Articles Posted in Probate

big-house.jpgA man’s death without an estate plan triggered a protracted legal squabble between his children and their stepmother over a parcel of property the father and stepmother purchased prior to their marriage. Because the man died without placing his intentions in writing, the Wisconsin courts had to decide the issue of ownership, and concluded in Droukas v. Estate of Felhofer that the property was a marital asset, and belonged 100% to the stepmother. A single document, known as a marital property agreement, potentially could have avoided this entire litigation.

In March 1999, Gregory Felhofer and Mary Lynch purchased an empty lot in Franklin, Wisconsin. The couple began building a home on the property that summer and, in mid-September, with construction underway, the couple married. The city did not issue a certificate of occupancy until January 2000.

Eleven years later, the man died intestate. The home was not included in the man’s estate. Felhofer’s children from a previous marriage contested the probate distribution, arguing that the home was improperly omitted, and that they were entitled to a one-half ownership interest in the property. The wife argued that the home was marital property and automatically became solely hers when her husband died. The children countered that the parcel could not be marital property because the purchase occurred before Gregory and Mary married.

Continue reading →

wi_supreme_court.jpgA recent Wisconsin Supreme Court case, McLeod v. Mudlaff, is among the most recent in court cases with “estates gone wrong” issues. While the Supreme Court’s decision focused upon the validity of the decedent’s marriage, the case arose initially as a probate dispute. The breakdown of the deceased woman’s estate offers some helpful instruction about the potential benefits of living trusts in estate plans.

Ms. Laubenheimer created a will in 1999 leaving most of her estate to her three stepchildren. In early October 2008, Laubenheimer suffered a series of debilitating strokes and was admitted to a nursing facility. On October 11, two doctors signed a “Statement of Incapacitation”, attesting to her condition. Nevertheless, Joseph McLeod, who had been living with the woman, checked her out of her nursing home twice, on Oct. 27 and Nov. 3, to obtain a marriage license and hold a marriage ceremony. The woman died three months later.

A probate dispute ensued when McLeod argued that Laubenheimer’s 1999 will was invalid and that, because he was her husband and the woman never adopted her stepchildren, he was the sole heir of the woman’s $450,000 estate. The stepchildren contended that the woman lacked the mental ability to provided legal consent after her incapacitating strokes, making her marriage to McLeod invalid.

The issue before the Supreme Court focused solely on whether a trial court can invalidate a marriage after one spouse has died; however, Laubenheimer’s case also offers a valuable lesson regarding estate planning. In cases where, as the deceased woman’s stepchildren asserted here, a party seeks to manipulate the system to improperly gain control of another’s assets, a living trust may offer a degree of protection.

How a revocable trust can (and can’t) help

Many revocable living trusts name the trust’s trustor, or creator, as the original trustee. That person has the authority to manage all assets owned by the trust until an event occurs that triggers a transition to the successor trustee, whom the trust creator named at the time of the trust’s creation. Most trusts provide several events that trigger a successor trustee’s assumption of control, including the original trustee’s death or incapacitation. Often, trust documents state that the medical statements of two doctors provide sufficient proof to establish incapacitation. In Laubenheimer’s case, if she had created and funded a living trust with her assets, the two doctors’ October 11 “Statement of Incapacitation” likely would have triggered a transition of trusteeship of her trust from herself to her successor trustee, a person she would have named prior to her loss of mental capacity.

Continue reading →

will microsoft images.JPGHaving someone select you as the personal representative of his or her estate can elicit both positive and negative reactions. You may be honored, but at the same time, you may feel intimidated by the responsibility that comes along with it. Before you agree to take on this role, you should understand exactly the wide variety of responsibilities involved.

One of the first duties a personal representative (which is also called the “executor” in some other states) is tasked with is to submit the deceased’s will to probate. According to Wisconsin law, once you learn that you are the personal representative, you must file the deceased’s original will the Register in Probate for the appropriate county within 30 days. This filing is required even if the deceased estate does not require an actual probate process.

Your role as personal representative also makes you responsible for protecting the estate’s assets. This often involves changing legal ownership of assets from the deceased to the estate, and continuing to pay the bills. This usually involves opening a separate bank account in the name of the estate from which the bills are paid.

The personal representative must also determine exactly what is contained in the estate. This means creating an inventory of assets, including the deceased’s real estate, bank accounts, investment accounts and personal property. For some of these assets, including real estate and some others, you may need to obtain an appraised value of the item. The Internal Revenue Service requires appraisals for individual items with a value of $3,000 or more or, if you are dealing with a group of similar items, the number is $10,000. This means that, if you think the value of an asset is above, or even close to, that dollar amount, you should get the appraisal.

