What Does “Sound Mind” Mean When Writing a Will?

What Does “Sound Mind” Mean When Writing a Will?

A last will and testament, along with other important estate planning documents, records a person’s decisions regarding the disposition of their property upon their death. Once you turn 18, you can write and amend your estate planning at any point during your life, so long as you have a “sound mind” at the time you execute the documents.

Like most states, Wisconsin’s laws on the mental capacity required to make and amend estate planning documents find their basis in the English common law. The exact language is found in Wisconsin Statute Section 853.01, which states that “Any person of sound mind 18 years of age or older may make and revoke a will.” While the age requirement is straightforward, the exact requirements of having a “sound mind” are less obvious.

To begin with, it should be noted that the capacity to make estate planning decisions, also known as “testamentary capacity,” is a distinct analysis from other types of capacity related questions. Someone may no longer be capable of living on their own due to mental decline but still may have the capacity to make or amend their estate planning. Even being under the legal guardianship of another does not itself prove the person lacked testamentary capacity.

Unfortunately, a clear and simple test is impossible because mental capacity exists on a multi-dimensional spectrum, while the legal analysis requires a “yes” or “no” answer. Borrowing from the common law tradition, Wisconsin cases have established a three-part test to determine on a case by case basis whether someone was of sound mind at the time of a document’s execution:

(1) The person executing the estate planning documents, also known as the “testator” must understand the nature and extent of his or her estate. This does not require an exact knowledge of investment allocation or dollar signs, but generally the testator should be able to roughly identify what assets they own and about how much they are worth.

(2) The testator must understand who the “natural objects of his or her bounty” are. Unlike some countries, in the United States adult children are not legally entitled to inherit anything from their parents, and subject to a number of limitations, spouses are not legally entitled to inherit from one another either. However, this test requires that at the time the testator made the estate planning decisions, they at least understood which individuals would be expected to receive their estate, usually this means the testator’s spouse or children.

(3) The testator must be able to form a rational conclusion on the selection of beneficiaries and the disposition of the estate. This requirement roughly translates to at least a basic understanding of the facts regarding their family situation and the effect of the estate planning documents. The testator is not required to have a detailed understanding of all of the exact workings of their estate planning documents so long as they basically understand the end-result.

In short, the requirements boil down to: you need to know roughly what you have, who would be expected to receive it and how the estate documents you are signing will affect where things go.

Because the bar for testamentary capacity is somewhat low, applying the three-part test sometimes leads to results where a court finds the testator had a sound mind but where the lay person would probably not think so. A good example of this is the rule for persons suffering from “insane delusions.” If a testator believes all manner of conspiracy theories and holds absurd opinions on matters, but understands their estate, the natural objects of their bounty, and the general effect of the plan they are signing, they likely have proper capacity and a sound mind for estate planning purposes. There is some room for challenge if the insane delusion “materially affected” the disposition because it can be argued the insane delusion impacted their ability to meet the prongs of the test, but even then, these challenges are difficult as courts are usually reluctant to weigh in on whether a belief is “insane” or not. The line between eccentricity and insanity is a difficult one to draw. A now infamous 1947 case is an often-cited cautionary tale of a court extending its analysis past strict legal questions as several male judges weighed in on whether a woman was “insane” for disliking men and giving her fortune to a women’s charity. Needless to say, the case has not aged well.

As an example of an insane delusion “materially affecting” the disposition, consider the following. If a parent disinherited you and also believes aliens have infiltrated our society, then the decision will likely stand if the three factors of the test are met. In contrast, if a parent disinherited you because they believe you are an alien who infiltrated our society, then you may have an argument to challenge the will because the insane delusion affected the ability of the parent to rationally select beneficiaries under the third factor of the test.

