Wisconsin Estate Planning

Just Bought a Crib and Car Seat? Time for an Estate Plan

New parents are all about making sure that their bundle of joy has all the right equipment, and that includes an estate plan with a guardian.

Most people would rather clean out the gutters than plan for their family’s life after they die, especially if they’ve just added a new member to the family. But when a new baby has arrived, is exactly the time when you need to make sure that a comprehensive estate plan is in place.

SF Gate’s article, “Congrats on Your New Baby! Now It’s Time for an Estate Plan,” says that an estate plan is correctly thought of as a series of legal documents created with a qualified estate planning attorney that sets out your wishes for the disposition of your assets and the responsibility for your dependents if they are minors when you die. Let’s look at some of the reasons why you should have a professionally-drafted estate plan.

For your children. Many experts say that this is the most important consideration. You’ll designate the person or persons you want to care for your minor children in the event you and your spouse die unexpectedly. You can designate a single individual or family to manage your children’s financial affairs. This is also known as a Guardian of the Estate. You can add another to care for your children (Guardian of the Person). The other option is to have one person or family member fill both roles.

For loved ones. Your estate plan will direct your loved ones how to make health care decisions on your behalf in the event that you become incapacitated. This is a big responsibility for the person who is chosen, so be sure to clearly state your intentions in a Healthcare Directive.

For your things. We all have prized possessions that have little actual market value but would have large emotional implications were you to pass away. A proper estate plan created by an experienced estate planning lawyer will speed up, or may even eliminate, the probate process. This will save your heirs and loved ones time, money, and added stress and grief. If you have specific instructions for the disposition of your prized possessions and assets, detail the reasons in your estate plan to avoid misunderstandings or hard feelings among your heirs.

Yes, it may feel sad to think about death when you are holding a newborn or celebrating another happy life event. However, these are necessary tools to protect those you love. Imagine how comforted your loved ones will be, knowing that you were thinking about them and caring for them. An experienced estate planning attorney will create the legal documents that you need, guide you through the decision-making process and make sure that your wishes are clear and your family is taken care of.

Reference: SF Gate (December 22, 2016) “Congrats on Your New Baby! Now It’s Time for an Estate Plan”

Why You Should Not Avoid This Difficult Conversation

It’s easy to talk with loved ones about happy events, but conversations about your end of life wishes are more important than you might think. Consider the arguments and hurt feelings that could be avoided, if your loved ones know exactly what you want, and why.

While most of our lives pass with only minor incidents, as we age the likelihood of being struck by a serious illness or having an accident increases. This means that our loved ones may face the difficult decisions that come with a parent’s passing. Making sure that your family members know what your end-of-life preferences are and discussing your wishes, along with putting an estate plan into place, can ease everyone’s mind and make a difficult situation a little less stressful.

The website seniorhomes.com posted an article, “10 Steps to Communicate Your End-of-Life Wishes.” According to the article, the most important question when it comes to communicating end-of-life wishes might be, “how to do it?” Luckily there are actions you can take to make the process easier for you and your family. Get going now, before it’s too late … and make it a priority.

Planning. There’s no better time than the present to let your family know about your final wishes. Start by drawing up a living will that states your treatment and care preferences in the event you are unable to speak for yourself.  You should also sign a durable power of attorney that appoints one or more family members or trusted friends to make medical decisions for you if you become incapacitated. Get that paperwork started today.

Clarity. It’s not pleasant to dwell on becoming too ill to make healthcare and other important decisions, but a critical injury or debilitating illness can occur at any time. As a result, it’s vital to be clear about your wishes as soon as possible—just in case.

Opportunity. Finding the appropriate time to discuss end-of-life issues can be tough, but there are certain events may give you the opportunity to do so. Possible occasions include those related to milestones like the birth of a child, marriage, death or serious illness of a loved one, retirement, an anniversary, during holiday gatherings, or when you create your will or other estate planning. Hopefully, you will have this conversation before an injury or a major illness that requires you or another family member to move out of the home and into a long-term care setting.

Discussions. Have these end-of-life conversations early to make certain that everyone understands your wishes. Your preferences may also change over time and necessitate future discussions on the subject.

Permission. Ask your loved ones for permission before launching into the topic. This will reassure them that you respect and honor their wishes.

Purpose. Your conversations with family need to include two important goals: (i) to be sure your financial and healthcare wishes are expressed and honored; and (ii) to give them the information and confidence they need to make future decisions.

Setting. Have the talk in a quiet and comfortable setting, such as a private spot without distractions. Be mindful of your state of mind and that of other family members.

Listening. Whatever your role in discussing end-of-life wishes, it’s important to listen carefully. Be certain that you hear and understand what your loved ones are saying.

Who participates in this conversation? Be aware that a loved one may want to talk about end-of-life wishes in private.

Pace. If you’re listening to a loved one express their wishes, let them set the pace and don’t argue about their wishes. They may not be your wishes, and they may not make sense to you, but these are their choices.

A respectful and thoughtful mindset will be needed, both by the person who is conveying their end-of-life wishes and family members. If for some reason, the conversation is not going well, you may find that an estate planning attorney can provide further pointers on how to help move the discussion along.

