Friday, March 18, 2011

Gifting a Home to Children - Ask First, Then Decide

Clients called me the other day saying, on the advice of their financial planner, they wanted to gift their home to their children. Their financial planner told them they could "do this all without anyone knowing". Thankfully, they called me first, and I firmly advised them not to make the gift. Why was I so against it? In their specific situation:

  1. They do not have adequate funds (excluding the home) to pay for nursing home care if they needed it (and they are 70+ in age);
  2. Gift tax issues come up because they'd be giving a gift of more than $13,000/per/year;
  3. Capital gains tax issues may be a problem for the children (if they sold the home, they'd pay cap. gains tax on any profit over the purchase price of the parents in 1964);
  4. Transfer fees owed to the department of revenue were not factored in.
Gifting can be an ideal option for some clients, just not these clients. All too often I find myself telling clients that "legal advice" from financial planners and insurance sales people are not "legal" nor are they sound. Always, always, seek the advice of an attorney before gifting a home, or any other property. It is far less expensive to hire a lawyer for advice beforehand, than to hire one to clean up a mess.

Thursday, March 17, 2011

The Newest (and Oldest) Ideas in Funeral Planning

Reading through the news letter from the First Unitarian Society of Madison (where my family and I are members) I noticed a class that might be of interest to my readers --

The Newest (and Oldest) Ideas in Funeral Planning

Over 100 decisions must be made within 24 hours of a death, a time when loved ones are in a time of great stress. Advance planning can make things a little easier. The first half of the class will cover many of the issues in pre-planning a funeral and burial/cremation. Topics covered include state laws with regard to burial and cremation, burial trusts, funerals, memorial services, and means to plan in advance for these events. Planning in advance is a gift to your loved ones and will ensure your values are respected. The second half will offer information and material on "green" funerals and burials in light of state regulations. Information will be provided to allow participants to choose more ecologically sensitive options, such as biodegradable caskets, and make them aware of the cemeteries in Wisconsin that have green burial sites. Rachel Bledsoe, from Cress Funeral Home, will help in this presentation. Cress has recently been certified as a member of the Green Burial Council, the first in Dane County.

Susan Wester, M.D., is a retired pathologist who worked at Gundersen Clinic in La Crosse for 25 years, prior to relocating to Madison in 2007. She continues to work part-time in pathology. She is on the board of directors of Compassion and Choices of Wisconsin, a death-with-dignity organization, and is a member of the FUS End-of-Life Taskforce.

Wednesday, March 16, 2011

Limitation of Transfer on Death Deed in Wisconsin

Recently a client inquired about the possibility of placing a Transfer on Death Deed on a property held by an LLC. My initial answer was no, but I stated I wanted to double check. My first impression was correct.

The function of a Transfer on Death Deed is to place a beneficiary on real property. This placement effectively converts real property from being a probate asset (meaning it will pass through probate upon the owner's death) to a non-probate asset, and transferring outside of probate. Non-probate transfers are generally faster, and avoid the 0.2 percent fee assessed by the court. However, examination of Wisconsin Statues confirmed that this option does not apply if the property is owned by an LLC.
Wis. Stat., Section, 705.15 "An interest in real property that is solely
owned, owned by spouses as survivorship marital property, or owned by 2 or more persons as joint tenants may be transferred without probate to a designated TOD beneficiary..."
Most likely the motivation behind excluding an LLC is that the transfer is triggered by the death or the party or parties. When an LLC owns the property, there would never be a death...LLCs don't die.

As always, reading a lawyer's blog does not constitute receiving legal advice. Please seek advice from legal counsel before taking an action.

Tuesday, March 15, 2011

State Estate Taxes

Many people may think that now that the federal estate tax exemption is $5million they are free of worry about the estate tax. If so, they are wrong. Why?
  1. the exemption is only for 2011 and 2012; it returns to $1million in 2013 unless Congress takes action (which it probably will);
  2. some states have a state estate tax that kicks in below the $5million mark; and
  3. some states have inheritance tax laws.
Wisconsin is not one of the states listed in bullets 2 and 3, however, I always advise clients that they should monitor the never knows when the State will opt to tax estates again.

Remember, there are 50 different states in our country. That means there are 50 different sets of estate planning laws. You must determine what laws impact you in your state. It is always wise to consult an attorney in your state who focuses on estate planning.

For more on the states that do have a lower threshold for estate taxes, SmartMoney has a nice article.

Monday, March 14, 2011

Hiring an Estate Planning Attorney

Time ran a piece called "I Can't Take It With Me". The writer approaches estate planning with humor. However, the description of the lawyer and the process he followed is anything but funny to me. Sadly, too many attorneys operate this way, and it turns people off of estate planning. Whether you are 18 or 88, have money or not, estate planning is important. Why? You take control. You make decisions, not a court. I urge people to remember, not all attorneys act like the one in this article, nor do they charge such high rates. Stories like this may keep people from tackling this important issue. I hope it won't stop you from taking control

Friday, March 11, 2011

Free Seminar on Wills and Other Important Documents

Next Wednesday, March 16th, I will be speaking at UW Extension as part of a free seminar on Wills and Other Important Documents. The event was originally scheduled for earlier in the year, but was delayed due to weather. Contact UW Extension for registration details. It runs from 6:30pm - 8:30pm.

Thursday, March 10, 2011

Personal Representatives, Dying Without a Will, and Bonds

People often ask me, why should I bother doing a will, I don't have a complicated life? One reason is that if you die without a will, the person who steps forward to act as the personal representative may be required by the probate court to take out a signature bond before the court will appoint them. In many cases this means the PR is bonded for themselves; they are an heir. If a will were done this hassle could be eliminate; a will can say no bond is required if a nominated PR acts.

Estate planning is a gift to the people you leave behind. This is another example of how doing a will can simply an already difficult process for loved ones.

Thursday, March 3, 2011

TOD versus POD

A common question raised during my estate planning seminars, is "what is the difference between a TOD and a POD?". Both are forms of non-probate transfers. This means that both establish a distribution plan for an asset upon the owners death. The difference? TODs, which stands for Transfer on Death, attach to brokerage accounts. PODs, which stands for Pay on Death, attach to bank and credit union accounts.

It is always advisable to consult an attorney when creating an estate plan; this post is not meant to be construed as legal advice.

Wednesday, March 2, 2011

Estate Planning Seminars

It's Seminar Season for me! Once again I will be speaking at a variety of events, all related to estate planning and probate. Most sessions are open to the public, and many are free of charge. If you are in the Madison, Wisconsin area, and want to learn more about wills, trusts, and or probate, I invite you to attend an upcoming seminar. Details are on my web site,

Tuesday, March 1, 2011

HIPAA and Probate

Recently a client of mine was told by a health insurance company that the company could NOT speak to her about her deceased mother's insurance claim (which they were denying) because the deceased mother had never signed a power of attorney for health care. The company wrongly stated that the privacy continued after death. Why were they wrong? Because my client was the personal representative for the estate, and HIPAA treats a personal representative the same as the release would be needed. Moreover, the authority of a POA for health care ends with death. Yet again, a great example of why it is important to have POAs completed (even if an insurance company relies on them when the should not).

Need more information on this topic, check out this HIPAA summary page.

As always, this post is meant for discussion, not dispensing legal advice. Check with your attorney prior to taking action.