Wisconsinites, Take Note: Five Common Mistakes in Estate Planning

By Attorney Isaiah M. Richie Schloemer Law Firm, S.C.

Just because you can do something doesn’t mean that you should. Many times, estate planning clients ask their attorney to draft documents for them that will make the administration of their Trust or Estate substantially more difficult than they would otherwise desire, if the whole idea of using a Trust is to avoid a difficult probate process. You will lose that benefit due to naming too many beneficiaries, or adding too many other complexities and you will have lost the primary benefit of the Trust. Alternatively, if you are drafting a Will and have decided to omit a Statutory heir, you may be setting up your Personal Representative to have to go through what is known as “formal probate,” because any disinherited individual may contest the Will or refuse to sign a Waiver for the admission of the Will.

The following items are five of the most common mistakes people make when drafting their estate planning documents.

1) Too Many Beneficiaries

This mistake usually comes in one of two ways – either the individual does not have any clear heirs, like a son or daughter; or, they have several children but also want to make numerous specific gifts in small amounts to charitable organizations, friends, or other extended family.

Examples of this would include:

Expansive bequests – writing “My Estate shall be distributed to all of my nieces and nephews in equal shares” when that person has 15 to 30 nieces and/or nephews. Depending on the form of administration, this will add a lot of extra work for the Personal Representative or the attorney representing that Personal Representative in the administration of the Estate. It will also require that all those beneficiaries be formally given notice of hearings, if the proceedings are in probate.
Token gifts – If you have three children who inherit the majority of the Estate, and you also list five different charitable organizations, whom each receive $1,000, several Godchildren who each receive $500, and several friends or extended family members who they would like to receive $500 each. The additional amount of work necessary to accomplish these specific bequests to have those beneficiaries located and sign waivers and final receipts and to administer such small gifts, can prove incredibly burdensome to the Estate administration process.

2) Naming a Non-inheriting Representative

Typically, this occurs when an individual wants to name a close family friend as their Personal Representative, but the Estate is going to the children or other family members, who perhaps live out of state, out of the country, or are simply not in a good position to be the Personal Representative. Keep in mind that when you name an individual as the Personal Representative, the statutory amount that they are able to take is only 2% based on the size of the Estate. This may not be a large sum of money and it may not fully compensate them for the amount of time and energy that you are asking them to expend on your Estate.

Alternatively, you should consider naming a Corporate Fiduciary, such as a Trust Company or Trust Division of a bank which would then be able to administrate your Estate without burdening your friends.

Another alternative would be to specify that the individual should receive more than the statutory 2% and be fairly compensated for the time and effort they put into the administration of your Estate.

3) Vague Instructions

One example of this would be if the Personal Representative is directed to hold a Celebration of Life ceremony for all of my friends. However, it does not give the Personal Representative full discretion in determining who those individuals are, nor does it set a budget for the Celebration of Life ceremony. While funeral costs and reasonable burial expenses are considered statutory claims that are covered by the Estate, asking your Personal Representative to take money out of the Estate to pay for such a Celebration of Life may put them in jeopardy if any of the beneficiaries of the remainder disagree with the amount spent or reasonableness thereof for the Celebration of Life.

4) Too Many Representatives or Agents

An individual wants to name more than one Personal Representative or Trustee, knowing that those people do not work well together or do not like each other. A common misconception is that it will guarantee fairness and transparency. However, you are typically creating more problems than solutions by making two people work together who are otherwise incapable of doing so.

A preferred alternative to this would be naming a Corporate Fiduciary to act as the Personal Representative or Successor Trustee, or, naming only one individual at a time knowing that there are some checks and balances in place, such as the required Inventory, accounting and receipts in the administration process.

5) Complex or Nonconforming Real Estate Division/Distributions

Sometimes a Will or Trust will give a property or a piece of property to one or more beneficiaries. Keep in mind that if you have not already divided the parcels or land and particularly, if such a division would not typically be acceptable under the Municipal Zoning or Land Division Guidelines, you may be creating a huge issue for the Estate or Trust. While there are some exceptions in the division of real estate for probate, that exception may or may not apply to a Trust administration, depending on what Municipality and County you are working in. Additionally, granting an option to purchase or receive real estate or portions of real estate will almost inevitably prolong the administration of your Estate and increase expenses due to the need for an appraiser to prepare an analysis of the property and then give those beneficiaries sufficient time to exercise the option or make their determination.

Conclusion

It is difficult to stress how important it is to speak with a qualified estate planning attorney about all of the above issues. Many times, people will go online and use form documents through online legal services in an attempt to save money, simplify their Estate or accomplish their goals. While these services may be cheaper up front, you are not receiving the advice and counsel of an attorney who is familiar with these types of pitfalls; and at the end of the day, your Estate or Personal Representative is likely to end up spending much more in the long run trying to work out your estate planning then if you had consulted with a professional in the initial drafting.

If you have questions regarding estate planning or probate and trust administration in Wisconsin, or if you would like assistance in administering an estate in West Bend, Slinger, Germantown, Kewaskum, Port Washington, Menomonee Falls, Milwaukee, Washington County, Sheboygan County, Dodge County, Ozaukee County, Waukesha County, or Milwaukee County, Wisconsin, please contact the author of this article, Attorney Isaiah M. Richie, at [email protected] or you can contact Schloemer Law Firm, S.C. at 262-334-3471 or by email at [email protected].

Originally published: April 18, 2024.