10/31/2016
ESTATE PLANNING: It is more than just writing a will.
by Jeffrey M. Mayer, Esq.
Why do I even need a will? Why can’t I write my own will? Why do I need an attorney to put my will together? Let’s address each of these questions separately.
Why do I even need a will? People do wills to control where their stuff goes, and with all bluntness intended, you will be dead . . . “so it goes.” However, if you do not have anything of any value, you do not care where your worthless stuff goes after you die, and you do not have anyone to give your worthless stuff to, you shouldn’t bother with a will. Let the worthless stuff you leave behind be somebody else’s problem.
However, if you have at least a little bit to give away, you have even the most minor of control issues, and you have someone that you would like to give your stuff to, there are reasons to do a will:
1. Having a will saves money. Without a will, there is nobody identified to be your executor or personal representative (“PR)”. Who you name in your will to be the PR will be honored by the probate system. Without a will identifying a PR, somebody would need to consult with somebody like me, an attorney, about what needs to be done to be appointed as the PR. That person would likely even need to hire an attorney to get them appointed as the PR. Of course, all this would cost money, more money than it would cost to just do a simple will.
2. Having a will ensures that your stuff will go to the people you want to get it, maybe. The stuff in your probate estate still needs to pay your creditors that timely file claims. However, contrary to popular belief, if you die without a will and somebody steps up to be the personal representative, your stuff may still go to who you would have likely chosen had you done a will. By law, what remains after your creditors are payed, goes to your spouse, and if your spouse predeceases you or you have no spouse, your stuff goes to your children, and so on and so on. It is all set out by statute. It is when nobody cares enough to step up to be the PR or your stuff is worthless, the two of which often goes hand in hand, that your stuff goes to the state and is added to the school fund.
Of course, if you have minor children, you should do a will to identify the person(s) you want to raise your children in the event of your untimely death . . . so it goes. I wrote in an advertisement once that every family has an “Aunt Sally” who, for many reasons, you do not want to raise your children. I was surprise how many people told me about their “Aunt Sally”. So, if the other parent of your children is also deceased at the time of your untimely death, you need a will to ensure that “Aunt Sally” does not raise you children.
Why can’t I write my own will? You can. If an attorney tells you that you can’t write your own will, my recommendation is that you find another attorney. You certainly should look for another attorney if he or she says something like: “Holographic wills are not recognized in the State of Wisconsin”. A hand written document, (1) if written and signed by a competent person, (2) if witnessed by two legally acceptable witnesses, and (3) if the document gives something to someone after the person dies, will be recognized as a will in the State of Wisconsin.
Why do I need an attorney to put my will together? What you need is an attorney to put your estate plan together, and a will is a part of your estate plan. Even though estate planning will cost you money now, a good estate plan will save your estate money. Let me explain.
An estate planner should have an eye toward probate. There are a variety of forms that probate can take. The easiest and least expensive process is called “transfer by affidavit”.
“Transfer by affidavit” really isn’t probate at all. If your assets “subject to probate administration” have a value of less than $50,000, you can do probate via “transfer by affidavit”. This will save your probate a bunch of money.
Your PR starts the process by filing the will with the register in probate along with a letter advising him or her not to open a probate file because the probate assets “subject to probate administration” have a value of less than $50,000 and things are going to be handled via “transfer by affidavit”.
So, when doing your estate plan, the question becomes: “How do you get your assets “subject to probate administration” to have a value of less than $50,000.” Getting you assets that will be “subject to probate administration” to have a value of less than $50,000 may be easier than you think.
People understand and often want to do trusts because trusts do not go through probate. This is true, but trusts can be costly. There are, however, many other tools available to prevent your assets from going through probate – that is, to prevent your assets from being “subject to probate administration”. By using these tools, most people can quite painlessly get their assets “subject to probate administration” to be below $50,000. The following is a small sampling of what can be done:
• For the gross majority of people, the home is the one asset that prevents their assets from being below the $50,000 cap. To remove the house from probate, if you are married, the house should be titled in both spouses’ names, such as “John Smith and Mary Smith, as husband and wife with the right of survivorship.” Right of survivorship property passes ownership outside of probate. As such, assuming that you and your spouse are not killed simultaneously, the house would pass to the surviving spouse outside of probate and the house would not be “subject to probate administration”.
• Real estate can also be made to pass outside of probate by completing and filing a Transfer on Death (TOD) document. A TOD is available to transfer an interest in real property notwithstanding how the property is titled.
• After the home is taken out of the picture, the remaining property “subject to probate administration” is the personal property, i.e. furniture, cars, etc. For most, the value of the personal property does not reach the $50,000 cap. However, if the personal property does reach the $50,000 cap, there are also ways to reduce the personal property subject to probate. The following are a few examples of how this can be done:
a. A title to a car, boat or RV can be changed, for example, to “John Smith or Mary Smith”, which effectively changes the vehicle to right of survivorship property.
b. If you are married, a marital property agreement can be used to have a deceased’s spouse’s interest in the personal property transfer to the surviving spouse. In other words, you can use a marital property agreement to make personal property “right of survivorship” property to remove the personal property from being subject to probate administration”.
c. Payable on Death (POD) bank accounts also pass outside of probate.
For most people, a probate estate “subject to probate administration” can be reduced to less than $50,000 with some creative and painless estate planning. If properly done, probate can be avoided and handled through a process called “transfer by affidavit”. The process is both easy and cheap.
No matter what procedure is used, reducing what is “subject to probate administration” saves money by reducing the filing fee. The probate filing fee is .2% of the stuff that is “subject to probate administration.” The lesser the value of the stuff “subject to probate administration” the lesser the filing fee. So, if a probate estate is valued at $500,000, the filing fee is $1,000. Getting a probate estate to be is valued at less than $50,000 and handing the estate via “transfer by affidavit” reduces the filing fee to $20 if the assets subject to probate are valued at less than $10,000, or if the value of the assets subject to probate exceeds $10,000, the filing fee returns to .2% of the assets that are subject to probate administration. As you can see, reducing the assets that are “subject to probate administration” reduces the filing fee no matter what probate procedure is used.
Estate planning simply makes “cents” – actually, dollars and cents. Estate planning will save you money even though you will be dead . . . “so it goes.”
FOOTNOTES:
1 To begin, note that this article is not going to be filled with a bunch of legalese. I am a licensed attorney that grew up “north of Hwy 8”. I avoid legalese like the plague, and if you are fond of attorneys that use fancy words, you will need to go elsewhere. Also, note that this articles audience is intended to be most people. There is an over $5,000,000 (over $10,000,000 if you are married) inheritance tax “credit”. Most people do not need to be concerned about paying an inheritance tax. Of course, if you have over $5,000,000 in assets, I would be more than willing to help you with your estate planning, too.
2 “[S]o it goes” is from Kurt Vonnegut’s Slaughterhouse-Five. If you have not read it, I highly recommend that you do.
3 “Intestate” is the legal word used to mean you died without a will, but I promised to stay away from legalese.
4 “Holographic” simply means hand written.
5 Contracts that identify beneficiaries, such as life insurance policies and IRAs, pass outside of probate. You do not need to do anything other than to confirm that the beneficiaries are who you want them to be.