The three-factor test is analyzed at the time the document is executed, and it is possible that someone may lack capacity one day and have it the next. It is common for people suffering from certain types of cognitive decline to have good days and bad days. While this type of situation poses certain evidentiary hurdles if a challenge is brought, there is nothing inherently invalid about documents executed during a period where the signor temporarily has a sound mind. This is sometimes referred to as a “lucid period,” and in these situations it is usually wise to take extra care to record the evidence of capacity at the time of document execution. This is especially true if someone in the family is going to be upset with their treatment under the plan, as it increases the odds of a legal challenge.

Even if a testator has a “sound mind” as defined in the three-part test, a will, or portion of a will, may be challenged if an individual exercised “undue influence” over the testator to secure a benefit for themselves. Undue influence is beyond the scope of this article, but generally refers to a situation where someone has improperly applied their influence to get someone to change their estate planning to benefit themselves. One of the requirements for an undue influence claim is that the testator was “vulnerable” to undue influence, usually meaning some level of cognitive impairment, but not to the level of lacking a sound mind for estate planning purposes.

If a testator lacked a sound mind when they created or changed their estate planning directives, then those decisions, in theory, will not be valid or effective at their death. In practice, the technically invalid documents will be submitted to the court, and, if properly executed, will be presumed valid until an interested party to the estate proceedings formally challenges the documents within the required time frame. If no one raises the issue, the court overseeing the estate will have no way of knowing the validity of the presented documents is in question and will likely approve whatever distributions are called for in them. Claims not timely brought are forfeited, as courts have a legitimate interest in bringing all matters relating to an estate to rest within a reasonable amount of time following the death of the individual.

If you have questions or concerns about testamentary capacity or other estate planning topics, you should discuss them with an estate planning attorney.

 

Is My Contract Enforceable During an Emergency?

Is My Contract Enforceable During an Emergency?

As a result of forced closures and disruptions to supply chains connected with the Covid-19 pandemic, many businesses are facing the reality that they will not be able to complete obligations agreed to in contracts entered into prior to the crisis. This has brought new attention to an often-overlooked portion of contract law: force majeure clauses.

Sometimes referred to as “Act of God” clauses, force majeure provisions lay out the rules for how contract obligations will be affected if defined events outside of the parties’ control hinder their ability to comply with the contract. Typically, when a party fails to comply with the terms of a contract, they are in “breach,” and the non-breaching party may sue them for the damages caused by the breach or other damages laid out in the contract itself. Force majeure literally translates to “superior force” and fittingly is intended to protect a party who cannot complete the terms of the contract because of intervening forces outside of their control. To be effective for this purpose, the clause must be (1) enforceable, (2) successfully triggered, and (3) provide an adequate remedy or alternative.

States vary in the enforceability requirements for force majeure clauses. Some states require certain formalities to be made and vary in how they interpret terms like “unforeseeable.” It is important to make sure you understand how your state interprets any contracts you enter into and which state law will be used when settling disputes related to the contract. Another aspect of enforceability is whether the procedure for using the provision was properly followed. Some contracts require notices be delivered of the intent to rely on the force majeure clause. Failing to follow the procedure outlined in the contract may result in forfeiting the benefits of the force majeure clause.

To trigger the protections afforded by force majeure provisions, an event described in the clause must occur. Courts tend to use strict contractual analysis when interpreting the clauses, meaning that the exact phrasing in the contract will usually control and courts will be reluctant to read in provisions not explicitly included in the text. Common trigger events include natural disasters like floods, hurricanes and earthquakes, acts of terrorism, war, riots, and publicly declared states of emergency. When the term “Act of God” is used, the commonly accepted definition is any event which may be attributed entirely to nature without human interference. Economic hardship or shifts in the markets are unlikely to trigger a force majeure clause, as these risks are present in every contract and courts typically assume the parties have factored them in when entering into the agreement.

Many of these clauses are already written to expressly include epidemics and pandemics. Even without explicit reference to epidemics or pandemics, it is possible such events may fall under references. For example, a force majeure clause including terms for governmental action or restrictions may allow the clause to trigger not because of the pandemic itself, but because of state and federal actions taken to combat it. It is likely that in years to come, more clauses will be written to explicitly include these triggers to avoid any room for doubt over whether they qualify.

