Estate Planning for Domestic Partners

Today it not uncommon for couples, whether opposite sex or same sex, to live together as domestic partners without any desire to legally marry or to officially register as domestic partners. There are many laws in Wisconsin that provide spouses and registered domestic partners with certain legal protections when it comes to financial and health care matters. These right can be found primarily in Wisconsin’s Marital Property Act and in Wisconsin’s domestic partnership laws (Fair Wisconsin provides an excellent summary in its Domestic Partnership Protections Reference Guide). In contrast, couples who are not legally married and who are not registered may have no more legal rights with regard to each other than friends, distant relatives, or even strangers.

While everyone should have a comprehensive estate plan in place, it is even more vital for unmarried/unregistered domestic partners to execute proper legal documents if they wish to protect each other’s rights. Examples of these documents, although not a comprehensive list, include: 1) a Health Care Power of Attorney naming the person authorized to make health care decisions in the event you are no longer capable of making your own decisions, 2) a Living Will (also known as a Declaration to Physicians) stating whether or not you wish to be kept alive artificially under certain circumstances, 3) a HIPAA form authorizing specific individuals to access your medical records when necessary, 4) a Property Power of Attorney naming the person authorized to make financial decisions in the event you are no longer capable of managing your own affairs, 5) an Authorization for Final Disposition naming the person authorized to make burial and funeral decisions for you, and 6) a Will designating who will handle your estate and how your assets will ultimately be distributed after your death. In addition, if a couple owns real estate together, a Joint Ownership Agreement is an important tool to ensure your rights and obligations are spelled out while you are alive and well, and also after an incapacity or death has occurred.

Remember that an estate plan is not only for your own peace of mind, but it is primarily a gift for those who matter most – your loved ones.

The Nursing Home Dilemma

Clients and prospective clients often ask me about legal options available so that they might qualify for Medical Assistance in the event they need nursing home care at some time in the future. Some suggest gifting to their children during their lifetimes, while others suggest establishing an irrevocable trust known as a “Medical Assistance” trust to protect their assets.

This is a very tricky question, and if you are considering this approach I would strongly urge you to read the following article recently published in the personal finance section of the Forbes website: Beware of This Financial Advice About Aging Parents.

While there are different types of irrevocable “Medical Assistance” trusts available, there are many drawbacks to this type of planning, including the loss of control over assets, uncertainty as to whether this type of trust will ultimately be effective in the end, and the high cost of establishing this type of trust.　You must be very careful with gifting, as there are limits on the amount that can be transferred each year without incurring certain gift tax consequences, and also due to the possibility that your assets would then be subject to the lawsuits and other creditor claims of your children.　Further, there is a “look-back” period for the transfer of assets within five years (in the future, this may be seven) from the date a person attempts to qualify for Medical Assistance.　Finally, please remember that Medical Assistance (i.e., Medicaid) is a welfare-based program and that qualification for this program may severely limit the health care options available to you when the time comes.

Often, there are better alternatives.　For example, there are some great long-term care options now available that can protect your investment and offer a guaranteed death benefit – even if you never use your policy. In the alternative, your financial advisor may be available to re-structure your assets so that they can provide a lifetime income stream. Further, an Irrevocable Life Insurance Trust can be set up to replenish your estate in the event your assets are depleted by long-term care costs.

If you are concerned about nursing home costs, please talk to your estate planning attorney and a trusted financial advisor about your options before making any decisions you might regret in the future. Remember, your primary objective should be to take care of yourself (and your spouse) first.

Practicing Law as a “Helping” Profession

When I am asked out in the real world what I do for a living, I often remark that I am a lawyer, “but not that kind of lawyer”.  Of course I understand that attorneys have a bad reputation in general; in fact, I always keep a copy of Jess M. Brallier’s book entitled Lawyers and Other Reptiles displayed in plain sight in my office.  After all, it is important to have a sense of humor!

Today, I met with a wonderful couple who left my office happy that they had finally taken the plunge and started creating their estate plan.  We had a wonderful time in our meeting, and somehow discussing death and taxes for over an hour was completely effortless.  Recently, another couple cheerfully left my office after the final review and signing of a prenuptial agreement.

