Today is Wisconsin Tax Freedom Day

Today is Wisconsin Tax Freedom Day, that is; all of the money earned by a Wisconsin resident from January 1 until today will be required to pay all Federal, State and Local Taxes.  As you may notice from an earlier post, Wisconsin Tax Freedom day comes 3 days later than the national tax freedom day.  That is because Wisconsin has a higher tax burden than the national average.  In fact, Wisconsin ranks as the 9th highest State and Local tax burden in the nation. Wisconsin also ranks in the top ten for highest gasoline tax (9th) and cigarette tax (6th).  Wisconsin is also has the 11th highest state and local property taxes in the nation.  If there is a bright spot, it’s that our sales tax is one of the lowest in the nation (41st).

Based on the rankings, Wisconsin is one of the highest taxed states in the nation.  To add insult to injury, Wisconsin also ranks as a donor state of Federal Taxes, which mean that Wisconsin only receives $0.80 of in-state Federal spending for each dollar sent to Washington.  That puts us in the same boat as all of our neighboring states with the exception of Iowa, which receives $1.10 in Federal spending for each dollar it sends to Washington.

15 Tips for Preparing a Special Needs Trust and Wisconsin’s Advantage

Wills, Trust & Estates Prof. Blog recently posted an article highlighting 15 tips for attorneys preparing a Special Needs Trust.  In brief, a Special Needs Trust is a trust set up to benefit a disabled person without damaging their eligibility for Medicaid, Social Security or other government benefits.  There are two types of Special Needs Trusts; a self-funded trust with is funded from the beneficiary’s own assets and a third-party funded trust, which is funded by someone other than the beneficiary.  Special Needs Trusts have some restrictions; the beneficiary has to be disabled and cannot have any control over the spending of the funds.  The control over the funds must be in the hands of an independent trustee, with sole discretion over how the funds are spent.  Furthermore, there are restrictions on what the money may be spent on, good or services which are not considered necessary for “special needs” my be counted as personal income for the beneficiary and will temporarily or permanently disqualify them for government benefits.  Self-funded Special Needs Trusts have further restrictions.  First, the beneficiary must be under 65.  Also, there is a requirement that Medicaid be paid back first by any funds remaining in the trust at the beneficiary’s death.

Special Needs Trust funds can be spent on supplemental items needed for the support and maintenance of the disabled person.  Funds can’t be spent on items which are covered as part of the government assistance.  Funds can be spent on a variety of items which are beneficial to the disabled person, for instance a specially equipped vehicle may be purchased to allow the caretaker to transport the beneficiary.  As noted above, the use of the fund are for supplemental needs, and cannot be used to purchase items considered a “luxury.”

Top 15 Tips for Estate Planners When Estate Planning for Special Needs article can be found in Prob. & Prop., March-April 2010, at 39.  In outline the top 15 tips are:

• Don’t disinherit the child with special needs.
• Carefully Consider the division of assets among the children.
• Understand the differences among Medicare, Medicaid, Supplemental Social Security Income (SSI), and Social Security Disability Income (SSDI).
• Choose the trustee of the SNT carefully.
• Parents should prepare a letter of intent to assist the trustee of the SNT.
• Include contingent special needs provisions in clients’ estate planning documents.
• Include special language in a parent’s revocable living trust.
• Include special language in a parent’s general durable power of attorney.
• Parents should review all of their assets and beneficiary designations.
• Consider life insurance as a funding method for the SNT.
• Retirement plan assets may not work well.
• Coordinate other relatives’ estate planning documents with the parents’ third-party SNT.
• Don’t forget the estate plan of the child with a disability and of any unmarried sibling of the child.
• What if the parent requires or may soon need nursing home Medicaid?
• Obtain a court order directing that child support be paid to a self-settled first-party SNT.

The Wisconsin advantage is the availability of WisPACT.  WisPACT is a nonprofit corporation in Wisconsin who’s sole purpose is to manage special needs trusts.  The trusts documents used to set up a WisPACT trust have been created and vetted to make sure they comply with the Special Needs Trust rules.  The trustee’s have experience and will ensure that any distribution request may harm eligibility for government assistance is in the beneficiaries best interest.  The trustee’s experience is beneficial.  Traditional Special Needs Trusts often name a family member of the disabled person as trustee.  These family member trustee’s often don’t fully appreciate the types of distributions which would render the disable person ineligible for government assistance.  This lack of knowledge could lead to serious and expensive mistakes.  WisPACT gives Wisconsin residents in need of  a special trust a powerful tool to use for their Special Needs Trust planning.  For an FAQ regarding WisPACT, click here.