When successfully triggered, a force majeure clause usually will allow for the obligations of the contract to be terminated outright, altered in some way, or delayed. These remedies need to be considered carefully when drafting the clause to ensure the protection provided is a good fit for the subject matter and facts related to the contract. For example, a clause allowing either party to unilaterally terminate the contract when triggered may not be in your best interest if the transaction in the contract is beneficial to you, but you just need more time to complete it. What happens to money paid in advance and how partial performance will be treated are also things to consider when drafting the remedy section of the clause.

In the absence of an enforceable force majeure clause, there may be other options which allow a breaching party to escape liability for breaking the contract. The common law doctrines of impossibility and frustration of purpose may also provide relief from a contract’s terms in times of unforeseen emergency. While beyond the scope of this article, in short, these defenses to a breach of contract cover situations where an unforeseen event, not reasonably anticipated by the parties, either makes compliance impossible, or results in the original purpose of the contract to be so undermined that the actual objective sought to be gained by the contract actions is no longer possible. Even with the potential availability of these common law doctrines, it is preferable to rely on clear contractual language rather than asserting common law defenses.

If you have questions about how the force majeure clause in your contract will be applied, you should speak with an attorney. You may also want to review your insurance policies for provisions limiting their liability for damages caused by such force majeure events. These limitations are common but may deny you coverage at the time you need it the most. Current events may also serve as a prompt for you to be proactive in preparing for whatever the next disaster may be. If your company contracts do not already contain a force majeure clause, or if you believe it is time the existing language be reviewed with greater attention, an attorney will be able to help your business be better prepared to weather future disruptions.

 

What Happens If I Pass Without a Will?

What Happens If I Pass Without a Will?

“What will happen to my assets when I pass away?” This is the question that brings many clients into their attorney’s office for initial estate planning discussions. Typically, their estate planning attorney will ask questions to learn about their assets, family and wishes. From that information, the attorney will work to craft a plan that best achieves those goals. Many clients make that initial appointment intending only to create a Will, but soon learn that a comprehensive estate plan is about much more than the contents of a Last Will and Testament. In most cases, beneficiary designations, marital property agreements or trusts become important components for the plan. The purpose of this article is to examine what happens if that meeting never occurs and the individual passes without any estate planning done.

As a preliminary matter, it is important to note that most people have at least done some estate planning even if they have never written a Will or met with an attorney. Typically, this comes in the form of a beneficiary designation on financial accounts, life insurance or retirement assets like 401(k)s. Alternatively, some may own property in a form of title which creates rights of survivorship. While these choices may not have been a part of a comprehensive plan, they do represent decisions which have deviated from the “default.” This sort of uncoordinated and piece-meal planning can sometimes cause more harm than good, especially when beneficiary designations are not updated for many years or are not made consistent with other planning documents. For example, a decades old beneficiary designation on an account will control over a newly executed Will unless the designation is updated. For the purpose of this article’s examination of what happens without any estate planning, we assume these designations were left blank and assets are titled such that there are no survivorship rights.

For residents of the State of Wisconsin, the “default” is found in Wisconsin Statute Section 852.01. In a sense, this statute is the state legislature writing a Will for anyone who has not written their own. The distribution pattern written into this section attempts to grasp what most people would have selected in their Will had they written one, or in a beneficiary designation had they made one. As such, the more “traditional” your family structure is, the more likely the default will align with your actual desires as it is based on the “issue.” The term “issue” in this context of estate planning, refers to lineal descendants, typically children and grandchildren and will continue to refer to such throughout this article.

In the absence of any planning to the contrary, if you did not have any children with anyone other than your current spouse, everything will go to the spouse, if they survive you. However, if you have children from another relationship, then your surviving spouse or domestic partner will inherit one-half of your property other than your interest in marital property or property held as tenants in common with the survivor.

