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What is a Testamentary Trust?

by Mike Schulz, Associate Attorney

A trust is an agreement under which a trustee holds property for the benefit of a beneficiary. Trusts can differ greatly in how they are created, what terms govern their operations, and so on.  Trusts that are created through instructions left in your Will are known as testamentary trusts.  For those with young children, this type of trust is a low-cost way of ensuring that their needs will be met, and their inherited property is managed responsibly in the event that both parents die before the children turn 18.

Care for Children

As opposed to outright distribution of an inheritance to an adult beneficiary, in the event that both parents die and intend to leave property to their minor children, the property must be managed for them under some kind of fiduciary arrangement.  Consequently, it should not be assumed that an estate is too small to justify setting up a trust for minor children.

As is the case for all trusts, significant consideration should be given to the trustee appointment and powers. The same individual who might serve as the guardian of a minor’s estate can be selected as a trustee and would probably serve more easily and flexibly under a trust or as custodian of a testamentary custodianship.

There are several advantages to setting up a testamentary trust versus other arrangements for minor children.  Under a guardianship for example, minors receive property and the ability to manage the funds at the age of 18. Distribution at such an early age can be avoided by using a testamentary trust.  The trust can be structured in a way which defers termination until the child becomes 21 or 25, or even at such time as it appears to the trustee that the child has completed their education. Distribution of the remaining funds to all beneficiaries can (and often should) be deferred until youngest child has attained the required age or circumstances specified within the will.

Flexibility and Cost

Testamentary trusts are created through instructions provided within your will – which means it can be updated at any time based on the changes in circumstances. The executor of an estate – the person administering the will through probate – is instructed to create the trust if certain conditions that are met.

Additionally, because the trust isn’t formed until your death, the cost of creating the trust can be paid out of the estate – saving the upfront cost and efforts that go along with creating a different type of trust.

 

Russell Law Offices, S.C. can help you navigate this process efficiently and effectively. Call the office today to schedule your consultation with one of our Estate Planning attorneys.

Landlord/Tenant Checklist & Its Importance

by Alex Levy, Associate Attorney

The summer rental season has begun, prompting a post about a particular document that marks the beginning, and end, of many tenancies – the move-in/move-out checklist. The move-in/move-out checklist is a form that a tenant traditionally fills out to record the physical condition of the rented premises upon moving in, and that a landlord traditionally fills out to record the physical condition of the rented premises upon the tenant moving out. This form often receives attention in the context of the return of, or the withholding from, a tenant’s security deposit. Below are a few reasons why landlords and tenants may find this move-in/move-out checklist useful, as well as some considerations in filling out the form.

A landlord may utilize a move-out checklist to identify deficiencies at the premises following a tenant’s departure and calculate the extent that the tenant’s security deposit will be withheld, if any. A landlord may also use the move-out checklist as the procedural or documentary vehicle through which they restore the premises for the subsequent tenant – since the form illustrates the types of cleaning, repairs, and replacements that need to be made to return the unit to ‘move-in ready’ condition, it can just as readily serve as the checklist to turn the unit. A proactive landlord may also use the move-in checklist they receive from a new tenant as a way to identify, and remedy, potential deficiencies on the premises that the landlord may have failed to notice when they conducted the move-out checklist for the previous tenant.

A tenant who thoroughly fills out a move-in checklist upon taking possession of the premises, and who returns it promptly to their landlord, reduces the likelihood of encountering a misunderstanding with their landlord about the extent that the state of the property differed from move-in to move-out. This benefit manifests most relevantly in the form of a more likely return of the tenant’s security deposit. A new tenant also benefits from filling out a move-in checklist because the activity forces them to evaluate their newly rented premises in an amount of detail that they may not have otherwise done, which facilitates the immediate identification of any physical deficiencies. Such a tenant may then act quickly and request that their landlord make any remaining repairs that were identified on the move-in checklist, without drawing as much suspicion from the landlord about whether or not the damage preceded the new tenant’s occupation of the premises.

