When people think of the phrase "estate planning," the first thing that comes to mind is a will. Not coincidently, a will is also one of the most important documents used in planning for your future. With a properly structured will, you can direct where your property will go after your death, provide guardians for your minor children, and even create trusts.
Q: What is a will?
A will is exactly what most people think it is - a document disposing of your property at death. A will nominates a person to serve as a "personal representative," who will manage your affairs after death, pay your creditors, and make sure any remaining property is distributed according to the terms of your will.
In addition to disposing of your property, a will can be used to nominate guardians for your minor or disabled children, set up trusts for family members, or disinherit someone in your family. A will is also needed to avoid intestacy. Any property that you pass through a will is subject to probate.
Q: What is probate?
Any property that you pass through a will is subject to a judicial procedure called probate. Probate is a process designed to examine whether your will is valid, notify and pay your creditors, authorize your personal representative to manage your property, and eventually distribute that property to the people you name in your will.
In Wisconsin, your personal representative may choose between two types of probate; informal probate, which is performed mostly by mail, and formal probate, which involves more judicial supervision. Although informal probate is often faster and cheaper, some situations, like disputes about the validity of your will, require formal probate. You can also demand a formal probate by the terms of your will.
Q: You mentioned "intestacy." What is that?
When a person dies without a will, all of their assets that are subject to probate (i.e. not in a trust or set up to transfer on death) will pass through a process called intestacy. You can think of intestacy as a sort of state default will that distributes your property according to a statutorily defined set of rules. For example, property subject to intestacy will go first to your spouse. If you don't have a living spouse, the property will go to your children in equal shares, etc. In extreme cases, your property might end up being taken by the state, a process called "escheat."
Q; So intestacy is bad, right?
Not necessarily. For a very small subset of people, the intestacy provisions will match up with how they want to distribute their property after death. The key phrase, however, is "small subset." For most people, relying on the intestacy statutes will not succeed in meeting their goals. Even in cases where intestacy gets the property to who you want it to go to, it may not get the property to those people how you want it to go to them. For example, intestacy cannot be used to set up trusts for minor children, which could result in a costly guardianship or custodianship until that child come of age.
Q: I have all of my assets in trust, do I still need a will?
Yes! Even if your estate plan transfers most of your assets in trust or through other non-probate methods like transfer on death provisions, you still need a will. A will is capable of doing things a trust is not, like nominating guardians for your children, or disinheriting a family member. A will is also needed to dispose of any property you might forget to put into a trust. Wills that are written to take advantage of an already existing trust are frequently called "pour-over" wills.