The Grove Report

News Flash: Beneficiary designations are a Big Deal

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Grove Thoughts

Use Care: Beneficiary Designations Trump Your Will or Trust.

Always a good thing to meet with your investment adviser and have your insurance coverage and investments properly aligned to meet your needs.   However… Some times …  after all that planning … the act of filling out your beneficiary designation forms might seem like an afterthought.

As mundane as the beneficiary designation process may seem, it is important to keep in mind that the beneficiary designation form on file with the company will control ownership and distribution of the life insurance policy/individual retirement plan after you die: Not your will or your trust.

Example: If you have a life insurance policy for $100,000.00 and you name your son Mickey under the beneficiary form, Mickey gets the cash on your death. If you also named Minnie to receive your assets under your will, she sees none of that money.

Knowing that the designation trumps the Will or Trust, great care should be used when filling the beneficiary designation form out.

The Change Forms the Companies offer are not always understandable or helpful.

The insurance companies and IRA custodians have pre-printed beneficiary designation forms that they make you use. Keeps them out of hot water because they are a consistent element of their operations, which leads to fewer mistakes when the time comes to process them.   They are (for the most part) constructed to fit the company’s processing needs but can sometimes fall short when they are being used to meet your goals. This is because sometimes the company’s processing needs are not lined up with your wishes.

Ask yourself some questions when filling out these forms.

What happens if one of my beneficiaries dies before I do?

One of the biggest surprises for unwary clients is that so many of the forms default to the “survivorship rule”. These forms with the survivorship rule in them divide a predeceased beneficiary’s share equally among the surviving beneficiaries. This “survivor takes all” result works for some people, but not most people. For example, some folks would like to see a grandchild take a predeceased child’s share rather than leave the grandchild out by having the proceeds split only between the children lucky enough to survive them.

If the survivorship rule is not what I am looking for, what are some alternates available?

So now we enter into the world of Latin phrases. But … do not worry. These are not as hard to grasp as it might seem. There are two main phrases to remember: “by right of representation, per stirpes” and “by right of representation, per capita”. The term “per stirpes” means by root or branch, while the term “per capita” means by head.

Per stirpes: Per stirpes is the most popular of these two alternatives. Per stirpes boils down to meaning that the percentage planned for one beneficiary that predeceases goes to the deceased beneficiary’s heirs by blood: Often their children or grandchildren.

Example: If your son Mickey was entitled to 50%, but died before you did, his two surviving kids (your grandkids), Tammy and Timmy would each take 25 %. Your surviving daughter, Minnie is entitled to the other 50%.

Per capita:  Per capita is the rarest of these two alternatives. Per capita boils down to meaning that the percentage planned for one beneficiary that predeceases is ignored. Instead the deceased beneficiary’s heirs by blood: Often the decease beneficiary’s children, step up onto the same level as you children.

Example: Your son Mickey was entitled to 50%, but died before you did and your surviving daughter, Minnie was entitled to the other 50%. Mickey had the two kids Tammy and Timmy. Tammy and Timmy step up on the same level as Minnie. That means Minnie, Tammy and Timmy would each receive 33 1/3%.

What most people want is a per stirpes distribution at death vs. the survivorship rule or a Per capita distribution.

What happens if I run out of listed beneficiaries?

The answer here can be found on the form but also may be in the policy or contract itself. Some companies default to have the proceeds paid to your estate, while some set your spouse, children and/or parents as beneficiaries if you run out or fail to name any beneficiaries.  Definitely get this question answered.

What to do.

Be sure to read the default provisions in your beneficiary designation forms. You need to know what they say so that you can make any appropriate changes to them.  Customize your designation if you have to do so. In many cases, the beneficiary designation forms can be customized to meet your wishes by adding and addendum (attachment) to it spelling out your intended desires.

Know that is ok to seek help too. A qualified estate planner can help you spot issues and help you to modify the beneficiary designation form so that it aligns with your wishes.


Land Contracts in Wisconsin: What are they?