I am a firm believer that legal matters don’t need to be unpleasant, and I consider myself extremely fortunate that I enjoy my profession and that I look forward to coming to work each day.  My goal is never to create disputes, but rather to help my clients resolve their legal issues in the best way possible.  Not all lawyers create problems – some of us actually seek to solve them!

Surprising Similarities Between Martial Arts and Estate Planning

Last week I attended the 2011 Martial Arts SuperShow in Las Vegas with my husband, who owns a martial arts academy – Infusion Mixed Martial Arts, LLC in Mount Horeb, Wisconsin. This was my first MAIA event, and I was surprised at how very similar the overall messages were to those of the American Academy of Estate Planning Attorneys.

In celebration of MAIA’s ten-year anniversary, the theme of the event was about defining your legacy: “We leave an imprint on the people we meet and they tell a story about who we are and what we’ve done. So, our question to you this year is, ‘What legacy will you leave behind?’ It’s up to us to choose our own legacy – intentionally, with purpose and positivity.”

I learned that times are changing in the martial arts industry, as I already knew they were rapidly changing in the legal industry. It’s no longer only about obtaining the next belt, or signing a will or a living trust. It’s about making sure to demonstrate that you truly care for your clients by going above and beyond what is expected. You can earn a black belt quickly and cheaply from a martial arts studio that doesn’t truly care about you or your family, but in the end will you ever truly learn to defend yourself? Likewise, you can obtain a will or a “bare bones” living trust from an internet site or from a law firm that doesn’t take time to make sure your plan accomplishes all of your objectives, but in the end will you have preserved a lasting legacy for your loved ones?

How HIPAA Affects You

HIPAA is an abbreviation for the federal Health Insurance Portability and Accountability Act of 1996, with a new health information privacy law that went into effect on April 14, 2003. According to HIPAA laws, an authorization (“HIPAA form”) is necessary for your health care provider to share information with your loved ones about your health care records, condition and treatment.

Most health care providers have HIPAA forms available upon request, or even through their websites. It is important to remember, however, that these HIPAA forms typically apply only to that specific organization and that they are typically effective for a limited period of time. If you are treated by a different provider, or if your HIPAA form has expired, it will do you no good.

For obvious reasons, it is essential that the person who you designate as your health care agent (or even your financial agent) has access to your medical records when needed in order to make informed decisions on you behalf – or even to obtain a certificate of incapacity, the document that is needed before your power of attorney can be activated.

For additional information about HIPAA, you can visit the Wisconsin Department of Health Services (DHS) “HIPAA NOW” site at http://www.dhs.wisconsin.gov/hipaa. If you don’t have a general HIPAA form in place as part of your estate plan, you should contact your estate planning attorney.

Do I Really Need an Attorney to Set Up an LLC?

There can be many benefits to creating a Limited Liability Company, whether you own an apartment complex, have a consulting business, or are selling cupcakes. With a properly organized and managed LLC, you can protect your personal assets from the debts, obligations, and potential lawsuits of your business. In addition, a Limited Liability Company can provide for continuity in the event an owner dies, becomes incapacitated, or leaves the business.

In Wisconsin, the Department of Financial Institutions offers an online method to quickly file Articles of Organization for a Limited Liability Company. Many assume that, after answering a few questions online and paying a $130 filling fee, you are magically protected from liability!

However, filing Articles of Organization online barely scratches the surface of creating an effective Limited Liability Company. There are many additional legal requirements that must not be overlooked. For example, Wisconsin law provides that you must have an Operating Agreement in place which lays out the general guidelines regarding management of the LLC. Without this important document, your LLC provides you with no protection and the creditors of your business could easily “pierce the corporate veil” and obtain access to your personal assets.

The moral of this story is that, if something looks too good to be true, then it probably is. The cost of hiring an attorney to assist you with establishing your Limited Liability Company can be well worth the legal protections you will obtain in the long run. We often discover the dangers of do-it-yourself estate planning when it’s too late – after a death or incapacity. We often discover the dangers of do-it-yourself business planning when it’s too late – after your business has been sued.

Protect Your Pets with a Pet Trust!

What will happen to Fluffy or Benji upon your death? One would hope that a family member or other loved one would agree to care for your pet and expect nothing in return. After all, anyone who knows you fully appreciates that your pet is not just an item of personal property, but a member of your family… right?

