10 Costly Misconceptions about Wills, Trusts, & Powers of Attorney

Misconception #1: A Power of Attorney can be used after death. No. Upon a person's passing, Powers of Attorney lose any and all authority possessed during a person's life. Whether a Power of Attorney for Health Care or a Power of Attorney for Finances, both documents, expires upon death. Neither document allows for anything to be done after death. Such decisions remain strictly in the hands of the Personal Representative under a Will or a Trustee under a Trust.

 Misconception #2: A Will avoids probate.  No.  A Will is the primary tool of the probate system. Your Will is like a letter to the Court telling the Court how you want your property distributed.  The Court gets to interpret your Will. After your death your representative must prove to the Court that all your property is collected and appraised, and all your bills and taxes are paid, before your property can be distributed to your heirs.

Misconception #3: Your Will and your assets remain private.  No.  Because probate is a public legal proceeding, everything that occurs with your estate will become public record.  This means that anyone – including nosy neighbors and salespeople – can go to Court to find out the balance in your accounts, the value of your stocks and other assets, and who you left your property to.

Misconception #4: Estranged family members do not need to be notified of a probate if the Will excludes them from an inheritance.  No.  All heirs must be notified of the probate even if they are excluded from the Will.   It is safer to handle an estate with potentially disgruntled heirs through a Living Trust.

Misconception #5: A Testamentary Trust avoids probate.  No.  A Testamentary Trust is a Trust created at your death by direction of your Will for a specific purpose. Your Will and estate still must go through the probate process.

Misconception #6: Minimizing Estate Taxes should be a primary concern. Probably No. Currently, the exemption level is over $5,450,000 per person. This means prior to having to pay any estate taxes, you need to have assets over that exemption level. While there may be other taxes worth worrying about, namely income taxes on pre-tax retirement accounts, estate taxes often are not of paramount importance.

Misconception #7: Revocable Living Trusts are only for large estates.  No.  Revocable Living Trusts are for anyone who wants to avoid costly conservatorship and probate proceedings.  Those with small estates, and especially their heirs, can benefit from a Revocable Living Trust.

Misconception #8: A Revocable Living Trust must have a separate tax return.  No.  If you are a trustee or co-trustee of your Revocable Living Trust, it does not need a tax return of its own.  Your personal tax return is sufficient for the IRS.

Misconception #9: There are no costs associated with administering a Trust at the death of the original settlor of the Trust.  Not always true.  Depending on what assistance and professional help a Trustee relies on, administering a Trust, distributing the assets, and terminating the Trust can result in fees and costs.  Many trustees hire attorneys and accountants, but these costs are substantially less than the costs of probate.  Typically, these costs are paid by the Trust.

Misconception #10: You have to amend a Revocable Living Trust when you buy or sell your assets.  No.  Your Trust does not have to be changed when you buy or sell assets.  When you buy a new asset, such as real property, a car, or open a new bank account, you simply take title as trustee of your Trust.  If you sell an asset, you sell it as trustee of your Trust.

If you’d like to ensure that you maximize the resources available to your loved ones and keep your family out of Court and out of conflict, schedule a Family Life and Legacy Planning Session.™ We can review your existing plan and help you make adjustments that will help you achieve your goals.

This article is a service of The Estate Planning Group and Davidson Law Office, LLP, your Life & Legacy Planning Lawyers, who believe in developing trusting relationships with families for life. We don’t just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.

9 Mistakes that Tear Families Apart

Mistake #1: Relying on the Law.  If you do not set up an estate plan, upon your death your property will be distributed according to the laws of your last state of residence.  Often, the law will require the probate judge to give your property to someone other than the people you would have chosen.

Mistake #2: Relying on a Will.  If your estate plan consists only of a Will, your heirs may face many costly problems such as probate and conservatorship proceedings.  A Will is the most common estate planning tool, but it is usually not the best tool to use.

Mistake #3: Relying on Community Property laws.  Relying on the Community Property laws is a position many clients take.  However, your property will still have to go through probate on the death of the spouse.  Also, Community Property ownership requires a conservatorship if a spouse is incapacitated and the home needs a mortgage, home equity line, or to be sold.  Relying on the Community Property laws is not a good estate plan.

Mistake #4: Relying on Guardianships.  These Court supervised proceedings for addressing your physical or mental incapacity are costly, time-consuming and horribly burdensome.  Your properly set up Revocable Living Trust, as well as Powers of Attorney, Durable Powers of Attorney for Health Care, and Physician’s Directives and Releases avoid this issue.

