Some people think of estate planning as only dealing with the distribution of their property after death. Estate planning also encompasses planning in the event of disability. Revocable trusts are available to avoid a guardianship, in the event of disability, and to avoid probate at the client’s death. Sometimes all that is necessary are a durable power of attorney to handle incapacity and re-titling assets to avoid probate.
For younger clients, wills appointing guardians for minors and a trust for the minor children could be appropriate. Advance directives, such as a power of attorney for health care, are important for clients, regardless of age. A marital property agreement might be appropriate for a Wisconsin married couple when one spouse is in a second, or later, marriage and has children born of that previous marriage. For a client who has a child receiving governmental benefits such as medical assistance or SSI, a special needs trust might be appropriate.
Whatever the age of the client, the estate plan should take into account the proper wording of beneficiary designations and the impact of tax and property laws. A well-drafted estate plan will maximize the amount of the estate passing to heirs and minimize the expenses in terms of terms of taxes, administration and delay.
A client who wants to pass an inheritance to a beneficiary who receives SSI or medical assistance benefits might consider a special needs trust. Such a trust (sometimes also called a supplemental trust) provides for “extras” not covered by governmental benefits. The trust holds the inheritance as a fund for future special expenses, such as unreimbursed care, clothing, furniture, adaptive equipment, special trips, and other expenses that will improve the beneficiary’s quality of life. A beneficiary of a properly drafted and implemented special needs trust will continue to receive the governmental benefits.
Elder law considers many issues, all to keep a senior living independently, safely and comfortably in familiar surroundings for as long as possible. The legal solutions are tailored to each client’s needs. Issues may include the legal aspects of disability planning, health care decisions, long-term care insurance, making gifts to family members, and qualifying for medical assistance benefits. For those with children who have special needs, planning is essential to provide for their child’s continuing care.
Sometimes, adult children become frustrated by a parent’s reluctance to deal with issues in advance of a crisis. Although advance planning is better, as long as the elder remains legally competent, planning opportunities still exist.
Court-supervised probate administration is necessary when a loved one dies if certain assets are titled in the sole name of the deceased person and if together those are greater than a certain dollar amount. Probate administration is the process of inventorying assets, paying creditors and distributing the rest to the heirs, all under the supervision of the probate court. The estate of the deceased person is probated in the county where he or she was domiciled at the time of death, although the personal representative may be a Wisconsin resident or an out-of-state resident. Proper tax planning, by considering federal and state fiduciary income tax laws, impacts the net after-tax inheritance passing to beneficiaries. The federal estate tax law impacts very few clients under present law. Wisconsin does not have an inheritance tax nor an estate tax. Probate estates should take all allowable estate income tax deductions to offset the estate’s taxable income. The proper choice of the estate’s fiscal year and the proper timing of the payment of estate expenses will maximize the net after-tax inheritance passing to beneficiaries.
Sometimes a loved one has titled all of his or her assets so that at death, all pass without probate. Examples include designation of T.O.D. beneficiary for real estate, transfer-on-death designations for securities, payable-on-death designations for bank accounts, and beneficiary designations for life insurance, annuities, retirement plans, and IRAs. Collecting these proceeds and transferring title to assets might involve state and federal income tax rules. Distribution of assets held in pension plans, profit-sharing plans, 401(K) plans and IRAs involve tax planning for the beneficiary.
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