Unfortunately, many pets are abandoned after the death of their owners. According to the ASPCA, about half of all pets that end up in animal shelters are euthanized. Caring for another person’s pet can be a great personal responsibility, not to mention the costs that are involved with food and veterinary care. Depending on the age and life expectancy of your pet, these responsibilities could potentially last for a decade or more!

There is a great solution to this dilemma, and it’s known as a "pet trust". Often, when I mention a pet trust, clients presume this may be a luxury available only to the super-wealthy. Thoughts of Leona Helmsley come to mind, the New York hotel magnate who left $12 million in 2007 to care for Trouble, her beloved Maltese.

The vast majority of modern pet trusts are not quite so extravagant. Generally, a pet trust is set up within your Will or your Living Trust. The most common type of pet trust sets aside a designated dollar amount upon your death. For example, you can set aside $5,000 per cat or dog (or bird, ferret, chinchilla, etc.) that you own at the time of your death. You then direct your personal representative or trustee to find a good home for each pet for the remainder of its natural life. Whoever agrees to care for your pet also receives this cash distribution along with your pet, with the understanding that the money is compensation for veterinary care, food, shelter, love and affection. This arrangement provides a great incentive to make sure that your pet does NOT end up at the humane society.

Our beloved orange cat, Chester, has a trust of his own in the event he outlives us. If you are interested in setting up a pet trust for your furry or feathery family member, you should talk to your estate planning attorney.

The Importance of Health Care Documents

All too often, clients come to my office with nothing more than a simple Will in place and a mistaken belief that this constitutes a sufficient estate plan. While a Will can designate who will serve as the personal representative (also known as the executor) of your estate, how your assets will ultimately be distributed, and your preference for guardians of any minor children, it is essential to understand that a Will is nothing more than a death document. In other words, your Will has no effect until your death.

The harsh reality is that, regardless of age, we are all one car accident away from mental incapacity. While financial issues are certainly important and should be addressed as part of your overall estate plan, many people simply assume that their loved ones would automatically be authorized to make health care decisions for them in the event of mental incapacity. However, this is not an accurate assumption. Without proper planning, your loved ones – even your spouse – would be required to initiate a guardianship proceeding (also known as living probate) in order to obtain the legal authority necessary to make health decisions for you. For a more detailed explanation of Living Probate, see Michelle’s blog from April 28, 2011.

If you wish to avoid the possibility of living probate for health care matters in the event you became mentally incapacitated, you must execute a Power of Attorney for Health Care as part of your estate plan. Through this essential document, YOU can designate who is authorized to make health care decisions for you. While it is possible to designate co-agents for financial decisions, you should only designate one health care agent at a time. Imagine the difficulties doctors might encounter when faced with siblings arguing over decisions such as whether or not life support should be removed! Most people name a primary health care agent, and then at least one backup in case the primary agent is unable to make decisions for some reason.

In addition to a Power of Attorney for Health Care, your estate plan should include a Living Will. Not to be confused with a Last Will or a Living Trust, a Living Will (also known as a Declaration to Physicians) tells your doctor whether or not you would prefer to be kept alive artificially under certain circumstances. Finally, the health care portion of your estate plan should include a HIPAA form authorizing your agent to access your medical records when needed. Without an effective HIPAA form in place, even your spouse may be hard-pressed to obtain your medical records. How can one serve as a health care agent if he or she can’t see your medical records? This could potentially create quite a dilemma.

Terri Schiavo’s case provides a glaring illustration of how important health care documents can be. Terri’s unexpected incapacity at the age of 26, followed by prolonged life support, resulted a legal battle between Terri’s parents and her husband that lasted seven years. If Terri had executed health care documents prior to her accident, her entire battle could have been avoided.

What is a WisPACT?

Many individuals, whether young or old, are receiving valuable public benefits such as Supplemental Security Income (SSI) and Medical Assistance. Anyone who has gone through the qualification process for these types of entitlement programs is well aware that the application process alone can be a nightmare!

Sometimes, a well-meaning relative will leave an inheritance directly to a beneficiary who is receiving public benefits. This can be through a will, or possibly through a beneficiary designation on a bank account, a retirement account, or a life insurance policy. Other times, a person who is receiving public benefits will suddenly become the recipient of a lawsuit settlement – most often, due to a personal injury.