There are a few considerations that both a landlord and a tenant may want to take into account when filling out the move-in or move-out checklist, respectively. First, many appliances may not appear to lack functionality in plain view, so it is wise to test each of them to make sure that such items are in fact entirely operable. Second, certain deficiencies may warrant increased specificity – this may be achieved by describing the deficiency more articulately on the form or by taking pictures of the noted deficiency. Lastly, a reminder that communication is an important aspect of developing, maintaining, and ending a productive landlord-tenant relationship – mutual management of expectations may reduce the likelihood that potential disputes will flare up in the future.

Special Needs Trusts

By Laine Carver, Associate Attorney

All too often, people receiving public benefits like Medicaid or Supplemental Security Income (“SSI”) are disinherited from a relative’s estate. The fear is that an inheritance will disqualify the individual from those public benefits. However, the solution does not have to be to disinherit that individual. By creating a Special Needs Trust, the individual can likely receive the benefits of the inheritance while retaining their public benefits like Medicaid or SSI.

A trust is a legal creation in which a third-party—the trustee—has legal ownership of the trust assets for the benefit another person—the beneficiary. A Special Needs Trust is one created for the benefit of a person with a legally-recognized physical or mental disability and specific language that allows the beneficiary of the trust to retain public benefits like Medicaid and SSI. The trust assets can be used to pay for the beneficiary’s medical expenses, travel, entertainment, and other quality of life expenses. Furthermore, upon the death of the beneficiary, assets remaining in the Special Needs Trust can be paid to another party as determined by the language in the trust.

Self-Funded vs. Third-Party Funded Special Needs Trusts

A Special Needs Trusts may be funded in one of two ways. The first way is to fund the trust with the beneficiary’s own assets. This is a “self-funded” Special Needs Trust. The second way is to fund the trust with assets owned by a third party who wishes to pass those assets to the beneficiary. This is a “third-party funded” Special Needs Trust. Though largely similar, there is one very important difference between self-funded and third-party funded Special Needs Trusts: upon the death of the beneficiary, if the beneficiary received Medical Assistance under the state’s Medicaid plan, the amount of this assistance generally must be paid back to Medicaid under a self-funded trust. However, there is noMedicaid payback requirement when the Special Needs Trust is third-party funded. Therefore, it is extremely important to be certain that inheritances and gifts are made directly to an individual’s Special Needs Trust and not the individual, if at all possible.

Pooled Special Needs Trusts

Pooled Special Needs Trusts (PSNTs) are a common way for individuals to access the benefits of Special Needs Trusts at a lower cost. PSNTs are Special Needs Trusts managed by a non-profit organization that holds trust assets for the benefit of multiple individuals. Each beneficiary of a PSNT has their own sub-account within the trust itself. The benefits of PSNTs are plentiful. First, the pooling of trust assets reduces the administrative costs of managing the trust. For example, the cost of investing the trust assets is reduced since there are more assets to invest. Second, PSNTs are often managed by experts who specialize in Special Needs Trusts and public benefits like Medicaid and SSI. Finally, some PSNTs, like those managed by Wispact, provide grants to beneficiaries to pay for the attorney’s fees for establishing a sub-account within the trust.

First Step in Creating a Special Needs Trust

 If you think you or someone you know could benefit from a Special Needs Trust, please do not hesitate to contact Russell Law Offices, S.C. to set up a consultation to determine if a Special Needs Trust is right for you.

 

What is Estate Planning? 

by Michael Schulz, Associate Attorney

Did you know you have an estate?

Almost everyone does! Your estate includes the things that you own such as your home, car, personal belongings, bank accounts, life insurance and more. Upon the event of your death, an estate plan will help those who are taking care of your arrangements follow through with your wishes.

Create a Will or Trust

A Will provides the instructions for your estate and lists the beneficiaries of your assets. Within a Will, your assets are required to go through your state’s probate process. The court system sets the framework for the distribution of your assets based on your wishes. Typically, this process can take a few months to a couple years depending on the complexity of your estate. On the other hand, a Trust avoids the probate process while also listing the beneficiaries of your estate. Additionally, a Trust can remain valid long after your death, when managed by a Trustee, for future wishes of your assets such as taking care of a loved one or providing for future generations. Everyone’s needs for their estate will be different, so a personalized plan is the best option. Consult your attorney for advice as to which option is best for you and your estate needs.

