Seven Things You Need When You are Personal Representative of an Estate

Seven Things You Need When You are Personal Representative of an Estate

Being asked to wind up the affairs of a deceased loved one may feel like an honor, but the duties of a Personal Representative, or Executor, as the position is sometimes called, can also be complicated. If you have been named as Personal Representative in the Last Will & Testament of someone who has died, here are some things to keep in mind:

1. You Will Need Patience.
Being appointed takes time. Your nomination as Personal Representative does not give you authority to act on behalf of the estate. Before you can act, you will need to file an application with the probate court to request that you be appointed. You will be required to file a number of documents to open the administration, and will be appointed only after all interested parties, heirs, and beneficiaries have been given notice of the proceedings and any applicable waiting periods have passed. The process and time frame varies depending upon the number of heirs and beneficiaries, and whether any party raises an objection to the Will or to your appointment as Personal Representative. In the meantime, you will not have authority to pay bills, secure property, or handle administrative tasks for the estate.

2. You Will Need Help.
You will often need the assistance of an attorney to prepare the initial required filings and help you through the remaining probate process. The required legal filings can be complicated. In addition, you will need legal advice regarding claims filed against the estate, tax issues, distribution methods, or objections by beneficiaries. Your attorney can coach you through legal questions and situations as they arise. He or she can also conduct research on specific matters and look over or prepare paperwork before filing.

3. You Will Need Information.
Before initiating the probate process, you will need information about the decedent’s assets and the original Last Will & Testament. Not all estates are subject to probate. If the deceased named direct beneficiaries on his or her life insurance, bank accounts or retirement accounts, for example, these assets will not need to go through the probate process. How assets are titled matters in determining what procedures will be necessary to handle the decedent’s affairs. If you don’t have very much information regarding assets and expenses, an attorney will not be able to tell you which procedures can be used until you gather more information. It may be necessary to sort through files and go through all of the decedent’s paperwork before you can begin the process.

4. You Will Need Time.
Administering an estate is very time consuming. It will take several months to administer a basic estate, and much longer for complicated estates. In Wisconsin, there is a three month period after the estate has been opened, during which creditors may file claims in the estate. In addition, the estate will need to remain open until all assets, including real estate, are liquidated and transferred. This may mean waiting several months to a year or more for real estate to be sold. Being a Personal Representative can feel like a “second job” as you spend time making phone calls to obtain information from banks, mortgage servicers, investment firms, and life insurance companies and schedule meetings with financial advisors, realtors, accountants, and attorneys. You may need to sort through and dispose of years of accumulated paperwork and personal property, often while dealing with other grieving family members who also have an interest in personal property and sentimental items.

5. You Will Need Excellent Skills.
You must have good organizational and financial skills. Personal Representatives are required to keep very good records and provide an accounting to the probate court for all expenditures. You will need to keep meticulous records of financial transactions, as well as communications with attorneys, accountants, bankers, and other contacts. If you hate the thought of balancing your own checkbook, and happily relinquish financial tasks in your household to your spouse or partner, you will have difficulty dealing with the tasks of a Personal Representative. In that case, a good Personal Representative will enlist the help of professionals to organize the estate’s finances.

6. You Will Need Money.
As Personal Representative, you will likely incur expenses during the administration of an estate, such as travel, mileage, postage, etc. Fortunately, you are entitled to be compensated for out-of-pocket costs. You are also entitled to compensation in the form of a Personal Representative’s fee, typically 2% of the value of the estate. Be prepared, however, that heirs do not always understand the amount of time involved in administering an estate, and the Personal Representative’s fee may become a source of conflict. While the law allows the fee, many Personal Representatives feel uncomfortable accepting payment.

7. You Will Need to Fulfill Legal Duties.
Personal Representatives have a duty under the law to properly administer the estate. Personal Representatives are required to complete certain duties, such as paying administration and funeral expenses, publishing notices to creditors, filing tax returns, providing notice to heirs, and following the distribution instructions as set forth in the decedent’s Will. The law also provides a time frame in which these tasks must be completed. In addition, you have a legal duty to properly value assets and make sure that heirs receive the inheritance to which they are entitled.

