In order to help our clients understand a few of the terms that we will use, we thought it would be helpful to prepare a glossary of commonly used terms in Wisconsin estate planning. We have made this list Wisconsin and Kenosha centric and have included terms that are often used in Kenosha and Wisconsin by estate planning attorneys and courts.
Some of the estate planning definitions that are often used in the Wisconsin estate planning area are as follows:
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A process during which the deceased persons assets pay debts, claims and funeral expenses and the remaining estate funds are then distributed according to the wishes of the deceased person set forth in the Will or Trust. The Administrator is in charge of the process and must follow what is set forth in the Will or Trust. If there is no Will or Trust, the distributions and payments are made according to the law of the applicable state and is called intestate succession.
A person also referred to as an “agent” that is appointed by a Power of Attorney document to handle financial affairs for another person while that person is alive.
A person who will receive something, possibly cash or real estate or personal property, through a Will or trust or income from a Will or Trust. A beneficiary can be a Specific Bequest beneficiary or a Residual beneficiary.
A properly prepared and properly executed document that revises a Will without a complete rewriting of that Will.
- Community Property
Ownership of property in “community property” states under which married persons property and income may be considered owned by both spouses in certain circumstances, such as property acquired during the marriage. This is relevant to Wisconsin Estate Planning, as Wisconsin is a Marital Property state which is a form of Community Property. Also see Marital Property and Marital Property Agreement.
A person who has died. In the Wisconsin probate and estate planning context, it usually refers to the person who created the Will or Trust after he or she has died.
- Declaration to Physicians
See Living Will.
A persons children, grandchildren, or great-grandchildren who are related by blood or because of legal adoption. The term issue is also used to describe descendants.
- Durable Power of Attorney
A Financial Power of Attorney that does not terminate if the person making the power of attorney becomes incapacitated.
- Elder Law
A term used to distinguish an area of law that addresses the needs of aging, including dealing with Federal and State laws that apply to the rights and privileges of the elderly and encompasses areas of law such as Estate Planning, Irrevocable Trusts, Revocable Trusts, Wills, Will Contests, Durable Power of Attorneys, Power of Attorney for Health Care, Advance Medical Health Care Directives, Funeral Directives, Special Needs Trusts, Probate, Avoiding Probate, Disability Planning, Nursing Home Planning, Guardianships, and Protecting Assets from Nursing Homes. (Further reading: What is Elder Law?)
- Estate Planning
Planning in advance of disability, incapacity, or death to make sure that key life issues have been addressed while the person is still of sound mind and able to understand and sign key documents such as Power of Attorneys, Power of Attorneys for Health Care, Wills, and Trusts to form a strategy and provide for the administration and disposition of his or her assets upon death or upon incapacity.
- Estate Tax
The Federal tax that is imposed on transfer of assets at death, especially to non-spouses. The current Federal Estate Tax, simply speaking, is for assets in excess of 5.34 million dollars for the year 2014. There is not currently an estate tax in Wisconsin, but approximately 20 other states still have some form of estate tax.
For Wisconsin see Personal Representative.
- Family Trust or B Trust
Generally a trust that is set up to benefit a spouse or other family members and is usually part of a “credit shelter trust” (CST) trust created in a Will or in a Revocable Trust.
A person or company that manages money for a person or beneficiary, such as an agent or attorney-in-fact under a Durable Power of Attorney, a Trustee under a Trust, or a Personal Representative under a Will. A fiduciary normally has an obligation to act in good faith and in the best interest of the person who they represent and are governed by laws and a standard of care and should act in a prudent manner. In Wisconsin this term is most often used to refer to a Personal Representative or a Trustee.
- Financial Power of Attorney
A document that authorizes an agent, also referred to as an attorney-in-fact, to conduct financial matters on one’s behalf. A power of attorney ceases to be valid upon the incapacity of a person unless it is a Durable Power of Attorney. A power of attorney terminates at the death of the person who created it.
- Gift Tax
A tax on gifts that are completed from one person to another. Wisconsin does not have a gift tax, but there is a federal gift tax. We often can gift in excess of the “annual exclusion” amount that is currently $14,000.00 per donee per year without incurring any gift tax or reporting requirements. The gift tax is often misunderstood and should be discussed if undertaking any significant gifting. The gift tax lifetime “exclusion” amount is $5.34 million for 2014.