Estate planning will organize your records, ensure your assets have accurate information and update your beneficiary designations. It is likely that only YOU know the information about your assets, where the information is and how to access it. The estate planning process is a great way to collect your information from inside of your head and put it in all one spot so there is no confusion for your loved one. Honest mistakes and outdated information can become a big problem for your beneficiaries and may end up under the supervision of the state. Inaction could leave you with no input as to where your assets and minor children go at the time of your passing.

Going through the estate planning process is very important, so do not delay! If you do not have an estate plan completed upon your death or incapacity, your estate follows the standard process and beneficiary flow chart that your state applies. While it is the standard, you may not like your assets to be managed in that manner. Thus, it is critical that you control the future of your estate with a complete and up-to-date estate plan.

All in all, an updated estate plan should give you peace of mind that your loved ones will be protected after your death. Call Russell Law Offices, S.C. to schedule your estate planning consultation today.

 

Russell Law Offices, S.C. has created a FREE downloadable Estate Planning Checklist to help prepare you for the Estate Planning Process. Click the button below to download now!

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With Higher Interest Rates a Land Contract Might be Right for Your Real Estate Sale

by Nathan Russell, Managing Attorney and Owner

By now we are all feeling the pain of inflation.  Whether it is at the gas pump, grocery store, or purchasing home improvement supplies, it hits us everywhere.  The rapid growth of inflation has caused for the Federal Reserve to hike up interest rates.  Higher interest rates are bad for new home loans, credit cards, and business borrowing.  However, the higher rates are good for individuals with money or assets to invest.  A land contract is a beneficial tool for both buyers and sellers of real estate especially in a high interest rate environment.

Specifically, a land contract is a transfer of real estate that is considered seller financing.  It is similar to a mortgage, but instead of having a bank or credit union lend money to the purchaser, the buyer, referred to as a Vendee in the document, makes payments to the seller, referred to as a Vendor in the document,  until the contract is satisfied.  Often in these arrangements, the seller wins due to a steady stream of income at a higher rate than they could get at a financial institution and potentially limits capital gains due to taking payments over time.*  The buyer wins as well as they often get a lower interest rate than they would at a financial institution and they are able to purchase real estate in situations where they not able to get a traditional financing.

Keys for Seller

Keys for the Buyer

While not for everyone, a land contract presents an intriguing tool for real estate sellers to get solid investment returns, potentially save on taxes, and generally be in a very strong position in default.

Russell Law Offices, S.C. has experienced attorneys who can provide advice not only on land contracts but all types of real estate transactions.  Reach out to Attorney Nathan Russell and his associates for assistance with your real estate transaction throughout Wisconsin.

*Always consult with your tax professional before entering into a land contract.

Considerations when Selecting a Power of Attorney

by Nathan Russell, Owner & Managing Attorney

Selecting people who will represent you and your wishes is an important part of the estate planning process known as choosing your Powers of Attorney. Your Power of Attorney will act on your behalf if you are no longer able to do so. The two types of Power of Attorneys are Financial Power of Attorney and Medical Power of Attorney. Both can be lead and managed by the same person or by different people in your life.

Many people select their spouse, their children, a close relative, or friend, but you have the power to choose whoever you would like. Selecting a power of attorney is not necessarily who is closest to you but who can represent you and your wishes the best.

Characteristics to look for when selecting your Power of Attorneys:

  1. Someone who is trustworthy
    • Don’t forget, the people or person you select as your power of attorney will have access to your assets and have final decision-making authority when considering your medical decisions. Choosing a trustworthy power of attorney to carry out your wishes is of the upmost importance.
  2. Someone who understands their duties as your Power of Attorney
    • Serving as a Power of Attorney is a significant responsibility that should not be taken lightly. This person should be responsible, reliable, and able to fulfill the job duties for you.
  3. Someone who understands your wishes and your values
    • You should have conversations about your wants and wishes prior to making this person your Power of Attorney. Be very clear and specific about what your wants and needs are. This person should also be able to stay the course of your wishes, even when emotions are high and in the event of an emergency when decisions need to be made quickly.
  4. Someone who is articulate and can communicate your wishes to professionals
    • Your Financial Power of Attorney does not need to be a banker, just like your Medical Power of Attorney does not need to be a doctor. But they should be assertive, someone who knows how to ask the right questions and someone who is not afraid to challenge suggestions or options that may not reflect your wishes.

