Visit any animal shelter and you’ll see the animals whose owners could not take care of them, or whose friends or family members intended to take care of them, but for whatever reasons, could not care for them. Putting a pet trust into your estate plan, is a better way to care for pets, if you they outlive you.

The pet trust has several steps, and our estate planning attorneys can set it up for you. First, you need to appoint a trustee of the trust funds. This person is in charge of the financial aspect of the trust, from paying vet bills, making sure pet health insurance premiums are paid, to providing money for the caretaker to buy supplies. It’s a good idea to have a secondary trustee, just in case.

Next, you name a caretaker of the pet. This person can be the same as the trustee, although it may be better to name a different person, to create some checks and balances on the funds. You can, if you like, give the trustee the right to appoint a caregiver or a back-up caregiver. Make sure you discuss all of these details with the trustee and the caregiver and their back-ups to be sure that everyone understands their roles, and all are willing to take on these responsibilities. Some pets can live a long time, and you want to have everyone understand what they are undertaking.

Third, you’ll need to designate the amount of money to be held in trust for the pets for medical care, daily living costs and support until the pet dies. Don’t forget to include the cost of burial or cremation.

Finally, name the persons or organizations you wish to receive any remaining funds.

An informal letter of instruction to both the trustee and the caregiver would be very helpful. Provide details on the pet’s personality, quirky behavior, preferences for food, treats, play and any information that will help all the parties get along well. You should also provide information on your pet’s vet, any registration numbers for microchips, medical and dental records, medications, etc.

Are you concerned about what will happen to your pets once you’re gone? We invite you to start a conversation with one of our experienced estate planning attorneys to see if a pet trust is right for you.

Reference: Times Herald-Record (March 9, 2019) “Who’ll care for your pets when you’re gone?”

What is the Best Way to Leave an Inheritance to a Grandchild?

Inheritance to a grandchild
What is the best way to leave an inheritance to your grandchild?

Leaving an inheritance, money or real estate, to a grandchild under the age of 18 requires careful handling, usually under the guidance of an estate planning attorney. The same is true for money awarded by a court, when a child has received property for other reasons, like a settlement for a personal injury matter.

According to the article “Gifts from Grandma, and other problems with children owning property” from the Cherokee-Tribune & Ledger News, if a child under age 18 receives money as an inheritance through a trust, or if the trust states that the asset will be “held in trust” until the child reaches age 18, then the trustee named in the will or trust is responsible for managing the money.

Until the child reaches age 18, the trustee is to use the money only for the child’s benefit. The terms of the trust will detail what the trustee can or cannot do with the money. In any situation, the trustee may not benefit from the money in any way.

The child does not have free access to the money. Children may not legally hold assets in their own names. However, what happens if there is no will, and no trust?

A child could be entitled to receive property under the laws of intestacy, which defines what happens to a person’s assets, if there is no will. Another way a child might receive assets, would be from the proceeds of a life insurance policy, or another asset where the child has been named a beneficiary and the asset is not part of the probate estate. However, children may not legally own assets. What happens next?

The answer depends upon the value of the asset. State laws vary but generally speaking, if the assets are below a certain threshold, the child’s parents may receive and hold the funds in a custodial account. The custodian has a duty to manage the child’s money, but there isn’t any court oversight.

If the asset is valued at more than the threshold is for the state, the probate court will exercise its oversight. If no trust has been set up, then an adult will need to become a conservator, a person responsible for managing a child’s property. This person needs to apply to the court to be named conservator, and while it is frequently the child’s parent, this is not always the case.

The conservator is required to report to the probate court on the child’s assets and how they are being used. If monies are used improperly, then the conservator will be liable for repayment. The same situation occurs, if the child receives money through a court settlement.

Making parents go through a conservatorship appointment and report to the probate court is a bit of a burden for most people. A properly created estate plan can avoid this issue and prepare a trust, if necessary, and name a trustee to be in charge of the asset.

Another point to consider: turning 18 and receiving a large amount of money is rarely a good thing for any young adult, no matter how mature they are. Our experienced Madison area estate planning attorneys can discuss how the inheritance can be structured, so the assets are used for college expenses or other important expenses for a young person. The goal is to not distribute the funds all at once to a young person, who may not be prepared to manage a large inheritance.

If you’re interested in discussing the best way for you to leave an inheritance to your grandchild, we invite you to request a consultation with one of our estate planning attorneys.

Reference: Cherokee-Tribune & Ledger News (March 1, 2019) “Gifts from Grandma, and other problems with children owning property”

Why Is a Revocable Trust So Valuable in Estate Planning?

