PROBATE
Q. What is probate?
A. Probate is the legal process of distributing a decedent's estate in probate court in the county and state where the decedent lives. There can be multiple probate proceeding if the decedent owns property in multiple states.
Q. If I have a Will does my assets go to probate?
A. Yes, If you have a Will or you don't have a Will, your assets will go to probate court, unless you do something else. You can avoid probate by joint tenancy, P.O.D., T.O.D., Trusts, Marital Property Agreements, and proper beneficiary designations.
Q: Does joint tenancy avoid probate?
A: Yes. But a joint tenancy could subject your money or property to the debts of the other joint tenant (divorce, bankruptcy, IRS, judgments, personal injury claims). Many of your concerns about avoiding probate can be handled with a Marital Property Agreement, Trust, or a Transfer on Death. Also, creating a Durable Power of Attorney for Finance will provide an agent during your lifetime.
Q: What is a Marital Property Agreement?
A. A marital property agreement is an agreement between spouses which will determine how your property is transferred during a divorce or in the event of death. In the event of death, the property can be transferred without having your assets go to probate.
Q. What is a P.O.D.?
A. A P.O.D. is a payable on death which may be used on your financial assets held by a bank. This allows you to choose who the beneficiary is of that specific account. After you pass away the beneficiary will take your death certificate to the bank and the assets held in the P.O.D. account will be paid to that beneficiary, without having the asset go to probate.
Q. What is a T.O.D.?
A. A T.O.D. is a transfer on death which may be used for both real estate and brokerage accounts. This allows you to choose who the beneficiary is of your real estate or your brokerage accounts. A new T.O.D. deed must be filed with the Register of Deeds on each property. You must contact your broker and place a T.O.D. on each financial account held by the brokerage.
Q. What assets of mine may be taxed?
A. Both Probate and Non-Probate assets can be taxed. A person’s estate for federal estate tax purposes include all his or her real property, securities, bank accounts, furniture, artwork, jewelry, and all other tangible personal property, as well as most life insurance arrangements and IRA’s, 401K plans, and other retirement plans. That is why proper estate planning can reduce paying estate taxes later.
Q. When do I need an employer identification number (EIN)?
A. Most estates, irrevocable trust, and business use EINs. Also, known as a federal employer identification number (FEIN). It is equivalent to a social security number and normal given to any entity that must withhold taxes and file a tax return. These are some of the entities that will need an EIN:
Trusts, except certain grantor-owned revocable trusts, IRAs, Exempt Organization Business Income Tax Returns
Estates
Corporations and business entities
Real estate mortgage investment conduits
Non-profit organizations
Farmers' cooperatives
Plan administrators
LIVING TRUST
Q: How does a Living Trust avoid probate?
A: A Living Trust is a separate legal entity. Once your property has been placed in the Living Trust name, the Living Trust will manage the property and distribute the property according to your wishes.
Q: Do I still have control over my property after I place it in a Living Trust?
A: Yes, A Revocable Living Trust can be amended at anytime. You may remain the Trustee of the Living Trust during your lifetime. You may transfer any asset into the Living Trust and take it out of the Living Trust just as you were able to before. You may terminate the Living Trust at anytime.
Q: Will I have to file a separate income tax return for the Revocable Trust?
A: No, You may continue to report your income and deductions on your Form 1040. The Trust is only required to file a separate return when it is made irrevocable by your death or by amendment.
Q: Will I lose property tax exemption?
A: No, The property tax exemptions for homestead and over-65 are unaffected by the transfer of the property to a Living Trust.
Q: Can the Living trust be used to avoid estate and inheritance taxes?
A: Yes. The Internal Revenue Code has allowed for an unlimited marital deduction and the portability election, which allows you to avoid being taxed up to an estimated 11.58 million for a single individual in 2020 and will rise with inflation for future years.
Q: Will a Revocable Living Trust protect me from Medicaid spend down and creditors?
A: A Living Trust will not protect you from Medicaid spend down or creditors. An irrevocable trust may protect you from both, if done correctly.
Q. Who may serve as a Trust Protector and what are their powers?
A. Technically, anyone can serve as a trust protector; however, it is a good idea to appoint an independent third party rather than a family member or a beneficiary. In some cases, like an irrevocable trust, the Settlor or Grantor, might serve as the Trust Protector when they are not a beneficiary or trustee.
These are some of the powers
Review and approve the trustee's reports or accounting.
Modify or amend the trust instrument to achieve a different tax status or to respond to changes in federal or state law.
