Estates + Trusts Law Minnesota and Wisconsin

Estate planning can seem like a daunting task, but when you work with an experienced estate planning lawyer, the process does not need to be overwhelming. We break the process down in to pieces, 1) design, 2) review, and 3) signing, and provide guidance at each step.  In our experience, clients leave the estate planning process with their minds at ease, knowing they have considered all of the available options and have a plan that meets their specific goals and objectives.

Clients come to an estate planning attorney for a wide range of reasons: a financial planner suggested it, they have minor children, they own or co-own a business, they are in a second marriage and want to protect children of the first marriage, they have a family member with special needs. The reasons are varied and differ with each client.

The process begins with an initial inquiry and ends with a completed estate plan. Below are the basic steps:

• The first step is your initial inquiry and interest in creating an estate plan
• Next, we’ll gather information about you and your family
• After that, we’ll review your goals for your estate plan and create a unique plan for you
• Once you decide on a plan of action, we’ll pull together the documents we need with your help
• Finally, we’ll bring you in to review and sign your documents
• If there are any remaining steps, such as funding a trust, we’ll help you complete that process as well

Your lawyer attorney will guide you through the estate planning process and explain which tools will enable you to meet your objectives.  At the end of the process, you will leave knowing that you have a plan that will carry out your goals and make things easier for your loved ones.

Estate taxes apply to clients who have property in excess of something referred to as an “exemption amount.”  The exemption amount is the amount of property that you can have without being subject to estate tax.  For estate planning purposes, it is important to pay attention to both the federal and state estate tax exemptions. 

While many clients are concerned about estate taxes, under current law most Americans do not have a federally taxable estate.   The estate tax exemption went up to $5 million dollars per person under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.  More recently, in 2017, it was doubled to $10 million by the Tax Cuts and Jobs Act.  After indexing the current exemption amount for inflation, a single person can die with up to $11.7 million dollars in 2021 without any federal estate tax.  The increased exemption under the Tax Cuts and Jobs act is set to expire on December 31, 2025, at which point the exemption will fall back to the previous exemption of $5 million, indexed for inflation. 

If one spouse does not use their entire exemption amount, the balance of their exemption is ‘portable’ to their surviving spouse when that spouse dies. So, for married couples, more than $23 million is protected from federal estate taxation with little or no planning done in advance.  

Many states, however, impose a separate estate tax that is often more widely applicable than the federal estate tax. The State of Minnesota has an estate tax exemption of $3 million, and the State of Wisconsin has no estate tax.  Because the state and federal estate tax systems are often out of sync, it is important to consider both State and federal taxes to ensure that you pay as little in estate tax as possible.  

In addition to estate taxes, good estate planning also considers other tax planning opportunities for you and for your beneficiaries, including income taxation and capital gains, gifting, the generation skipping transfer, charitable planning, and other tax strategies. 

When considering how to pass assets to a spouse or child, an important consideration is asset protection. Consider for a moment passing your estate to your children “outright.” An outright distribution is essentially handing a check to your child after your death. While state and federal law provide some protection for assets distributed outright, that protection is incomplete. 

With careful planning, property can be distributed to your children in a way that will provide them protection from creditors and predators.  This includes providing protection from divorce, bankruptcy, and liability. Asset protected distributions even protect the beneficiaries from themselves, taking away the beneficiaries ability to overspend. 

Asset protection can be temporary, or permanent. Some parents and grandparents want to protect beneficiaries until they reach predetermined ages, such as 25, 30, and 35. Others want to extend the protection for their entire life. We work with clients to provide the right balance of protection and flexibility for their individual situations. 

Every business is unique, and your succession plan needs to fit your goals. 

Developing a prosperous business is often a lifetime achievement.  Planning for the succession of that business ensures survival and growth of the business, preserves family harmony, minimizes taxes and facilitates retirement. At Lommen Abdo, you’ll find lawyers who will listen to your objectives and help you devise a plan that meets those objectives. 

Sometimes balancing the goals of the owners, family members, the buyers or transferees, and the business can be difficult.  A variety of options are available, including gifting, sales or exchanges, installment obligations or private annuities, and employee stock ownerships plans. 

Areas of focus: 

• Tax planning 
• Closely held businesses 
• Purchase and sale agreements 
• Retirement planning 
• Lifetime gifting 
• Estate planning 

We represent individual business owners, professionals, closely held business and small companies.  Our succession planning practitioners are backed by experienced business operations attorneys and litigators. In addition, Lommen Abdo’s appellate department regularly appears before the Minnesota and Wisconsin state and federal appellate courts, including the Seventh and Eighth Circuit Court of Appeals and specialty courts such as the tax court. 

There are many factors to consider, among them: 

• Should the business be given as a gift? 
• Should it be sold to one child, with provisions to provide for other children? 
• Should the business be transferred to a third party — for example, a co–owner, employee, or another individual or business? 
• What is fair to all members of the family? 
• Should the business be sold with proceeds divided by the family? 

Estate planning is the process of considering your personal, family, and financial needs and setting up a plan that meets your specific wishes if something happens to you or those you care about. While document drafting is important, our attorneys spend the time to listen and guide you in the estate planning process to make sure your plan is tailored to your situation.

Good estate planning is more than just a simple will. Estate planning also minimizes potential taxes and fees, reduces the need for court procedures, streamlines estate administration, and includes disability planning with insurance, powers of attorney, and healthcare directives.  On the financial side, a good estate plan coordinates what would happen with your home, your investments, your business, your life insurance, your employee benefits (such as a 401K plan), and other property upon your disability or death.