The role of Personal Representative of an estate requires time, patience, and the organizational skills to deal with a somewhat overwhelming amount of legal and financial documents. With this information, we hope that you are more prepared to handle the responsibility of being Personal Representative. Please note that Anderson O’Brien Law can assist you in the process of administering an estate.

 

Trust Settlements – How to Navigate the Process

Trust Settlements – How to Navigate the Process

Regardless of the type of estate plan you have set up, if someone passes away, there are a number of matters that will need to be addressed. A trust sets up the terms for how a trustee should administer the affairs and assets of the deceased. Below are discussion points for some of the most common matters associated with the trust settlement process.

1.) Will
If there is an original last will and testament, it should be filed with the Register in Probate in the county of which the deceased was a resident prior to passing. Whether there is a trust governing disposition of assets or not, filing the original last will and testament is required under Wis. Stat. § 856.05(1).

2.) Debts
A creditor claims notice should be published in the newspaper to bar creditor claims after the notice period. (Of course, there are certain exceptions to what types of creditors’ claims would be barred which I am not going into here.) Debts of the deceased should be paid. Often, there are many medical expenses that have been incurred immediately prior to passing. Those types of expenses have priority to be paid and should be paid promptly. Likewise, funeral/burial expenses have priority (to be paid) and should be paid promptly.

3.) Credit Cards and Credit Bureaus
If there are credit cards in the deceased’s name, those companies should be contacted and provided a death certificate so that no additional charges can be made to those cards. Once those credit card accounts are settled and closed, all the deceased’s credit cards should be destroyed or discarded. Similarly, to avoid additional credit and fraud issues, the three credit bureaus (Equifax, Transunion, and Experian) should be notified of the deceased’s passing. This will prevent credit from being issued in the deceased’s name or with the deceased’s social security number.

4.) Real Estate
If there is real estate in the deceased’s name, the real estate will need to be transferred from the deceased’s name. The method used to transfer the real estate in the deceased’s name will depend on how the real estate is titled. For example, if the real estate is titled in the name of both spouses as survivorship marital property, a termination of decedent’s interest form will need to be recorded with the appropriate register of deeds office. If the deceased owned the real estate solely in his/her name, then someone will need to have authority to sign a deed to transfer the real estate. Usually this person is the personal representative who has been appointed by the register in probate to settle the affairs of the deceased. Alternatively, if real estate is titled in the name of the trust, then the trustee of the trust will have authority to transfer the real estate. Some trusts require the real estate to be distributed directly to beneficiaries or may require the real estate to be sold. There is no single sure-fire method to remove the deceased’s name from the real estate and/or to transfer the real estate to the deceased’s beneficiaries. If there is real estate in the deceased’s name, it is better to take care of this as soon as possible. Leaving real estate in the deceased’s name for many years will only make resolving the situation more complicated. If real estate tax bills are still coming in the deceased’s name, this is an indication that something needs to be taken care of. It is recommended that you consult your estate planning attorney to discuss how to address real estate titled in the deceased’s name or in the deceased’s trust to ensure the provisions of the trust are complied with.

5.) Bank Accounts
If there are bank accounts in the deceased’s name, you will need to know if: (a) those accounts have joint owners listed, (b) those accounts have any pay-on-death designations, or (c) those accounts are in the deceased’s name solely. If there are joint owners, then they are the owners of the account and the deceased’s name can simply be removed from the account. If there are pay-on-death designations, then those pay-on-death beneficiaries would own the account. If the bank accounts are in the deceased’s name only, a probate may be required to transfer those accounts to the deceased’s beneficiaries. If the accounts are in the name of the deceased’s trust, it is important to consult the trust document to make sure that the trust provisions are being followed. Some trusts may require distributions to beneficiaries or to other trusts created under the original trust.

