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Recent Blog Posts
What is a Special Needs Trust?
Trusts can be an effective way to protect your assets while also ensuring that those assets wind up where you intend while avoiding probate. At its most basic, a trust creates a legal relationship between parties in which the assets of the trust are held by one party for the benefit of another. The parties to a standard trust are known as the settler (or grantor), the trustee, and the beneficiary or beneficiaries. Each party has a particular role, detailed below:
- The settler/grantor provides the assets to be held in trust. Trust assets can be bank accounts, real property, investments, or even personal property.
- The trustee is the party who hold the property for the benefit of those who are intended to benefit from the trust. A trustee owes duties, some fiduciary, to the beneficiaries of the trust.
- The beneficiary or beneficiaries of the trust are the party or parties who are entitled to the benefit of the trust assets. Beneficiaries can be companies or natural persons.
An Estate Planning To-do List
Since the holidays are right around the corner, there are some things that you should start to consider for planning your estate. One reason to plan now is that laws will change on January 1, 2014, and certain trusts can allow you to leave assets to your loved ones without being lessened by taxes. To make the most of your hard work, make sure you take the time to complete your estate plan.
Starting in 2014, the federal tax free limit that people can transfer to successors will increase. The gift tax will is also set to increase. There are also many different tax breaks or exclusions that will change beginning next year. This is a good time to begin or review your personal estate plan with a checklist.
Three Simple Steps for Planning Your Estate
An organized estate is one of the most important gifts you can leave your survivors. