Frequently Asked Questions (FAQs)

You might not know what options are available to you. You might not know where to begin. You might feel overwhelmed. The attorneys at Christenson and Allex have put together this list of questions and answers to help you assess your own situation and determine what might be of help.

Estate Planning - General

March 2014

What is the main difference between an Opt-Out Marital Property Agreement and an Opt-In Marital Property Agreement?

Under Wisconsin's marital property law, all property of spouses is presumed to be marital property except as classified otherwise (generally by gift or inheritance) or by marital property agreement. In the absence of a marital property agreement, only one-half of the marital property assets titled in the deceased spouse's name can be distributed under the spouse's will because the surviving spouse will already own one-half of such assets. With an Opt-Out Marital Property Agreement, a married couple chooses to use an ownership system other than the one provided in Wisconsin's Marital Property Law. For example, under an Opt-Out agreement, estate assets can be distributed based on ownership as established by title of the assets. Conversely, a married couple whose property has not been subject to the marital property law (e.g., one who moves in from out-of-state) may choose to make themselves subject to the law. An Opt-In Marital Property Agreement can be used to achieve significant estate and income tax advantages by classifying all property owned by the spouses as marital property.

February 2014

What is a "Revocable Living Trust"?

A revocable living trust is a trust you create while alive that is a separate document from your will. A "trust" can be thought of as a type of account that holds property, including real estate, cash, stocks, bonds, partnership and LLC interests, jewelry, furniture, equipment, vehicle, etc. Trusts have three players: (1) the "grantor" who creates the trust; (2) the "trustee" who holds legal title to the trust's assets and has the fiduciary responsibility to manage the assets according to the terms of the trust; and (3) the "beneficiary" for and to whom the trustee is managing and distributing the trust assets. After the trust is created, it is typically funded. To properly "fund" the trust you will want to consult with you estate planning attorney.

September 2013

How can I plan for funeral arrangements as part of my estate planning?

In almost all cases, the funeral and disposition of remains will take place before the Will is probated, so a Will is not a good place to leave instructions for these events. The Wisconsin legislature has recently authorized the use of a document to designate an agent to make funeral and burial arrangements for you. The statute allows you to give direction as to special instructions for funeral arrangements and religious observances. The legislature has created an "Authorization for Final Disposition" statutory form for this purpose. In any event, if you have preferences for your funeral or disposition of remains, it is important that you speak with members of your family so that they will know and, hopefully, follow your wishes.

August 2013

My spouse and I are thinking about getting Long Term Care Insurance in case we have future long term care expenses. Should we consider purchasing a policy that qualifies under the Long Term Care Partnership Program?

Planning for long term care expenses is an important part of the estate planning process. Long term care insurance can be very helpful, and one option to consider when purchasing long term care insurance is the Long Term Care Partnership Program. The Long Term Care Partnership Program essentially provides that for every dollar of care paid for by long term care insurance, the applicant on whose behalf such amounts were paid can retain a dollar of assets. Countable resources are disregarded to the extent benefits are paid under a qualified long-term care insurance policy, and the disregarded assets are not subject to Estate Recovery. The idea behind the program is to allow persons who have made an effort to provide for a part of their long term care to "protect" some of their assets from having to be used before they are eligible for Medicaid. Existing LTC policies issued before January 1, 2009 do not qualify; however, an exchange option may be offered by the company. Qualified LTCIP policies are certified by Office of the Commissioner of Insurance and listed on the OCI website.

March 2013

I receive social security. What will the impact of the sequester cuts have on my payments?

The consequences of the automatic reduction of spending caused by the sequestration cuts are not entirely known yet. However, certain programs--Social Security, Medicaid, federal retirement programs and Medicare--are protected from the full impact of sequestration. Therefore, there should be no impact on the payment of your social security benefits. However, the sequestration cuts might affect the day-to-day operations of the Social Security Administration due to the reduction of the SSA's administrative budget. We will continue to monitor the situation.

October 2012

Our cat, Peanut, is a member of our family. We are concerned about his welfare should anything happen to us. We have Wills and powers of attorney that provide safety nets for each other and our children, but should we be including Peanut in our estate plan?

Yes. Many of us have pets that we consider to be family. You can create a safety net for Peanut in your estate plan should something happen to you. For example, you could name one or more people in your estate plan to make decisions regarding Peanut. In addition, you could set aside money to help with Peanut's expenses should you be unable to care of him.

September 2012

I need a Will and am thinking of purchasing a software program to help me write one. Can you recommend a program for me to consider?

It is understandable that you would look to purchasing a software program to help you write your Will. They are generally inexpensive and easy to obtain. Unfortunately, I do not recommend that you spend your money in this manner. Many of the software programs do not cover such topics as marital and individual property, planning for people with special needs, or planning to minimize the impact of estate taxes. They also do not include legal advice that is based on your specific situation. You are better off using your hard-earned dollars to hire an estate planning professional to create a Will that will help you to meet your estate planning goals.

June 2012

My fiancé and I are getting married in a week. This past week we picked up our marriage license and rings and confirmed the details of the ceremony/reception/honeymoon. What else should we be doing?

First of all, congratulations on your upcoming nuptials! After you return from your honeymoon, you should plan on visiting a lawyer to work on estate plans that include each other. Although there are certain "default" provisions in the law that benefit married couples, generally it is better not to rely on the defaults because the results may not be what you and your spouse intended. In addition, the defaults do not include the transfer of decision-making in the event of a spouse's incapacity. You and your spouse should work with a lawyer to create a well-drafted Will, Power of Attorney for Health Care, and Durable Power of Attorney for Finances and Property.

April 2012

My neighbor was appointed to be the personal representative of her mother's estate. What does a "personal representative" do and why is it important to nominate one?

A personal representative is appointed by a court after you die to make sure that your debts and creditors are paid and that your property is distributed according to your will or by the laws of intestate succession if you die without a will. The person serving as a personal representative does not need to be a lawyer or financial professional, but must be able to fulfill their duties with diligence, honesty and accuracy. You can nominate a person in your will to serve as a personal representative. If you die without a will or the person that you nominate is not able to serve, then a court will decide who to appoint. It is a good idea to nominate one or more people to serve as your personal representative in advance through your will so that you, rather than a court, can make this important decision.

February 2012

Sometimes I'm not able to handle my trustee responsibilities due to my MS (Multiple Sclerosis) symptoms. Do I have to give up being trustee completely?

Not necessarily. If you have brief episodes when your symptoms are debilitating and then have long periods of time when you are able to handle your trustee role, you should be able to have a co-trustee who is authorized to handle routine bill paying and banking transactions. If, however, your flare-ups are more severe and last a longer period of time, you should consider resigning as trustee so your successor trustee can take over all trust management tasks. You should do what you can to avoid an on-again, off-again pattern of removal and reinstatement of trustees. A carefully drafted trust provision could clarify your role and the role of your co-trustee, if you feel that sharing trustee responsibilities is necessary.

November 2011

My 12-year-old will stay with my Mother when my husband and I are on a cruise. Can she make medical decisions for my son if we are unavailable?

Yes. Until recently, your mother could not do so without court involvement. However, a new Wisconsin law allows a parent to use a power of attorney to give certain powers related to the care of their child to another person. You and your husband could sign a Power of Attorney allowing your mother to make medical decisions for your son when both of you are unavailable. Since this new Power of Attorney must meet certain requirements, I recommend you speak with your attorney to discuss this matter further. Bon voyage!

September 2011

2011 was going to be my year to get my estate plan in order. Fall is now here, and I have done nothing to make this happen. Is it too late?

Not at all. Whether you are single, married, have kids or take care of an elderly parent, putting together an estate plan is a good idea and may not require much time. Working with a qualified attorney can streamline the process by helping you to identify your estate plan goals. The attorney can then draft documents, such as a Will and Powers of Attorney, to help you meet your goals.

July 2011

What is "probate" and why do people say I should "avoid probate"?

"Probate" is a court supervised process used to settle an estate when assets can't be directly transferred to a beneficiary or a joint owner of an asset. The court that handles this process is called "Probate Court." In some cases, using the Probate Court process is neither expensive nor time consuming. When the estate is small and the beneficiaries are cooperative, a probate case can be completed quickly and cost less than some probate avoidance techniques. In other situations, such as when family members can't agree on division of the assets and a commissioner or a judge has to intervene to settle the dispute, the process can be very expensive and time consuming. If you think settlement of your estate will be contested, you should consider avoiding probate through the use of a revocable trust and other strategies.

February 2011

Have laws affecting estate planning changed significantly in the past two years?

Three major changes in the law have occurred that could potentially affect your estate plan. The Domestic Partnership Law went into effect in 2009 and has a significant impact on unmarried couples. The Power of Attorney for Finances statute was completely revised in September of 2010 and affects everyone who has named a financial agent. The 2010 Tax Relief Act was signed in December of 2010 and affects anyone who is concerned about estate taxes, gift taxes, capital gains taxes or income taxes on IRA accounts. So, if you haven't reviewed your estate plan in the past two years, you should consider a quick review in 2011 to take advantage of the changes in the law that may affect your plan.

September 2010

How do I start a conversation with my elderly parents about their estate plan without offending them?

If your purpose in wanting to talk with your parents is to be helpful, it will be easier to open the discussion if you have completed your own estate plan. You can then talk about why you decided to "get things in order" and how you felt about the process (e.g. it took less time and didn't cost as much as I thought it would.) If they haven't left the room, or hung up the phone, you may just ask them if they have completed the same Power of Attorney forms you completed. Asking about these forms should be less threatening than asking for specific financial information.

June 2010

Recently, my father passed away. We had a tough time trying to figure out what he owned, what he owed and where his assets were located. I don't want to leave my loved ones with the same situation. What should I do?

It a good idea to periodically review and organize your important documents. You should keep your documents in a safe place, but let your loved ones know where those documents will be kept. In addition, you should create a comprehensive list of who to contact in the event of your disability or death (including key advisors) and the passwords to any internet accounts that you have. The time that you spend getting and keeping your affairs in order will be invaluable to your loved ones upon your disability or death.

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Estate Planning - Wills

April 2014

If my estate plan is built around my revocable living trust, why do I need a Will too?

In most cases, when you have a revocable living trust and have transferred assets into the name of the trust, your trust serves as a substitute for a Will to deal with your estate after your death. However, there may be assets that were not transferred to the name of the trust or are not controlled by your trust at your death--for example, forgotten savings bonds or a tax refund may be in your name and not the name of your trust. Any assets not owned by your trust will go through probate and will be subject to state statutes of intestacy (which may not be consistent with your trust) if you do not have a Will. Therefore, a "pour-over Will" is necessary to direct your probate estate to be paid or transferred to your trust, so that your intentions in your trust control your entire estate.

November 2013

How do I nominate a guardian for my minor children?

One very important reason for having a Will, regardless of whether you have any probate property, is that a Will is the only place where you can nominate someone to serve as guardian for your minor children. This provision becomes significant when both parents pass away or when a surviving parent is unable to care for the children. If you are married and your spouse is the other parent of your children, you should nominate at least one back-up guardian. Your spouse should name the same people, in the same order, in his or her Will. If you are not married, and the other parent of your children is alive and has not given up his or her parental rights, it is likely that the court will have a preference for the other parent. Although the court will appoint a guardian of the estate to handle the child's financial affairs, parents with young children should also consider creating a trust to hold the property being given to the children.

May 2013

I want to plan for my digital estate. Is writing down my usernames and passwords in my Will the best approach when planning for digital assets?

No. Your Will is not the best place to save this information. One reason is that provisions regarding digital assets may quickly become outdated and information might change before a new Will can be executed. Likewise, it may be critical to access the assets quickly. Another reason to avoid putting sensitive information in your Will is that Wills become available in public records. A more protective approach might be having a separate document containing detailed account information. It is still recommended that you develop an inventory of your digital assets including a list of how and where they are held, along with usernames, passwords and answers to "secret" questions. If you wish to keep this information in a document, you should update it frequently and save it to a USB flash drive or in the cloud. Then, you should make sure that a family member or friend knows the password to access the information.

February 2013

I own recreational property with my brother as joints tenants. I would like to leave my interest in the cabin to my wife. Can I do this with a specific statement in my Will?

No. Wisconsin law considers real estate held as joint tenants with rights of survivorship to be non-probate property. If you want to use a Will, you will need to do two things. First, create a Will that leaves the cabin to your wife. Second, you need to change the ownership of the cabin from joint tenancy to a form that does not include survivorship by having a new deed drafted for the cabin. In that way, your interest in the cabin becomes probate property and your Will can transfer the interest to your wife.

April 2012

My husband has a son from a prior marriage and my husband doesn't have a will. Should I be concerned?

Yes. If your husband dies without a will, the intestacy law applies (Ch. 852), and his son could claim up to about half of all of the assets you and your husband own. You would only retain your half marital property interest in assets and be able to make some "spousal elections" related to personal property and your home. Unfortunately, the intestacy law applies to all assets, even assets with beneficiary designations. If your husband has a valid will, the intestacy law would not apply to ANY of the assets.

March 2012

Are there any reasons why I should not write my own will?

While you will save money if you prepare your own will, you or your family may find that hundreds or thousands of dollars in legal costs must be spent later if incorrect or incomplete language was included within your will. In addition, if you write your own will, you and your family may be faced with a result that you did not intend because of incorrect or incomplete language. Before you spend much time writing your will, we recommend that you consult with an estate planning attorney to discuss ways to minimize the costs associated with your estate plan.

January 2012

I need to make changes to my Will. Can I cross out the section in my Will that needs to be changed and write in how I want it to read?

No. In Wisconsin, any change to a Will must be witnessed by two disinterested witnesses in order for the change to be valid. A note in the margin or striking out words will likely be ignored after your death even if you sign or initial the changes. It may even open the door for a Will contest. It is extremely important that you follow the proper formalities when making changes to your Will and other estate planning documents. Therefore, it is best to hire an estate planning attorney to review your current Will with you and to prepare a document called a "Codicil" that details the changes to your Will. This will make sure that the changes you wanted will actually be effective.

August 2011

What arguments could be used to challenge the validity of a Will?

An argument could be made that the Will wasn't witnessed properly. In Wisconsin, the signature of the testator (man) or testatrix (woman) on the Will must be witnessed by 2 adults, and the witnesses must both be present at the time the Will is signed. Other challenges could be undue influence or lack of capacity. An attorney who is assisting a client in executing their Will should follow standard procedures to be sure the Will is witnessed properly and the client understands the document. Of course, the attorney should also carefully assess the circumstances surrounding the creation of the Will to make sure the client is not being pressured by someone to create a Will that favors certain people or organizations.

March 2011

I would like to make sure that my affairs are in order so I am considering having a Will prepared. Will this be enough?

Having a Will prepared is a good start, but thorough estate planning involves more that just preparing a Will. A comprehensive estate plan includes coordinating the distribution of all of your assets after you die, i.e., property subject to probate, retirement accounts, life insurance, payable on death accounts and property that you own jointly with another person; and planning for your incapacity. This means that, in addition to a Will, you should consider having prepared powers of attorney for health and financial matters and a living will. In addition, you may want to consider purchasing long term care insurance to cover the costs of assisted living or nursing home care should you become unable to safely care for yourself.

October 2010

I have two cats and I live alone. I am worried that they will not be taken care of should something happen to me. What should I do?

First, talk with your family and friends to find out who would be able to care for your pets should something happen to you. Second, write down who has agreed to care for your pets along with instructions for the care of your pets so that your family and friends will know what to do. Third, you may want to consider including a section in your Will that distributes your pets along with a sum of money to the person who had agreed to care for your pets so that they will have sufficient resources to do so.

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Estate Planning - Beneficiary Designations

April 2014

When my broker asked if I wanted to designate my account "transfer on death" to my spouse or children, I completed the beneficiary forms she provided. Isn't that the best way to avoid additional expense for preparing estate planning documents and for avoiding probate?

Beneficiary designations for brokerage accounts, retirement accounts, and life insurance are very common to transfer those assets to intended recipients after the death of the owner. In many cases, such beneficiary designations are advisable when they are consistent with a person's overall estate plan. On the other hand, there may be instances when outright transfers may not be advisable--such as planning with a trust for a spouse, children, or grandchildren--where the beneficiary designation circumvents and undermines the estate plan. Consulting with an estate planning attorney is recommended to develop a comprehensive estate plan that considers the use of beneficiary designations, along with Wills and trusts, as appropriate for your individual situation.

September 2013

I have children from a prior marriage. What can I do to ensure that they are not disinherited if I pass away before my spouse?

If you leave all of your assets to your spouse, you run the risk that your spouse may change his or her estate plan to disinherit your children at your spouse's death. This is true whether your children are from your current marriage or from a prior relationship. There are several planning approaches to address this concern. For example, you can leave all or part of your assets in Trust for your spouse for his or her lifetime during which time the spouse can get income and/or principal from the Trust. Such Trusts can then provide that at your spouse's death, the remaining assets will be distributed to your children.

February 2013

I was reviewing my retirement plan the other day and noticed that the primary beneficiary designation was "to my estate." Ultimately, I would like my IRA to go to my children. Should I change my beneficiary designation?

If your goal is to allow the beneficiary the option of maintaining tax deferral for as long as possible, you need to be careful with beneficiary designations. If you say "to my estate," the benefits will either be paid out as a lump sum or paid out over a very short period of time. The income taxes will be due with the filing of the tax return for the year the payments are made. If you list your children by name, they may able to hold the account as an "inherited IRA account" and maintain the tax deferral option for his/her lifetime. This method works well for adult children.

February 2013

What if my children are minors and I want to leave my IRA to them?

You can name a minor as an IRA beneficiary, but you should take some extra precautions to make sure your wishes are carried out. Naming young people as the beneficiary of an IRA can be attractive since the beneficiary can stretch out the required withdrawals across his or her life expectancy. The younger the beneficiary, the less they have to withdraw each year and pay in taxes, and the more time the assets can continue to increase, tax-deferred.

However, a minor child cannot inherit an IRA in his or her name until the age of majority. A trustee, custodian or a guardian would have to handle the account and make the annual distributions on the child's behalf. If you die without creating a Trust for your children as part of your estate plan, it will be necessary for your family or friends to go to court to appoint a guardian to manage the account. Also, if you want to exercise greater levels of post-death control or wish to have some control over the inherited IRA beyond the minor's age of majority, you can consider having the trust stay in effect until the child is older (e.g., 25 or 30).

May 2012

What would happen if my children are younger than 18 when I die and they are beneficiaries of my life insurance?

The insurance company wouldn't be able to pay the benefits to your children directly so the company would require that the benefits be paid to a Guardian. The Guardian would have to be appointed by the Court. Guardianship litigation can be expensive in some cases. To avoid guardianship litigation, you can include a Children's Trust in your Will or Revocable Trust and name a trustee. The insurance company will pay the benefits to the trustee, if you provide clear directions in the beneficiary form.

August 2010

There has been so much upheaval in the financial services industry. I think that the company that I purchased my annuity from many years ago was bought by another company. Should this concern me?

Yes. Unfortunately, sometimes certain important documents, such as beneficiary designation forms, can get lost or misplaced during a transition. This may lead to unintended distribution and/or income tax consequences after a person has died. If there has been a change in ownership of the original company where you purchased your annuity, you should contact the new company and request a copy of your beneficiary designation form. This will let you know if the company still has the form and, if so, who your named beneficiaries are. If you find out that the company no longer has the form or you wish to name different people than are currently listed on your form, you will be able to complete a new one.

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Estate Planning - Financial and Health Care Powers of Attorney

June 2014

My mother just had a severe stroke and her Health Care Power of Attorney has been activated. As her agent under the Power of Attorney, can I admit her to the nursing home for her care?

A Wisconsin Health Care Power of Attorney allows you as your mother's agent to admit her to nursing home care if she has answered "Yes" to the specific question to authorize you to do so. (A "Yes" to a parallel question is required for admission to an assisted living facility, known under Wisconsin law as a "community based residential facility.") For care longer than for respite or recuperation, specific authority for nursing home admission is required in the Health Care Power of Attorney. Furthermore, even if she answered "Yes" in the Health Care Power of Attorney, if your mother objects to the admission to the nursing home, then you cannot admit her with the Power of Attorney. In the case of her objection, a court-ordered guardianship and protective placement is required.

December 2013

How should I decide whom to name as my power of attorney?

A durable power of attorney, whether for health care or for finances, is effective even when (or especially when) you are incapacitated, and your agent must make decisions for you. Therefore, it is crucial that you choose an agent whom you trust 100% as your substitute decision-maker. In addition, you will want to choose someone who has the abilities and skills to make the appropriate decisions under the circumstances. For health care decisions, you should consider whether your agent can handle stressful health crises, can advocate for your best care, and can make difficult medical decisions to carry out your wishes. For an agent under a financial power of attorney, you will want to choose someone who can handle your money and property appropriately, whether straightforward tasks such as banking and bill paying, or more complex transactions like selling real estate and managing investments.

April 2013

What is the difference between a Power of Attorney for Health Care and a Declaration to Physicians/Living Will?

Under a Power of Attorney for Health Care you appoint another person as your agent and give the agent the authority, subject to certain restrictions, to make health care decisions on your behalf when you cannot do so due to "incapacity." A power of attorney is distinguished from a Declaration to Physicians (sometimes referred to as a "living will") by the fact that it grants an agent power to act in respect to essentially all of your health matters. The Declaration to Physicians merely states life and death preferences such as the desire not to have life-sustaining procedures or feeding tubes and is considered a directive that your physician should follow.

September 2012

My 19 year old son is heading off to college. Should he have power of attorney documents?

Yes. Anyone who is over 18 should have power of attorney documents for both health care and finances. Since your son is over 18, you are no longer considered his guardian, so you no longer have the right to obtain his medical information or make medical or financial decisions on his behalf. Most importantly, if your son needed immediate medical attention and was unable to communicate for some reason, no one (even you) would have the authority to authorize treatment or obtain information about his medical status.

August 2012

I just moved to Wisconsin from Florida. Do I need to create all new estate planning documents? I already have a Will and power of attorney documents.

You may not need to create all new documents. Wisconsin will honor a Will created in another state if it was witnessed properly and your financial power of attorney may contain all of the necessary provisions. However, your Power of Attorney for Health Care may need to be revoked and replaced with a Wisconsin Power of Attorney for Health Care. There are several provisions in the Wisconsin form that are unique and must be included to assure that your "agent" has the authority to make the decisions that don't require court involvement. It is a good idea to have your documents reviewed.

May 2012

Does completing a Power of Attorney for Health Care form eliminate the need for a Guardianship in the future?

Not entirely. A Power of Attorney for Health Care (POAHC) could reduce the possibility that a court would need to appoint a Guardian of the Person, if the form is completed correctly (you check the "yes" answers to the questions about admission to a nursing home or a community-based residential facility). However, if you haven't completed a Power of Attorney for Finances and Property, a court will likely need to appoint a Guardian of the Estate to handle your financial decisions. Generally, both forms are necessary.

March 2012

My friends from UW and I are going on spring break. Is there anything I should bring related to my estate planning documents?

Yes. You should bring copies of your Health Care Power of Attorney and Living Will. If during your trip you need medical help and can't make your own health care decisions, these documents will provide the doctor with contact information for your health care agent, and also let the doctor know your desires about life sustaining care in the event your agent cannot be reached. Ideally, you want to carry these documents with you at all times and make sure that your agents have copies as well. You might also want to carry a card in your wallet or purse indicating that you have a health care agent and provide the contact information for your agent.

December 2011

Are there any bargains in estate planning?

Generally speaking, estate planning is a "bargain" because one of the primary purposes is to avoid litigation cost and reduce or eliminate taxes. More specifically, there are some real DOOR BUSTERS. The Transfer on Death (TOD) Deed costs less than $200 and avoids the cost of probate litigation ($2000 or more). The Power of Attorney for Finances and Health Care documents cost less than $500 and avoid the cost of Guardianship litigation ($2000 - $10,000 or more). Adding Payable on Death (POD) beneficiaries to your bank accounts is free and can save thousands in legal fees to transfer the same assets through a probate process. These strategies are not recommended in all situations, but should be considered. Consult with an attorney to determine if these strategies will work for you.

November 2011

If my mother's Power of Attorney for Health Care has been activated, should I assume that she can't sign a new Power of Attorney for Finances and Property?

No. Your mother may be declared incapacitated for the purpose of making health care decisions, but she may still have the capacity to complete a Power of Attorney for Finances and Property. An attorney who drafts the Power of Attorney for Finances and Property will be able to make an assessment as to whether your mother has the capacity to sign that type of document. The attorney will need to ask your mother a series of questions to determine if she understands the form, knows what she owns and is consistent in expressing her wishes about who should act as her agent. However, if the attorney believes she lacks the capacity to sign a Power of Attorney for Finances and Property, she will likely need a court-appointed guardian of the estate.

September 2011

Can I appoint both of my daughters as my health care agent(s) to act together in all of my health care decisions?

No. You can't appoint co-agents on a Health Care Power of Attorney form because the law that controls this form doesn't allow co-agents. You can appoint one of your daughters as the first agent and the other daughter as the alternate, however. You should discuss your wishes regarding health care with your daughters before appointing either of them. You'll want to make sure that they are willing to make decisions that match your wishes.

July 2010

I heard from a friend that Wisconsin changed its statutory Power of Attorney for Finances and Property form. Is that true and do I need to revise mine?

Recently, Wisconsin adopted the new Uniform Power of Attorney for Finances and Property Act. The Act takes effect September 1, 2010 and includes, among other things, an updated statutory power of attorney form. If you have a Power of Attorney for Finances and Property that was properly executed before the Act's effective date, your Power of Attorney will remain valid. If, however, you would like to take full advantage of the Act's new provisions, you should have your Power of Attorney for Finances and Property reviewed by a knowledgeable attorney and possibly modified to accommodate the new provisions of the Act.

June 2010

How will the new Power of Attorney for Finances law affect me if I already have a Power of Attorney for Finances?

The new Power of Attorney for Finances law (Chapter 244: Uniform Power of Attorney for Finances and Property) goes into effect on September 1, 2010. The new law doesn't invalidate prior Power of Attorney forms. However, the new law includes rules that govern all powers of attorney (for finances). If your power of attorney does not specifically cover an issue or is unclear about a particular issue, the new Chapter 244 will be the default that you, your agent and anyone who accepts the power of attorney will have to follow. The new statutory form will be available online after September 1, 2010 at: www.dhs.wisconsin.gov/forms/AdvDirectives/index.htm. Before using the statutory form or any other online form, consider consulting with an attorney to determine if you need a form that includes long term care planning language or tax planning provisions. A power of attorney for finances can be a very powerful tool to assure your financial security and protect your estate planning goals.

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Estate Administration

February 2014

What is "Probate Property"?

A will only determines who receives "probate property." In general, probate property includes all of your property, with some important exceptions. Probate property does not include property that you own jointly with another with rights of survivorship. For example, if you and another jointly hold title to real estate as joint tenants, and one of you dies, the deceased owner's interest in the real estate passes to the surviving owner, regardless of what the deceased owner's will says. Probate property does not include assets that are owned by a Trust. Probate property does not include property that is disposed of at your passing according to a contractual beneficiary designation. Examples of such "contractual assets" include life insurance policies, annuities, IRA's, 401(k)'s, pensions, payable-on-death (POD) accounts, etc. Upon death, your contractual assets are left to whomever you have named as a beneficiary. However, Trust property and contractual assets can be converted into a probate asset if you name your "estate" as the beneficiary, thereby allowing the terms of your will to determine where the asset goes. Extreme caution should be used in naming your estate as the beneficiary. Therefore, do not make any such conversions before consulting with your estate planning attorney.

September 2013

Is it true that under Act 20, the Wisconsin Department of Health Services ("DHS") can make an estate recovery claim at the death of a surviving spouse to "pay back" any Medicaid received by a predeceased spouse who received benefits?

Yes, if the estate recovery changes are implemented as stated in the Budget Bill. The new law will permit DHS to pursue recovery claims against the estates of surviving spouses, even if the surviving spouse did not receive any Medicaid benefits. Act 20 expands the types of property subject to Medicaid estate recovery to include property in which a Medicaid recipient or a surviving spouse held any legal title or interest immediately before death. The new law creates a presumption that property owned by spouses up to five years before a Medicaid Application is filed and any property owned at death by a surviving spouse is considered marital property, and therefore subject to estate recovery. This expansion of estate recovery will also allow for claims on property transferred by Transfer on Death and other non-probate instruments, such as Life Estates and Living Trusts.

July 2013

Is there an option other than Probate available when someone dies with a small estate?

Yes, it may be possible to use a Transfer by Affidavit. The Transfer by Affidavit is a method of transferring assets totaling $50,000 or less from someone who has died to an heir or legal guardian. In order to determine whether this option may be used we must add up the date of death value of all assets in the decedent's individual name and that do not have a beneficiary designation. The $50,000 amount is gross value, and not offset by any debt or lien on the assets. If the total value of these assets exceeds $50,000, Probate will most likely be required for the estate. If the total value is less than $50,000, an heir, trustee of trust created by decedent, or person who was guardian of the decedent at the time of decedent's death may have the property transferred by completing a Transfer by Affidavit and delivering it to the person who holds the property. If the assets include an interest in real estate, the Affidavit must also be filed with the Register of Deeds. If the decedent received medical assistance payments, the Affidavit must be sent to the Estate Recovery Program, a program administered by the Wisconsin Department of Health Services.

June 2013

What is the difference between the Inventory and Final Account in a Probate proceeding?

The Inventory is a document that must be filed with the court during an informal or formal probate process. The Final Account is required in a formal probate and may be required in an informal probate. The Inventory lists all of the probate assets (real estate, personal property including vehicles and boats, checking accounts, etc.) in which the decedent had an interest on the date of death and the value of such assets. Non-probate assets, which include assets that have beneficiary or payable on death designations, are typically not included on the Inventory. The Final Account summarizes all of the estate transactions. The Final Account sets forth all of the income received by the Estate since the date of death and correspondingly shows all of the expenditures out of the Estate since the date of death.

April 2013

I have a number of online bank accounts and like to share pictures and messages on Facebook. I am worried about what will happen to my accounts if something were to happen to me. Can I give my personal representative the power to manage my online accounts after I pass away?

The need for planning with digital assets has become more important with the growth of technology. Digital assets include the digital rights to pictures, websites, blogs, social media and e-mail accounts, and local hard-drive storage. Access to your online accounts and assets such as photographs is important to consider. You may want someone to gain access quickly, or you may want someone to limit access quickly. The State of Wisconsin has not yet passed legislation relating the power of personal representatives to have access to and control of a decedent's digital assets. Social media companies rely on different and confusing terms of service agreements, and the probate court has its own set of procedures. Given the current status of the law, and differing contracts, it is important that your estate planning documents provide your personal representative the authority to access and control your online accounts. Even if these digital assets have limited or no financial value, you should still plan to preserve them if they have sentimental value. You may also want to consider planning in the event you become incapacitated to make sure someone has access to business and/or personal online accounts, including your e-mail accounts.

August 2012

If my mother has a revocable trust and I am her successor trustee, will I need to hire an attorney to administer the trust after she dies?

I would recommend that you consult with an attorney to be sure you know how to set up and maintain a record keeping system for the administration of the trust. You should document all of your actions. You won't be under court supervision, but you have a legal obligation to keep complete and accurate records of every transaction. For example, you will need to keep a copy of each bill payment and obtain receipts for every distribution to the beneficiaries. You'll also need to work closely with an accountant who is experienced in completing income tax AND fiduciary tax returns.

My father passed away and I am helping my mother settle my father's estate. He had a will that left everything to my mother, but named me as his personal representative. Most of his assets were jointly titled with my mother, but I found some stock certificates in their safety deposit box that are titled in his name only. What should I do?

The stock certificates will eventually need to be transferred to your mother based on the terms of your father's will. But before that can be accomplished, an analysis must be done to determine which of your father's assets (if any) will require the involvement of the probate court to transfer that asset to your mother. Please gather recent information related to your parents' assets and liabilities and consider contacting a lawyer to help you get started.

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Elder Law and Medicaid Planning

February 2014

What is "elder law"?

Elder law focuses various practices of law -- estate planning, guardianship, long-term care planning, real estate, and contract law -- on the needs and issues of individuals facing diminished physical or mental capacity due to age or disability. Often, elder law entails advance and flexible estate planning with health care and financial powers of attorney, real estate, wills, and trusts. A guardianship may be useful or necessary in some cases. In many cases, long-term care planning assists individuals or married couples maximize their income and assets while availing themselves of public benefits, such as Medicaid.

February 2014

What is a conservatorship?

In Wisconsin, a conservatorship is a voluntary arrangement, where an individual asks the court to appoint someone (the conservator) to manage the individual's finances because the individual is unable to do so for him or herself. While similar to a guardianship in many ways, a conservatorship does not require the court to declare the individual incompetent. Although arranging a conservatorship is more involved than naming a financial power of attorney, it may be preferable if the individual wants court involvement to approve and supervise the conservator.

November 2013

How can I possibly pay for long-term care if I can no longer live independently at home?

As people enter their later years, many worry about covering the high costs of assisted living or skilled nursing care needs. Depending on one's circumstances and needs, such care can range from a few thousand dollars to over $10,000 per month. So, how can a person plan for such expenses? Some people can pay out of pocket from income and assets, at least for a certain period of time. For others, long-term care insurance provides the assurance that care costs will be covered without financial hardship. In limited circumstances, such as for rehabilitation following a qualifying hospitalization, Medicare covers some or all of skilled nursing care expenses. If an individual or his or her spouse is a military veteran, some benefits may be available to assist with the financial costs of care. For many individuals who need long-term institutional care, they must seek Medicaid benefits after they have exhausted most of their assets. In cases with a spouse living at home, additional spousal impoverishment protections allow the spouse to keep certain assets for their own support. Because planning and coordinating various assets and programs is essential for maximizing one's financial resources for long-term care, sound advice from a well-qualified attorney can provide peace of mind and strategic options for an individual's and family's needs.

November 2013

Can I put my assets into a trust and qualify for Medicaid benefits sooner?

With one significant exception, many types of trusts are not very workable for Medicaid planning, especially if the goal is to have the trust benefit the individual who puts assets into the trust. If the trust is irrevocable and too restrictive, then the creator loses any benefit from the trust and may be penalized for giving away ("divesting") property if he or she applies for Medicaid within five years of transferring assets to the trust. Alternatively, if the individual has access to any of the trust assets, some or all of the trust will be counted as an asset for the individual's Medicaid eligibility. One significant exception is a pooled and community special needs trust created by the individual for his or her own benefit. Such a trust is not counted for Medicaid eligibility purposes and transferring funds to such a trust is not penalized as a divestment. During the person's lifetime, the trust account is available to supplement his or her personal or care needs beyond what Medicaid provides. In exchange for the exempt status of such a trust account, if there are any assets remaining in the trust at the individual's death, the state may be reimbursed for Medicaid expenditures before any of the funds may be distributed to the person's heirs.

August 2013

Now that the Budget Bill passed, when will the new rules take effect?

Governor Walker signed the 2013-15 budget into law on June 30, 2013, bringing numerous changes to the Medicaid program in Wisconsin. The proposals that will affect elderly and/or disabled were passed with effective dates of July 1st and/or October 1st. However, a last minute amendment was added to the budget bill delaying implementation of the budget provisions on estate recovery and divestment. The next step in the legislative process is for the Department of Health Services to submit proposed rules on how to implement the new laws to the Joint Finance Committee of the Wisconsin Legislature for approval. The timeline for this procedure is unknown at this time.

June 2013

What impact will the Wisconsin 2013-15 Budget Bill proposal have on Medicaid applicants?

The Governor's budget, specifically as it relates to Medicaid applicants, will make some sweeping changes to the estate recovery program and divestment practices. This legislation, if enacted, will change when and how the State of Wisconsin can recover against property such as life estates, trusts, promissory notes and other assets. The law proposes to add additional requirements on trustees of living trusts; this appears to apply broadly to all living trusts, revocable and irrevocable, and in addition, imposes personal liability on trustees for failure to comply, or timely comply, with the Law. The Budget Proposal also impacts marital property in Wisconsin and will alter certain spousal impoverishment protections. We anticipate that the proposed law will affect most if not all elderly and/or disabled citizens who may need Medicaid, and we will continue to closely monitor the legislation.

May 2013

Can I give away up to $14,000 a year without worrying about the "look-back" period of Medicaid?

No. The IRS gift tax rules should not be confused with the Medicaid divestment rules. Under the federal gift tax rules there is an annual exclusion from the gift tax for gifts under $14,000 in 2013. If your total gifts during the year to a recipient exceed the $14,000 annual exclusion amount, then you will have to report those gifts to the IRS. The Medicaid rule on gifts is completely different. The Medicaid "look-back" is the period of time during which the state "looks back" to see whether you (or your spouse) made a gift. A gift of ANY size within the five (5) year look-back period can cause a penalty period under the Medicaid rules.

October 2012

What is Special Needs Planning for the elderly or disabled?

Special Needs Planning is a series of steps an individual or couple can take to assure payment of long-term care costs (caregiver costs, assisted living or nursing home costs, etc.) using a combination of government benefits, insurance, and personal income. The primary goal is to provide excellent care and services without impoverishing a spouse or depleting the entire estate. Other goals include avoiding unnecessary court involvement (e.g., guardianship) and reducing taxes (e.g., capital gain taxes). Special Needs Planning is an essential component of a complete estate plan for most low-middle income families, given the high cost of long-term care.

July 2012

My mother is being pressured into giving money to my sister and she can barely pay her own bills. What can I do to protect my mother from being pressured into poor financial decisions?

If your mother has not been declared incompetent and is subject to a Guardianship Order, she is "legally" able to do anything she wishes with her money or assets. However, the situation you're describing may be a type of financial abuse. Sometimes, the abuse starts with small gifts or loans, but ends with complete loss of assets and accumulation of debt. If you and your mother can discuss the situation and she agrees that she is easily coerced by your sister into making bad decisions, she may be willing to consider a Conservatorship in which you would be named her Conservator and have the authority to handle her finances. She would not have to be found incompetent to have a Conservator appointed by the Court.

June 2012

If I give my home to my children now, will my home be considered "unavailable" if I need to apply for Medicaid someday?

Before you take such a major step, you should consider many other options that would allow you to maintain control of your home, avoid capital gains taxes and protect your property from long term care costs. Making an outright transfer of your home to your children will subject the home to your children's creditors and claims by their spouses. Such a transfer could also result in sizable capital gains taxes when the home is sold. The other issue to consider is the Medicaid "look-back period" of five (5) years. Any gift given within five (5) years of your application for Medicaid will result in denial of benefits for a period of time from several months to several years depending on the size of the gift.

October 2011

I am running out of money to pay for assisted living costs, and I am the widow of a veteran. Are there any VA benefits that could help pay my assisted living costs?

Yes. There is a benefit that many people are not aware of called "Aid and Attendance" -- a type of VA pension. This benefit may be available to you if you meet the income and asset criteria and if your spouse was a veteran who served at least 90 days of active-duty service with at least one day during a war-time period. The amount you could receive may cover the difference between your income and the cost of assisted living. You also need to be aware that the rules that apply to VA benefits are quite different from the rules that apply to Medicaid benefits, so you'll want to talk with an Elder Law attorney who assists clients with Medicaid Applications and has maintained their accreditation with the VA.

November 2010

If my spouse is receiving Medicaid benefits to cover long term care costs, can I change my Will or beneficiary forms?

Yes. After your spouse is found eligible for Medicaid benefits to cover long term care services, you should be able to change your Will or beneficiary forms. Be careful! You will need to create or amend a Marital Property Agreement to classify your assets, if you plan to leave some or all of your assets to people other than your spouse. If your spouse is unable to sign the new document, an agent under your spouse's Durable Power of Attorney may have the power to sign on behalf of your spouse. If not, the Court could authorize creation or amendment of a Marital Property Agreement in response to a special Guardianship Petition.

October 2010

Before I agree to act as someone's financial agent, what should I ask?

Before agreeing to act as a financial agent for a friend or a relative, you should ask to see a draft of the Financial Power of Attorney (FPOA) form. You'll want to check the form to see when you actually start acting as the "agent." One type of FPOA says that your authority as "agent" doesn't begin until the person's physician or a psychiatrist says that the person lacks the capacity to handle his or her financial affairs. This type of FPOA is called a "Springing Power of Attorney." The other type of FPOA is effective immediately and doesn't require a physician or psychiatrist's opinion about the person's capacity. This second type of FPOA is used quite often because it is so convenient. However, a form that is effective immediately can leave you wondering when you should step in and start handling the finances. You'll want to clarify exactly when the person who is appointing you to act as his or her "agent" expects you to begin helping or wants you to take over all of the tasks.

September 2010

I am thinking about becoming an organ donor. How do I do this? Also, I have poor eyesight and diabetes. Will this prevent me from being able to donate?

First, tell your family that you wish to donate your organs upon your death. If you have a Power of Attorney for Health Care, make sure that your agents also know your wishes. Second, sign the back of your driver's license or Wisconsin ID card. Third, make sure that your Power of Attorney for Health Care indicates your desire to become an organ donor on the section entitled "Anatomical Gifts." Don't let poor eyesight and diabetes prevent you from indicating your desire to be an organ donor. After your death, a medical evaluation will be done to determine what organs are suitable for donation.

August 2010

Is it necessary to have a Service Contract with my son if he is going to do some work on my home and I think that someday I may need to apply for Medicaid?

Yes. A recent ruling by an administrative law judge (MEH Decision MDV 16/107) makes it clear that you'll need to prove that the money you paid to your son was not a gift and therefore a "divestment." To prove the payment was not a gift, you should have a Service Contract that was signed BEFORE you paid your son. In the past, some attorneys would rely on an MEH rule that allowed payments to relatives without a contract if the payments were considered reasonable for the type of work being performed (for example, caregiver services, remodeling work, etc.). This recent ruling leaves no doubt that payments to relatives will be considered gifts, even if the payment is reasonable and the amount is low. The solution is to seek the assistance of an elder law attorney to draft a Service Contract between you and your son.

July 2010

If I agree to act as someone's Guardian or Financial Agent, will I be held personally liable for that person's bills?

No, you won't be expected to pay the bills of the person who appointed you to act as his or her agent from your funds or need to worry about that person's creditors being able to claim your assets. However, there are rules you must follow as an agent (also referred to as a fiduciary). If you violate the rules for fiduciaries, there could be civil penalties. Some improper actions taken by a financial agent could even result in criminal penalties. If you are ever unsure about your responsibilities as an agent, you should consider hiring an attorney to provide you with advice related to your fiduciary role.

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Planning for Family Members with Special Needs

December 2013

How can parents of a child with special needs provide for the long-term personal care of their child?

When a child has special needs, the parents' care and planning often extends throughout the child's lifetime. When the child approaches age 18, if the child's disability impairs his or her ability to make decisions related to health care, living arrangements, and educational and vocational programs, a guardian of the person will be necessary to have someone act on behalf of the adult child and in the child's best interest. In a guardianship proceeding, parents are often named the child's legal guardian, with a standby guardian named as a back-up. If the adult child does not require a guardian but wishes to keep parents involved in educational, financial, and health care decisions, a variety of powers of attorney and releases are advisable to allow the parents to remain engaged in the child's activities and decisions that would otherwise be private or confidential.

May 2013

My parents want to leave money to my children in their Wills. I have a disabled child. What should I tell her grandparents?

Family members do not need to disinherit a child simply because the child has a disability. Careful planning must be done, however, to prevent a situation where your child is named as a beneficiary and finds herself at risk of losing some benefits necessary to cover her basic needs. If family members are considering making your child a beneficiary of their Will, they must name your child's special needs trust as the beneficiary of that child's share. Naming her as a direct beneficiary of assets could cause her to temporarily or permanently lose benefits. Special needs trusts, such as WisPACT II Trust, are a good option in that they can be used to pay for things that the government benefits will not cover such as travel expenses, education expenses, and other things that could enhance your child's life.

September 2012

My teenage son has Autism, and I'm sure he will need a Guardian when he is an adult. When should I start the Guardianship process?

I would recommend that you start the Guardianship process when your son is 17 1/2. The Court can enter the Order three months before his 18th birthday. It is wise to start the process early to make sure that the Guardianship Orders are in effect before your son turns 18. If the Hearing has to be rescheduled for some reason (illness, weather, etc.), causing a delay, the Orders will still be in effect when your son is 18.

January 2012

I'm trying to help my mother apply for Medicaid so she can be considered financially eligible for the Partnership Program. Will any of her assets be considered exempt?

Yes. You probably know that your mother can't have more than $2,000 in non-exempt assets. So, it is very important to determine which assets she can keep before you advise her to sell assets or spend down to $2,000. Some of the assets that don't count are her home, her personal property (furniture, jewelry, clothing, etc.), a car of any value, and a pre-paid funeral plan. These are the most common exempt assets. However, if your mother owns other assets (for example, an annuity or a rental property), you should talk with an elder law attorney or a Benefit Specialist in your county to see if those assets might also be considered exempt.

June 2011

My child is 17-1/2 and he is mentally disabled. When can I apply for SSI benefits and start the guardianship process?

You can start the Guardianship process now and you can submit his SSI application one month before he turns 18. It is advisable to start these processes before he turns 18 to avoid any delays in setting up the Guardianship and any loss of benefits that he'll be entitled to receive. Before starting the Guardianship process you should consider whether your son needs both the Guardian of the Person and the Guardian of the Estate. If your son's limitations are mild, he may not need both types of Guardians. For example, an alternative to Guardian of the Estate could be an "agent" under a Durable Power of Attorney.

May 2011

My daughter is legally competent but she has a disability that creates challenges or even roadblocks for her when she tries to handle all of the tasks involved in pursuing an education beyond high school. Can she appoint me to act as her "agent"?

Yes. Your daughter could sign a "Special Durable Power of Attorney for Matters Concerning Education" and appoint you as her agent. She could also appoint an alternate agent. This form covers tasks that the other Powers of Attorney (financial or health care) don't cover. For example, you would be able to have access to school records and other personal education information and be able to negotiate with service providers for reasonable accommodations for your daughter. By giving you the authority to handle tasks that could be overwhelming to your daughter, she'll be able to focus on her course work and maximize her chances of success as a student.

April 2011

As the parent of a special needs child I often feel overwhelmed trying to stay up-to-date with all of the information that will affect my child's financial future. What do you suggest?

Staying up-to-date in all areas of the law and financial matters that could possibly affect your child's financial future is only possible if you find a way to network with other parents who are dealing with the same issues AND consult regularly with your "team" of professionals who focus in the areas of estate planning, guardianship, trusts and financial planning. Trying to "go it alone" is a recipe for frustration and failure. There are so many programs and rules to become familiar with that it would take years of study and you don't have that kind of time. You need to know how to protect your child's financial future now. Our office offers free workshops on these issues. See our News & Events page for announcements of these workshops.

May 2010

Our developmentally disabled child turns 18 years old soon. What should we do to make sure we, as his parents, can continue to make decisions on his behalf and protect him from people that could take advantage of him financially?

You can file for Guardianship of both the "Person" and the "Estate" before he turns 18 so the Guardianship would be in effect on his 18th birthday. As Guardian of the Person you could make decisions, on his behalf, about living arrangements, health care and many other non-financial decisions. As Guardian of the Estate you could make his financial decisions, and protect him from being coerced into purchases or contracts that he cannot afford. In addition to acting as his Guardian, you should consider setting up a Special Needs Trust to protect assets that he may inherit from you or other family members. A Special Needs Trust can hold assets of any amount and pay for expenses that his disability benefits or medical benefits don't cover. An Elder Law attorney can assist you with the Guardianship process and creating a Special Needs Trust for your child.

May 2010

What should I think about when choosing a guardian for my child?

There are two types of guardians that can be named if a child's parents are dead or incapacitated: Guardian of the Estate and Guardian of the Person. A Guardian of the Estate is responsible for the child's finances, while a Guardian of the Person is responsible for the health and well-being of the child. Different people can be chosen for each job and an effort should be made to match the attributes of the person with the job. In addition, consideration should be given to naming people with similar values to your own, who are financially stable, and who will be able to take care of your child through to adulthood. It is also important to talk with the people who you would like to serve as guardian prior to naming them as such. Finally, once you select a guardian for your child, it will be necessary to talk with an attorney to make sure that your selection is legally binding.

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Taxes and Gifting

December 2013

What will be the limits for tax-free gifts in 2014?

There will be no change in the annual gift tax exclusion, which allows you to give $14,000 per person without it counting against the lifetime exemption. Spouses can also combine their annual exclusions to double the size of a tax-free gift to $28,000. The lifetime gift tax and the estate tax exclusion amount is adjusted for inflation, so this amount will go up to $5.34 million per person in 2014, from $5.25 million in 2013. Widows and widowers can add any unused exclusion of the deceased spouse to allow a transfer up to $10.68 million tax-free by use of "portability."

March 2013

We have a Joint Revocable Trust that is a number of years old that includes formula clauses in connection with estate tax planning. Should I be concerned with those formulas now that the federal estate tax laws have changed?

Many existing estate plans contain "formula" clauses for purposes of saving estate tax. As a result of the current large exclusion amount ($5 million per person) and the portability option, those clauses may have unintended consequences. We advise all of our clients with formula clauses in their estate planning documents to have their documents reviewed as soon as possible.

February 2013

My spouse and I would like to pay our child's tuition at college -- are we limited to giving her $14,000 per year?

No. Direct payment of tuition on behalf of an individual is not a gift for gift tax purposes if the payment is made directly to the school. Since tuition payments are not considered taxable gifts, you are not limited to the annual exclusion amount in this case. If you want to give other types of gifts, the annual gift tax exclusion currently allows an individual to transfer up to $14,000 to anyone, each year, without incurring gift tax. Also, since you are married, gifts can be treated as "split" so $28,000 can be given to each person without paying any gift tax.

