The thought of preparing an estate plan can be overwhelming. This is especially true if you are completing the estate planning process for the first time. You may have a long list of questions or perhaps you may not know where to begin. An experienced estate planning attorney can help guide you through the process. There are several things you can do to help ensure your first meeting with that attorney is as productive as possible.

Compile a List of your Assets and Liabilities.
There is no one-size-fits-all solution in estate planning. Your individual family, assets and goals should guide your plan. When preparing for your initial meeting to discuss your estate plan, it is very helpful to bring a list of your current assets and liabilities. Some examples of assets are: funds in savings accounts, owned vehicles and retirement accounts. Some examples of liabilities are: taxes owed, credit card debt and mortgage debt. In addition to current values, it is also important to provide the attorney with information regarding how the assets are titled and whether you have any existing beneficiary designations. This information will help the attorney recommend the most appropriate plan for you and discuss estate tax and probate avoidance concerns.

Consider Who You Want to Play a Role in Your Estate Plan.
To have a comprehensive estate plan, you must nominate people and/or entities to act in certain capacities on your behalf. Below is a list of some of the different roles they may play in your estate plan as well as some considerations to think about before your initial appointment.

1. Personal Representative. Your personal representative, also known as your executor, will handle the settlement of your estate upon your death. In most instances, the personal representative selects an attorney for the estate and works with that attorney throughout the process.
2. Guardian. Perhaps the biggest decision for people with minor children is the selection of a guardian. This is the person who will be responsible for the care and custody of your minor children upon your death. The guardian of the estate oversees the child’s property, while the guardian of the child is responsible for the child’s day-to-day care.
3. Trustee. Depending on the size and complexity of your estate, there are several trusts that may be appropriate for your circumstances. Some trusts are created in a separate document, while some are integrated right into your will. When there are minor children, we always recommend some form of trust for their protection. The trustee will be responsible for managing the assets of the trust, employing advisors to help with the trust, generally tracking the beneficiary’s needs and ensuring the trust is administered according to its terms.
4. Durable General Power of Attorney. A Durable General Power of Attorney nominates an agent and alternate agent to act on your behalf regarding the management of your property and other financial issues. You may establish your Durable General Power of Attorney to be effective immediately or to become effective at a later time when you voluntarily activate it or when a physician certifies that you are incapacitated.
5. Health Care Power of Attorney. A Health Care Power of Attorney allows you to name an agent and an alternate agent to make health care decisions on your behalf if appropriate medical personnel certify that you are incapacitated, including end of life decision-making.

Decide on Your Beneficiaries.
Perhaps it goes without saying but an essential part of any estate plan is designating who you wish to leave your assets to upon your death. Prior to your initial meeting, you should consider who you want to name as the primary and contingent beneficiaries in your estate plan. Also, you can leave a bequest (property given to someone through a will) to a beneficiary in a variety of ways. You may leave a beneficiary a specific asset or dollar amount.  Alternatively, you may name beneficiaries to receive a percentage of your overall estate. Finally, you should consider whether you want your beneficiaries to receive their bequests outright, or if you want to place certain restrictions on the bequests to help ensure the funds are managed appropriately for minor beneficiaries or those with special needs. This can often be accomplished by using a variety of different trusts that fit your situation.

When you have completed the above steps and you have your documents in order, please reach out to one of our experienced estate planning attorneys, they would be happy to assist you.

Wisconsin is facing a shortage of primary care doctors, particularly in rural areas. According to a report by the Wisconsin Council on Medical Education and Workforce, there is expected to be a shortfall of 745 primary care doctors by 2035, in large part due to upcoming retirements. While the medical field may seem separate and distinct from the legal field, this looming shortage is already impacting certain laws.

The Wisconsin legislature enacted 2019 Wisconsin Act 90 on February 5, 2020. The Act expands the provider types that can determine whether a person is incapacitated for purposes of activating a power of attorney for health care, declare that a patient has a terminal illness or is in a persistent vegetative state for purposes of invoking a living will.

Under prior law, an incapacity determination could only be made by two physicians, or by one physician and one licensed psychologist. Under the new law, an incapacity determination may be made by two physicians, or by one physician and one of the following individuals: i) a licensed psychologist; ii) a registered nurse who is currently certified as a nurse practitioner by a national certifying body approved by the Board of Nursing; or iii) a licensed physician assistant (PA) who a physician responsible for overseeing the PA’s practice affirms is competent to conduct evaluations of the capacity of patients to manage health care decisions. The new law does not affect the other applicable criteria for determining that a person is incapacitated, including that the providers must still personally examine the patient and cannot be a relative or have a claim to a portion of the person’s estate.