Mistake #5: Relying on the small estate affidavit or informal administration procedure to avoid probate.  Most people assume they have fewer assets than they actually have.  In Wisconsin the small estate exemption that avoids probate is permitted only for estates consisting of less than $50,000.

Mistake #6: Relying on a gifting program as your way of avoiding probate. The law allows you to give away your property at a rate of $14,000 per person per year.  A married couple can give $28,000 per year to anyone they choose without gift tax consequences.  While this is an effective way to reduce the size of your estate, trying to spend your last dime on your last day is difficult to put odds on, plus you lose control of the assets you have given away, and beneficiaries get total control over everything that has been given to them.

Mistake #7: Relying on the Courts to take care of your child’s finances.  If you die intestate (with no Will) or with only a Will, and your property passes to your minor child, the Court will put your child’s money into a Court-supervised guardianship requiring at least annual accountings to the Court.  Naturally, this may require hiring CPAs to prepare accountings, and lawyers to file those accountings with the Court, plus filing fees, all of which comes out of the inheritance.   It also means that the Court determines the person who will serve as guardian of the property, who may not be the person you would have chosen.

Mistake #8: Relying on a form kit for your Will or Living Trust.  One size does not fit all because no two people or families are alike.  From your family’s needs and dynamics to its personalities and values, can you imagine any form kit ever being suitable for any family?  If you use a form kit, you’re asking for problems.  If your will is not properly executed, it will not be valid.  The only estate plan you can rely on is one that is custom prepared by a qualified estate planning and asset protection lawyer.

Mistake #9: Relying on the wrong attorney.  Most attorneys know very little about estate planning.  What’s more, even some estate planning attorneys don’t put much time or energy into comprehensive protections for your family’s unique circumstances.  That’s why I urge you to choose an estate planning attorney who has the primary focus, mission and purpose to help you achieve your family’s estate planning and asset protection goals:  protecting, preserving and passing on more of what you’ve worked for.

If you’d like to ensure that you maximize the resources available to your loved ones and keep your family out of Court and out of conflict, schedule a Family Life and Legacy Planning Session.™ We can review your existing plan and help you make adjustments that will help you achieve your goals.

This article is a service of The Estate Planning Group and Davidson Law Office, LLP, your Life & Legacy Planning Lawyers, who believe in developing trusting relationships with families for life. We don’t just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.

How can I preserve my assets for my kids and loved ones?

With tax time just behind us, you may be thinking you did well by minimizing what you paid to Uncle Sam and your state in taxes, so more can go to your family.  Every year around tax-time, we’re reminded of how complicated maximizing your money and minimizing tax liabilities can be - and for many people, this seems to be the singular focus for how to preserve assets for loved ones.

Unfortunately, we don’t get much in the way of real information about really preserving our assets through estate planning.  And, regrettably, many of us simply don't think about it, or maybe think we don't have enough to make a difference.

Simply put, this is Penny Wise and Pound Foolish - Your family will likely lose more in the costs of estate administration than you can ever overcome with annual tax tricks. 

Truth is, if you have people you love and any assets at all in your name, you do have an estate and it is worth preserving for the people you love. In some cases, that may mean keeping them out of court and out of conflict, if anything happens to you. (Did you know that the biggest family fights happen over the smallest sums of money or even the personal effects of a person who has passed on? Let’s keep that from happening to your family!)  

If you’re concerned about maximizing the amount your heirs receive and minimizing the amount received by governments, there are several steps you can take.

First and foremost, keep your family out of Court. It’s unnecessary, extremely expensive and almost always public. Consider using a Trust to make it easy to handle your assets if you become incapacitated or when you pass on. 

Second, ensure legal documents are in place for trusted family or loved ones to take care of financial, legal and health care issues in the event of any incapacity.  An incapacity without simple legal planning in place can be devastating to a family, both financially and emotionally. 

Third, while most Americans need not worry about the Federal estate and gift tax ($5.49 million in 2017), if you have an estate near or above that level ($10.9 million for married couples) you need to implement tax minimization strategies to avoid the extreme estate tax hit your heirs will experience. Some will need to think about State taxes, as well, if you live in one of the 20 states that impose them. (Wisconsin does not.) 