Unfortunately, these individuals will usually find that receipt of this money will immediately disqualify them from receiving the public benefits they depend on. Not only will the funds quickly disappear, but the individual must then go through the entire qualification process all over again once the money has been spent. In Wisconsin, the money cannot be gifted to someone else, nor can the money be disclaimed by the beneficiary without resulting in immediate disqualification. This series of events eventually leads to much frustration over something that should have been a relief.

There is a solution in Wisconsin to this dilemma: The funds, rather than passing to the individual outright, can instead be placed directly into a supplemental needs trust. While some situations warrant a private supplemental needs trust, most often the best solution is a WisPACT. The Wisconsin Pooled & Community Trusts (or “WisPACTs”) provide for the special needs of persons with disabilities without endangering their eligibility for public benefits.

Once the money is placed into a WisPACT, the trustee can make distributions to buy many goods and services for the individual. Note that there are restrictions on distributions from these types of trusts. For example, the trust may only be used for the individual, cash distributions are generally prohibited, and some public benefits programs limit or prohibit distributions for food, shelter, or housing.

However, the money in a WisPACT is available for many items that will make the individual’s life more comfortable. The following are some examples of distributions that may be made from a WisPACT: Travel expenses for vacations and holidays, uncovered medical and dental costs (including elective treatments, upgraded eyeglasses, etc.), educational expenses, appliances and furniture, an automobile for the individual’s benefit, home repairs, lawn maintenance and cleaning services, accounting and legal fees, and even extras like cable TV and electronics!

If you are interested in exploring the possibility of a WisPACT trust, it is essential that you talk to an attorney who specializes in estate planning right away. Once the money has been transferred directly to the individual, it may be too late to take advantage of this wonderful opportunity.

Special Planning for Special Beneficiaries

In an ideal world, all of our children or other beneficiaries would be fully grown, responsible, and disability-free upon our deaths. However, we don’t live in a perfect world and unforeseen circumstances often exist. Whether your beneficiaries are minors, are receiving special needs assistance from the government based on a disability, or are otherwise not in the best position to manage an inheritance, there are plenty of great solutions available through proper estate planning.

If your beneficiary is a minor (or simply too inexperienced to manage money, even if over age 18), a good estate plan will set this beneficiary’s inheritance aside in a trust. You can appoint the person or institution that will be responsible for managing the assets until your young beneficiary reaches an age at which he or she is more capable of managing assets. In the meantime, you can make the funds available for expenses such as support, health care, and education if you desire to do so. Considering that the average inheritance is spent within 18 months (yikes!), some clients even prefer a staggered distribution approach – for example, perhaps you wish to distribute one-third at age 25, another third at age 30, and the final third at age 35.

Did you know that, if your beneficiary is receiving special needs assistance such as SSI or Medical Assistance, leaving an outright inheritance could disqualify him or her from receiving these valuable governmental benefits? However, we don’t have to disinherit special needs beneficiaries. Rather, a good estate plan will set aside this beneficiary’s inheritance in a special needs trust. You can appoint the person or institution that will be responsible for managing the assets. Sometimes referred to as a “luxury trust”, the funds can be available to your beneficiary for those things that the government will not provide and that will make your beneficiary’s life much better. For example, the funds may be available for travel, for special classes, for housekeeping services, or even for a new TV! In the meantime, your beneficiary will not be disqualified from receiving his or her benefits.

Finally, some of us have loved ones who, for one reason or another, based on life choices, have demonstrated that they are just not good with money. There are many solutions available for this situation as well. For example, the funds for this type of beneficiary can be set aside in a creditor protection, or “spendthrift”, trust. You can appoint the person or institution that will be responsible for managing the assets. Sometimes, this type of trust is a lifetime trust and the appointed trustee can determine what the funds can and cannot be used for. In the meantime, if your beneficiary gets sued or divorced, the trust assets may be unavailable to satisfy these obligations. Whatever amount is left over upon the death of your beneficiary will be distributed to the successor beneficiaries of your choice.

At the minimum, considering the divorce rate is still about 50%, why not give all of your beneficiaries the option of keeping their inheritance protected in the event of a future divorce?

Keep in mind that your documents must contain very specific legal language to accomplish the above goals, so it is essential to have an estate planning attorney draft the proper provisions to avoid unintended consequences. Each family is very different, and your estate plan should certainly be unique and tailored to your particular circumstances!