A person or company appointed by a court, after a court hearing, to make decisions and represent a person who is incompetent. The guardian of the person makes person decisions for the incompetent person such as living arrangements and health care needs. The guardian of the estate makes financial decisions for the incompetent person. A properly drafted and executed Durable Power of Attorney along with a Power of Attorney for Health Care can normally avoid the need for a guardian, if these documents are created and signed prior to the individual becoming incompetent.
- Health Care Agent
The person named in a Power of Attorney for Health Care who is in charge of health care decision making if and when the person creating the document becomes incapacitated and can no longer make his or her own decisions. Normally there will also be successor agents named as well. Also see Power of Attorney for Health Care.
The person(s) who would receive a decedent’s assets at death under state law if there is not a valid Will or Trust.
- Inheritance Tax
Wisconsin no longer has an “inheritance” tax.
A person who dies without a valid Will so that the decedent’s assets are distributed according the state laws that are referred to as “intestacy laws.”
A document filed during probate administration and sometimes during trust administration setting forth the assets owned at the decedent’s death and the value of those assets. In a probate administration case, the Inventory is filed with the court and is a public document.
- Irrevocable Life Insurance Trust
A trust set up to hold life insurance that is irrevocable and considered separate from the person creating the trust and is used to exclude life insurance from the taxable gross estate at death. It is often referred to as an ILIT.
- Irrevocable Trust
A trust that cannot be terminated, revoked or amended by the creating person. In Wisconsin and in estate planning an irrevocable trust can refer to a trust that is set up to protect assets from a nursing home and Medical Assistance if prepared and funded well in advance. See Using Trusts to Protect Assets from Nursing Homes
A person’s children and/or lineal descendants such a grandchildren and great-grandchildren. It refers to a direct blood line in Wisconsin along with legally adopted persons. In Wisconsin the term “issue by right of representation” is commonly used to indicate that a share of beneficiary, if predeceased, shall be distributed to his or her children or lineal descendants. Although slightly different this is often also referred to as Per Stirpes distribution.
- Joint Tenancy
Ownership of an asset titled in the names of one or more persons and may have the feature of right of survivorship to the surviving owner.
- Last Will and Testament
- Living Trust
A trust created by a person during life and includes Irrevocable Trusts and Revocable Trusts. A living trust is generally not a trust that is part of a Will, as that is called a testamentary trust.
- Living Will
In Wisconsin this is referred to as a Declaration to Physicians and is used to provide very limit directions to a doctor with respect to certain health care matters if the creator of the document is incapacitated. This is not a replacement for a Power of Attorney for Health Care as this form is too limited in scope and will not avoid the need for a guardianship in Wisconsin. A living Will is not a Trust and is not a Last Will and Testament.
- Marital Property
A law for married persons with respect to ownership and rights in and to assets, property, and income during life and upon death of a married couple. Marital Property law is unique to the State of Wisconsin, but is a form of and based upon many principals contained in Community Property law.
- Marital Property Agreement
A document created by married persons in advance of marriage (prenuptial agreement) or following marriage (post-nuptial agreement) to agree with or alter the pre-set Wisconsin Marital Property laws. A Marital Property agreement can also be used to direct that property, upon death of one or both spouses, shall be distributed to a trust or person to avoid probate. In Wisconsin, a Marital Property Agreement can be used to help fund a Revocable Trust at the death of a spouse of both spouses to avoid probate and can be referred to as a Non-Probate Marital Property Agreement.
- No-Contest Clause
A clause in a Will or Trust that creates a penalty for anyone who sues to attempts to obtain more from the probate estate or trust estate then provided for in the Will or Trust. A common no-contest clause will revoke an inheritance in whole or in part if that beneficiary of the Will or Trust challenges the Will or Trust or attempts to obtain more than stated in the Will or Trust. No contest clauses are generally not favored, in many circumstances, by courts and are not permissible in all states. However, No-Contest Clauses are legal in Wisconsin with many legal
- Per Stirpes Distribution
Refers to each branch of a family receiving an equal share of an estate. When a beneficiary predeceases the decedent, the share that would have gone to that beneficiary is given to the heirs issue in equal shares at each surviving generation. Also see Issue.
- Personal Representative
A term used in Wisconsin to describe the person appointed by a probate court to be in charge of the probate administration process of a deceased person. This is often referred to in other states as an Executor or Administrator. The Personal Representative may be set forth and nominated in a decedent’s Will before death along with successor Personal Representatives.