If you’d like to ensure that you maximize the resources available to your loved ones and keep your family out of Court and out of conflict, schedule a Family Life and Legacy Planning Session.™ We can review your existing plan and help you make adjustments that will help you achieve your goals. 

This article is a service of The Estate Planning Group and Davidson Law Office, LLP, your Life & Legacy Planning Lawyers, who believe in developing trusting relationships with families for life. We don’t just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.

5 Common Misconceptions about Estate Planning

Whenever you work long enough in a selected profession, you often find that there are common questions that arise and many times common misconceptions as well. Estate planning is no different. Here are five of the common misconceptions about this area of law:

 

1. "If I have a will, I will avoid the probate process, right?" Wrong! A Last Will and Testament will not help you avoid the probate process. A Last Will and Testament only informs the Probate Court how you wish to have your assets distributed upon your death.

2. "I can handle a decedent's Estate because I am the Power of Attorney." False. A Power of Attorney is a document that applies only during a person's lifetime. As soon as that person passes away, your authority ceases to exist. If you continue taking actions after a person passes away, you could become legally liable for actions taken. 

3. "I heard a revocable trust protects my assets from the nursing home. Is that true?" Unfortunately, no. A revocable trust will not give you protection from the costs of nursing home care. A slightly different trust, called an irrevocable trust, can offer such protections, but it comes with a number of factors worth considering to see if such a tool is right for you. There are certainly other reasons to consider a revocable trust, but nursing home care protection is not one of them.

4. "Should I be worried about estate taxes?" While there may be taxes due at your passing, the estate tax (also called the death tax) is unlikely to be one of them. Under the 2017 Estate Tax rules, each individual can pass up to $5,490,000.00 at their death without having to pay any estate taxes. This high exemption level means that a very small percentage of the population will have to pay estate taxes.

5. "I do not need to have a trust because I am not wealthy." Wealth oftentimes has little to do with whether you would like a trust or not. More important, is evaluating whether the efficiencies of avoiding the probate process and avoiding potential conflict and time for your heirs, justifies the creation of a trust.

 

Unfortunately, these misconceptions have been repeated and shared so often that they are now viewed as true. To get started on your own estate plan, contact our office today!  We offer an initial complimentary Life & Legacy Planning Session, where your goals and objectives determine what plan is right for you.

How much does a will cost? How much does a trust cost?

By far, one, if not the, most common question asked, is "How much does this cost?" Rightly so, attorneys carry the dubious distinction of being attentive to the time (see this article for an example), oftentimes, going as far to bill in 6 minute increments (or in 1/10 of an hour allotments). So, how much can you expect to pay for a will, a trust, or powers of attorney documents for your family?

 

While each attorney varies how they bill for legal work, there are three general approaches:

Hourly Billing. Just as it sounds, you are billed for the amount of time an attorney works on your particular legal matter. At the end of the day, the legal bill will depend on how long and complex the legal matter is and the time the attorney spent on the legal issue(s).

 

Contingency Billing. Here, the billing amount is based on the total amount recovered from the other party. For example, if you agree to a 15% contingency fee arrangement, and the total recovery is $10,000, the attorney would be entitled to receive $1,500. This type of billing approach is often utilized in personal injury cases and how attorneys (oftentimes the ones you see in commercials) can claim that you will not owe them anything in legal fees unless you win your case.

 

Flat-fee Billing. Flat-fee billing is often used when the legal work is for a particular legal transaction and not necessarily for an unpredictable, personal injury-type situation. This type of approach can have the added benefit of being more transparent on the front end, as you will know the total cost for the particular matter, without incurring additional and unexpected costs.

 

At The Estate Planning Group, we do things a little differently – we prefer to develop trusting relationships with families for life, so we can ensure you and your family are protected no matter what happens, and we let you decide on the appropriate plan and costs.  All our estate planning services are billed on a flat fee basis, so you know the total costs before you make a decision.

The best way to determine exactly what planning will best suit you and your family’s needs and concerns is to meet with one of our attorneys for a Life & Legacy Planning Session, where we can help answer all of your questions, address your concerns, and meet your goals.

At your initial complimentary Life & Legacy Planning Sessions, we walk you through what would happen if something were to happen to you, how your family would handle things, and design a plan to make it easier for the people you love. By knowing what would happen, you can identify those things you want to address in your planning.

 

You, then get to choose the right planning tools from a point of understanding, not just have a lawyer whose motives may not be the same as yours tell you that you need this or that plan.  We can then assist in designing the plan that will take care of your family.  To get started, contact us today!