Reference: seniorhomes.com (December 22, 2016) “10 Steps to Communicate Your End-of-Life Wishes”

Can a Non-Family Member be Your Executor?

Deciding who to name as the executor of your estate is a challenge for everyone. There are situations where you may need to consider someone who is not related by blood or marriage.

There are three key factors to look for when considering who should be the executor or personal representative of your estate: one, the ability and personality to do the necessary tasks, even if they are unpopular; two, a willingness to be your personal representative and three, someone who knows you and your situation very well. If no family member meets these criteria, according to The Brainerd Dispatch’s article, “How to find an estate plan executor outside of your immediate family,” you may need to look to your extended family or outside of the family. You do have options.

Many experienced estate planning lawyers say that it's typically best to find an individual to serve as the personal representative of your estate. If you can’t think of any readily obvious choices that you believe would be a good fit, expand your thinking. Perhaps there is an adult grandchild who might be a possibility.  You might also have a good relationship with the adult child of a close friend who’d be able to carry out the tasks of personal representative.

Folks are typically very willing to help if asked. However, make sure that it’s not just anyone, but someone with some financial or legal knowledge and who is familiar with your wishes, even if they're not a member of your immediate family. They should also not be afraid to seek help from an experienced estate planning attorney.

There are some alternatives to working with an individual. If finding an individual you trust and is willing and able to serve as an personal representative for your estate is impossible, then you may consider engaging a third party to serve as your personal representative.

A financial advisor probably won’t be able to serve as the personal representative of your estate, due to his or her potential conflict of interest. However, you may be able to hire an experienced estate planning attorney. At the very least, he or she may have some relevant recommendations.

Once you have selected a personal representative, the next step is to devote the necessary time to review the details of your estate plan and your financial situation. Make sure that the personal representative understands your wishes and knows where important documents can be found. Whether the personal representative is your spouse or your best friend, they will appreciate being prepared when the time comes to settle your estate.

Reference: Brainerd (MN) Dispatch (December 23, 2016) “How to find an estate plan executor outside of your immediate family”

Life Can be a Risky Business

One family’s experience serves as a painful lesson as to why you must protect yourself and your family with these basic estate planning documents.

Twenty five years ago, a young woman living in Florida suffered a terrible heart attack. Terri Schiavo was resuscitated but sustained massive brain damage that left her in a vegetative state. Her husband, wanted her feeding tube removed, as he believed this would have been her wish. Schiavo’s parents wanted her kept alive. As detailed in Harrisburg Magazine’s article, “Protect Yourself,” the result was seven years of agony for everyone. After 14 appeals and interventions by lawmakers including President George W. Bush, Schiavo’s feeding tube was disconnected. It was a nightmare that could have been avoided if there had been a properly executed and signed living will.

A big issue in this fight was that those closest to her testified she never would have wanted to be kept alive in a vegetative state, but Schiavo hadn’t signed a living will. Therefore, if you fail to have the legal documents necessary to express those intentions, no one will know what they are. Without leaving your written wishes, it takes important decisions out of the hands of your family.

End-of-life directives are just one of the legal documents that are needed to protect us. Wills and powers of attorney (financial and medical) are crucial for sound estate planning. A financial power of attorney allows another individual, like a spouse or trusted friend, to take care of your financial affairs in the event that you become incapacitated, which is particularly useful as you get older.

A medical power of attorney is like a living will, but it details more than deathbed concerns. It also allows your trusted agent to be given your private medical information and to decide health care issues for you if you’re incapacitated.

Wills are extremely important, especially for those with children. They let you name a guardian for your children if you and your partner pass away. This step will prevent the courts from deciding who should care for your children or a dispute by relatives over guardianship. In some states a will is not required, but another legal document specified by state law will suffice.

Even unmarried people without any kids should have a will. If not, state intestacy laws will dictate how your property will pass to your heirs. If you die without a will, the state will distribute your assets to your next of kin. This could be someone you don’t really like or whom you’ve never met.

Everyone has heirs. Even if you think you don’t have anyone, there’s likely a cousin out there somewhere, and the intestacy statute will try to find the next of kin. If you have a properly prepared will, you can leave funds to charity, and make sure that the funds go where you want them to go—instead of to some distant relative with whom you have absolutely no relationship.

Living wills, wills and powers of attorney are not pleasant to consider and may seem unnecessary when people are young and seem healthy. But the Schiavo case is a reminder of what can happen in the absence of proper estate planning.

Reference: Harrisburg Magazine (December 2016) “Protect Yourself”

Dreaming of Becoming a Snowbird? Put a Flight Plan in Place

It’s not as simple as packing everything you own and heading south. Careful financial and tax planning and a test run will help avoid major hassles if you decide to follow this well-trod path.

Most people live where they do because of either work or family or both. But when retirement is on the near horizon, dreams of moving and starting a new chapter in a new location begin for many Americans. According to a study from Merrill Lynch, people believe that they are free as birds to decide where they live at around age 61.