Paying the estate’s debts is another key element. A personal representative must also locate, and then pay, all of the estate’s creditors. The court will set a deadline by which everyone to whom the deceased owed money must present their claims. This period for creditor claims is between three and four months. The personal representative must publish a newspaper advertisement notifying creditors to submit their claims before the deadline.

Of course, one of the most essential tasks is distributing the estate’s assets and disposing of estate property. This may require retaining professionals to locate some beneficiaries named in the will. It may also necessitate working with real estate agents to sell property, or holding an auction or “estate sale” to dispose some assets.

—–

Continue reading →

sign.jpg

Some parents dream of the day when their children will take over a family business. For those whose children have the same passion for the same line of work or business, seeing this occur can be a “dream come true.” For others, their dream becomes complicated if for some reason their child or children are not remotely interested in the family business, or the children have different levels of interest. Consequently, having a plan in place is important so that the business is handed down appropriately.

If there are no children interested in continuing to run the family business, there are a couple of alternatives. One is simply to sell the business altogether. The other would be to name someone outside the family to be the successor. In either of these situations, the children would not be burdened with the day-to-day operations but they could still benefit from the sale or the profits from it.

Where it gets sticky is when there is one child who wants to take over the family business and the other who doesn’t. Unfortunately, giving shares of the business to the children equally might create future conflict if there are disagreements about the way the company is being run, among other things.

There are advanced planning tools available that can facilitate an equal and equitable transfer. This will help to avoid unpleasant situations that can arise from simply giving the business to the kids and letting them sort it out.

Here are some estate planning tips on how inheritance equalization can be accomplished from an experienced Wisconsin probate and estate planning lawyer. These tips are particularly important because in many family-owned businesses most of the assets are tied up in sweat equity. If there is one child that has been more involved in the business than others, you have to consider whether their illiquid equity will factor into the distribution of the assets of the estate to the other children.

One solution is to equalize inheritance between children with the use of life insurance. Essentially, the children who are going to take over the business will inherit stock in it and those who are not involved will receive an equal amount from a life insurance policy naming them as beneficiary, in addition to other assets that are not business related.

Another option is to simply sell the business, or name a successor from outside the family to run it. In either of these scenarios, the children can benefit from its sale or the profits from its continued operation.

If you do not have adequate assets outside the business and are unable to insure your life for enough to even things out, your next question should be: Which goal is primary? 1. to make certain that your children are treated fairly and equally, or 2. to make sure the business has the best chance of surviving.

Continue reading →

family history.jpg

Many parents are unsure about what to tell their children about their inheritance for fear that their knowledge of even the most modest amount might cause them to be less productive adults.

Considering predictions that the baby boomer generation is going to inherit approximately $12 trillion from their parents, this is understandable. A 2010 study by MetLife determined that the median inheritance for two out of three baby boomers was approximately $64,000.

Parents who have considerable wealth are often reluctant to let their children know how much they stand to inherit out of fear that they may have no incentive to become employed and lead productive lives.

On the other hand, parents who do not have as much might be concerned that whatever they have accumulated will be used up for their own retirement and other needs. Under this scenario, children who had anticipated an inheritance would not receive anything.

In either situation, it is wise to at least discuss, in general terms, what you have or don’t have with your children. Tell them where your important documents are, and let them know who is to be your trustee or executor after you go.

This provides you with an opportunity to discuss family values and to tell them about your life. Studies have shown that children want to know about the struggles their parents have gone through and where they were raised. Share your life story with them and consider giving them something that has meant a lot to you for their safe keeping. It is also a good time to consider scheduling family vacations so that the entire family can get together or discuss plans for the holidays. By doing this, you will be instilling your belief in family values and traditions in your children.

Regardless of your financial situation, it is important that you have a durable power of attorney, health care documents and a trust or will established. The will is by far the most basic succession planning document and trusts are more flexible and advanced estate planning tools. The durable power of attorney allows you to appoint someone else to handle your financial affairs for you while you are alive and unavailable or incapacitated. Health care documents are living wills and a health care power of attorney.
These documents designate what type of care you want if you cannot make decisions for yourself or appoint someone to make them for you.

Continue reading →

952313_gavel.jpg

How many times have you overheard a discussion or read an article talking about avoiding probate. Then later, wondering what it involved and why should you want to avoid it?

Probate is the legal process which divides and distributes a person’s assets after his or her death. The probate court will inventory the estate and distribute it to the heirs or beneficiaries of the deceased, after all debts are paid. A will must go through probate to be given effect. The term “probate” is derived from the Latin words “having been proved”. Through the legal process, the will is proved, or authenticated, the heirs are identified and the estate is distributed according to the will, after all taxes and debts are paid.

If there is no will, the assets of the deceased will be distributed according to the state’s laws of intestacy.