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What is a Land Contract

A land contract is a form of seller financing. It is a written agreement by which a seller, or “vendor,” promises to convey to the purchaser, or “vendee,” real estate upon the completion of certain obligations, typically on an making payments under an installment payment plan.  It allows the parties to negotiate a sale when conventional financing is not available to the buyer, or is not feasible.  Because it is a negotiable contract, the parties can benefit from better interest rates (and a better rate of return on investment), payment terms and minimal loan costs.  In addition, a seller can sometimes control the amount of capital gain from the sale, and even use the sale as a stream of income for the term of the land contract.

The land contract purchaser takes possession of the real estate and agrees to make installment payments of principal and interest, typically on a monthly basis, until the contract is paid in full or balloons. During the term of the contract, the purchaser has “equitable title” to the property.  The vendor has legal title to the property until the contract is paid in full, and then must convey the property by deed to the purchaser.

The land contract is recorded with the Register of Deeds, giving notice to all of the vendee’s interest in the real estate and the vendor’s obligation to convey the real estate upon full payment.  The transfer fee is due at the time the land contract is recorded, along with a transfer return.  When the buyer conveys the real estate by deed, no additional transfer fee is collected, although another return will need to be delivered.

Provisions found in a Land Contract

Careful review of the specific contract is always necessary.  The State Bar of Wisconsin has a standardized form of land contract known as “Form 11” which lays out a template for the agreement. The contract can be altered on many ways. It is entirely negotiable as there are no statutory requirements or restrictions like traditional mortgage loans.

In considering a land contract transaction, you will need to determine the following terms at a minimum: (i) purchase price; (ii) down payment, if any; (iii) interest rate; (iv) first payment (often upon execution of the land contract); (v) frequency of installments (typically monthly); (vi) amount of installment and amortization; (vii) maturity date; (viii) restrictions on prepayment; (ix) if either party can mortgage, sell or assign its interest in the land contract; (x) which party is responsible for real estate taxes and insurance during the term of the land contract; (xi) whether there are existing mortgages on the property and if lender consent is required; (xii) which party will pay for recording the contract and the transfer fee.

There are also provisions regarding events of default and period to cure the default; the use of and improvement to the property during the term of the land contract; and the obligation of seller to provide title information.

Default Remedies and Cancellation

If the purchaser / vendee fails to comply with the terms of the land contract, often by failing to make payments when due, the seller has a number of means to remedy the default.  He may commence a lawsuit for the balance, or each delinquent payment as it comes due in the case where there is no acceleration clause in the contract.  This is most akin to suing on a promissory note since the seller can get a money judgment and then enforce the judgment through typical collection efforts, such as garnishing wages or levying assets.

Alternatively, the seller may commence a lawsuit to terminate the land contract and extinguish the purchaser’s interest, similar to a quiet title action.  This approach makes sense where a purchaser has left the property, or “abandoned” it, and the seller simply needs title to be clear to pursue selling to another party, or take other measures.

The vendor may also sue for specific performance of the land contract, keeping the purchaser on the hook for the full sale price.  Again, this works similar to a mortgage foreclosure, where a deficiency judgment can be entered against the purchaser following the sheriff’s foreclosure sale.  Like the foreclosure of a mortgage, there is a period of redemption whereby the purchaser could save her investment and the vendor would have to deliver a deed to the property.  The unique aspect of the land contract foreclosure is that the period of redemption is not set by statute (other than to require a minimum of seven working days,) but is determined on a case-by-case determination by the circuit court.  In most cases the court sets a period that is less than the conventional mortgage redemption period of six or 12 months.

Most frequently, the seller uses the remedy of “strict foreclosure” to terminate the contract. In strict foreclosure, the seller decides to terminate the land contract, assume possession of the property and clear title.  In the lawsuit, he asks the court to set a period of redemption during which the balance of the purchase price must be paid, or, the contract will cancel and title to the real estate (including the equitable interest of buyer) reverts to the seller without any further adjudication or sale.  In exchange, the seller gives up the right to collect the balance of the purchase price or any deficiency judgment, but may still recover fees and expenses relating to the foreclosure.  If redemption expires and the purchase price has not been paid, the seller’s attorney files an affidavit to this effect and asks for an order from the court confirming the judgment.