CNBC’s article, “A financial flight plan for snowbirds,” says that it's not surprising to see retirees move, at least part time, to their dream destination. More than a third of retirees surveyed, told Merrill Lynch that they’d already moved, and another 27% anticipated moving soon. But before you begin splitting time between two or more states, think about which state you want to be your primary place of residence, or domicile because you can have multiple residences—but only one domicile.

You should consider the advantages of choosing one state instead of another, like the fact that there are several warm weather states that don’t have a state income tax. Others have tax breaks on retirement income and on real estate taxes for older residents. Estate taxes can also be more favorable in some states than in others.

Once you’ve decided, be prepared to show the government that the state you picked is truly your domicile state. Some states have investigated people who say they’re now residents in other states and who say they don’t owe any taxes.

Each state has its own requirements to prove residency. For example, some basics are heading to the local DMV and changing your driver's license, as well as changing your mailing address and tax return address. A big mistake people make is having their income tax return sent to the wrong state. That can be a bad move, since the federal government and state governments share this type of data.

You should also speak with an experienced estate planning attorney in your new domicile state to be certain that all of your financial and estate-planning documents, like your will, powers of attorney, and healthcare or medical directives, still are legal under the laws of your new state.

Don’t forget to change your auto insurance policies so that you are properly covered in both states.

Our advice? Rent in the new state before you buy. You might find that you miss seeing your grandchildren and children, or that your dream location isn’t exactly what you thought it was. This is a big change at a critical point in your life. If you change your mind, that house that was such a bargain may become a financial disaster, if you want to sell it fast.

Reference: CNBC (December 8, 2016) “A financial flight plan for snowbirds”

Less Well Known Benefits of IRAs

Certain creditor protection aspects of IRAs have the potential to protect heirs from creditors, but there are issues, so you’ll want to plan these out carefully.

Everyone knows that IRAs are a great way to save for retirement, but the potential to protect against creditors is another valuable aspect of these accounts. Is the same protection extended to beneficiaries? This article from Forbes, “Estate Planning Tip: Creditor Protection for IRAs & Beneficiaries,” explains in detail how these rules apply to various bankruptcy situations and the issues to consider when naming your IRA beneficiaries.

Bankruptcy. Similar to the protection offered to pensions, 401(k)s and Social Security benefits, IRAs can be protected from creditors in bankruptcy. If you declare bankruptcy, your IRA assets will typically be safeguarded and can’t be taken. However, this doesn’t extend to other types of judgments, civil lawsuits, or IRS levies. State laws will vary, but your IRA assets may be protected from other creditors. There is a $1 million inflation-adjusted limit that applies to federal bankruptcy protection rules for the aggregate value of Contributory and Roth IRAs (with inflation, the limit is $1,283,025 as of April 1, 2016). Assets rolled over to an IRA from a qualified plan, like a 401(k), aren’t subject to the same dollar limits and can be fully protected.

Beneficiaries Protection. A big benefit to IRAs is the simplicity in selecting a beneficiary to receive the money when you die. This can be a great estate planning tool because these assets are not subject to probate and pass directly to the beneficiary. Make sure that your beneficiary designations line up with your overall estate planning goals. However, beneficiaries of IRAs are not always given the same creditor protection as the original account owner, so you need to consider this when selecting your IRA beneficiary.

An inherited IRA for a non-spouse beneficiary is no longer automatically protected from creditor’s claims when the beneficiary files for bankruptcy. When the owner dies, and the non-spouse beneficiary takes ownership of the account, the assets are no longer deemed retirement funds, and can be seized in bankruptcy. This only applies to non-spouse beneficiaries because a spouse can roll over inherited IRA assets into his or her own account. When this transfer occurs to a surviving spouse, the assets are once again protected. However, a non-spouse beneficiary can’t comingle inherited IRA assets with their own retirement assets. Check your state laws on the degree of protection over non-spousal inherited retirement funds.

Children as beneficiaries. Many parents opt for their children to be beneficiaries of their IRA accounts. This can be an issue if the children have financial issues or face debt collectors. You can get around this be creating a conduit trust, and by listing the trust as beneficiary of the IRA and not the child. As a result, an inherited IRA payable to a trust can be protected from the child’s creditors while still allowing the child to benefit from the inheritance. The IRA’s required minimum distributions are calculated on the trust beneficiary’s life expectancy, and income is taxed at the beneficiary’s tax rate. Since the assets aren’t legally owned by the beneficiary, they’re protected from creditors in most instances. However, keep in mind that once the income is paid out to the beneficiary, that income isn’t protected.

Like so many other estate plans, IRA beneficiaries should be reviewed regularly. Your own goals may change, and your beneficiaries will also experience changes in their lives. If a child is going through a divorce, for instance, you may want to work with a qualified estate planning attorney to find a way to protect your legacy and your child. Your state’s laws on creditor protection may change, as may tax laws. A regular review with an estate planning attorney is a worthwhile investment.

Reference: Forbes (December 9, 2016) “Estate Planning Tip: Creditor Protection for IRAs & Beneficiaries”