In Wisconsin, if an individual dies and has at least $50,000 in assets that do not automatically transfer to someone else, probate is necessary. This could include bank accounts, investments, vehicles, real property and personal property.

So why would you want to avoid the probate process? Because the probate process can be lengthy, from a few months to over a year or more, depending on how complicated the estate is. The average probate case in Wisconsin is open for 12 months. Having a long drawn out probate battle can be expensive and result in substantial legal fees.

Another primary reason to avoid the probate process is to avoid delay in the distribution of the assets of the estate, which are tied up during probate.

Also, if the will provides for trusts for children or grandchildren, that will require continued oversight by the probate court, an annual accounting and additional attorney fees.

In order to avoid the probate process, individuals in Wisconsin can establish a living or revocable trust, which will in effect own the assets of the estate. The living trust is one of the most popular vehicles for avoiding probate. It gives the individual who has a living trust the power to make alterations as desired, including complete revocation. Following this individual’s death, the named beneficiaries of the trust will then be distributed the assets of the estate, without having to go through probate.

—–

Continue reading →

1285082_flag sxchu username linder6580.jpgThe question of who will inherit your money or property when you die is an important one. Too often, individuals who seek to plan their estate believe that merely writing a will is enough to ensure their end of life wishes are followed. Although creating your will is a significant first step in the estate planning process, it is important to realize that a number of other legal instruments may override the provisions of your will.

How your property or financial instruments are titled will take precedence over your will. For example, if you own your home jointly with a right of survivorship going to a spouse or other individual the property will transfer to your co-owner no matter what your will states. Additionally, named life insurance beneficiaries will always receive the insurance money regardless of the provisions contained in your will. A bank account, savings bonds, and any retirement accounts will also transfer to your named beneficiary after you die.

Only those assets you own individually that do not have a named beneficiary may pass by will. Still, it is important to tell your estate planning attorney about all of your assets and discuss with him or her exactly who you would like to receive those assets after your death. Your lawyer can help you decide if named beneficiaries are the best way to plan, and can help you change them if you wish.

Through a will, the parents of minor children have the ability to specify who will have guardianship of their children if they both die. Also, your personal representative (also known as an executor) is named in your will. A personal representative is a trusted individual who is tasked with carrying out your wishes throughout the sometimes lengthy probate process. Through probate, a court will oversee the payment of your debts and the transfer of your assets according to the provisions included in your will. Many people choose to avoid probate by transferring assets into a revocable living trust. A knowledgeable Wisconsin wills and trusts attorney can discuss the probate process with you in more detail.

Protecting the financial health of your family members and other loved ones after you die is important. In order to avoid mistakes and ensure your wishes are followed, you are advised to consult with an experienced estate planning lawyer on a regular basis.

Continue reading →

1316486_mock_credit_card_2 sxchu username highwing.jpgWhen a spouse dies, most people are understandably overcome by grief. Unfortunately, in Wisconsin, a surviving spouse may also be burdened by their deceased loved one’s credit card debt.

In most states, when a credit card debt is in only one spouse’s name, the debt will be paid out of the estate. Any credit card debt that exceeds the assets in the estate is never paid and a spouse cannot be forced to pay the debt.

Wisconsin, however, is one of ten marital property states. This means any debts incurred by either spouse are generally deemed to be jointly held. According to Wisconsin law, a surviving spouse will generally be held responsible for the individually acquired credit card debt of a deceased spouse.

Important exceptions do exist. For example, a surviving spouse may not be held responsible for a debt that was acquired by their deceased spouse before or during the marriage if used to pay an obligation that preceded the marriage. In some cases, a surviving spouse may only be required to pay those debts he or she directly benefited from such as utility or healthcare payments. A surviving spouse is always responsible for any outstanding debts related to a jointly held credit card.

After one member of a married couple passes away, the executor of his or her estate must provide notice of the death to all creditors, including credit card companies. A copy of the notice letter should be maintained in the executor’s records.

The Credit CARD Act of 2009 provides that no late or annual fees may be charged by a credit card company while a decedent’s estate is being settled. In addition, the estate is also provided with 30 days during which to pay the final outstanding balance on a credit card without incurring additional interest charges. If you are contacted by your deceased spouse’s creditors, you should refer them to the executor of your spouse’s estate. If you are the executor, you should not discuss the debt until you determine what assets remain, whether the debt is valid, and whether you are responsible for the debt. If your spouse died with outstanding credit card debt, you should contact an experienced wills, trusts, and estates lawyer to assist you in settling your spouse’s estate.

Continue reading →

1033245_clear_blue_window sxchu username tizwas01.jpgAlthough nearly all property owners choose to protect their investment in the event of an unexpected catastrophe by purchasing insurance, many fail to consider protections from potential legal hazards. If you have real property that you plan on leaving to a child or other heir, you should review your estate plan carefully. By placing your home or other property into trust, you have the opportunity to avoid probate and speed the transfer of your assets to your heirs.

