Estate Planning

Trustee Duties Change – Wisconsin Act 20

Wisconsin Act 20 amends Wis. Stat. s. 701.065, effective for deaths of Settlors or beneficiaries that occur on or after October 1, 2013, regardless of when the trust was created or funded. The amendment affects Living Trusts, both revocable and irrevocable, and Self-Settled and Pooled Special Needs Trusts.

Living Trusts. Under new Wis. Stat. s. 701.065(5)(b)(1), if the Settlor of a Living Trust, or if the predeceased spouse of a Settlor of a Living Trust, at any time received any recoverable public benefits, the Trustee is required to provide written notice of death to the DHS within 30 days after the death of the Settlor and before any property held in the trust is distributed. The Trustee is to provide demographic information about the Settlor and the Settlor’s predeceased spouse, a copy of the trust document, and documentation supporting the value of the trust on the Settlor’s date of death.

Trusts in Estate Planning

With significantly higher estate tax exemption amounts now a “permanent” part of our tax code (see the discussion on page 1 for details) you may wonder if you should even bother considering a trust as part of your overall estate plan. While trusts are used extensively as tax planning tools, there are many non-tax reasons that a trust may be right for you and your family.

If you ever become incapacitated, a properly drafted and funded trust could help your family avoid the need to seek a guardianship through the court system. Instead of a court-appointed guardian, the trustee you have previously selected will be able to manage your financial affairs through the trust. Upon your passing, the trust serves as the primary estate planning tool that will help your family carry out your wishes. A well-designed and implemented trust plan will help avoid the time and expense of state court probate proceedings while still maintaining a structured approach to settling your final affairs.

American Taxpayer Relief Act

With the passage of the American Taxpayer Relief Act (ATRA) on January 1, 2013, Congress avoided the worst of the so-called “fiscal cliff.” While some of the tax measures included in the ATRA are temporary, certain provisions were also made “permanent.” This article describes some of the major changes made to both the individual income tax rules and the gift/estate tax provisions.

Income Tax Highlights

Without this legislation, income tax rates would have reverted to the levels from the late 1990s across the board. Instead, only the top marginal rate has increased from 35% to 39.6%. This higher rate only applies to income that is above the “applicable threshold.” (See the chart for the threshold level for this rate and other income tax rates in effect for 2013 for single and married couples filing jointly.)

Parental Power of Attorney – Wisconsin’s Law Update

The Wisconsin legislature recently gave parents more options in planning for the short-term care and support of their children, if they are unable to do so. This assistance came in the form of a new power of attorney document which allows a parent to temporarily delegate full or partial parental authority to a third person without court or social services involvement.

Prior to the enactment of this new law, the only way a parent could delegate parental authority was through a formal guardianship proceeding or a petition for protective services. Obviously, these options were not practical for parents simply looking to delegate legal decision-making authority to a third person for a short period of time.

Special Needs Trusts for Disabled Beneficiaries

Historically, parents and other relatives of disabled individuals have been advised to disinherit the disabled person for estate planning purposes. This is because an inheritance can have a devastating effect on the public benefits the disabled individual is receiving. Given the rising costs of medical care, it is often critical for a disabled person to continue to be eligible for public benefits.

Often this means that parents give their assets to another child or trusted relative with the expectation that he or she will provide for the disabled child. This may cause a problem because it does not take into account the fact that the other child or relative could die, get divorced or have financial problems, which all could result in a loss of the funds for the disabled person.

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