The attorneys at Russell Law Offices, S.C. are experienced in drafting these important documents for clients.  Please feel free to reach out to schedule a consultation with one of our estate planning attorneys.

Adult Adoption and Why It May Be Right For You

by Peter Konz, Associate Attorney

Yes, adult adoption is a real thing, and stranger yet it may be a good decision for you. Wisconsin law permits adult residents of the state to adopt other adults with the consent of the adoptee and the spouse of the adopter. The judicial order of adult adoption has the same legal consequences as an order of adoption of a minor. So then . . . why would you adopt another adult?

Two prominent reasons to adopt include (1) formalizing relationships, and (2) establishing inheritance rights.

Some people choose adult adoption to formalize what essentially is a parent-child relationship. Common examples include adult step-children or adult foster children wanting to enshrine their relationship with their adoptive parent in the law to reflect their bonds. Adopted children may later in adulthood want to reestablish their bond with their birthparents. Adoption legitimizes and reinforces the family’s sense of belonging amongst each other and the family’s status in the community. The adoptive act is not only symbolic, but it conveys all the rights, duties and other legal consequences of the natural relation of child and parent; often reflecting the rights and duties already felt by the parties.

People also choose adult adoptions for its impact on inheritance rights. Subject to certain exceptions, under the law of intestate succession, and governing instruments, e.g., wills, the adopted person will be treated as a birth child of the adoptive parent and the adoptive parent will be treated as the birth parent. The effect of this treatment may create inheritance rights extending beyond the adopter and adoptee. Moreover, adoption can act as a safe guard for the adopter’s or adoptee’s testamentary intent and competency.

Needless to say, adoption is a life altering act, altering legal relations between people, and should not be made without careful consideration. Additionally, there may be other reasons to explore adult adoption. If you believe adult adoption may be right for you, we at Russell Law Offices are here to help you navigate the process.

Will vs Trust: Which is right for you? 

by Michael Schulz, Associate Attorney

The differences between a Will and a Trust are simple, but the process of selecting the right pathway for you and your estate can be complex. Both are considered essential to a comprehensive estate plan but have major differences in how they function.

Table adapted from Legacy Assurance Plan, 2022

The key differences between a Will and a Trust that you should consider are:

Effective Date:

A Will is effective only after your death and does not have the authority to manage your property if you become incapacitated. A Trust can take effect during your lifetime as well as after your passing. A Trust can be used to manage and distribute your assets before death, immediately after death and into the future.

Probate and Privacy:

A Will requires validation through the court’s probate administration process. The state’s court must confirm your will and allow your executor to distribute assets per your Will’s instructions. This can be a long and sometimes costly process. In addition to drawing out the process of transitioning your assets to your beneficiaries, all Wills are subject to becoming public record, which means anyone is about to see the details of your Will. If you wish to keep your estate private, a trust could be a good solution as it does not become subject to public record.

Complexity and Cost:

A Trust typically requires more paperwork and, therefore, can initially be more costly than a Will to establish. But, avoiding probate costs that a Will is guaranteed to incur, a Trust may be a worth-while investment. On the other hand, because of the cost and complexity of a Trust, it may not be updated regularly.

Contestability:

Both Wills and Trusts are legal documents but are created under different laws. Trusts, which fall under Contract Law, are held to a stricter standard than Wills, which fall into Testamentary Law. Typically, because of this a Trust will trump a Will.

Choosing between a Will, a Trust or a combination of both can be a headache. Let Russell Law Offices, S.C. help you choose the right pathway for you and your estate. Call to schedule a consultation today!

References available upon request.

 

Russell Law Offices, S.C. has created a FREE downloadable Estate Planning Checklist to help prepare you for the Estate Planning Process. Click the button below to download now!

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