Revocable Trust
A revocable trust can do a lot to solve big estate planning and tax problems.

There’s quite a bit that a trust can do to solve big estate planning and tax problems for many families. As Forbes explains in its recent article, “Revocable Trusts: The Swiss Army Knife Of Financial Planning,” trusts are a critical component of a proper estate plan. There are three parties to a trust: the owner of some property (settler or grantor) turns it over to a trusted person or organization (trustee) under a trust arrangement to hold and manage for the benefit of someone (the beneficiary). A written trust document will spell out the terms of the arrangement.

One of the most useful trusts is a revocable living trust where the grantor creates a trust, funds it, manages it by herself, and has unrestricted rights to the trust assets (corpus). The grantor has the right at any point to revoke the trust, by simply tearing up the document and reclaiming the assets, or perhaps modifying the trust to accomplish other estate planning goals.

After discussing trusts with your attorney, he or she will draft the trust document and re-title property to the trust. The assets transferred to a revocable trust can be reclaimed at any time. The grantor has unrestricted rights to the property. During the life of the grantor, the trust provides protection and management, if and when it’s needed.

Let’s examine the potential lifetime and estate planning benefits that can be incorporated into the trust:

  • Lifetime Benefits. If the grantor is unable or uninterested in managing the trust, the grantor can hire an investment advisor to manage the account in one of the major discount brokerages, or he can appoint a trust company to act for him.
  • Incapacity. A trusted spouse, child, or friend can be named to care for and represent the needs of the grantor/beneficiary. She will manage the assets during incapacity, without having to declare the grantor incompetent and petitioning for a guardianship. After the grantor has recovered, she can resume the duties as trustee.
  • This can be a stressful legal proceeding that makes the grantor a ward of the state. This proceeding can be expensive, public, humiliating, restrictive and burdensome. However, a well-drafted trust (along with powers of attorney) avoids this.

The revocable trust is a great tool for estate planning because it bypasses probate, which can mean considerably less expense, stress and time.

In addition to a trust, ask your attorney about the rest of your estate plan: a will, powers of attorney, medical directives and other considerations.

Any trust should be created by a very competent trust attorney, after a discussion about what you want to accomplish. We invite you to start that discussion with one of our estate planning attorneys.

Reference: Forbes (February 20, 2019) “Revocable Trusts: The Swiss Army Knife Of Financial Planning”

Using Trusts to Maintain Control of Inheritances

Trusts
Trusts can help accomplish goals and maintain control.

Trusts, like estate plans, are not just for the wealthy. They are used to provide control, in how assets of any size are passed to another person. Leaving an inheritance to a beneficiary in a trust, according to the article from Times Herald-Record titled “Leaving inheritances to trusts puts you in control,” can protect the inheritance and the asset from being mishandled.

For many parents, the inheritance equation is simple. They leave their estate to their children “per stirpes,” which in Latin translates to “by roots.” In other words, the assets are left to children according to the roots of the family tree. The assets go to the children, but if they predecease you, the assets go to their children. The assets remain in the family. If the child dies after the parent, they leave the inheritance to their spouse.

An alternative is to create inheritance trusts for children. They may spend the money as they wish, but any remaining assets goes to their children (your grandchildren) and not to the surviving spouse of your child. The grandchildren won’t gain access to the money, until you so provide. However, someone older, a trustee, may spend the money on them for their health, education and general welfare. The inheritance trust also protects the assets from any divorces, lawsuits or creditors.

This is also a good way for parents, who are concerned about the impact of their wealth on their children, to maintain some degree of control. One strategy is a graduated payment plan. A certain amount of money is given to the child at certain ages, often 20% when they reach 35, half of the remainder at age 40 and the balance at age 45. Until distributions are made to the heirs, a trustee may use the money for the person’s benefit at the trustee’s discretion.

The main concern is that money not be wasted by spendthrift heirs. In that situation, a spendthrift trust restricts payments to or for the beneficiary and may only be used at the trustee’s discretion. A lavish lifestyle won’t be funded by the trust.

If money is being left to a disabled individual who receives government benefits, like Medicaid or Supplemental Security Income (SSI), you may need a Special Needs Trust. The trustee can pay for services or items for the beneficiary directly, without affecting government benefits. The beneficiary may not receive any money directly.

If an older person is a beneficiary, you also have the option to leave them an “income only trust.” They have no right to receive any of the trust’s principal. If the beneficiary requires nursing home care and must apply for Medicaid, the principal is protected from nursing home costs.

Our estate planning attorneys are able to review your family’s situation and determine which type of trust would be best for your family. If you want to make sure you maintain control of inheritances, we invite you to request an estate planning consultation.