6.) Appraisals and Date of Death Valuations
Generally, real estate in the deceased’s name or deceased’s trust should be appraised to obtain a date of death value. The reason to obtain an appraisal is to take advantage of the step-up in basis rule. The step-up in basis is an adjustment to the value of an asset (usually an appreciated asset) for tax purposes. When an asset is distributed to a beneficiary, the asset is usually worth more than what the deceased paid to acquire it. The appraisal will assign a new basis to the asset so that if the beneficiary later sells the asset during the beneficiary’s life, the beneficiary’s capital gains tax is minimized or eliminated entirely. In conclusion, by having reliable appraisals and valuations completed, the beneficiaries will be able to take advantage of the step-up in basis rule.

Some think that because they have a trust, everything happens automatically. However, the trust settlement process requires involvement in addressing matters such as debts, real estate, wills, and more. If you find yourself in need of help navigating this process, contact our estate planning attorneys at Anderson O’Brien Law.

 

Buy-Sell Agreements: Working for the Best and Planning for the Worst

Buy-Sell Agreements: Working for the Best and Planning for the Worst

However optimistic you are about the future of your business, the reality is at some point your business will either end or change hands. A thorough business plan takes this into consideration. The best-case scenario is after many years of success, your business partners or a successor will fund a comfortable retirement for you by purchasing your interest in the business. The worst-case scenarios generally involve death, disability, divorce, disagreement or bankruptcy of you or your business partners. From the best-case to the worst, both you and your business may benefit from having a Buy-Sell Agreement in place.

Buy-Sell Agreements are sometimes called “business pre-nups” because they serve a similar function to the agreements soon-to-be married couples enter into which direct how their assets would be divided upon their death or divorce. Buy-Sell Agreements are binding contracts which spell out who business owners can sell their interests to, on what terms, and how the price will be determined. When the business is going well, and all the owners are getting along, it is much easier to agree on equitable terms than when tensions are high at the time of a buy-out and parties have little incentive to negotiate fairly. By discussing issues in advance and setting the ground rules for what happens upon the occurrence of certain events, business owners can avoid future arguments and limit the potential for expensive litigation down the road.

Starting with the best-case scenario, a voluntary retirement from a successful business, Buy-Sell Agreements can help define an exit strategy and ownership succession. The value of a business is not always clear and can be calculated in different ways with a wide range of potential results. The Agreement can state which valuation method will be used for the exiting owner’s share of the Company. The Agreement can also help define the structure of the exit to minimize taxes or allow them to be paid over time. For business owners hoping to fund a large part of their retirement using these proceeds, not knowing their buy-out price or tax burdens in advance can seriously jeopardize their ability to plan for retirement. These Agreements also are helpful in getting owners to think about who their buyers may be. As the Baby Boomer generation is entering retirement age, there will be a lot of small business owners looking to sell, and the market for willing and able buyers may be strained. If a buyer must be found unexpectedly or on short notice, the purchase price will likely be much lower than the true value.

As great as you and your business partners may get along now, it is possible at some point business or personal disagreement will rise to the level where one of you will be forced to leave the business. Business owners may also unexpectedly exit the business for reasons like a desire to focus on their families, illness of themselves or a loved one, or moving out of the area. In these situations, you and the exiting owner may have different opinions about what fair buy-out prices and procedures would be. In the absence of an Agreement, these disagreements can escalate quickly and may result in litigation. By having the Agreement in place, the emotional impact of dispute and the tendency for people to believe they are being treated unfairly is checked by being able to look to an agreement everyone consented to beforehand for how the exit will take place.

