Your Estate Plan is Not a Slow Cooker (don’t set it and forget it)

One of the cardinal sins of estate planning is to “set and forget” your estate plan. Estate plans are not one size fits all, and should be reviewed and updated as circumstances change.

A common example is a married couple who implement an estate plan upon the birth of a child. They most likely appoint guardians for their minor child, and name close friends or family members (perhaps their parents or a sibling) as personal representative or trustee. Twenty years go by, and the couple fails to revisit their estate plan. Now, that child is no longer a minor, individuals named as personal representative or trustee may be deceased or no longer willing and able to serve, and our couple may no longer be married to each other! While Wisconsin law automatically revokes most dispositions of property and fiduciary designations in favor of a former spouse upon dissolution of marriage, it cannot create a completely new estate plan out of thin air.

Another example is an unmarried individual with no children who leaves his or her estate to a parent. If that unmarried individual later marries and has children, failure to update his or her preexisting estate plan and/or beneficiary designations may effectively disinherit said spouse and children. As with divorce, there are Wisconsin statutes intended to avoid this (presumably) unintentional result, but they are not a catch all and should not be relied upon to reform an out-of-date estate plan.

The moral of the story is that while you can “set it and forget it” with your Ronco® rotisserie oven or Crock-Pot® slow cooker, you should not do this with your estate plan. Creating an estate plan is only the beginning; your plan should be reviewed and updated periodically, especially after significant life events such as births, deaths, and divorces.

If you have any questions on this topic, please contact Lin Law LLC (920) 393-1190.

Yet Another Estate, Gift, and Generation Skipping Transfer Tax Senate Bill

In an earlier post, “Dueling Estate, Gift, and Generation Skipping Transfer Tax Senate Bills,” we discussed two different Senate bills concerning the federal estate, gift, and generation skipping transfer (GST) tax rates and exemption amounts.  On June 25, 2019, Senator Chris Van Hollen (D-Md) introduced yet another bill, the “Strengthen Social Security by Taxing Dynastic Wealth Act.”  This bill would simultaneously reduce the federal estate, gift, and GST lifetime exemption amounts while increasing the applicable federal estate, gift, and GST tax rates.

The bill would reduce the lifetime exemption amounts to a basic estate tax and GST tax exemption of $3.5 million (the exemption amount in effect in 2009) and a gift tax exemption amount of $1 million.  Notably, this would appear to “de-unify” the gift tax exemption from the estate and GST tax exemption amounts.  In addition, the bill would increase the maximum estate tax rate from 40% to 45%.  Finally, the bill would divert estate tax revenue to the Social Security Trust Fund in an attempt to bolster the program’s depleted reserves.  The projected revenue generated by the bill would cover approximately one-fifth (1/5) of Social Security’s estimated long-term funding gap.

Like the previous two bills, this one is unlikely to become law.  However, the number of bills introduced in the last year should remind us that the applicable exemption and exclusion amounts are always subject to change, and that it’s important to periodically review your estate plan with the current exemption amount in mind.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

Creating an Estate Plan for Your Digital Assets (and what they are in the first place)

In creating and implementing an estate plan, one category of assets is often neglected—digital assets. In addition to accumulating liquid assets and tangible personal property, we are increasingly accumulating more and more digital assets throughout our lifetimes. But what are digital assets? They can include:

  • Photographs and videos stored in an electronic format;
  • Playlists and digitally recorded music;
  • Social media accounts such as Twitter, Facebook, and Instagram;
  • Website domain names;
  • Other information and assets that are stored electronically, such as Bitcoin and other cryptocurrencies.

So, how do we plan for and protect our digital assets? First, create a list of any and all digital assets, including where to find them and how they are accessed. Second, make sure that this information is secure but accessible by your personal representative or trustee. Finally, ensure that your fiduciaries are authorized to access and use your digital assets by implementing an Authorization and Consent for Release of Electronic Information.

If you have any questions on this topic, please contact Attorney Emily E. Ames at or (920) 393-1190.

To pay or not to pay… to what state does my Trust pay taxes?

In a recent U.S. Supreme Court decision, North Carolina Department of Revenue v. Kimberly Rice Kaestner 1992 Family Trust (“Kaestner”), the Court held that a State may not tax the income earned by a trust based solely on the state of residence of the trust’s beneficiaries.