Of course, the land contract will dictate which remedies are available to the seller; yet another reason to review the specific contract carefully before entering into it.

The Land Contract is a Really a Sale subject to Seller Financing

A common misconception among parties to land contracts is that the “sale” has not yet occurred at the time the land contract is signed and filed since the seller will not required to deliver the deed to the buyer until some point in the future. Actually, the sale of the property for real estate tax purposes occurs when the land contract is executed and possession is delivered to the buyer.

Under Wisconsin law, the seller has conveyed his ownership interest in the property and retains “bare legal title” as the seller’s security interest in the property. The purchaser becomes, for all practical purposes, the owner of the real estate.  The vendor retains legal title, but that title is really only held as security for payment.


Estate and Trust Planning:  Going Beyond Just the Numbers and into the Heart

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Estate planning professionals are taught early on that they need to be objective.  It is an essential element of the practice to be dispassionate when approaching the work. We are brought into the mix to assist our clients with minimizing the costs of probate and to help them find ways to reduce the impacts of various taxes and fees related to one’s death. We are often enamored with the latest trust techniques out there that can be employed to meet sophisticated gifting and distribution goals set for our clients.

Understanding the points above, I was reminded again last week that there is much more to the estate planning story than the mechanical muckity muck of law and taxation.  I was meeting with a client to discuss a revocable living trust in his planning. He had many perceptive questions about the use of a trust in his potential plan. After we counseled for some time, he was satisfied that the trust was the best option under his circumstances.  Once there, he leaned back in his chair and said simply: “I want to do this because I love my children and my grandchildren.” With that said, our path for his plan was decided.

It was fitting that the date of that meeting was right around Valentine’s Day. As with most estate plan meetings happening everywhere, I provided a list of trust planning pros and cons on a whiteboard. I’ve never added the word love to my list of pros. However, I think that love is a major factor in why folks plan in this way.

Put simply, the motivation for estate and trust planning goes beyond just the numbers and into the heart.


Social Media Warning: Consider the consequences before you type something mean about another person

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We received a call from a client who was on the wrong end of a social media barbecuing. The client wanted to know if we have laws to stop this kind of thing in Wisconsin.

Wisconsin has a few laws on the books to deal with those sweethearts who are dispensing aggressive and foolish social media comments to the detriment of others. Here are some examples:

Privacy Action:

A person harmed may seek equitable relief, recover compensatory damages and a reasonable amount for attorney’s fees. The threshold for filing a suit requires one of the following to occur:

• Intrusion upon the privacy of another of a nature highly offensive to a reasonable person, in a place that a reasonable person would consider private or in a manner which is actionable for trespass.
• The use, for advertising purposes or for purposes of trade, of the name, portrait or picture of any living person, without having first obtained the written consent of the person or, if the person is a minor, of his or her parent or guardian.
• Publicity given to a matter concerning the private life of another, of a kind highly offensive to a reasonable person, if the defendant has acted either unreasonably or recklessly as to whether there was a legitimate public interest in the matter involved, or with actual knowledge that none existed.

It is not a privacy violation to communicate any information that is already readily available to the public.

Criminal Law Statute Gives Rise to a Civil Claim:

Criminal defamation charges that can be made by the government against these people too. Conduct defaming someone else is prohibited under Wisconsin Statute section 942.01 et seq. This is not typically pursued by the authorities unless it reaches a level well beyond what most folks could tolerate. Knowing this, a civil claim can also be filed based on this same statute. It is available to a person harmed even if the District Attorney does not press charges, or if charges are pressed, unrelated to the outcome of the criminal case.

Common Law:

Wisconsin common law claims could also be applied to a person’s reckless use of the social media. Legal claims for defamation, libel or slander have been used. Generally, suits can be had if the person who:
• Makes a false statement communicated by speech, or conducted in writing to a person other than the one defamed, and
• the communication is unprivileged and tends to harm one’s reputation, lowering him or her in the estimation of the community or deterring third persons from associating with or dealing with him or her.

