As we noted in our previous blog — if you want your wishes concerning your children and assets to be carried out upon your death, you must have a legal plan in place. Below is a summary of estate planning options.

Will.

  • A will is a written document that outlines how you want your real and personal property distributed upon your death — including who receives what property and how they receive that property.
  • In Wisconsin, each spouse can dispose of one-half of marital property and 100 percent of individual property in a will.
  • A will can designate a guardian for your children; however, children over age 14 can tell the probate judge whom they would like to be designated as a guardian. The judge considers both the will and the child’s wishes in making a final decision.
  • A will can be used to set up a testamentary trust that goes into effect upon your death.
  • A will can establish both a guardian of the person (for a minor child) and a separate guardian of the estate for a minor child.
  • A will allows you to designate a personal representative who assembles your property, pays debts and funeral expenses, inventories your estate, files and pays estate and income taxes, sells property and distributes property.
  • You must be 18 or older to make or revoke a will.

Trust.

  • A trust is a legal arrangement in which property ownership is transferred to a designated trustee who manages the property in order to earn income and increase the principal according to the provisions set up by the trust.
  • The trust beneficiaries do not have control of the trust — the trustee does.
  • Trusts can be a means of protecting assets from inexperienced beneficiaries, or those who struggle with managing their assets.
  • Parents may prefer placing property into a trust for their minor children. This allows parents to place property into a trust and assign a trustee who will choose how to use the property to benefit the minor child. Parents also can designate an age at which the child inherits the property contained in the trust.
  • A trust can continue for the life of your child (thus the child does not inherit the property outright) and then be distributed to that child’s children (your grandchildren).
  • Trusts allow you to make gifts to minors without appointing a guardian of the estate.
  • A living trust is established during your lifetime; a testamentary trust is part of your will and goes into effect upon your death.
  • A living trust is not made public upon your death (in comparison, a will is a public record).
  • A revocable living trust is considered to be one of the most flexible estate planning tools available.
    • Assets are placed into a living trust as soon as the trust agreement is finalized and signed; you (and your spouse) usually serve as the trustee while you are alive. Thus, you can take distributions from the trust while you are alive.
    • A revocable living trust takes the place of a will and thus avoids probate and costs.
    • It can be used to manage your assets were you to become incapacitated during your lifetime. In that instance, the back-up trustee would manage the trust’s affairs during your illness or incapacity.
  • An irrevocable living trust is used primarily to set up a trust with a very specific objective in mind — caring for an ill family member, making donations to a charity, distributing assets to someone at a set age or time.
    • Another individual or institution is usually named as the trustee.
    • Income is distributed to beneficiaries and is not contingent upon your death, unless that is a provision of the trust.
  • A trust can reduce estate and income taxes in most cases.

Power of attorney — finances

  • A power of attorney for real property and finance helps you manage financial matters.
  • It protects you from guardianship — a court proceeding that establishes you as incompetent and places your assets under court supervision.
  • The power of attorney should be granted to a trusted person or corporate entity.
  • The agreement goes into effect immediately upon being signed unless it is specified that the agreement goes into effect on a specific date or in the event of your incapacity.

Power of attorney — healthcare

  • The healthcare power of attorney allows you to appoint someone to act on your behalf and make healthcare decisions in the event you are unable to do so. To be valid, two independent physicians or a physician and a psychologist must examine you and determine that you are incapacitated for the healthcare power of attorney to have legal effect.
  • In Wisconsin, if you do not have a healthcare power of attorney and are unable to make healthcare decisions, the court will appoint a guardian to make those decisions. The state does not necessarily delegate that duty to next-of-kin. To ensure your wishes concerning your healthcare are followed, it is best to designate a trusted healthcare power of attorney.
  • You cannot appoint a doctor or someone who works in the healthcare field as your power of attorney unless that person is a relative.
  • It is best to have a frank and honest conversation with your appointed healthcare power of attorney to ensure that person is aware of your wishes.

The above is a synopsis of estate planning tools. To determine which is best suited to your needs, please contact us today.