Kaestner concerned a trust established by Kimberly Rice Kaestner’s father, a New York resident, for the benefit of Kimberly and her three children, who were North Carolina residents during the tax years at issue.  North Carolina attempted to tax income earned by the trust for the 2005-2008 tax years based on a North Carolina law authorizing the State to tax any trust income “for the benefit of” a state resident.

However, the trust itself was subject to New York law, the trustee was a New York resident, and the trust’s assets were managed by a custodian in Massachusetts.  The fact that the trust’s beneficiaries were North Carolina residents was, therefore, the trust’s sole link to the state.  Finally, the language of the trust gave the trustee complete discretion over distributions of income and principal, and no income was distributed to Kimberly or her three children during the tax years in question.

The Court struck down the North Carolina statute, holding that it was an unconstitutional violation of the Due Process Clause of the Fourteenth Amendment.  The Due Process Clause limits the States’ authority to impose taxes to those that “bear a fiscal relation to protection, opportunities and benefits given by the state.”  In the context of a tax premised on the residency of a trust’s beneficiary, the beneficiary in question “must have a degree of possession, control, or enjoyment of the trust property or a right to receive that property.”  The Court held that, because Kimberly and her three children did not receive any income from the trust during the relevant tax years, nor did they have the right to demand any such distributions, the trust lacked the requisite minimum contacts with the state of North Carolina.

While the Court’s holding in Kaestner is undoubtedly a “win” for grantors, trustees and trust beneficiaries, the holding is very narrow and fact-specific, and therefore provides limited guidance with respect to other state income tax regimes.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

Medicaid Eligibility – What is a “divestment” and why should I care?

The Medicaid application process uses various terminology to refer to eligibility requirements.  For example, what is a divestment?  A “divestment” is defined as any transfer of income, non-exempt assets, or homestead property belonging to the Medicaid applicant and/or his or her spouse for less than fair market value.

Any divestment during the applicable look-back period triggers a period of Medicaid ineligibility, with certain limited exceptions.  The look-back period is 60 months and is measured from the date that the applicant is institutionalized and applies for certain Medicaid benefits.  The penalty period is equal to the value of the divestment, divided by the average daily nursing home private pay rate ($286.15 as of July 1, 2018).

As an example, Jane gifts her personal residence, with a fair market value of $50,000, to her son John in May 2018.  In May 2019, Jane is admitted to a nursing home and applies for Medicaid to cover the cost of her long-term care.  Because Jane transferred homestead property for less than fair market value during the 60 months prior to her admission to the nursing home, she will incur a penalty period of 174 days ($50,000 divided by $286.15 = 174.73 days, rounded down) during which she will be ineligible for Medicaid.

Certain transfers, such as the purchase of an annuity or a promissory note, are not considered a divestment if they meet certain requirements.

If you have any questions on this subject, please contact Attorney Emily E. Ames at or (920) 393-1190.

Medicaid Eligibility – How do I know which assets to count?

As referenced our previous post, Medicaid 101 – What is it and who is eligible?, Medicaid applicants can have no more than $2,000 in available, non-exempt assets, which raises two questions: when are assets available, and which assets are exempt?

An asset is “available” if: (1) the asset can be sold, transferred, or disposed of by or on behalf of the applicant; (2) the applicant is entitled to receive the proceeds from the sale of the asset; (3) the applicant can legally use the proceeds to provide for his or her support and maintenance; and (4) the asset can be made available in less than 30 days.

Exempt assets, which are not subject to the $2,000.00 asset limit, include:

  • the applicant’s personal residence (up to $750,000 in equity), if he or she has a subjective intent to return to the residence, or his or her minor or disabled child or dependent relative resides in the home;
  • one (1) automobile of unlimited value, if the applicant uses it to travel to his or her medical appointments;
  • whole life insurance with face value of up to $1,500;
  • irrevocable burial trust worth up to $4,500; and
  • personal property and furnishings of “reasonable value.”

If you have any questions on this subject, please contact Attorney Emily E. Ames at or (920) 393-1190.

Medicaid 101 – What is it and who is eligible?