There are many types of commonly used real estate trusts. A Qualified Personal Residence Trust (QPRT) is an irrevocable instrument that is usually created for a fixed term. Once the term expires, the property placed into the trust passes on to the chosen beneficiaries. In order to alter a QPRT, a property owner must first obtain the consent of each of the trust’s beneficiaries. Once the term of the trust expires, the property owner is required to pay rent to the beneficiaries as long as he or she lives on or uses the property.

A significant benefit of using a QPRT trust instrument is that the taxable value of a property is set at the time the trust is created. With property values across the nation down, this type of trust may become increasingly attractive to many property owners. Additionally, if the current gift tax exemption of $5 million returns to $1 million at the end of 2012, a QPRT may be especially attractive to individuals who would like to pass on highly valued real estate.

A revocable or living trust offers more flexibility than a QPRT because it may be changed at any time without the consent of a named beneficiary. Such trust instruments may also be customized to fit the needs of any individual. Additionally, a revocable trust can help your heirs avoid going through the probate process in multiple states if you own property in more than one part of the nation.

Each individual’s situation is unique. For example, you may be best served by creating a revocable living trust for your home while another individual would be best served by a QPRT. Careful advance planning including the use of trusts may reduce or eliminate the need for your family to wait for the often lengthy probate process to conclude. An experienced Wisconsin trusts attorney can help you evaluate your situation and create an estate plan that is right for you and your loved ones.

Continue reading →

1094119_toned_mercury_dime_1 sxchu username larrymo123.jpgMany people create a simple will and feel they have provided for their loved ones and heirs. Although they can potentially be valuable estate planning tools, wills also have many shortcomings. Because a will is essentially a list of instructions regarding how a decedent’s assets should be distributed, it normally has little value until the estate enters the probate process. In probate, a judge is tasked with determining whether a will is valid and how the assets in an estate are to be distributed. Unfortunately, as the Derzon case described below demonstrates, the probate process can be lengthy, expensive, and public.

In 1959, David Derzon began a collectibles business that is still currently operating in Milwaukee. When he died in 2007 at age 83, he left the bulk of his approximately $3 million estate, including the family business, to his 59-year-old wife, Rebecca. Prior to David’s death, Rebecca’s own will stated the Derzon estate would pass to David’s two children from a previous marriage and her half brother. A few months after David’s death, however, Rebecca’s will was rewritten. When Rebecca died unexpectedly less than one year after her husband, her will left the entire Derzon estate to her half brother and sister, nieces, and nephews.

One of the main issues involved in the Derzon litigation is the mental and physical state of the couple at the time their wills were created. David’s two sons claim their father was recovering from brain surgery and unable to understand the implications of his decisions at the time his 2007 will was signed. David’s children also believe Rebecca’s half sister, Lori Laatsch, improperly influenced her to change her will in 2008.

According to David’s sons, Rebecca, who reportedly died from an accidental alcohol overdose, was extremely depressed following the death of her husband and suffered from substance abuse issues at the time her last will was created. Additionally, the children allege Laatsch, who inherited 75 percent of their father’s business, went years without speaking to Rebecca and only befriended her near the end of her life. To further complicate matters, the revised will reportedly states it is a draft despite that it was signed by Rebecca. The attorney who prepared it claims Rebecca insisted on signing it immediately during a March 2008 meeting at the family collectibles store.

According to David’s children, Rebecca was an accepted member of the Derzon family and they had a good relationship with their father’s second wife. Still, the 2008 revision was not the first time Rebecca altered her will. In 2006, she amended it to lower the percentage of her estate that each son would inherit and included her half brother for the first time. Ironically, litigation over the will began when Rebecca’s half brother attempted to get a copy of several records from Rebecca’s attorney. Since Rebecca’s death, many court battles have ensued over relevant documents and other records.

In August, Milwaukee County Circuit Judge Jane Carroll will rule on whether Rebecca’s half sister exercised undue influence over the woman. The burden of proof, however, is on those challenging the will’s validity. The lengthy and expensive probate battle may have been avoided entirely if the couple had instead chosen to create a comprehensive estate plan.

Cases like this are some of the most heart-breaking parts of our practice at Krause Law Offices LLC. Challenging a will is an uphill battle, so it is important to get an estate plan right before it is too late.

At Krause Law Offices LLC, we often draft plans for couples or individuals in their second (or beyond) marriage. These plans often contain language that prohibits a surviving spouse from changing the distribution percentage after one spouse dies. Another technique is to plan the estate so that a portion goes into an irrevocable trust upon the first spouse’s death, and is preserved for that spouse’s children, while still providing income for the surviving spouse for a number of years, or for life.

Continue reading →