When I meet with new clients who would like to have their estate plan updated, I usually request that they provide me with a copy of the estate plan their prior attorney drafted or the one they drafted themselves using the internet. Too often, I find that their prior estate plan consists only of a will.
If a person's only estate planning document is a will, then his or her estate will have to go through probate. Probate subjects an estate to a lengthy court process which means higher costs and attorney fees. It also creates public court documents and increases the likelihood that an estate plan can be challenged.
There are three main ways to avoid probate. One is if the clients are a husband and wife, they can utilize a marital property agreement, which is simply an agreement between them. Wisconsin is one of only two states (the other is Washington) that allows a married couple to use a marital property agreement to transfer an estate after the death of the first spouse and then again upon the death of the second spouse. This process usually requires a one-time filing with the court after each death.
The second way to avoid probate is to use a trust. There are many types of trusts. Just because your friend says her trust does this, does not mean that your trust does the same thing. To know what a trust does, a person must read the trust. A revocable living trust is a commonly used estate planning tool to avoid probate. Typically, the assets of the deceased person are transferred to the trust prior to or at the time of death and as a result, probate is avoided because everything is owned by the trust and not the deceased person.
The third way to avoid probate is to name a beneficiary on all life insurance policies, IRAs, annuities, and other accounts. Likewise, a person can put a payable on death designation on his bank accounts and certificates of deposit. Further, a person can also put a transfer on death designation on real estate. For example, if a husband and wife own real estate together, they could sign and record a deed now that says upon their deaths, the real estate described in the deed transfers to their children.
When relying on beneficiary designations to transfer assets, they must be kept current and accurate. A person has to be attuned as to who the beneficiaries of each asset are to avoid an unfair distribution of his estate. Further, the wording used in the beneficiary designation is also critical. If a person simply names his three children as the beneficiaries of an account and one of those children predeceases him, that child's share would likely go to his other two children rather than his deceased child's children. It is also important to remember that the terms of the beneficiary designation on an account control over the terms in the will in regards to that same account.
It should be noted that if someone dies owning less than $50,000 worth of assets that are subject to probate, Wisconsin law provides for a simplified court process known as a "Transfer by Affidavit" which allows an estate to be transferred with a one-time court filing. It should also be noted that if a person dies without a will or any other estate planning documents, there are laws in place that determine where the deceased person's property transfers.
The purpose of this article is not to fully articulate all the types of estate planning tools, but rather, to emphasize that relying solely on a will to transfer a valuable estate is a costly mistake. Although estate planning may seem simple, it is actually a complex area of law. If you are meeting with an attorney about estate planning and he is only suggesting that you do a will and is not mentioning any of these other alternatives, I suggest you find another attorney.
Halbach is a partner in Twohig, Rietbrock, Schneider and Halbach, S.C., a Chilton law firm that specializes in ag law. Call Halbach at 920-849-4999.