Estate Planning
What is Estate Planning? It is a process by which one makes plans for the things important to him or her after death. For example, if you have minor children, part of your estate plan would be the recommendation to the Court of a specific person to act as Guardian to care for your minor children during their minority. In the absence of an estate plan, the Court would determine, without your recommendation, who would care for your children. For some this is an alarming revelation. For those without children, your estate plan would indicate who receives your worldly possessions after your passing.
Is a Last Will and Testament an important part of an Estate Plan? Yes — regardless of how formal or informal or estate plan is, it is important that it incorporate a Last Will and Testament to address any assets which do not have a designated beneficiary, that aren’t jointly held or in the event of the existence trust, held in the name of the trust.
What is a Trust? A trust is a legal receptacle which retains ownership of your various assets so that at the time of your passing there is no requirement for a probate proceeding. While the avoidance of probate is the prime reason that many people execute trusts, a trust has far greater benefits which may be appropriate to your specific situation such as greater flexibility in the distribution of assets, privacy, and tax savings.
What is probate? Probate is a process by which the Court oversees the implementation of the directions incorporated into your Last Will and Testament. In the State of Wisconsin, this process can last up to 18 months and can depending on your specific circumstances cost several thousand dollars in attorneys’ fees.
What happens if I die without a Last Will and Testament? If you die without a Will, you are deemed to die intestate. This essentially means that the Court has not been given any direction as to who should care for your children and/or who should receive your assets that are held individually in your name and which don’t have a designated beneficiary. In this event, the Court will follow the statutory guidelines more commonly referred to as intestate succession to determine who receives what, when, where and how much.
If you die intestate the court will almost always require the personal representative (sometimes referred to as the executor) to post a bond. The bond is nothing more than an insurance policy guaranteeing the beneficiaries that the personal representative will not flee with their assets. This insurance policy is not free and can cost more than a Last Will and Testament. The Court is limited as far as who will act as personal representative as not everyone will be able to post a fiduciary bond as a result of bankruptcies, lack of credit or poor credit.
Do I Still Need a Will if I have very little assets outside of those which have named beneficiaries? Yes — even though the use of beneficiaries is a necessary part of a prudent estate plan, usage of beneficiary designations have several negative side effects such as circumventing testamentary trusts which would otherwise benefit minors or those with special needs. No one knows how their finances will change between today’s date and the date of your death.
Can I avoid the necessity of a Will simply by utilizing beneficiary designations on everything that I have? No — You cannot put a beneficiary designation on everything. For example, you also can’t put a beneficiary designation on personal property, cars, home furnishings, etc.
Should I Use a Simple Will? That is a decision that’s best made with the assistance of a lawyer. All estate planning is not the same as all people are not the same. The existence of children, requested distributions of assets, family dynamics, family members or friends with special needs, costs, the desire for privacy, the availability of other assets and the existence of the federal and state estate tax will all play into what kind of estate plan is right for you.
What happens if a person dies without a will? The laws of each state vary slightly in some case and a great deal in others; but generally, follow these guidelines:
– If decedent is married without children, the spouse inherits the whole estate.
– If decedent is married with children, the spouse and each child share in the estate equally.
– If the decedent has child and is not married, the estate shall descend to his or her children, and their descendants, in equal parts, the descendants of the deceased child or grandchild to take the share of the deceased parent in equal parts among them.
– When there shall not be a child or children of the intestate nor descendants of such children, then the brothers and sisters and father and mother of the intestate and the descendants of such brothers and sisters shall inherit the estate in equal parts, the descendants of a sister or brother of the intestate to have in equal parts among them their deceased parent’s share.
– If there shall not be a child or children of the intestate, or descendants of such children, or brothers or sisters, or descendants of them, or father or mother, then such estate shall descend, in equal parts, to the grandparents and uncles and aunts, if any.
– If none of the above situations is applicable, such estate shall descend in equal parts to the next of kin of the intestate in equal degree, computing by the rules of the civil law.
How large does a person’s estate have to be to justify making a last will and testament? A will can be important regardless of the size of your estate. With a will, you can be sure that your estate is distributed the way you want it to be. You can designate a guardian to care for your children if both spouses are deceased. Finally, by choosing an executor, you can choose someone you are comfortable with handling your estate.
Can I change my Last Will and Testament? You can make and execute a new will as often as you desire. Do not try to change it by using strikeouts and/or written additions. This can cause many problems in interpretation and possibly void your Will. A codicil can be used to amend or revoke provisions in a will. The codicil is subject to the same legal requirements as the will itself as far as its execution and the capacity of the testator. With the use of word processors, it is just as easy to do a new will adopting the changes. Is it expensive to have a Will done? That depends on how complicated your will is and how much advance work you do. For example, providing your attorney with an information sheet like the following will save on legal fees.
What are the Pros and Cons of using a Living Trust rather than a Will? A Will is a document that sets forth how you want your possessions distributed after you die. Writing a will involves naming an executor, who is trusted with carrying out your wishes as expressed in your will. An executor also has the responsibility of handling the final legal and financial affairs of the estate, including filing the final federal and state income tax returns, and settling all financial obligations of the estate.
A living trust transfers control of your property contained in the trust to a trustee, who administers the assets of the trust. You may serve as trustee for a living trust. Many people transfer their possessions into a living trust to avoid probate. Proponents of living trusts also say that probate can be lengthy and expensive. Only property held in the name of the deceased must go through probate. Along with a trust, an individual needs a “pour over” will that passes title of property accumulated after the trust was set up. This kind of defeats the argument about avoiding probate. Also, creating a living trust is initially more expensive than drafting a will.
A Last Will and Testament enables you to do the following:
– You are able to name an executor of your will to handle your wishes as expressed in your will. He or she also will work through the probate process with the aid of an attorney and handle the distributions of your property and assets following court costs, taxes and payment of debts.
– You are able to list specific items or percentages of your assets as bequests to certain people or organizations.
– You are able to select a guardian for your minor children should both spouses die before the children are grown. This guardian can also handle the assets passed to the children by you and distribute the assets to the children upon their reaching the age of majority.
A Living Trust has the following attributes:
– You may also make bequests to specific parties with a living trust. You may elect to distribute your property and accounts immediately following your death or you can set up a plan for distribution over a span of time with conditions to be sure your bequest is being used wisely.
– You are able to select a guardian for your children until they are of legal age and for their assets.
– Your living trust will be managed during your lifetime and transferred to another trustee designated by you following your death with no court publicity.