If there are issue, then they shall receive in equal shares any shares not inherited by the surviving spouse. If there is not a surviving spouse, then they shall receive the entire amount “per stirpes,” which is Latin for “by branch.” This means that your children each would receive an equal share, but if one of your children predeceased you, their share would instead pass to any children they had which remained alive, split by whatever number of grandchildren descended from that deceased child. If the deceased child left no issue of their own, that “branch” of the family tree has been extinguished, and the other branches assume their share.
If there is no surviving spouse or issue, then the assets pass to the deceased’s parents. If there are no surviving parents, then the shares pass equally to any siblings of the deceased, per stirpes. Here, per stirpes would again mean we would look down the family line of any predeceased siblings for a beneficiary. If no surviving beneficiaries are found at this point, then the assets pass to the grandparents per stirpes.

Any share that would go to a beneficiary under the age of 18 will be held in a custodial account for their benefit until they reach of the age of 18. This is because minor children are considered incapacitated under the law and cannot manage large sums of money on their own. When the child comes of age, whatever funds are left are turned over to their control.

Finally, if no heirs can be found as close to the deceased as any living descendant of the deceased grandparents, then the property “escheats,” or “goes to,” Wisconsin Statute § 852.01(3) to be added to the state’s school fund. Clients sometimes ask if their property will be taken by the state if they do not have a Will. This is usually what they are referring to and, as you can see, this will only happen if no family can be located out as far as the descendants of the grandparents.

In addition to the rules described above, there are a great number of exceptions and rules for special circumstances which are too numerous to discuss here. For example, someone who murders their spouse is effectively disinherited, and a parent who abandons their child can lose the rights to inherit from that child if they die. There are also rules for how domestic partners inherit from one another.

Those with children from multiple partners, who are in second or third marriages, who have the intent to treat their children differently, or want to provide for someone who is not legally their child, such as a stepchild, often find these default rules vary greatly from how they would want their assets divided. Unfortunately, the court will not hear arguments that the resulting distribution does not match what the deceased would have wanted. The only way to opt-out of the pattern established by the statute is to take affirmative steps during your lifetime.

Assets pass to the appropriate beneficiaries through probate, which is the court supervised process for distributing the assets of one’s estate upon their death and paying their final expenses. A common misconception is that a Will avoids the need for probate, but a Will merely provides alternate instructions for distribution of one’s assets in the probate process. If you have assets in multiple states, it may be necessary to have multiple probates. This is because Wisconsin courts have limited authority to dictate how property in other states transfers. Proper planning can avoid this expensive problem.

A Will also nominates a personal representative to oversee the probate process. In the absence of a nomination, the court will appoint someone to manage the probate process. Often, this is a surviving spouse or a relative who steps up to the responsibility and volunteers to take on the task. Unfortunately, the power the personal representative wields can sometimes attract those who are seeking to abuse the position for personal gain or to go on a power trip. In the absence of a clear direction by you, the court may not be able to tell the difference between these types of people.

Even if your intent matches the default distribution pattern, estate planning can still offer a number of benefits over dying intestate (without a Will). For example, certain types of estate planning can avoid the probate process entirely, saving time and money upon your death. Trust funds are commonly used to prevent beneficiaries under a certain age from gaining direct control of large sums of money. A trustee manages the funds and helps pay for expenses for the beneficiary until they reach the set age and get full rights to the property. Many prefer this option over the possibility that a grandchild would receive a sizeable inheritance upon turning 18, as statistically that money will probably be wasted and gone within a few years. Sometimes, when a beneficiary is known to be irresponsible with money and the problem does not seem likely to improve with age, trusts can hold onto the money for their entire lives.

