The mere mention of an Estate Plan conjures up all sorts of reactions and emotions, including confusion, fear, and avoidance.
However, if you’re working with a trusted Estate Planning Attorney and Financial Advisor, your estate plan can bring you peace of mind and confidence. One of the most important parts of creating a comprehensive financial strategy is to implement an estate plan. I met up with Julia Walsh, an Estate Planning Attorney at Murphy Desmond S.C., a local law firm in Madison, Wisconsin. We discussed the 5 most commonly asked questions around estate planning.
1. What is the purpose of an Estate Plan?
There are many purposes, but the most obvious is to control the disposition of your money and property after you pass away. Additional purposes include nominating who will take care of your children if you are unable to, either temporarily or after you pass away, and controlling how and at what ages your children inherit your property. Another reason to have an estate plan is to nominate who oversees taking care of you and your finances during your life, when you are either unable to or at an age where you want assistance doing so.
The 3 main parts of an estate plan are:
· Will or Revocable Living Trust · Financial Documents · Healthcare Documents
2. Who should have one?
Everyone! Everyone would benefit from an estate plan. Who do you want to inherit your house, car, jewelry, art some day? Who will take care of you, your children, your healthcare decisions, and your finances when you are temporarily or permanently unable to? These are important questions for everyone.
Those who have second marriages should strongly consider an Estate Plan. Wisconsin is a marital property state, which means on death, subject to a few exceptions, the bulk of your assets are considered marital, which means your spouse will automatically get 50% of the assets, unless you have an estate plan that dictates otherwise. Additionally, your 50% could pass to your children from previous marriages instead of your spouse if you do not have a proper estate plan in place.
If you are charitably inclined, you can use your estate plan to direct what charities could get donations, which can be spelled out in your plan. Having a good estate plan makes things clean for everyone involved. Everyone should consider a consult with an estate planning attorney to educate themselves at the very least to learn how a properly executed estate plan helps save time, energy and money in the long run.
3. What are some common misconceptions people have about creating an Estate Plan?
· Misconception #1: I have a Will so I don’t have to worry about probate, titling, or beneficiary designations.
The Will controls your “probate assets”. If you own assets in your individual name over $50,000 as of date of death, a probate administration overseen by the Court is required to “unfreeze” and distribute those assets. The probate process can be time consuming and expensive, and your Estate will be liable for associated expenses.
Methods of avoiding probate include updating the titling of assets. For example: a married couple can own a home jointly and upon the first death, the home passes directly to the surviving spouse outside of probate. The same holds true with a life insurance policy with a beneficiary designation.
Having a Will does not prevent probate, but controls probate. An example of a probate asset would be a cash account worth over $50K in your name only. Those funds will have to pass through a Court supervised probate administration in order for the Will to dictate who should get those funds. Without a Will in place, the laws of Wisconsin will dictate who gets those funds.
It is important to consult with an estate planning attorney to discuss the use of a Will, Trust, beneficiary designations, and titling to ensure the smoothest administration of your estate after you pass away.
· Misconception #2: A Trust is a fancy entity that only rich people need.
There are many different types of Trusts that can vary in complexity depending on the purpose of the Trust. A “simple” Revocable Trust is a commonly used method of avoiding the probate process and is relatively inexpensive and easy to put together with an experienced estate planning attorney.
· Misconception #3: I don’t need an estate plan, because I don’t have a lot of money or assets.
Similar to the first misconception, if you have any money or assets, you should consider an Estate Plan to avoid a probate administration. Probate documents are accessible to the public, and the court decides who will administer your Estate if you do not use your estate plan to nominate an Executor. Furthermore, the probate process can be expensive and can result in your assets passing in accordance with the laws of Wisconsin rather than in accordance with your wishes.
Additionally, an estate plan can be used for purposes other than just controlling where your assets go when you die. You can use an estate plan to nominate individuals to help you with financial and healthcare decisions during your life if you are ever unable to.
· Misconception #4: It is Expensive!
Setting up an estate plan does not need to be and frequently is not expensive. Putting together a basic Trust, such as a Revocable Living Trust, is relatively inexpensive and will prevent a probate administration and the associated fees later on. Spending the time and money now to set up or update your estate plan is a relatively inexpensive investment and an integral part of your financial plan, that will help protect you, your family, and your money. Different law firms charge different fees for your estate plan, so be sure to do your homework and make sure you are working with an estate planning attorney you trust and whose fees you are comfortable with.
4. How do Estate Plan Attorney’s work with a Financial Advisors?
If you are going to have an estate plan, it is critical that you work with a financial advisor as well. Both estate planning attorneys and financial advisors are experts in their own field and they can communicate together and save you the time and hassle of reviewing and updating your financials.
For instance, the financial advisor helps with action items such as updating beneficiaries and titling, as well as putting assets into Trusts. By working with a financial advisor, you can ensure consistent and accurate communication with the estate planning attorney. An estate planning attorney will stick to their expertise and not get involved in financial or investment advice. The same holds true with a Financial Advisor; they will not get involved in the drafting of the plan documents or providing legal advice.
My recommendation is to find a good financial advisor that works well with your estate planning attorney. This will make things much smoother, faster and cheaper in the long run.
5. How do you know if your estate plan is “bulletproof?”
If you have a good team in place, they will make sure you have a solid Estate Plan. By “team,” I mean having an estate planning attorney, a financial advisor, and a CPA. They will help make sure all the boxes are checked.
You will want to make sure you check in to see if you need to update your estate plan every 3-5 years, or if there is a major life change. Some examples are: new marriage, divorce, birth, death, kids in college, or your child is now over 18.
You should check on your current titling of assets like cars, boats, home, etc. It is very important to work closely with a financial advisor who will make sure beneficiaries are accurate on your documents and policies. They will also communicate with the estate planning attorney and CPA to ensure accuracy of legal and tax information. Having a team you trust and that works well together will ensure your estate plan is accurate, up to date, and “bulletproof”.
If you have any questions or would like to learn more about the Estate Planning process, please reach out to Attorney Julia Walsh at JWalsh@murphydesmond.com or 608-268-5563.
Julia T. Walsh focuses her legal practice on estate planning, probate and trust administration. Julia’s experience includes representing and guiding clients through Wisconsin Formal and Informal Probate Administration, Special Administration, Trust Administration, and Probate and Special Administration Hearings. Julia has handled preparation of financial powers of attorney, healthcare powers of attorney, and living wills. She has experience in transfer of property, fiduciary disputes, and a variety of probate matters.
Julia is an active community volunteer. In 2018, she received the Community Shares "Backyard Hero" award for her research and work with low-income and at-risk Wisconsin families. The award recognizes volunteers on the front lines of critical issues who make their community a better place to live.
In her spare time, Julia enjoys being outside, cooking, and playing or watching all sports, but particularly volleyball.