The Basics of Estate Planning in Wisconsin
The thought of estate planning can be overwhelming for couples and individuals alike. There is a lot to think about as families change and tax laws are revised every few years.
The following Q&A can help break down the basics of estate planning for people who live in Wisconsin.
Who should have an estate plan?
Any individual or couple with meaningful assets who wants to direct where those assets go upon death should have an estate plan.
The term “assets” can include a home, other real estate, investments, or other financial accounts. Assets can also include automobiles, jewelry or artwork, and other items of value. In Wisconsin, ticket holders can even list their Packers tickets in their wills!
Essentially, anyone who answers “yes” to these three questions should have an estate plan:
- Do you have assets?
- Do you want to choose which individuals or charities receive your assets?
- Do you want to choose a trusted person to handle your estate when you pass?
It is especially important for individuals and couples with children or grandchildren to have an estate plan to ensure their intentions are properly communicated with regard to how and when their holdings are distributed.
An estate plan comprises five main documents. What are they?
An estate plan usually involves the preparation of five documents. Each one serves a special purpose in handling a person’s physical and financial affairs in the event of death or disability.
A WILL is a document that gives direction about how to distribute a deceased person’s property. It designates a person (referred to as the “personal representative” or executor”) who the will maker chooses to administer his or her estate. A will also designates a “guardian” or person chosen to raise minor children.
A TRUST is a document whose primary purpose is the avoidance of probate court proceedings. A trust outlines specifics such as when a person is to receive an asset. (For example, the trust maker can choose to hold off on giving money to someone until he or she reaches a certain age.) When assets are held in a trust, they are not subject to administration by a probate court.
A MARITAL PROPERTY AGREEMENT can be done prior to marriage or during marriage. It is a document which helps classify the ownership of a couple’s assets as “yours, mine, or ours.” Then, when one spouse passes, his or her property is handled separate from the surviving spouse’s property, so as to avoid mixing the two.
Most people think of marital property agreements in the context of a divorce, but they are highly useful for estate planning. They are especially important for couples with children from prior relationships. Without a marital property agreement, there can be much confusion as to what property should be administered by the deceased spouse’s estate.
A FINANCIAL POWER OF ATTORNEY is a document that enables a living person to designate another to manage his or her finances while he or she is still alive. The document can empower the designated person to handle the finances whenever the maker directs them to do so, or when the maker becomes incapacitated. After the person’s death, the financial power of attorney expires.
A HEALTHCARE POWER OF ATTORNEY allows a person chosen by the maker (of the healthcare power of attorney document) to make medical decisions if the person is incapable of making decisions for himself or herself.
What happens if a person does not have a will or an estate plan when he or she passes?
When a person passes without a will, it is called “intestate.” The laws of intestacy will apply, which essentially create an estate plan for the deceased person. Without a will, the estate will move forward under these default probate laws.
This means the court will supervise the disposition of the person’s assets. The court will also determine who gets what, who can be the executor of the estate, among other matters, according to state law. This might not be what the deceased person may have wanted.
If a person is married and does not have a will or a trust, he or she cannot assume all assets will automatically go to the surviving spouse. For example, if the married person has children from a previous marriage, a family dispute could erupt over the handling of the estate’s assets.
Anyone with children or other heirs, or anyone with substantial assets who has a preference as to how those assets are to be distributed, should have an estate plan which ensures his or her wishes are carried out.
What is probate?
Probate court proceedings occur when a person passes -- with or without a will -- and the person’s assets cannot be distributed without the court’s assistance.
Probate will be required if the deceased has assets (that exceed $50,000 total in value), but no beneficiary has been designated for certain of those assets. Assets can include life insurance, retirement accounts, bank accounts, or other funds, as well as real estate or other physical property including vehicles, jewelry and such.
Probate court is commonly considered the place where disputes get resolved among family members, heirs, and beneficiaries of an estate. It can include interested third parties and creditors. Guardianship of minors can be a part of the probate process, as well.
How can probate be avoided in Wisconsin?
Probate can be avoided for many estates in Wisconsin. Well-recognized strategies can be employed to prevent heirs from having to invoke the probate court’s assistance to transfer the deceased’s assets.
Those strategies can include the following:
- Have a trust in place! A trust can hold assets while the trust owner continues to use and control them. Assets which can be held by a trust include financial accounts, a home, vehicles, and even a pet. An attorney can provide guidance about the pros and cons of having a trust.
- Name (and be sure to update as needed) the beneficiaries on payable-on-death accounts such as life insurance policies, bank accounts, or other financial accounts.
- Create transfer-on-death deeds for the home or other real estate.
- Have joint financial accounts that allow the surviving spouse to assume sole ownership when the first spouse dies.
If an estate plan is already in place, how often should it be updated?
Anytime there is a change in the family, such as a death, birth, marriage, or divorce, the estate plan should be revisited to make sure it remains relevant. Also, any time the tax laws change would be a good time to review the plan.
Simple changes can be made to an existing estate plan with an amendment called a codicil. In most cases, there is no need to create a whole new estate plan unless it has been many years or there are many changes since it was last updated.
The estate planning lawyers at Murphy Desmond welcome the opportunity to discuss your estate planning needs. We have lawyers experienced in estate plans for couples and individuals of all ages and with unique needs. Murphy Desmond has offices in Madison, Appleton, Janesville, and Dodgeville, Wisconsin. You can reach us at firstname.lastname@example.org or call us at 608.257.7181.
Published June 28, 2021