Reference: Times Herald-Record (Feb. 16, 2019) “Leaving inheritances to trusts puts you in control”

Can I Draft My Own Will?

A common question among people is “Can I write my own will?” or “Do I really need a lawyer to do my estate planning?”

The Frisky‘s recent article, “Why You Should Hire A Lawyer to Write Your Estate Plan,” says that writing your own estate plan can be a complicated thing—and one that a non-attorney may find very difficult.

It’s More Than a Will. Many people believe that a will and an estate plan are the same. This is not true. An estate plan is a legal strategy that prepares you for potential incapacity and eventual death. A will is a legal document that’s part of the estate plan.

Money, Time and Energy Savings. Creating your own estate plan will be more time-consuming than you may have thought. Hiring a lawyer to do this will cost you—but it will cost you more, if you decide to do it on your own. Hiring a lawyer for your estate plan will save you time, because he or she is trained in the law to do it the right way.

If you do finish your own estate plan and you realize that it really is a mess, you can hire a lawyer to do it over for you. However, calculate how much time, energy, and resources you’ve spent on making on your quick DIY estate plan. Work with our experienced estate planning attorneys and create a sound estate plan.

It’s Complicated. If you don’t fully understand what you’re doing, estate planning can drive you nuts. That’s because every word you write is crucial. Everything you write counts and may be interpreted differently. The law in this area also changes all the time. Agencies in the federal government, the IRS and the courts are always creating new regulations and decisions. Our estate planning attorneys monitor all of this, making sure your estate plan is in compliance and taking the best advantage of the current law.

Objectivity. Another thing our attorneys add to the mix—in addition to legal expertise—is objectivity. Our experienced estate planning attorneys will give you a clean, unbiased view of your current situation, along with a fair and honest assessment of your options.

Feel free to reach out to us to request an estate planning consultation. Our attorneys will take the time to listen to your goals and offer a strategy to create an estate plan that protects your legacy and cares for you and your loved ones.


Reference: The Frisky (February 6, 2019) “Why You Should Hire A Lawyer to Write Your Estate Plan”

Think You’re Not in Favor of the Estate Tax? You’ll Be Surprised

There are many headlines right now about proposals to increase taxes on wealthy people.  While this sentiment crosses party lines, the majority of people have generally always been in favor of wealthy Americans paying more taxes. However, for some reason, the estate tax has always been looked at as a bad tax that is unfair, observes this article titled “People like the estate tax a whole lot more, when they learn how wealth is distributed” from The Washington Post.

The use of the phrase “death tax” hasn’t done much to enhance the federal estate taxes’ likability. It is the tax on a person’s estate and is paid when the person dies. Many people feel like it’s an unfair tax, levied during a time of a family’s grief. However, a research study from Sweden has revealed some interesting responses to how people feel, when questioned about wealth inheritance. Sweden abolished its estate tax in 2004.

The study gave participants information about wealth inheritance in three bullet points:

  • Inherited wealth represents about half of all wealth in the population.
  • Those with the highest incomes inherit the most.
  • A majority of Swedish billionaires have inherited their fortunes.

Others in the study were not given this information. The group who received this information were more likely to support the estate tax than those who did not. Of the people who did not receive these three facts, 25% supported the estate tax. Here’s the interesting thing: support among the group that did receive these facts stood at 33%, meaning the support for the tax was boosted by about 8 percentage points.

It boils down to this: people who do not know much about wealth distribution are likely to think an estate tax is not a good thing. The larger implication is that once people have a greater understanding of how wealth is distributed (or in this case, not distributed), they are far more likely to support an estate tax.

Similar studies in the U.S. have come to the same conclusion. People were asked if the estate tax should be abolished. Half of them were told that the tax effects only estates worth more than $5 million. In that group, support for keeping the tax was 46%. In the other half, people who were not told that fact, 27% didn’t want to keep the tax.

Generally speaking, most Americans don’t know as much about wealth distribution. One study revealed that Americans think the bottom 60% of the country owns a little more than 20% of the total wealth. The bottom 60% of this country owns 1% of the total wealth. Ninety percent of wealth is held by the richest 20% of families, with the richest 1% owning 40% of it.

Regardless of where you sit on the economic scale, and whether you think the estate tax should be abolished, your assets will be more likely to be passed to the next generation, if you have an estate plan in place.

If you’re interested in learning more about putting an estate plan in place that passes your assets onto your loved ones, a consultation with one of our estate planning attorneys is the first step.


Reference: The Washington Post (Feb. 6, 2019) “People like the estate tax a whole lot more when they learn how wealth is distributed”
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