Case examples … See: Ladd v. Uecker, et. al, 2010 WI App 28 and Laughland v. Beckett, Appeal No. 2014AP2393

Recent Example:

As recent as 2015, the Wisconsin Appeals Court upheld a Facebook defamation judgment, and punitive damages award based on the defamation statute and under common law principles. See Laughland v. Beckett, Appeal No. 2014AP2393 in the Court of Appeals of Wisconsin, District I. In the case, John Beckett created a Facebook page in someone else’s name and posted disparaging and negative comments about Laughland. Laughland sued and won. Also see an excellent article in the Wisconsin Bar Site (WISBAR News) on this case authored by Joe Forward in August of 2015.

Conclusion:

A good friend said it is better to sleep on a social media response than to just let it fly based on the emotion of the moment. Point well taken. Consider the consequences before you type something mean. Cyber-bullying is not funny. It might feel good now to throw another person under the social media bus, but be careful. Your social media victim could have the last say in the matter.


Choosing an Attorney for Your Estate Planning

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A recent Caring.com article by Susan Kostal, Senior Editor of the Legal channel, tells us who to look for when searching for a Trust, Wills, and Estates Attorney.

The article is a great read for people wondering how to find a qualified Trust and Estates Attorney. Most of the advice in the article is good quality common sense stuff.

Ask Your Friends

According to the article: “If you’re unsure how to find the right lawyer, start by asking friends for recommendations. Who have they used — and liked? You can also ask other lawyers who they would use.”

Look the Attorney in the Eye

Attorney Philip Feldman, head of the trusts and estates practice at Coblentz Patch Duffy & Bass in San Francisco is quoted in the article.  Feldman states that “Clients need to get a sense of who their lawyer is going to be. It’s important to look someone in the eye. This should be one of the most personal professional relationships you’ll have.”

Cost Expectations

Even more excellent advice from Ms. Kostal regarding fees:  “An average flat fee for a basic revocable trust plan may run from $2,500 to $10,000, depending on the complexity of the trust and the size of the estate. Flat fees, however, aren’t necessarily a better deal than hourly rates. And the most expensive lawyer isn’t always the best.

Ask at the outset for the lawyer’s rate. It’s better to know upfront, so that neither of you wastes the other’s time if there’s a huge discrepancy between what an attorney charges and what you’re willing to pay. Generally, the more assets a person has, the more complicated his estate is likely to be, and the more it will cost to put together a thoughtful estate plan.”

We think the advice provided by the article is right on point and recommend that you take a few minutes to read it.

For more information on Trusts: Articles on Trusts and Estate Planning.

 


Moving our Office to 104 West Main Street, Evansville Wisconsin on April 30, 2018

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The Future Home of Shannon Law Office. 
104 West Main Street, Evansville Wisconsin, USA


Conservation Easement: A Beautiful Thing

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A conservation easement is an interest in real property. It is established by agreement between a landowner and a qualified private land conservation organization (often called a “land trust”) or a government organization (often the DNR). It is put in place to restrict the exercise of rights otherwise held by a landowner in order to achieve stated conservation purposes.

The most recent Conservation Easement project underway here at our office presents a great story. Our Clients are both nature buffs. They truly love the outdoors and they want to make a difference in society.

After thinking it through, they decided that the best way to accomplish that goal was by donating 75 acres to a local nonprofit Audubon society. They also made the land subject to a conservation easement to be held by a Madison area land trust.

The Property contains areas of prairie grassland and oak woods/oak savanna. The public will have access to the property for bird-watching, hiking and other educational and recreational activities.

The preservation of this slice of heaven for the scenic enjoyment by and the outdoor education of the public is very important to the Landowner. What a terrific thing for the people of Wisconsin and beyond.


News Flash: Few People Actually Plan for Death or Incapacity

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Estate Planning Note:

AARP shared an article that reminds us how few of our neighbors have done Estate Planning.

See: http://www.aarp.org/…/info-2017/half-of-adults-do-not-have-…

The failure to plan for your death or incapacity can be painful for the family members left behind. This really rings true if you have underage kids or an asset like a family farm or other type of business that needs to be thoughtfully passed on to the next generation. The family assets can sometimes be tied up for years with fees and cost racking up.