Remove, replace, or appoint a trustee or directing party or a successor trustee or directing party. Removal or replacement of a trustee may be with or without cause.
Appoint assets to a new trust
Correct errors or ambiguities in the terms of the Trust that might otherwise require court construction or defeat the Grantors’ intent. Allow the trust to be amended due to changes in the law.
Resolve disputes between trustees (if there is more than one) or between beneficiaries and the trustee(s)
Change distributions from the trust based on changes in the beneficiaries' lives
Allow new beneficiaries to be added if there are additional descendants
Veto investment decisions
Q. What is some of the terminology in a trust?
Beneficiary – Person who has a beneficial interest or nominated in a trust or will to receive an interest in property other than in a fiduciary capacity.
Irrevocable Trust – A Trust that may not be revoked or changed after its creation.
Living Trust – Any living or testamentary private or charitable trust in property, which is operative during the life of the Settlor.
Revocable Trust – A Trust that may be revoked or amended after the Trust has been created.
Settlor or Grantor – Person who directly or indirectly creates a living or testamentary trust or adds property to an existing trust.
Successor Trustee – A person(s) selected by you and your spouse, who upon your demise or incapacitation will administers the assets placed in your trust and who will distribute the assets after you and your spouse pass away.
Testamentary Trust – A trust subject to the continuing jurisdiction of the court assigned to exercise probate jurisdiction.
Trust Protector - An independent third party or institution given the authority to perform certain duties with regard to a Trust to insure that the wishes of the Settlor and Grantor are fulfilled.
Trustee – A person holding in trust title to or holding in trust a power over the property. Can include original, added or successor Trustee. Trustee has a fiduciary responsibility to manage property in the Trust.
Q. What are some types of Trusts?
A. There are many types of Trusts and each has a different purpose, but these are some of the common ones.
- Revocable Living Trust - The terms of the trust may be changed during the Grantor's lifetime but then becomes irrevocable when they pass away.
- Irrevocable Trust - The terms of the trust may not be changed or revoked.
- AB Trust or Bypass Trust – Trust is divided into 2 Trust after the first spouse pass away. The surviving spouse has one trust to use both income and principal during their life time. The second trust is irrevocable and doesn't leave property to surviving spouse but surviving spouse uses property throughout their lifetime.
- Testamentary Trust – Trust made in your Last Will during Probate and is Court Supervised.
- Charitable Remainder Trust (CRT) – Beneficiary is a Charity and has tax advantages.
- Charitable Lead Trust – Charity gets income during Grantor's life, after death beneficiary gets assets that the Trust owns.
- Funeral Trust – Can be irrevocable to pay for last expense and is not counted as an asset or a divestment when apply for Medicaid if done properly. This is an insurance product.
- Special Needs Trust – Provides for beneficiary who is receiving assistance from the government without having those assets be counted as an available asset.
- Spendthrift Trust - Does not allow the beneficiary to sell or pledge away his or her interests in the Trust and is beyond the reach of the beneficiaries’ creditors, until the Trust property is distributed to the beneficiary.
- Pet Trust – Trust which will care for the needs of your pets after you pass away
- Off-Shore Trust - Trust which the money has been placed in another country’s banking system, mostly the Caribbean Islands, sometimes used to hide from our government or creditors – our government has enforced striker laws regarding these Trusts.
- WisPact Trust - WisPACT offers two types of Special Needs Trusts: the Self-Funded Trust and the Third-Party Trust. These Special Needs Trusts will not be counted as an available asset, and disbursements from them will not be counted as income under the rules that apply to SSI and Medicaid.All WisPACT trusts have been approved by the Social Security Administration (who administers SSI benefits) and the Wisconsin State Department of Health Services (who administers Medicaid benefits) as meeting the requirements for Special Needs Trusts. See WisPACt website.
ADVANCE DIRECTIVES AND POAs
Q. What are Advance Directives?
A. There are 5 advance directives: Declaration to Physicians (Living Will), DNR - Do Not Resuscitate, Organ Donation, Authorization for Final Disposition, and Heath Care Power of Attorney .
Q. What is a Declaration to Physicians (Living Will)
A. A document which allows an adult to communicate requests for health care to their physician in the event they are in a condition where death is immanent or if they were in a persistent vegetative state.
There are no agents to speak for you, all directions are in one document.
1. If I have a TERMINAL CONDITION, as determined by 2 physicians who have personally examined me, I do not want my dying to be artificially prolonged and I do not want life-sustaining procedures to be used. In addition, the following are my directions regarding the use of feeding tubes.