Medicaid, also known as Medical Assistance (“MA”) or Title XIX, is a health insurance
program, jointly administered by the federal and state governments, for the benefit of certain elderly, blind, and disabled Wisconsin residents.

Because Medicaid is essentially a welfare program, eligibility is subject to strict income and asset limitations. Income limitations depend on whether the applicant is single or married, whether the applicant is “categorically needy” (is already eligible for Social Security Income), and whether the applicant is “medically needy” (resides in a nursing home where the cost of care exceeds his or her income).

The asset limitation, however, is the same for most Medicaid applicants: the applicant can have no more than $2,000 in available, non-exempt assets. Note, however, that if the applicant is married, his or her spouse is able to retain additional non-exempt assets. The topics of exempt vs. non-exempt assets, eligibility for married individuals, and other related issues will be covered in future blog posts.

If you have any questions on this subject, please contact Attorney Emily E. Ames at or (920) 393-1190.

Dueling Estate, Gift, and Generation Skipping Transfer Tax Senate Bills

Earlier this year, two very different bills relating to the federal estate, gift, and generation skipping transfer (GST) taxes were introduced in the United States Senate.

On January 17, 2019, Senator Tom Cotton (R-Ark.) introduced a bill that would reduce the federal estate, gift, and GST tax rates to a flat rate of 20%.  Under current law, these transfers are subject to a progressive tax rate that maxes out at 40% for transfers in excess of $1 million (subject to the federal lifetime exemption amount of $10 million, as adjusted for inflation).

Conversely, the “For the 99.8 Percent Act,” introduced by Senator Bernie Sanders (I-Vt.) on January 31, 2019, would reduce the federal estate, gift, and GST lifetime exemption amount to $3.5 million. The federal lifetime exemption amount is currently set at $10 million (adjusted for inflation to $11.4 million for 2019), and will decrease to $5 million when certain provisions of the Tax Cuts and Jobs Act of 2017 sunset on December 31, 2025.  In addition, the Act would raise the federal estate, gift, and GST tax rates to 45% for transfers of $3.5 million to $10 million, 50% for transfers of $10 million to $50 million, 55% on transfers of $50 million to $1 billion, and 77% on transfers in excess of $1 billion.

Although neither of these bills is likely to make it through both houses of Congress to become law, it is always worth keeping an eye on legislation that has the potential to impact your estate plan.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.


New year, new estate plan?

As we begin 2019, consider adding a review of your estate plan to your list of New Year’s resolutions. For most people, it is appropriate to review your estate plan every two to three years, or whenever a life-altering event occurs (e.g., marriage, divorce, a significant change in job or health, birth or adoption of a child).

In addition, the following are a few non-tax reasons to review your estate planning documents:

  • Children Need Powers of Attorney.  Any child of yours that has attained the age of 18 since you implemented your estate plan (especially those away at college) should have basic estate planning documents in place, especially financial and health care powers of attorney.
  • Outdated Estate Planning Documents.  Estate planning documents may have been prepared prior to a marriage or divorce or prior to the birth of your children. Individuals you have named as trustee, guardian, or power of attorney may no longer be appropriate under the present circumstances.
  • Specialized Planning / Asset Protection.  Each family has its own unique situation that may require specialized estate planning, such as a blended family situation, a desire to make sure the assets you leave to your beneficiaries are protected in asset protection trusts, or a beneficiary’s disability and the considerations it presents in leaving assets to that disabled beneficiary.

In connection with reviewing your estate plan, it is also important to review the beneficiaries named on your life insurance policies and retirement accounts, to ensure that they are coordinated with your existing estate plan documents. Beneficiary designations that are not consistent with your estate plan can result in distributions that are inconsistent with your desires or cause unintended tax consequences to your beneficiaries.

This year, consider reviewing your estate plan to ensure that it continues to meet your needs.

If you have any questions on this topic, please contact Attorney Evan Y. Lin or Attorney Emily E. Ames at (920) 393-1190.

Disclaimer: The information in this blog post is provided for general informational purposes only, and is not intended as legal advice from Lin Law LLC or the individual author.  Please consult an attorney licensed to practice law in your jurisdiction for information regarding your individual situation.