Outside of what happens to your assets, dying without estate planning could affect who is given guardianship of your minor children. Typically, the Will is where a parent would nominate who would be charged with looking after their children were the parents to die while the children were still minors. In the absence of a nomination, the court system will decide who will take care of them. This likely will be a family member, but the court will have limited information about your child and your family dynamics. Nominating a guardian is often one of the most important reasons clients with minor children schedule an estate planning appointment.

This article only discusses what happens if you pass without an estate plan, but most estate plans will include power of attorney documents, which appoint trusted individuals to make decisions for you in the event you become incapacitated, but remain alive. These documents are critically important, and anyone over the age of 18 should have them in place. If you have questions about power of attorney, inheritance or wish to create an estate plan which distributes your assets on your terms, it may be time to speak with an attorney.

 

Contingency Clauses in Real Estate Contracts

Contingency Clauses in Real Estate Contracts

If you have ever bought or sold real estate, you may be familiar with the contingency clauses contained in these agreements. These clauses offer the option to back out of a sale if certain events occur. The meaning and consequences of these contingencies can be confusing for first-time buyers or sellers. Even those with experience in the field sometimes struggle to grasp the implications of contingency clauses.

To understand real estate contingencies, it is necessary to have a basic understanding of the process in which real estate transactions are completed. When a potential buyer wishes to purchase a residential property, they will present the seller with a signed “Offer to Purchase.” In Wisconsin, the WB-11 form is the standardized contract used for residential real estate sales and serves as a base from which options are chosen. This Offer will contain all of the terms of the transaction and becomes a binding legal contract when signed by the seller. The Offer does not actually transfer the property but rather begins the process, which will culminate in a closing.  At the closing, the documents are signed and the legal title to the property is transferred. Between acceptance of the Offer and the closing, the parties can agree to change the terms using an amendment, but unless both sides agree on a change, the terms in the original signed Offer will control.

The Offer lays out a series of responsibilities and deadlines for each party. These responsibilities generally consist of providing documents, making inspections and coordinating mortgage financing and title insurance. If a party does not timely complete their duties under the Offer, they are in breach of the contract. Depending on the situation, this may allow the other party to retain earnest money, which is the deposit to the seller that represents the buyer’s good faith to purchase, sue for monetary damages, or sue for “specific performance,” meaning they will request a judge to order the breaching party to fulfill their obligations. Often, the legal costs of pursuing these remedies deter the non-breaching party from pursuing them, but the potential for such legal action makes it inadvisable to assume that if something goes wrong, or if you change your mind, you can just walk away from an accepted Offer.

Because key information is sometimes not known when an Offer is accepted, most contracts contain contingencies which state that if specific events occur, then a party has the option to walk away without being in breach. If a contingency is triggered, the party backing out of the deal is not breaking the contract because the contract itself states they would not have to go forward if that event occurred.

Although some types of contingencies benefit the Seller, generally, Sellers prefer Offers with fewer contingencies because contingencies create more opportunities for the deal to fall through, leaving them with the unsold property. Buyers typically want more contingencies as it gives them flexibility if, after the Offer is accepted, something happens that makes them no longer interested in purchasing the property. What contingencies are included can be an important part of negotiations prior to the acceptance of an Offer.

The WB-11 form contains many options for contingencies. Most are preceded by a box which is checked if that contingency is to apply. If the box is not checked, that contingency is not part of the Offer. Outside of the contingencies included as options in the WB-11, additional terms may be added which make the Offer contingent upon other circumstances. With proper drafting, an Offer can be made contingent upon almost anything.

There are too many possible contingencies to describe them all here, but some of the more common contingencies are described below:

Financing Contingency. This contingency is common when the Buyer requires a mortgage to be able to purchase the property. If the Buyer is unable to obtain a mortgage for a set amount and at a set interest rate, and the Seller is not willing to offer them financing on the same terms, then the Buyer can walk away from the deal without being in breach.

