Word of the Month: Ancillary Probate

Word of the Month: Ancillary Probate

By Melinda Gustafson Gervasi

January 29, 2024

Image by M. Gustafson Gervasi, 2024, Geranium on the Windowsill

The following is a hypothetical situation, it is not based on an actual client experience.  It is a story meant to illustrate an issue common to estate planning.

The death of a loved one is never easy.  Processing the affairs of a recently deceased loved one in January, specifically January in Wisconsin, is a very difficult task.  Recently the adult child of a former client of mine made their way through the snow and slush that mother nature dumped on my hometown of Madison, Wisconsin, and arrived at my office.  Once their winter parka, hat and gloves were nestled into the coat tree in my waiting area, we sat down at the conference table to discuss "next steps".

Papers were pulled from color coded files the child had gathered from their parent's home.  There was the title to the Toyota Prius, copies of recent IRA Statements, printouts from the bank where savings and checking accounts existed, the deed to the house.  The pile contained last year's income tax filings, a property tax bill due any day, and credit card statements.  And at the bottom of the stack of paperwork we found a deed for land in Michigan.  "Oh, that is the cabin -- my grandfather built it by hand, and left it to my mom when he died in 1973."

My conversation with the child now veered into the topic of "ancillary probate"; the cabin is over the border and in a different state. Oftentimes the Personal Representative (or called an Executor in other states) discovers the deceased person owned property held in another state.  For example, a lake home, cabin, recreational land, or a boat docked in warmer waters. In this specific situation, the child would need to open a Wisconsin probate, which would handle the transfer of nearly all the decedent's assets.  However, the cabin owned in Michigan would need to be transferred under Michigan law -- creating what we call an ancillary probate.  Procedures vary from state to state, and in some cases probate can be avoided if the state has a "small estate" method for avoiding probate on lower-value assets. The web of final affairs became a bit more layered with land owned outside of Wisconsin, but a path did appear.  And now the child as well as you the reader have expanded your vocabulary to include an understanding of "ancillary probate".

Remember that a blog is not legal advice; it is a means to spark thought and reflection.  Please consult with an attorney licensed in your state for advice specific to your situation.  Thank you for reading, be well!

Taxes Are In The Air

Taxes Are In The Air

By Melinda Gustafson Geravsi

January 22, 2024 

Garner Park, Madison, WI - Image by M. Gustafson Gervasi 2024

January has arrived, bringing with it artic air to my hometown of Madison, Wisconsin.  No matter where you live in America, the month of January also brings the flutter of envelopes into your mailbox, all stamped IMPORTANT: TAX INFORMATION.  Whether it be a W2 from your employer, a 1099-Misc from your investments, or a K-1 showing stock gains, many of us are gathering forms to complete our annual income tax filings.  

Taxes quickly become complicated and technical because the IRS tax code is anything but simple.  When in doubt, I also say it is less expensive to hire a CPA for advice beforehand than to hire one to clean up a mess after-the-fact.  In area of focus, estate planning and probate, there are three main taxes that come up in client meetings:

1. Income Taxes -- a tax owed on income that can be owed at both the federal and state level.  Also, when a person dies there might be income taxes owed on earnings from January 1st to the date of death, and then income taxes owed on earnings (think dividends, interest, etc) from the day after death to December 31st.
2. Gift Taxes -- a tax owed by the person making a gift IF the tax is not exempt and exceeds the limit set by the IRS for that year (in 2024 the limit is $18,000/person).  Quite often I see a child who was named as a co-owner of a parent's bank account.  The parent dies and the child becomes the owner of the entire bank account.  If that child wants to share the account with a sibling who was not named, and that share is over the gift tax limit, a gift tax return may need to be filed.  It is an unpleasant surprise.
3. Estate Taxes -- a federal (and sometimes a state tax depending on where you live) that is assessed on assets that exceed a level set by Congress.  In 2024 that limit is $13.6 million for an individual.  While this tax impacts less than 1 percent of Americans, many people harbor a fear of the "death tax".  In my everyday operations I see the gift tax surprise more people than the federal estate tax, however, I focus on working with middle class Americans.

A blog is meant to spark thought, reflection, and discussion.  It is not legal advice.  Please consult with an attorney (and often a CPA) who is licensed in your state of residence for input on your unique situation.  Be well and thank you for reading. 

Anyone Can Leave a Legacy

Anyone Can Leave a Legacy

By Melinda Gustafson Gervasi

January 15, 2024

Today our nation celebrates the legacy of Martin Luther King Jr.  Across this country parades are held, speeches are given, and banquets are held.  It seems an appropriate time to remind you that, in my opinion, anyone can leave a legacy. With a bit of reflection, strategic thinking and planning you can promote what you value.  

Image by M. Gustafson Gervasi 2024

Back in 2013 I released a small book, meant to be read in an afternoon, to teach this concept to Middle Class America.  Over a decade later key concepts remain true and the steps you can take are relatively easy.  Here are 3 easy steps you can take to leave a legacy:

1. Direct 10 percent (or any percentage) of your retirement funds to a nonprofit organization that is close to your heart;
2. Request that In Lieu of Flowers, mourners make a donation to a charity that was pivotal in your life, such as: a college, university or trade program; medical research; or mental health support.
3. Leave directions to have your tangible personal property (furniture, clothing, books, etc) donated to a thrift store that aligns with your interests (my personal favorite is the Dane County Humane Society Thrift Store).

A philanthropic life does not require you to have a seven-figure net worth.  Read more about how middle class Americans had a positive impact on the operation of a nonprofit by checking out Middle Class Philanthropist: How Anyone Can Leave a Legacy.  If you have a story to share, reach out with a comment or email me directly.

A blog is not legal advice, but a platform to promote thought and reflection.  Please seek legal advice from an attorney licensed in your home state.  Thank you for reading, stay warm (it is -2 F at Noon here in Madison, Wisconsin), and be safe.

Estate Planning: Take It One Bite At A Time

Estate Planning: Take It One Bite At A Time

By Melinda Gustafson Gervasi

January 8, 2024

There is an African saying, "What is the best way to eat an elephant?  One bite at a time".  If 2024 is the year hope to tackle estate planning but do not know where to start, I suggest you embrace the wisdom of this saying.  Creating an estate planning, or updating an out-of-date plan can be monumental and thus unattainable.  Do not be deterred.  Break it down into small steps and you will make progress.  Here are 5 small tasks to get you started:

• Create your powers of attorney to say who is in charged of your finances and or health care decisions if you are alive but too ill to act;
• Review the beneficiary forms on your life insurance and update them if needed;
• Review the beneficiary forms on your retirement accounts and update them if needed;
• Create a list of your assets and liabilities to create an easy to access map of your finances for your loved ones if you die; and  
• Write out the contact information for people that should be notified in case of your illness or death, everyone from your college roommate to your cat sitter to your accountant.

It is estimated that only 32 percent of Americans have a will or estate plan.  Go against the tide, break the work down into more simple tasks, and work towards putting together the peace of mind you will give loved ones if the unthinkable happens.

Thank you for reading.  A blog is not legal advice, but meant to spark thought and reflection.  Seek legal advice from an attorney licensed in your state of residence for advice specific to your situation.  Be well!