The personal side includes directions to carry out your wishes regarding health care matters,  so that if you ever are unable to give the directions yourself, someone you select would do that for you. They need to know in advance when you would want them to authorize heroic  measures. You also need to decide who will administer your estate (personal representative),  raise your children (guardian), and manage your assets (custodian/trustee).

Only an attorney who regularly practices in the fields of wills, trusts, probate and estate planning is able to provide you with comprehensive and sound legal advice as you put your estate plan into place. There are usually several options, driven by your unique needs. Attorneys are subject to regulation by state bar organizations, many of which have continuing education requirements and mandatory liability insurance in case the lawyer makes a mistake.

When you speak with an attorney, you can get answers to your questions — including how  much it would cost.

Often the expense incurred in retaining an attorney to prepare and help you put an estate plan  into place is worth hundreds of times what you and your family would pay with no planning or  poor planning. It would also avoid the financial and emotional nightmares that can occur with a  poorly drafted (or improper) plan, at a time when loved ones and friends are already stressed  and grieving.

The term estate consists of all the property a person owns or controls, whether in his or her sole name, held in a partnership, in a joint ownership arrangement, or through a trust, and all other monies that would be generated on the person`s death, such as through life insurance. It includes:

• real property and things attached to it (houses, buildings, barns, etc.)
• all personal property (including automobiles, boats, furniture, clothing, coins, jewelry, art, etc.)
• investments (including bank accounts, stocks and bonds, mutual funds, stock options, etc.)
• retirement accounts (Including 401k, IRA, Roth IRA, and 403b accounts)
• all businesses and business interests (sole proprietorships, partnerships, corporations, joint ventures, and the goodwill, inventory, tools and equipment, accounts receivable, and other business property, etc.)
• powers of appointment (the right to direct who gets someone else`s property)
• life insurance and annuity contracts, pension benefits, IRAs, 403(b)s, etc.
• all debts and obligations owed to you
• all claims you have against others, such as for the pain and suffering from an auto accident.

The only time that you can prepare and implement an estate plan is while you are alive and have legal capacity to enter into a contract. If you are unable to manage your own affairs, or if you suffer from some other disability which affects your legal capacity, your estate plan may be effectively challenged by those who assert that you lacked capacity at the time the documents were created, (i.e. you were subjected to fraud, coercion or undue influence during the creation and implementation of your plan).

The best time to start an estate plan is now, while you have the capacity to do so.

You should have an estate plan if:

• you are the parent of minor children
• you have property that you care about
• you care about your health care treatment.

An estate plan consists of one or more documents that set forth instructions. Some documents are used to control health care decisions, others control your property in the event of your incapacity, and still other documents will control the distribution or management of your property in the event of your death.

An estate plan uses several tools which can prevent the court from exercising jurisdiction over your affairs. A Living Will or Directive to Physicians is used to determine if artificial life support systems are to be used or withheld.

A Durable Power of Attorney for Health Care is used to provide authority to a person, in whom  you have the utmost trust and confidence, to make decisions regarding health care treatment  when you are unable to provide informed consent.

A Durable Power of Attorney for financial matters enables you to authorize a person to act in  your place and stead in the event of your incapacity; this attorney–in–fact can manage your  financial affairs without the need for intervention by the courts.

A Trust or Family Limited Partnership is used to hold property; the Trustees or Partners manage  the property held by either of these entities. They continue to manage the property even if you are incapacitated.

Thus, a properly prepared estate plan can avoid a Conservatorship (assets) or Guardianship (personal needs) proceeding over your estate. Compared to the cost, stress, and burden of a Conservatorship/Guardianship proceeding, which is conducted in court, an estate plan can be very attractive.

As you begin the process, caveat emptor (let the buyer beware). There is a lot of information out there; while some of it is very good, some is misleading at best. There are many over–the–counter guides to estate planning available at bookstores. Some are pretty decent, most are awful. If you are planning to do it yourself, be prepared to spend a fair amount of time on this project. Always beware of the one–size–fits–all strategy.

In addition to the documents mentioned above, your plan typically may include: 

• A Will, sometimes called a Last Will and Testament, to transfer property you hold in your name to the person(s) and/or organization(s) you want to have it. A Will also typically names someone you select to be your personal representative (or Executor) to carry out your instructions and names a guardian if you have minor children. It can also include a trust or trusts to be funded upon death. A Will only becomes effective upon your death, and after it is admitted to probate. 
• A revocable living trust can be used to hold legal title to and provide a mechanism to manage your property. You can select the person or persons you want — often even yourself — as the trustee(s) to carry out the instructions you want in the trust and name one or more successor trustees to take over if you cannot. Unlike a will, a living trust usually becomes effective immediately, continues in force during your lifetime even in the event of your incapacity, and continues after your death. area revocable living trust is revocable, which allows the person who creates the trust to make future changes, modifications and even to terminate it. Revocable living trusts also help you avoid or minimize the expenses, delays and publicity of probate. 
• A family business entity such as a limited partnership can be used to own and manage your property, in a similar manner to a trust, but allows additional tax planning techniques to be employed. Family business entities are typically used for those who have large estates and thus have a need for specialized estate planning in order to minimize federal and state estate/death/inheritance taxes as well as provide elements of asset protection and business/management succession.