Closing of Buyer’s Other Property Contingency: This contingency allows a Buyer who is in the process of selling another property, usually their existing home, to back-out of a deal if the sale of their old property does not close by a certain date. This can be very important to a Buyer; without it they may end up being forced to either breach the contract or own two homes.  Be sure to carefully think through the dates and deadlines between the two transactions when using this contingency. Even if you already have a binding Offer on your old home, consider this contingency in case the deal falls through.

Inspection Contingency: This contingency allows the Buyer to have an inspector examine the property. If they discover a “defect,” as defined by the WB-11, the Buyer may be able to back out of the deal. The seller is typically given the right to “cure” the defect to prevent the sale from falling through. For example, if this contingency is included and an inspector identifies issues with the electrical wiring, the Buyer would have the right to walk away unless the Seller is willing to pay for the issue to be corrected.

Appraisal Contingency:  Under this contingency, the Buyer may hire an appraiser to determine the value of the property. If the appraisal is less than the purchase price, the buyer can back out of the Offer. Appraisals are expensive and take time, so consider whether it is worth the expense and whether there is enough time between acceptance and closing to receive the appraiser’s report.

If you have questions about what contingencies are appropriate for your real estate transaction, how contingencies in an existing sale may interact, or how to draft custom contingency clauses, you should consult with a real estate attorney.

 

Best Practices for Using Volunteers in Your Wisconsin Non-Profit.

Best Practices for Using Volunteers in Your Wisconsin Non-Profit.

The great majority of work performed by non-profits comes from unpaid volunteers. While volunteers can be vital to helping a non-profit reach its goals, their presence raises certain risks that leaders of non-profit organizations should be aware of to craft effective policies for their recruitment, management and retention.

The typical non-profit organization in Wisconsin is simultaneously subject to two sets of laws. The entity is organized under state law, specifically Chapter 181 of the Wisconsin Statutes, titled “Nonstock Corporations.” However, an organization’s tax-free status is controlled by federal law, specifically Section 501(c)(3) of the U.S. Internal Revenue Code, which generally requires the organization be operated for the sole purpose of pursuing one of several listed causes recognized as deserving tax-free treatment. The many requirements of these laws are beyond the scope of this article, but they affect certain aspects of volunteer management practices.

Recruitment:

Before you can manage your volunteers, you must recruit them. Consider how potential volunteers are screened and appropriate policies are put in place. A bad fit can be more trouble than they are worth, and someone with bad intent or ulterior motives can be disastrous both to the organization and to the cause it is trying to help. Outside of the damage an ill-intended individual can cause directly, bad press from being associated with that person can do lasting damage to an organization’s reputation.

The screening process can be as simple as an application form and/or interview asking relevant questions. A more thorough screening may also include background checks. The extent of the screening process should be commensurate to the level of trust that will be placed in that person. Volunteers entrusted with responsibility over expensive goods which can be stolen or vulnerable people who can be abused should be screened with extra caution. These concerns must be balanced with making volunteering as simple and easy as possible, so volunteers do not lose interest when faced with a daunting application process.

During recruitment, take steps to ensure no improper biases or discrimination are applied to volunteer selection. Discrimination against protected classes is generally illegal, even for non-profits. Among the classes protected by anti-discrimination laws are: age, sex, religion, national origin, race, disability or genetic status. Many of these laws are written with the employment context in mind, but there is legal precedent for their application to unpaid volunteers in certain circumstances. Although the law is unclear in many cases, the safest route is to assume anti-discrimination laws will apply. Some types of organizations have limited exceptions to these rules. For example, religious organizations have a narrow window allowing discrimination on the basis of religion. Discrimination laws are complex and you should consult with an attorney if you believe a decision or practice could potentially expose the non-profit to legal action. Even if a form of discrimination is technically allowed under current law, an organization known to discriminate against certain groups may lose moral credibility, which can translate to reduced donations. Additionally, the non-profit risks losing out on federal funding or contracts.

