March 2014 Update on the New Wisconsin Budget Bill

March 20, 2014

At Wokwicz Law Offices, we have been monitoring developments and the legal ramifications for the implementation of the latest Wisconsin Budget Bill. In this, our newest and most recent update, we have a number of key points to highlight to help our client protect their assets through well-formed estate plans.

As we previously note, the implementation of the Wisconsin Budget Bill is coming into play in piecemeal. Some of the provisions are in full force while yet other provisions have been repealed. Still further provisions have yet to be fully implemented. In short, we have detailed below where we stand on some of the primary long-term care and estate planningPlanning 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. changes adopted in 2013 by the Wisconsin Budget Bill.

We appreciate that this post leans towards the deep end of the legalese pool. If you have any questions about any of the topics below, please do not hesitate to call our estate planning and trust attorneys.

Irrevocable Trusts

Due to extensive lobbying and discussions, combined with possible conflicts with federal law, Act 92 restored the effective use of Irrevocable Trusts in Wisconsin as an Estate PlanningPlanning 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. and Asset Protection Option. Act 92 allows a properly drafted Irrevocable TrustA 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 to protect assets from a nursing home and Medical Assistance. Therefore, it is very important to plan ahead when using an Irrevocable TrustA 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 and have a properly draft Irrevocable TrustA 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 in place and assets properly transferred to the trustThe arrangement creating the legal ownership of assets by a trustee for the benefit of the Settlor and/or other beneficiaries. well in advance of needing long term care.

First and Second Marriages and Marital Property Agreements

Unfortunately, challenges remain under the Wisconsin Budget Bill for married persons. This is especially true since the new law continues to place restrictions on the assets of the spouse living in the home or community (Community Spouse) for five years after the nursing home spouse becomes eligible for Medical Assistance (Medicaid).

As such, we suggest that married couples consider an “Opt-Out Marital Property AgreementA 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.”. In the event that either spouse requires long term care, we are advising our client to implement a properly executed Marital Property agreementA 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. that makes the assets of the Community Spouse the individual property of the Community Spouse.

Moreover, due to the new law, the Community Spouse should have a willA 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. with a special needs trustA 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. for the benefit of the spouse in the nursing home for the first five years of the nursing home spouse becoming eligible for Medical Assistance. After the spouse in a nursing home has been eligible for five years, it may be suggested that the estate plan bypass the institutionalized spouse in favor of the children or grandchildren. However, with the new laws, a Community Spouse should generally not bypass the nursing home spouse within the five-year period or risk “divestment by death.” If the community spouse gifts property or dies leaving property to anyone other than the institutionalized spouse within the five years period of the nursing home spouse becoming eligible for Medical Assistance, this transfer willA 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. affect the nursing home spouse’s ability to continue to receive benefits.

Therefore, proper estate planningPlanning 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. is important in spousal cases. Many also feel that in second marriage situations that legal separation and divorce may become options to consider in order to preserve assets for children and grandchildren.

Life Estates

Life Estates are still valid planning tools in some situations, as they possess the advantage of protecting a portion of a house, cabin, land or other real property. The Wisconsin Budget Bill has not been changed with respect to life estates and the State of Wisconsin still appears ready to attempt recovery from life estates for individuals who received Medical Assistance and pass away after July 1, 2014. The issueA 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. of value and the constitutional issues of “takings” willA 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. probably end up in court.

Additionally, it appears that as of now the State of Wisconsin may apply estate recovery even to life estates set up prior to the enactment of the Wisconsin Budget Bill. We are waiting for the final implementation language from the Wisconsin Department of Health Services with respect to some of these details.

Promissory Notes

The original Wisconsin Budget Bill provision that aimed to make it more difficult to use promissory notes as a planning tool has been repealed. Therefore, we anticipate that the use of promissory notes willA 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. continue, especially for those who have not planned ahead at least five years before requiring long-term care. Specifically, Act 92 repealed language regarding the “presumptive heirs” penalty which willA 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. allow promissory notes to be used in family estate planningPlanning 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. situations.

Care Agreements

Care Agreements, where a parent pays a family member for care willA 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. continue to be an important estate planningPlanning 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. tool going forward. With a properly drafted Care Agreement in place, a parent can pay a child or other family members for the care services provided with the payments being treated as payment for services rather than impermissible gifts. This can be a great option to try to keep a parent living at home as long as possible, but prevent a divestment issueA 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. if the parent ultimately ends up in a nursing home or assisted living situation.

We’re Here to Help You Understand

As always, we welcome the opportunity to speak with you about your estate planningPlanning 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. needs. We know that this new Wisconsin Budget Bill is proving very difficult to understand and follow. Please call our estate planningPlanning 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. attorneys today at (262) 658-2181.