With this in mind, this just might be the year to finally get this particular project done.

Have a great day.


Why did you put Latin in my Will and Trust?

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The legal phrases: “by representation”, “per stirpes”, “per capita”, “per capita at each generation” and “survivorship” are found in both wills and trusts. While they may appear to be gibberish, the phrases have meaning in the probate and trust world.  They each provide for a distinct rule used to distribute assets after a person dies.

It is very easy to become confused when one comes across this kind of mumbo jumbo. The phrases are a far cry from plain English. They are definitely “old-school”.  The reason for using this old-school terminology is history. The phrases are based on old English law which was developed centuries ago and then handed down through the ages.

As one would suspect, each legal phrase produces a different result when used to determine the people receiving your assets when you die. “By representation”, “per stirpes” and “per capita” are there to help determine how assets flow to your descendants. “Survivorship” is a short stop/ everything to the one in a named group who survives the decedent. I like to call that the “king of the raft” approach. This was game I played in my youth where we tried to be the last one standing on a raft in the lake.

This  photo  shows three simplified examples that compare three commonly seen approaches (Per stirpes, Per Capita, and Survivorship):

The “per stirpes” model is by far the most popular choice for the clients in our practice. The families we deal with seem to like the branch approach to distribution, where a child’s share works its way down to survivors that are the heirs of that child if he or she dies before they do. “Per capita” is less popular, but can be used if the grandchildren are thought to be on par with the surviving children. The “survivorship” model is used most often with older clients who have already spent down a great deal of their assets and want to leave smaller amounts to the surviving children immediately below them rather than spread the minimal assets among an extensive family tree of heirs.

The State of Wisconsin has a statute that covers this topic too. Wisconsin Statue Section 854.04: “Representation; per stirpes; modified per stirpes; per capita at each generation; per capita”, does a nice job of explaining the differences as well. It goes as far as to delineate between a per stirpes and a modified per stirpes approach. It also equates the phrase “by representation” to “per stirpes”. Finally, it also lays out “Per capita at each generation” and “Per capita”. Section 854.04, in its final paragraph, says: If the transfer is made under a governing instrument (Will or trust, normally) and the person who executed the governing instrument had an intent contrary to any provision in this section, then that provision is not applicable to the transfer. In short, your will or trust can override the statute. This is often the way to go. A will or trust can be drafted to modify the general rule so that the distribution plan can be modified to fit your family’s unique circumstances.

Use care to consider what happens when the beneficiary dies before the person whose estate is being divided. Most folks want the children of the predeceased beneficiary to take the share which their parent would have taken had he or she survived the decedent. If the plan for distribution isn’t spelled out that way, the assets could be divided equally among the surviving heirs and the children of a deceased heir might not receive the deceased heir’s share.

Be sure to get solid advice on this and other important planning topics from a qualified expert. Do not hesitate to ask about the options available to you when you do sit down to plan your estate.  That way you can be sure that your hard-earned assets will go to your loved ones in the way that you intend.


Why Did My Neighbor Send Me a Bill for His Fence?

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By popular request–OK, by one person’s request–I’m going to write about how Wisconsin’s fence law can create unfriendly neighbors. As attorneys in a rural town, it’s an issue that rolls into our office every so often.

The fence law, currently found in Chapter 90 of our state statutes, says that a fence is required if the property on either side is used for farming or grazing unless the neighbors agree that one isn’t needed. So the person doing the farming or grazing pays for it, right? Not so fast my friend!

The law, which dates back to when Wisconsin was part of the Michigan Territory, states that the neighbors must split the cost to build and maintain any fence. As you might imagine, this can create quite a conflict between a farmer and his new subdivision neighbors when the farmer throws up a fence and sends half the bill to these suburbanites.

Those suburbanites often call our office to complain because surely this isn’t fair. But, despite some clamoring that the law should be repealed because it’s no longer practical, it’s still on the books and we have to give them the bad news (but at least get to congratulate them on their new half a fence!).