Even if you and your business partners are lucky enough to always agree, events outside of your control, such as an owner’s death, divorce, disability or bankruptcy, can lead to uncertainty as to who ends up with control of the business. When an owner dies, his or her share passes to their heirs. This often results in the spouse or children of a deceased business partner either wanting to participate in the business or, more commonly, wanting their proportionate share of the business earnings without having to work for them. Divorce can lead to a similar situation, and a court may order the business interest divided between divorcing spouses. If a business owner becomes disabled and unable to contribute to the business, their interest may become a burden on the other owners. Buy-Sell Agreements also often contain provisions for what happens if an owner becomes involved in criminal activity or becomes mentally unstable. If a business partner goes bankrupt, potentially for reasons having nothing to do with your business, creditors may be able to pursue their business interest to pay off what they are owed. Each of these situations result in either an unwanted business partner or an unexpected party demanding the value of the interest they now possess. A Buy-Sell Agreement can give the remaining owners rights to force out owners who have become a liability or purchase interests at a determined price to prevent heirs, ex-spouses, or creditors from gaining control. These goals are often accomplished by terms which give the remaining owners the first option to purchase any interest transferred from an owner for a price determined in the agreement. The source of funding the buy-out can vary, but is often a life insurance policy, which ensures available funds to buy the interest from the owner’s heirs.

Whatever the future holds for you and your business, a Buy-Sell Agreement can help make sure you are prepared for it. If your business already has a Buy-Sell Agreement in place, it may be time to review the document to make sure you understand it and that it still meets the needs of your business. An Agreement drafted for a start-up may no longer suit a business which has grown or added new business partners.

 

Estate Planning for a Disabled Spouse

Estate Planning for a Disabled Spouse

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.

 

I Signed My Will, Now What?

I Signed My Will, Now What?

Completing your estate plan for the first time is a significant milestone.  It means that you have taken an important step forward in planning for your family’s future.  Our clients often breathe a sigh of relief after signing their estate planning documents, knowing the plans they have often long discussed are now finally in place.  However, just because you have signed your documents does not necessarily mean your estate plan is complete.  There are often a variety of tasks we recommend you complete after signing your estate planning documents to ensure your plans are fully realized.

1. Update Your Beneficiary Designations. After signing your estate planning documents, we recommend you review the primary and contingent beneficiary designations you have listed for your (i) life and accidental death insurance policies, (ii) retirement plan, pension plan, 401(k) plan, IRA and profit sharing plans, and (iii) any other contract, annuity, deferred compensation arrangement, policy or plan where a benefit is payable to a named beneficiary upon death. Most of these contract payments pass outside of the provisions of your will or trust directly to the named beneficiary identified in the beneficiary designation form.  This means that simply updating your will or trust does not necessarily change the beneficiary of such contact payments.  It is often necessary to update these beneficiary designations to ensure such payments will be made to your intended beneficiary and coordinated with your overall estate plan.  Your attorney should discuss with you his or her recommendations for updating your beneficiary designations after you complete your estate plan and can often help you to do so if you have any questions.

2. Prepare a List of Tangible Personal Property Bequests. Under Wisconsin law, you can incorporate certain language into your will that allows you the ability to leave a written statement or list disposing of items of tangible personal property at the time of your death. This list is separate from your will, and you can prepare it on your own if you wish.  This provides you with increased flexibility to update such bequests.  The list may only dispose of tangible personal property, such as jewelry, household furnishings, etc., and may not dispose of monetary assets.  To be enforceable, the list must describe the items and their recipients with reasonable certainty, and it needs to be signed and dated by you.  However, if you anticipate any disagreement among the beneficiaries, you can certainly have the list witnessed or notarized.  You may change or revoke the list at any time.  If you choose to prepare a list and decide to subsequently change it, we recommend that you destroy the old list and prepare an entirely new list.  You should always avoid erasing or crossing out prior entries on your list because this can lead to confusion regarding your intentions and possibly compromise the enforceability of the list.

3. Prepare and Maintain a Current List of Assets and Liabilities. We recommend that you regularly maintain a list of all of your substantial assets (home, checking and savings accounts, investments, retirement plans, or otherwise) and liabilities. We also suggest that you maintain a list of your insurance policies, policy numbers, and the name of the agent for each policy.  By regularly maintaining such lists, the person handling your estate will have accurate information regarding your assets and liabilities, and this can significantly increase the ease and efficiency with which he or she can settle your estate.  These lists should be updated at least annually and be kept in a safe and secure location where the person handling your estate knows how to access them.