July 2011

Earlier this year, I learned that the Federal estate tax laws had changed. I just found out the Federal gift tax laws changed too. I thought that I could not give any more of my farm to my kids without paying gift taxes, but now I hear that I can make more gifts without paying taxes. Is this true?

Yes. Effective January 1, 2011, the law changed to allow any person to gift up to $5 million during their lifetime without paying a current federal gift tax. This increase (up from $1 million) is scheduled to end on December 31, 2012. Although Congress may decide to extend the $5 million lifetime gift tax exemption, we do not know if they actually will. If you would like to make additional gifts of your farm or other assets and not pay gift taxes, it is best to make the gifts now to take full advantage of this opportunity.

January 2011

I heard the 2010 Tax Relief Act passed in December. Can I relax now, if my estate is less than 5 million?

You can relax for two years. The 2010 Tax Relief Act passed in December but will expire on December 30, 2012. During this 2 year period, estates less than $5 million will not incur a federal estate tax. The tax rate on larger estates has also been held to 35% on the amount greater than $5 million. This is a dramatic change from the $1 million exclusion amount and the 55% tax rate that was scheduled for 2011 if Congress failed to act. The 2010 Tax Relief Act also provides relief from gift taxes for gifts up to $5 million, if the gifts are made during the next two years. If the changes in the gift and estate tax rules don't affect you, perhaps the changes in the basis rules, the ROTH IRA conversion rules and the rules regarding transfers to charities from Traditional IRA accounts could have an affect on you. I would recommend that you review your estate plan and discuss the opportunities created by the 2010 Tax Relief Act with your attorney.

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Real Estate

November 2013

When my spouse passed away, did the title to our house automatically transfer to me?

It depends on how the deed is titled. Real estate owned jointly with the "right of survivorship" passes upon the death of an owner to the surviving owner using a process that is almost automatic and does not involve opening a probate file. A "right of survivorship" interest in real property generally must be designated on the deed to the property to use this simple process. The termination of a decedent's interest in survivorship martial property and/or joint tenancy is acknowledged by the filing of a Form HT-110, "Termination of Decedent's Property Interest" with the register of deeds in the county where the real estate is located. This step is necessary to remove the decedent's interest as an exception to clear title in order to properly pass ownership of the real estate.

July 2013

What is the Wisconsin real estate transfer tax?

There is a transfer tax associated with most transfers of Wisconsin real estate of $3.00 per $1,000 of the real estate's value. However, there are a number of exemptions from the real estate transfer tax that can apply in estate planning, business and estate administration transactions. Even when transfers are exempt from the transfer tax, a Real Estate Transfer Return may need to be filed. Unless the transfer is considered exempt from the reporting requirements, the State of Wisconsin requires that a Real Estate Transfer Return be electronically filed with the Wisconsin Department of Revenue with every conveyance of real estate. If a Real Estate Transfer Return is required, the Register of Deeds will not record the deed without a copy of the receipt.

June 2013

We just received an Offer to Purchase on our house. What contingencies should we look out for when reviewing the Offer?

We recommend that you have an attorney review the Offer before you accept. Once the parties agree on all the terms, the Offer becomes a binding contract, the breach of which can have serious consequences. All contingencies in the Offer must be fulfilled before Closing can take place. A common contingency is financing, which requires a credit check of the Buyer, an appraisal of the property and approval of the lender. A contingency calling for the sale of the Buyer's current residence can become problematic if the Buyer is unable sell their property. There may be a property inspection contingency to check the roof, foundation, electrical and plumbing systems, etc. If there are problems with the inspection, the Buyer will have the right to terminate the deal or require the Seller to fix the problems, depending on the terms of the Offer. If a Seller does not repair the defects, the Buyer may have the right to end the transaction and have the earnest money returned.

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Small Businesses

March 2014

What is an Operating Agreement for a Limited Liability Company?

The Operating Agreement sets forth the internal governance of the LLC and the rights and obligations of the owners of the Company. In organizing a LLC, the members can design rules of control and conditions of ownership of membership interests. An Operating Agreement is similar to corporate by-laws or a partnership agreement. The rights of members to sell, encumber or assign their respective interests may be restricted by an Operating Agreement. Possible uses of Operating Agreements placing restrictions on the purchase or gifting of a member's interests, and/or providing a detailed set of rules regarding a member's rights and obligation when a member dies, becomes disabled or is subject to a divorce order. In addition, an Operating Agreement can provide a procedure for selling the interest or passing it on to heirs. This is an important aspect of the LLC to consider as it provides an opportunity for the LLC interest to be kept in the family.

December 2013

What is the difference between a C-Corporation and an S-Corporation?

The designations of "C" and "S" refer only to how the corporation is taxed. It has little to do with the legal formalities used to set up or operate the corporation. An S-Corporation is a small business corporation with a limited number of shareholders that chooses to have its profits taxed at the personal income tax level of its shareholders. Because the income is taxed only at the shareholder level, S-Corporations avoid the double taxation of C-Corporations, where the corporation pays its own federal income tax and the shareholders also pay tax on dividends they receive. The election to be taxed as an S-Corporation may not be desirable if the advantage of lower corporate tax rates outweigh the disadvantages of "double taxation," the owner wants flexibility regarding management or classes of ownership interest or if there is a possibility that the company will go "public." There are a number of important non-tax related factors to consider when choosing a corporate entity, therefore it is important to review the decision with your attorney and your accountant.

August 2013

What does "limited liability" mean with a LLC or Limited Liability Company?

The general rule is that a member or manager of an LLC is not personally liable for any debt, obligation, or liability of the LLC, whether arising in tort, contract, or otherwise. Ordinarily, an LLC member is not responsible for the debts or obligations incurred by the LLC beyond the value of the member's interest. In order to obtain the greatest protection the separate entity status provides, it is important to take precautions to make it more difficult for someone to pierce the liability shield. Of course, the LLC entity status will not protect you individually from your own errors, omissions or negligence.

March 2013

If I form a LLC, will I have to file a separate tax return?

No. Along with providing limited liability for its owners (called members), one of the primary benefits of a LLC is that it offers "pass-through" income taxation. This means LLC income or losses, gains, deductions, and credits "pass through" to the members and are taxable/deductible to members at each member's individual income tax rate. The business will not pay a separate federal income tax on the business profits, and the members will report any income on their individual tax return, unless the company elects to be taxed as a corporation.

August 2011

I recently started a business with my friend. On the advice of our accountant, we formed a limited liability company and applied for a Federal Tax ID number. Are there additional steps that we should take to get ourselves up and running?

Yes. Although the nature of your business will influence what you do next, one step you should take is to adopt an Operating Agreement. An Operating Agreement governs the internal management of a limited liability company and covers such topics as member rights/obligations, admission of new members, and whether a membership interest can be transferred. It may also include alternative dispute resolution procedures to help avoid court involvement should you and your friend disagree about an issue.

November 2010

I am starting a new business and would like some advice as to where to start.

One of the first questions that you should answer is what kind of legal form your business is going to take. The legal form of your business will affect how much you pay in taxes, who can invest in your business, and whether your personal finances will be at risk. Some of the legal forms that you could use include: sole proprietorship, partnership, limited liability company, or corporation. As you can imagine, each form has its advantages and disadvantages.

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