Timing is Everything in Legal Life Planning!

With Christmas fast approaching and the New Year practically upon us, discussions of goals and resolutions for the upcoming year frequently come up.  Invariably, when legal life planning is discussed, many times a "We'll do that next year" approach is adopted.

The legal life planning process, though, can only fully use all available tools if sufficient time exists.  Adequate preparation can mean the difference between having options and protecting your assets versus facing additional expenses and headaches down the road.

One of the best ways to plan ahead is to formally nominate someone to make health care and financial decisions for you when you are unable to communicate those desires.  Failing to execute Health Care and Financial Power of Attorney documents can result in your loved ones being forced to go to court, spending time and oftentimes thousands of dollars, to gain such authority.

Planning ahead about how best to pass your assets can also help ensure a smooth process for your chosen beneficiaries, while minimizing administrative costs.  Wills and other non-probate tools, like a payable-on-death (POD) designation or a life estate deed are often used, but other legal options, like a revocable trust, may deserve consideration too.

When attempting to protect assets from a future need for a nursing home stay and qualify for the government program that pays for such care ("Medicaid"), planning ahead is especially critical.

If you have gifted or sold any assets for less than fair market value within 5 years of trying to qualify, the Medicaid system requires the difference to be repaid before you qualify (the "5-year look back period").  Putting in place legal tools now to safeguard those assets before a need for nursing home care arises can avoid this issue.

Timing is everything in legal life planning!  Protections to put in place now to protect yourself and your loved ones will be discussed at our first seminar of the new year on Saturday, January 14^th at 10:30 a.m.  This seminar will be held at the Weyers-Hilliard Library in Green Bay.  More details can be found here:  http://www.theestateplanninggroup.com/event/life-and-legacy-planning-weyers-hilliard/

From all of us at Davidson Law Office and The Estate Planning Group, we wish you a Merry Christmas and a safe and happy New Year!

Estate Planning through the Ages

When you hear the words “estate planning” what is your first thought? Oftentimes, images of the very wealthy along with complex trust and tax planning spring to mind. In actuality, estate planning includes important documents that should be considered by people of all ages, regardless of one’s current stage in life. Whether a person just turned 18 or is enjoying retirement, estate planning includes different legal documents that deserve discussion. Below are some of the important periods and ages where estate planning should be thought about:

• Turning 18: Every person should have, at the very least, a valid Health Care Power of Attorney and Financial Power of Attorney in place upon turning 18. Wisconsin Statutes do not provide for any “default” person to make decisions for an individual after they turn 18, even if they are a parent or spouse. In the absence of a valid Health Care Power of Attorney, a guardianship proceeding may be required, which can become very expensive.
• Parents of young children: Estate Planning is also critical for parents of young children. By executing a will, young parents can nominate a guardian to provide personal security for their minor children. From the financial side, a testamentary trust can be incorporated into the will to ensure minor children do not receive all assets left to them by their parents at age 18 in one lump sum distribution. Instead, parents can nominate a trustee to manage any assets for the benefit of minor children and make distributions to the children upon reaching a pre-determined age, set by the parents.
• People looking to avoid Probate: Estate Planning also includes more detailed plans for individuals or couples who desire to bypass the probate process. With a revocable trust, the probate process can likely be largely avoided, which in turn, leads to a quicker estate administration and a faster distribution of assets to beneficiaries. The revocable trust is also a private document that is not publically available and can give added protections for beneficiaries from creditors.
• Individuals concerned with protecting assets from Nursing Home Care: For individuals who are worried about the possible costs of nursing home or long-term care, estate planning can provide asset protection. An irrevocable trust, unlike a revocable trust, can be used to shelter certain assets from being liquidated to satisfy nursing home expenses. However, assets are only safe if they are in the irrevocable trust for the 5 years prior to applying for a needs-based program, such as Medicaid. Additionally, control of any assets in an irrevocable trust must be ceded from the initial owners. Even with these trade-offs, for some clients the benefit of protecting certain assets from any nursing home care is well worth the protections an irrevocable trust provides.

The Estate Planning process addresses a wide range of issues for individuals of all different ages. From the young couple who just had their first child to the couple who has been together for over 60 years who are concerned about the impeding cost of nursing home care, estate planning can provide ease of mind ensuring the maximum protections are in place to preserve and protect each person’s assets.