4. Review and Update Your Estate Plan as Needed. The estate plan which is appropriate for you now may not be suitable years from now. We recommend that you contact your attorney and review your estate plan when any one or more of the following occur (i) when you move from Wisconsin to another state, (ii) when there is a change in your family circumstances (divorce, marriage, death of a child, marriage of a child, new grandchildren, incapacity of spouse or children, etc.), (iii) if there is a significant change in the law which may have an impact on your estate, and (iv) finally, even if you do not have a change in family circumstances or finances, it is advisable to regularly review your estate planning documents to make sure that they are a current statement of your preferences regarding the disposition of your property upon death.

The above recommendations are general tasks that should be completed in most all estate plans.  However, there may also be specific tasks that need to be completed that are unique to your individual estate.  Be sure to discuss with your attorney what tasks need to be completed after your estate planning documents have been signed to ensure your estate plan will fully accomplish your goals.

 

Special Needs Estate Planning

Special Needs Estate Planning

Special needs planning involves parents or caregivers who are interested in ensuring quality of life, advocacy and services to a child or individual with special needs. The planning itself is two-fold: First, parents and caregivers will want to be sure that they can use their own assets to provide resources and services and to ensure that such resources are appropriately handled after death. Second, for individuals with special needs, inheritances, like other resources, can have an adverse impact on needs-based or financially-based public benefits. Therefore, special needs planning also incorporates planning for those types of benefits as well.

A properly drafted special needs plan has two primary goals: (1) preservation of resources and (2) ensuring quality of life. The foundation of such planning includes a Will or Revocable Trust, a Special Needs Trust, and in some cases, Guardianship.

If you do not have a Will, Wisconsin Statutes will determine the beneficiaries who receive your property (the Laws of Intestacy). If you have a child with special needs who is receiving public benefits, you may not want that child to receive your property directly. Instead, you can set up a Special Needs Trust in your Will for your child with special needs ensuring that public benefits will remain intact after your death. If you have been court appointed as legal guardian for your adult child, you can also nominate a successor guardian in your Will.

As an alternative to your Will, you can execute a Revocable Trust, which is a trust that provides for distribution of your assets upon death. Unlike a Will, if the Revocable Trust is properly funded, it will allow you to avoid probate procedures. You can also provide for the distribution of assets to a Special Needs Trust within your Revocable Trust.

A Special Needs Trust is a trust arrangement whereby income and assets are preserved and used for the beneficiary without interfering with or jeopardizing the beneficiary’s eligibility for Medicaid, SSI, and other needs-based government benefits. Assets are held and managed by a Trustee, who distributes the assets in accordance with the instructions in the Trust document.

A Special Needs Trust created under a Will or Revocable Trust is called a third-party trust. A third-party trust is one created and funded with assets owned by someone other than the beneficiary. A third-party trust can also be created and funded prior to death and is called a living trust, or inter vivos trust. Under 42 USC 1396p (d)(4)(A), third-party trusts are not subject to a Medicaid lien.

All Special Needs Trusts provide that funds held in the trust are not to be placed under the control of the beneficiary, and most provide specifically that disbursements from the trust are not to be made to the beneficiary but are to be in the form of payments to vendors. The Special Needs Trust must also be irrevocable. The trust also provides what is to be done with any funds remaining after the death of the beneficiary. Unlike Special Needs Trusts established with a disabled individual’s assets (self-settled trusts), a third-party trust contains no requirement to pay back benefits paid to the beneficiary during his or her lifetime. It is important not to commingle the assets of a third-party trust with a self-settled trust because of this distinction.

Special Needs Trusts involve complex estate planning concepts. It is important that you work with someone who is familiar with different types of Special Needs Trusts, the various options for establishing such trusts, and public benefits planning to ensure that your assets are properly managed and that your loved one maintains necessary benefits following your death.

Pin It on Pinterest