- Pour Over Will
This is a type of Will used with trusts to pass assets and property, upon death, through the probate process to a trust. A Revocable Trust plan should make use of a pour over will as a safety net to make sure that assets are transferred to the trust as intended if for some unanticipated or anticipated reason a probate is necessary.
- Power of Attorney Financial
- Power of Attorney for Health Care
A document that authorizes a person, called an agent, to make health care decisions in the event that the person creating the document becomes incapacitated and can no longer make his or her health care decisions. A power of attorney for health care should also set-forth desires on the use or non-use of artificial equipment and feeding tubes in the event that the creator becomes incapacitated.
The court process proving the validity of a Will and conducting the orderly Inventory, Accounting, and Administration of a decedent’s assets under a Will or under Intestacy laws if there is no Will. The probate process in Wisconsin typically takes between six to twelve months in Wisconsin and can take longer in some cases. Probate can be avoided by proper Estate Planning and through the use of beneficiary designations, Transfer on Death Deeds, Marital Property Agreements and Trusts.
- Residual Beneficiary
The person or persons or organizations that receive the assets of the probate estate or trust estate after all bills, funeral expenses, taxes and specific bequests have been paid out or distributed.
The property left after all bills, funeral expenses, taxes and specific bequests have been paid out or distributed from the probate estate or trust estate. The “residue” is then distributed to the “residual beneficiaries.”
- Revocable Trust
A trust created during lifetime that can be terminated, amended, or modified by the person creating it. A Revocable Trust is often used in Wisconsin to avoid probate and provide for the orderly and proper distribution of assets upon death of its creator and to provide for management of assets and property if the creator of the trust becomes incapacitated.
The person or persons who create a trust. This person is often also called a Grantor.
- Special Needs Trust
A trust that is set up to provide for “extras” that will not be provided for by government or other programs for a mentally or physically disabled person. This type of trust is for the “special needs” of the disabled person beyond the persons basic care needs of food and shelter. In Wisconsin a Special Needs Trust can be set up as part of a Revocable Trust or in a Will during the estate planning process. A special needs trust can also be established by certain eligible individuals or if necessary by a court at the court’s discretion. If any of your beneficiaries are disabled, it is important to let the attorney know during the estate planning process.
- Spendthrift Provision
A provision in a trust, often in a Revocable or Irrevocable Trust, that helps protect the assets held in trust for a beneficiary from the beneficiary’s creditor.
- Tangible Personal Property
Personal property that is physical in nature and generally capable of being touched, such as jewelry, household items, furniture, automobiles, tools and equipment, guns and sporting goods. It is not “intangible personal property” such as cash, stock certificates, bonds, insurance policies, patents. Tangible personal property is also not real estate (referred to as real property) or things generally unique to real estate or attached to real estate in a permanent fashion.
- Tenancy in Common
A form of co-ownership of an asset such as real property where each co-owner has an undivided interest in the property, but each owners interest maybe transferred at death without approval of the other co-owner in the absence of a written co-tenancy agreement that states otherwise. Unlike property held in Joint Tenancy or as Joint Tenants, normally an owner’s Tenancy in Common ownership share does not pass to the other co-owners at death. Therefore Tenancy in Common property typically does not pass by law to the other co-owner(s) and the owner can pass his or her share to his or her issue or beneficiaries as desired.
- Testamentary Trust
A trust set forth in a Will that comes into operation at death through probate.
The person who creates and signs a Will.
- Transfer of Death
A designation used on certain financial accounts such as bank accounts that names a beneficiary or beneficiaries who receive the assets in the account at death of the account owner. This is often referred to as a TOD designation or as Payable on Death (POD) designation at many Wisconsin banks.
The arrangement creating the legal ownership of assets by a trustee for the benefit of the Settlor and/or other beneficiaries.
The person or company named in a trust to manage property and assets of a trust. Usually a trust will name an initial trustee or co-trustees and successor trustees. A trustee has the duty to act in the best interest of the person for whom they are managing the funds and is considered a Fiduciary. Most people that set up Revocable Trusts to avoid probate, name themselves as Trustee and also name successor trustees to take over upon death or upon incapacity.
A written document that sets forth and names the personal representative who will be in charge of overseeing the probate process and names the specific bequest and residual beneficiaries of property who are to receive and inherit assets and property through probate. A Will does not avoid probate, and must be properly drafted and executed to be legal. A Will can also avoid the use of a surety bond in many instances and can help utilize an “informal” Wisconsin probate process if it has the proper clauses and attestation clause.