Another concern with incoming volunteers is their classification within the organization itself. Non-profits in Wisconsin can either have members or not have members. If you are unsure whether a non-profit has members, the Articles of Incorporation filed with the State of Wisconsin will indicate the classification. If an organization has members, they may have voting and other rights to control the organization. If the non-profit is a member organization, be careful to be clear who is a member with these rights, and who is a volunteer.

Training and Supervision:

Once a non-profit has recruited volunteers, they must be trained and supervised to perform their duties. A volunteer orientation process promotes consistent training among volunteers and can ensure vital information is passed to everyone working on behalf of the organization. Key policies and procedures, as well as a mechanism for volunteers to get answers to any questions that may arise during the course of their duties, should be implemented and addressed. While certain training procedures should be uniform across all volunteers, job specific training should also be given based on the task the volunteer will be performing. Job duties may change over time, so updates and refresher training will likely be necessary, even for frequent volunteers.

In addition to initial training, a volunteer handbook can serve as a reference for important procedures and rules for volunteers. Detailed handbooks can also help protect the organization from liability should a volunteer do something against the organization’s policy. Some things a volunteer handbook should include are: non-discrimination and non-harassment policies, confidentiality rules, policies and permission statements for information and images of volunteers in promotional materials, policies for working with certain vulnerable groups, attendance, scheduling, conduct expectations and emergency procedures. This list is non-exhaustive and most non-profits will have unique policies to address their specific functions and organizational structure. It is important the handbook reflect current practices for the non-profit. Thus, it should be reviewed and updated regularly. Changes should be identified to existing volunteers so they are aware of the new expectations and they should be provided with the new handbook.

As discussed in the above “Recruitment” section, a non-profit should exercise care to avoid discrimination against or by volunteers. Monitor both supervisors and other volunteers for signs of discrimination or harassment. Harassment can include continuous jokes or jeers directed at a volunteer’s expense, or otherwise creating a hostile environment for them to perform their volunteer duties. Outside of legal concerns, not allowing such behavior can help keep volunteers eager to return and be productive in their duties.

Liability Protection:

When a volunteer makes a mistake, becomes injured, or otherwise takes action which gives rise to a legal claim, there are two major sources of protection for the organization and the volunteers themselves: state law and insurance.

In Wisconsin, a volunteer who provides services to a non-profit has limited liability under state statutes for damages arising from their acts as a volunteer, subject to certain exceptions including, but not limited to, violations of criminal law, willful misconduct if they are also an employee of the non-profit, or if the act was in their capacity as an officer or director of the organization.

Given the long list of exceptions, it is safest to procure insurance. Insurance also can help pay for the expenses of a volunteer who is injured while performing their volunteer duties. Many organizations purchase volunteer liability coverage to protect themselves and their volunteers from the costs of personal injury or property damages stemming from their volunteer duties. Auto insurance should also be considered if the volunteers will either be driving or riding in a vehicle as part of their volunteer duties. Wisconsin has minimum insurance requirements for all drivers, but these amounts are not nearly enough to cover expenses incurred in all but minor accidents.

Incentives:

By definition, volunteers should not expect payment in return for their services. Regardless, many non-profits desire to reward their loyal volunteers with some token of appreciation for their hard work. This can create issues with accidently classifying the volunteers as “employees,” or with the tax-exemption of the organization under federal law.

The tax-free status of an organization can be revoked if the organization is providing a “private” rather an “public” benefit. This can happen if monetary or other valuable rewards are given to volunteers. Likewise, the classification of a volunteer versus an employee is in part based on whether they receive anything in exchange for their work. Non-cash benefits to volunteers are allowed to a point, but beyond this hard to define threshold, problems can quickly accumulate. One thing is clear, avoid giving cash or gift cards to volunteers if the non-profit is looking for ways to reward its volunteers.

The laws regarding volunteering and Wisconsin non-profits can be complex and you should consult with an attorney if have questions about recruitment, training and supervision, liability protection and incentives for your non-profit.

 

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