According to State Representative Patrick Snyder, who helped introduce the legislation, several communities in Wisconsin depend solely on advanced practice clinicians, like PAs and registered nurses, for their care because the closest physicians are many miles away and, for these communities, and others that rely heavily on advanced practice clinicians, the Act will allow for a continuity of care that was prohibited under prior law.

If you previously signed a power of attorney for health care or living will under the prior law, you may consider having your document reviewed and potentially updated if you wish to take advantage of this recent law change.

 

Many have heard the quote often attributed to Benjamin Franklin, “In this world nothing can be said to be certain, except death and taxes.”  The sentiment behind this quote remains as relevant today as it did then, particularly in the context of modern retirement planning and tax-qualified retirement accounts.  According to the Social Security Administration, tax-qualified retirement accounts are the predominant retirement plan among workers in the early 21st century.  Common examples of tax-qualified retirement accounts include Individual Retirement Accounts (IRAs), 401(k) Plans, 403(b) Plans, etc.  The prevalence and value of these accounts have risen dramatically in the past 20 years.

Given this increased wealth accumulation, tax-qualified retirement accounts are beginning to play a larger role in estate planning.  For many, a trust often serves as the cornerstone of their estate plan.  Trusts offer many advantages including the ability to avoid probate while still (i) managing assets for the benefit of young beneficiaries, (ii) protecting inherited assets from a beneficiary’s creditors or ex-spouse, or (iii) preserving a beneficiary’s eligibility for important public benefits.  Given these advantages, it is often desirable to name a trust as the beneficiary of a tax-qualified retirement account.  However, it is important to understand that these accounts remain subject to a complex set of income tax regulations that can often pose a trap for the unwary, particularly in the context of trust planning.

The major attraction of a tax-qualified retirement account is the ability to accumulate funds inside the account on a tax-deferred basis (or tax-free, in the case of a “Roth” account).  However, IRS regulations dictate when this tax-sheltered accumulation must end.  At a certain point, the account owner and/or beneficiary must begin to withdraw required minimum distributions (“RMDs”) from the account and pay income tax on the funds that are withdrawn. Generally, the best income tax planning strategy with respect to RMDs is to withdraw them over the longest period of time possible.  This offers the advantage of delaying the income tax associated with the withdrawals and allows the funds to grow within the account on a tax-deferred basis as long as possible.  This income tax deferral can have a significant investment and long-term savings impact on the account in question.

When an account owner dies and has named an individual directly as the beneficiary of his or her tax-qualified retirement account, the beneficiary can often easily establish an inherited account that allows him or her to withdraw RMDs over the course of his or her remaining life expectancy.  This is usually the longest distribution period permitted under IRS regulation.  A spousal beneficiary will also have the option of rolling the account over directly into his or her name.

However, when a trust is named as beneficiary, the trust document itself plays a crucial role in determining how quickly RMDs must be withdrawn from the account.  If a trust meets specific requirements and is considered a “see-through trust,” the life expectancy of the oldest trust beneficiary may be used as the measuring life for determining how quickly RMDs must be withdrawn from the account.  Otherwise, if such requirements are not met, the funds must be completely withdrawn from the account over either the remaining life expectancy of the account holder or within a five year period, depending upon the age of the account owner at the time of his or her death.  This often accelerates the timeline for withdrawing the funds from the account, as well as the associated income tax.

For a trust to be considered a “see-through trust,” it must meet the following requirements:

1. Valid.  The trust must be valid under state law.
2. Irrevocable.  The trust must either become irrevocable upon the death of the owner or be irrevocable on the date that it is signed.
3. Identifiable.  The beneficiaries of the trust must be identifiable from the trust instrument.  This is required so that the oldest trust beneficiary can be identified to determine how quickly RMDs must be withdrawn from the account.
4. Documentation.  Certain documentation must be provided to the plan administrator.  This may often be satisfied by supplying a copy of the trust document.
5. Individuals.  All beneficiaries of the trust must be individuals.  Estates, charities, non-qualified trusts and other entities do not qualify as individual beneficiaries.

While some of the above requirements are fairly straight forward, it remains easy to run afoul with others in the average trust document.  For example, the simple act of including a charity as a contingent beneficiary may prevent a trust from being considered a see-through trust.  Accordingly, if you plan on naming a trust as the beneficiary of a tax-qualified retirement account, you should speak with your attorney to make sure your trust qualifies as a see-through trust.  In some estate plans, it might even make sense to create a standalone see-through trust depending on the size of the tax-qualified retirement accounts and the account owner’s estate planning goals and family situation.

