DE PERE AT DAWNEstate Planning

101:How to Plan for the Unthinkable

Richard E. NellNell & Associates, S.C.

April 18, 2012

Standard Estate Plans

• Wills– It’s never a bad idea to have a will– Identify Beneficiaries, how estate is divided– Specify ages of distribution, if applicable– Name an Executor/Personal Representative

Standard Estate Plans

• Durable Power of Attorney for Healthcare– Appoints an agent to make medical decisions on

your behalf– Effective only after 2 physicians determine

incapacity– Can be as specific or general as you wish– Need for guardianship can arise without a

healthcare POA

Standard Estate Plans

• Durable Power of Attorney for Finances & Property– Appoints an agent to manage all things financial and

real estate

– Can be designed to be effective immediately or effective upon incapacity

– Need for guardianship arises without

a financial POA

Probate

• The legal process by which title to property is transferred to heirs by a court

• Probate Assets: assets held in a decedent’s name alone with no beneficiary or P.O.D. designation

• Non Probate Assets: assets transferred by terms of document creating non-probate status

• Admitting a Will to Probate– A Will does not avoid the need for probate, but rather gives

direction to the probate court– The Will must be probated to be effective– Beneficiary designations and asset titling trump Will

language

Probate

• Alternative forms of Court Administration for Probate Estates less than $50,000– Transfer by Affidavit– Summary Assignment– Summary Settlement

• Costs of Probate—should it be avoided?

Trusts in Estate Planning• Living Trusts

– Assets transferred to trust during life of grantor– Irrevocable: generally can reduce estate taxes and

individual income taxes (not always a good idea)– Revocable: generally do not enable grantor to

avoid estate taxes or income taxes

• Testamentary Trusts– Funded upon death of grantor

• Common purposes are to minimize estate taxes and provide for long-term distributions

Estate Taxes

• Federal Estate Taxes– $5,120,000 estate exemption

– 2013 – $1,000,000 taxed at 55%

– The Gross Estate• §2031 IRC – “the value…of all property, real or personal, tangible

or intangible, wherever situated.”

• Includes probate and non-probated assets; §2033 IRC – the values of all property in which the decedent had an interest at the time of his or her death.

• Wisconsin Estate Taxes– Wisconsin does not have an estate tax, inheritance tax or

tax paid by a recipient of a gift at this time

Estate Taxes

• Taking Advantage of the Unlimited Marital Deduction– Unlimited marital deduction on property passing

outright to citizen spouse or certain types of trusts– Results in $0 estate taxes due on first death, but

wastes estate tax exemption of 1st spouse to pass– Estate tax exemption of 1st spouse to pass can be

maximized through use of bequests which do not quality for marital deduction (outright to children; to credit shelter trust)

Long-Term Care Issues

• Medicare– Covers 100 days of long-term care in a skilled nursing

facility

• Medicaid– Deficit Reduction Act of 2005 brought about significant

changes to divestment rules

• Paying for long-term care– Medicaid

– Long-term Care Insurance

– Private Pay—likely the most common

Estate Planning Wrap-Up

• Proper Estate Planning will maximize bequests to family, friends, pets and charitable organizations.

• Poor Estate Planning will maximize taxes to the state and federal government.