Yes, I want feeding tubes used if I have a terminal condition.
No, I do not want feeding tubes used if I have a terminal condition.
If you have not checked either box, feeding tubes will be used.
2. If I am in a PERSISTENT VEGETATIVE STATE, as determined by 2 physicians who have personally examined me the following are my directions regarding the use of life-sustaining procedures:
Yes, I want life-sustaining procedures used if I am in a persistent vegetative state.
No, I do not want life-sustaining procedures used if I am in a persistent vegetative state.
3. If I am in a PERSISTENT VEGETATIVE STATE, as determined by 2 physicians who have personally examined me the following are my directions regarding the use of feeding tubes:
Yes, I want feeding tubes used if I am in a persistent vegetative state.
No, I do not want feeding tubes used if I am in a persistent vegetative state.
Terminal Condition – An incurable condition caused by injury or illness that reasonable medical judgment finds would cause death imminently, so that the application of life-sustaining procedures serves only to postpone the moment of death.
Persistent Vegetative State – A condition that reasonable medical judgment finds constitutes complete and irreversible loss of all of the functions of the cerebral cortex and results in a complete, chronic and irreversible cessation of all cognitive functioning and consciousness and a complete lack of behavioral responses that indicate cognitive functions, although autonomic functions continue.
Life-Sustaining Procedures – Any medical procedure or intervention that, in the judgment of the attending physician, would serve only to prolong the dying process but not avert death when applied to a qualified patient. This includes assistance in respiration (breathing), artificial (drug) maintenance of blood pressure and heart rate, blood transfusion, kidney dialysis and other similar procedures, but does not include the alleviation of pain by administering medication or by performing any medical procedure or the provision of nutrition or hydration.
Feeding Tube – A medical tube through which nutrition (food or hydration water) is administered into the vein, stomach, nose, mouth or other body opening of a qualified patient.
Q. What is a Do Not Resuscitate DNR
A. A document, which directs emergency medical technicians, first responders and emergency medical personnel to not perform certain specific interventions. The person must be at least 18 years of age, requests and signs the order, is not known to be pregnant and has a terminal condition or a medical condition such that, were they to suffer cardiac or pulmonary failure, resuscitation would be unsuccessful, cause significant harm or pain or would be successful only temporarily. They are given a bracelet to wear.
Emergency Provider as appropriate will:
Clear Airway
Administer oxygen
Position for comfort
Splint
Control bleeding
Provide pain medication
Provide emotional support
Contact hospice or home health agency if either has been involved in patient’s care or the patient’s attending physician.
Emergency Provider will NOT:
Perform chest compressions
Insert advanced airways
Administer cardiac resuscitation drugs
Provide ventilatory assistance
Defibrillate
Terminal Condition – An incurable condition caused by injury or illness that reasonable medical judgment finds would cause death imminently, so that the application of life-sustaining procedures serves only to postpone the moment of death.
Q. What is Organ Donation?
A. This document, (also on driver’s license and Id cards) allows you to donate your organs, tissues or body parts to help save the life of another person. This does not mean that you will receive less care by the hospital, first responders or any other medical personal. This does not affect your preferences for your funeral or burial. Example:
Upon my death:
I wish to donate the following organs or parts:
I wish to donate my body for anatomical study if needed: Yes No
I refuse to make an anatomical gift. (If this revokes a prior commitment that I have made to make an anatomical gift to a designated donee, I will attempt to notify the donee to which or to whom I agreed to donate.
Failing to check any of the lines immediately above creates no presumption about my desire to make or refuse to make an anatomical gift.
Q. What is an Authorization for Final Disposition
A. New as of March 19, 2008 – Wis. Stat. 154.30. This document allows you designate another adult representative to make funeral arrangements and final disposition on behalf of the declarant.
Suggested Special Directions
- Arrangements for a viewing.
- Funeral ceremony, memorial service, graveside service, or other last rite.
- Burial, cremation and burial or other disposition, or donation of the declarant’s body after death.
Suggested Instructions Concerning Religious Observances and Suggested Source of Funds for Implementing Final Disposition
Directions and Instructions
Q. What are the 2 most important documents anyone over 18 years of age needs in Wisconsin during their lifetime?
A. Heath Care Power of Attorney and Durable Power of Attorney for Finance.
Q. What is a Health Care Power of Attorney?
A. A document, which allows an adult to designate another person to make medical decisions if the person completing the form is unable to do so. It also allows the person completing the form to state special preferences for care. Your agent and then your successor agents are listed. The agents are allowed to review medical records and speak to the Doctor in order to make an informed decision regarding your medical treatment.
