Friday, May 31, 2013
I’m getting married! Do I need a prenuptial agreement?
According to Wisconsin marital property law, all property of spouses is presumed to be marital property. If you wish to override this presumption, then you and your fiancé should enter into a prenuptial agreement. The process does not need to be an adversary one. Rather, your prenuptial agreement can simply allow the spouses to control the character of each spouse’s property by virtue of title throughout your marriage. For example, the agreement can provide that all assets titled solely in your name are your individual property, all assets titled solely in your fiancé’s name are his or her individual property, and all assets titled in both names are joint marital property. In Wisconsin, there are strict requirements to ensure your prenuptial agreement is legally binding. Therefore, it is advisable to contact a qualified attorney to draft this agreement well before your wedding date. Further, in order to ensure your assets pass to your intended beneficiaries upon your death, each spouse should also have a solid estate plan in place.
Thursday, May 23, 2013
Cabin Trusts - Let's Keep It In The Family!
In Wisconsin, I have many clients who own a family vacation home “Up North”. In fact, within my own family, we have a lovely cabin in Vilas County where we spend many relaxing holiday weekends together. Therefore, I personally understand the importance of planning to ensure a treasured family cabin can remain within the family following the death of a parent or parents.
Within a revocable living trust, a popular and very effective option is to create a separate “Cabin Trust” that will spring into existence upon the death of the trustor(s) (note that the “trustor” is the person who creates the trust). The trust can direct that the family vacation home will then be distributed to this Cabin Trust along with a specified cash amount to provide for the upkeep and maintenance of the property, which should include, but not be limited to, real estate taxes, insurance, improvements, and general maintenance of the property, for a certain period of time. The trust should also designate the beneficiaries (usually the trustor’s children) who may share in the use and enjoyment of the property. If a child dies, then his or her right to such use and enjoyment can pass to that child’s descendants.
In addition, the trust should name a trustee of the Cabin Trust who will be responsible for the general management of the property and trust funds. When the trust funds run out, the trust should provide that the adult beneficiaries of the trust will then become responsible for paying their fair share of the expenses. If a beneficiary fails to pay his or her share, then such beneficiary has lost his or her right to the use and enjoyment of the vacation home.
Finally, the trust should designate the circumstances under which the vacation home can be sold. Often, parents require either a majority or a unanimous consent among those children who have met their financial obligations before the property can be sold. Parents also often provide within the Cabin Trust that their children will have the first option to purchase the vacation home from the trust at a discounted price.
Overall, a well-crafted Cabin Trust can be a wonderful tool to keep the vacation home in the family and to eliminate potential future family disputes!
Within a revocable living trust, a popular and very effective option is to create a separate “Cabin Trust” that will spring into existence upon the death of the trustor(s) (note that the “trustor” is the person who creates the trust). The trust can direct that the family vacation home will then be distributed to this Cabin Trust along with a specified cash amount to provide for the upkeep and maintenance of the property, which should include, but not be limited to, real estate taxes, insurance, improvements, and general maintenance of the property, for a certain period of time. The trust should also designate the beneficiaries (usually the trustor’s children) who may share in the use and enjoyment of the property. If a child dies, then his or her right to such use and enjoyment can pass to that child’s descendants.
In addition, the trust should name a trustee of the Cabin Trust who will be responsible for the general management of the property and trust funds. When the trust funds run out, the trust should provide that the adult beneficiaries of the trust will then become responsible for paying their fair share of the expenses. If a beneficiary fails to pay his or her share, then such beneficiary has lost his or her right to the use and enjoyment of the vacation home.
Finally, the trust should designate the circumstances under which the vacation home can be sold. Often, parents require either a majority or a unanimous consent among those children who have met their financial obligations before the property can be sold. Parents also often provide within the Cabin Trust that their children will have the first option to purchase the vacation home from the trust at a discounted price.
Overall, a well-crafted Cabin Trust can be a wonderful tool to keep the vacation home in the family and to eliminate potential future family disputes!
Tuesday, May 14, 2013
Providing Divorce Protection for Your Children
Despite the fact that the Baby Boomer generation has seen high divorce rates, my experience has been that parents of Baby Boomers generally did not wish to discuss divorce protection for their children and grandchildren. Times have changed…
Most people now acknowledge that divorce is a common occurrence. Therefore, why not provide your beneficiaries with the opportunity to protect their inherited assets in the event of a future divorce?
