Don’t make assumptions about how you “think” your estate will be handled when you are gone. See an attorney and make sure you “know” what will happen. Here are some common misconceptions about probate transfers and related matters:
1. My Spouse Will Inherit Everything Anyway, So I Don’t Need to Do Estate Planning.
In a first marriage, your spouse is indeed presumed to be your heir. However, you may not avoid the probate process if assets are not titled jointly or with a payable-on-death designation. If there are substantial assets titled solely in the deceased spouse’s name, the surviving spouse may be forced to go through a costly probate process when it could have been avoided by simply re-titling assets in joint tenancy.
In the case of a second marriage, children from a prior marriage would share in the deceased spouse’s estate if they die intestate (without a will). Individuals in second marriages always need to get legal advice on estate planning matters, and possibly do a marital property agreement, to avoid conflicts between their families when they are gone.
2. My Step Child Will Inherit Equally Along With My Other Children.
Not unless you include him or her in your will. The rules of intestate succession don’t recognize non-biological children as heirs unless they have been legally adopted. If you want a step-child included as a beneficiary of your estate, you must write a will and include him or her as a beneficiary. If you don’t want a natural child or adopted child to inherit, you must write a will making that point clear.
3. Estates Smaller Than $5,000,000.00 Are Exempt From Estate Tax.
It is true that as of 2013, estates smaller than $5,250,000 are exempt from federal estate tax, however such estates may still be subject to a Wisconsin estate tax.
Wisconsin imposes an estate tax under current law, but the tax is dependent on federal law. Due to either the provisions of or absence of the federal estate tax in recent years, Wisconsin’s estate tax has been inactive for deaths beginning in 2008. The Wisconsin estate tax still exists; it is just dormant right now. Future changes to the federal laws affecting estate taxes could allow Wisconsin to resurrect its estate tax. Given the dynamic nature of this area of the law, it is in your best interests to consult an attorney rather than assume your estate will definitely be exempt from estate taxes.
4. My Old Will Is Good Enough, I Don’t Need To Change It.
As circumstances change, your estate planning needs to change to meet your needs. Probate rules change, tax laws change and your personal circumstances change. Births, deaths, marriages and divorces involving family members or your own retirement are all circumstances that may cause you to change your estate planning documents. If you haven’t considered your estate planning needs for a few years, you should meet with an attorney to see if you need to make changes and update documents.
5. A Will Is the Only Estate Planning Document I Need.
A will only controls the disposition of your assets after your death. It does nothing to control the management of your affairs while you are alive. In the event of an accident or serious illness, you should have power of attorney forms in place, one for health care and one for financial affairs. These documents appoint persons to make health care and financial decisions on your behalf if you are unable to do so. Without power of attorney forms in place, your family would be forced to go through guardianship proceedings in circuit court, which are time consuming and expensive.
In some cases, marital property agreements or trusts are also necessary to carry out the individual’s estate plan. A will is not the only document you need for a complete estate plan.
6. It Costs Too Much to Do Comprehensive Estate Planning.
In fact, the opposite is true. It costs too much NOT to do estate planning. Failure to have an adequate estate plan in place is likely to cost your family in terms of time, money and conflict in the future. The cost of doing estate planning is normally relative to your needs. An individual in a first marriage with a modest estate would not have to spend a great deal to put documents in place. But even with larger estates and more complicated issues, for example second marriages or federal estate tax issues, the cost of doing estate planning now is more than offset with the savings gained from avoiding problems and expenses in the future.
Robert S. Duxstad is a Wisconsin estate planning attorney practicing primarily in Green and Lafayette Counties. He can be reached by e-mail at duxstad@swwilaw.com.