Here is additional information to consider when signing a Health Care Power of Attorney.
Q. May my health care agent admit me to a mental institution?
A. No, a health care agent may never consent to the admission of you to a mental institution or other inpatient facility for mentally retarded this requires specific action in court under the mental commitment statutes.
Q. When can my health care agent admit me to a nursing home or community-based residential facility?
A. A health care agent may admit you to a nursing home or community-based residential facility only for recuperative care, respite care or permanent stay in certain situations.
Recuperative care – if the admission is made directly from a hospital inpatient unit where you were a patient for other than psychiatric care and the period of admission does not exceed 3 months.
Respite care – If you live with the health care agent, the agent may admit you for periods up to 30-days in order to provide the health care agent with a vacation or make the agent available to handle a family emergency.
Permanent stay – The only time an agent may permanently admit you is if the you have specifically authorized the admission in the document and if you at the time of the admission, is not diagnosed as being developmentally disabled or having a mental illness.
Q. Who can serve as my Health Care Agent?
A. A health care agent may not be a health care provider of the principal, an employee of a health care provider, and employee of a health care facility in which the principal is a patient or resides, or a spouse of any of those person, unless the proposed agent is also a relative of you. Pretty much anyone else can serve as your Health Care Agent.
Q. What is a Durable Power of Attorney for Finance?
A. A Durable Power of Attorney for Finance is a legal document that allows you to pick an agent to act on your behalf if you are unable too for any reason or you are incapacitated regarding your finances. This person may also become your guardian without having to go to court to be appointed as one. Any one over 18 years of age needs a Durable Power of Attorney for Finance.
Q. What are the advantages of having a Durable Power of Attorney?
A. If you were to become disabled for any reason during your lifetime and did not have a durable power of attorney, then the only way your financial affairs could be managed would be for someone to commence a Probate Court proceeding requesting the Court appoint someone to act on your behalf. These proceedings are known as Guardianship proceedings and also Conservatorship proceedings. These proceedings take time and great expense and unfortunately require someone to prove that you are unable to manage your financial affairs. Having a durable power of attorney avoids court intervention and the possibility that someone not of your own choosing will manage your financial affairs if you become disabled. Another advantage occurs in the area of asset protection. If a disabled person enters a nursing home and prior thereto did not take steps to shelter some of their assets, then all of the assets could be exposed to having to be used to pay for nursing home care.
Q. Can I revoke a Durable Power of Attorney?
A. Yes, you can revoke a durable power of attorney at any time as long as you are competent.
Q. When does a Durable Power of Attorney become effective?
A. A durable power of attorney can become effective either immediately upon your signing the document or at a later time such as when you become disabled. A power of attorney which becomes effective at a future time is commonly called a “springing” power of attorney.
Guardian
Q. What is the difference between a Conservator and a Guardian?
A. A Conservatorship is limited to the management of the property and financial affairs of a protected person and a Guardianship gives you more power and control over their persons.
Q. Is there more than one type of Guardianship?
A. Yes, here are some examples:
Guardian ad litem (GAL) - (“Ad litem” is Latin and means “for this lawsuit or action.”) This is not a guardian but an attorney who is appointed by the court to represent the interest of the ward but not the ward. The attorney makes recommendation about the best interest of the ward.
Guardian of the Person - A person or corporation appointed by a court to make personal and medical decisions for a minor or an adult who is incompetent. Has no control over finances, unless also appointed the Guardian of the Estate.
Guardian of the Estate - A person or corporation appointed by a court to have the management of the estate of a minor, an adult who is incompetent or an adult who is a spendthrift. Has no decision-making power over non-financial matters, unless also appointed the Guardian of the Person.
Temporary Guardian - Appointed only for a limited period of time (not to exceed 60 days or an additional 60 days if approved by the court). Appointed when the usual process for appointing a guardian will take too long in light of the proposed ward’s situation.
Special Guardian - Appointed to sell real estate when the owner is incompetent but does not have a guardian.
Standby Guardian - A person or corporation appointed by the court, usually at the same time the initial guardian is appointed, to become guardian upon the death, incapacity, unavailability, or resignation of a guardian. Assumes the powers of the prior guardian upon the prior guardian’s death, incapacity, unavailability, or resignation. In order to have authority to act on behalf of the ward, the standby guardian must contact the court to obtain a court document known as "Letters of Guardianship."
Successor Guardian - Appointed by the court to replace a guardian who has resigned, died or been removed.