Traditional estate planning, including the use of direct beneficiary designations, wills, and “bare bones” living trusts, usually provide for an outright distribution to your beneficiaries upon your death. Most often, married beneficiaries will then promptly place these assets into various accounts titled jointly with their spouses. Even if your beneficiary keeps the account titled solely titled in his or her own name, he or she may later add to the account using marital income. At that point, the account has been comingled and may no longer be considered individual property (also known as separate property). Thus, in the event of divorce, half of your hard-earned assets may end up in the hands of your beneficiary’s ex-spouse.
Rather than distributing your assets outright upon your death, a properly drafted living trust can instead distribute inherited assets to each child or other beneficiary in the form of a divorce protection trust. Each child can act as his or her own trustee, and you can specify that there are no restrictions as to how your child can use the assets of the trust. Any assets that remain titled in the name of your child’s divorce protection trust would be clearly identified as your child’s separate property, not to be divided in a divorce proceeding.
You can also specify within your living trust how the assets of your child’s divorce protection trust would be distributed upon your child’s death. If you wish, you can even provide your child with the power to name his or her spouse as the beneficiary of the trust upon his or her death. However, if there is a subsequent divorce, your child can then change the beneficiary – never losing divorce protection!
Divorce protection is one of the many options available within a comprehensive living trust plan. If you are interested in providing your children or other beneficiaries with divorce protection, if you have minor beneficiaries, if you have special needs beneficiaries, or if you simply wish to make things as easy as possible for your loved ones upon your death or incapacity, you should consult with an estate planning attorney regarding crafting a plan that will best accomplish your desired objectives.
Most people now acknowledge that divorce is a common occurrence. Therefore, why not provide your beneficiaries with the opportunity to protect their inherited assets in the event of a future divorce?
Traditional estate planning, including the use of direct beneficiary designations, wills, and “bare bones” living trusts, usually provide for an outright distribution to your beneficiaries upon your death. Most often, married beneficiaries will then promptly place these assets into various accounts titled jointly with their spouses. Even if your beneficiary keeps the account titled solely titled in his or her own name, he or she may later add to the account using marital income. At that point, the account has been comingled and may no longer be considered individual property (also known as separate property). Thus, in the event of divorce, half of your hard-earned assets may end up in the hands of your beneficiary’s ex-spouse.
Rather than distributing your assets outright upon your death, a properly drafted living trust can instead distribute inherited assets to each child or other beneficiary in the form of a divorce protection trust. Each child can act as his or her own trustee, and you can specify that there are no restrictions as to how your child can use the assets of the trust. Any assets that remain titled in the name of your child’s divorce protection trust would be clearly identified as your child’s separate property, not to be divided in a divorce proceeding.
You can also specify within your living trust how the assets of your child’s divorce protection trust would be distributed upon your child’s death. If you wish, you can even provide your child with the power to name his or her spouse as the beneficiary of the trust upon his or her death. However, if there is a subsequent divorce, your child can then change the beneficiary – never losing divorce protection!
Divorce protection is one of the many options available within a comprehensive living trust plan. If you are interested in providing your children or other beneficiaries with divorce protection, if you have minor beneficiaries, if you have special needs beneficiaries, or if you simply wish to make things as easy as possible for your loved ones upon your death or incapacity, you should consult with an estate planning attorney regarding crafting a plan that will best accomplish your desired objectives.
Friday, May 10, 2013
Do I Really Need an Estate Plan If I Don’t Have Many Assets?
Regardless of age, we are all one accident away from death or disability. For example, if Terri Schiavo had created an estate plan, a seven-year court battle between her husband and her parents could have easily been avoided. Therefore, it is a good idea for all adults to have at least basic estate planning documents in place – especially when you have minor children. In Wisconsin, these documents should include (at the minimum): (1) a Will designating how your property will be distributed upon your death and naming guardians and establishing trusts for your minor children, (2) a Property Power of Attorney designating someone to manage your financial matters in the event you become mentally incapacitated, (3) a Health Care Power of Attorney designating someone to make health care decisions for you in the event you become mentally incapacitated, (4) a Living Will indicating whether or not you wish to be kept alive artificially under certain circumstances, (5) a HIPAA form authorizing your agent to access your medical records when needed, and (6) an Authorization for Final Disposition specifying your burial and funeral wishes and also designating who is in charge of your burial and funeral upon your death.
Of course, depending your circumstances, there may be additional estate planning documents that should be part of your individual estate plan. The best way to determine what you need is to consult with a qualified estate planning attorney.
Of course, depending your circumstances, there may be additional estate planning documents that should be part of your individual estate plan. The best way to determine what you need is to consult with a qualified estate planning attorney.
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