 

Caring for a spouse who suffers from physical and/or mental decline can be an overwhelming task. The healthy spouse often spends the majority of his or her time ensuring that the care needs of their spouse are met. Faced with this daily struggle, it is all too easy for the couple to put off the crucial task of reviewing and updating their estate plan. Below is a list of some of the important estate planning documents that should be reviewed and possibly updated under such circumstances.

1. Wills.
Spouses often have wills that leave all of their property to each other upon the first of their deaths. While such planning makes sense when both spouses are healthy, it may not be the most appropriate planning if one spouse would likely enter a long-term care facility if his or her spouse dies and is no longer able to care for him or her at home. Given the high cost of such care, many individuals often turn to Wisconsin’s Medicaid program to help pay for such care. However, this program has strict financial eligibility requirements that limit the amount of assets an individual can have and qualify for benefits. The program allows a married couple to keep additional assets when one of the spouses lives at home (a “community spouse”), but such protections are lost if the community spouse predeceases the spouse who resides in a long-term care facility. Without further planning, those additional assets would then need to be spent down on the spouse’s long-term care. One way to avoid this outcome is for the community spouse to update his or her will to leave such assets to a testamentary supplemental needs trust for the benefit of their spouse, rather than to their spouse outright. Current Medicaid law provides that assets held in such a trust are exempt and that funding such a trust is not considered a disqualifying divestment. This can also avoid a “divestment by death” since Medicaid law now considers it to be a divestment if a community spouse transfers assets for less than fair market value in the five years after (rather than just the five years before) his or her spouse becomes eligible for Medicaid. The assets in the trust are then available for the spouse’s benefit and any assets that remain at his or her death can be distributed to the couple’s children or other beneficiaries.

2. Marital Property Agreement.
Wisconsin is a marital property state and spouses can sign a marital property agreement classifying their assets as either marital property or the individual property of one spouse. While marital property agreements are disregarded for Medicaid eligibility purposes, they can be useful tools in protecting assets from estate recovery. Federal law requires every state to have an estate recovery program allowing for recovery of amounts paid on behalf of recipients for certain Medicaid benefits, including long-term care services. Due to a recent change in estate recovery law, estate recovery claims may now extend to marital property in a surviving spouse’s estate. Spouses may reduce the likelihood of a successful estate recovery claim by signing a marital property agreement classifying their assets as the individual property of the healthy spouse.

3. Durable General Power of Attorney.
A durable general power of attorney is used to appoint an agent to make financial decisions on your behalf. Generic durable general power of attorney forms are often missing important provisions that would allow the healthy spouse to engage in Medicaid planning as agent on behalf of the disabled spouse. Without these specific provisions, the agent is often prevented by law from engaging in such planning. The authority to make gifts is perhaps the most important power that should be included in a power of attorney for Medicaid planning purposes. Restrictions may be placed on this authority, such as the requirement that certain individuals in addition to the agent must consent to the gift, but if gifting authority is not otherwise included, or is limited by amount, the agent may not be able to implement necessary Medicaid qualification planning. Also, since marital property agreements can be important Medicaid planning tools as discussed above, allowing the agent authority to enter into or amend such agreements can be helpful and provide added flexibility for your spouse. It is also important to authorize the agent to create and fund certain types of trusts on a spouse’s behalf that may assist him or her in qualifying for Medicaid, such as special needs trusts and other irrevocable trusts. Finally, it can be beneficial if the agent has a limited ability to update beneficiary designations in case such designations need to be changed in response to such Medicaid planning.

4. Health Care Power of Attorney.
It is crucial that the spouse experiencing physical and/or mental decline has a health care power of attorney in place that authorizes his or her spouse (or another individual) as agent to make health care decisions on their behalf if they become incapacitated. Additionally, if the healthy spouse has the disabled spouse named as primary agent, he or she should consider whether to update his or her power of attorney to name a different primary agent who is in a better position to make such decisions, such as a responsible adult child or family friend.

The potential long-term care costs that accompany a spouse’s physical and/or mental decline make advance estate planning all that more important. In particular, if your spouse is diagnosed with dementia or the early stages of Alzheimer’s disease, he or she may eventually lose their capacity to prepare or update estate planning documents. Accordingly, it is important that such estate planning documents be prepared and/or reviewed as soon as possible.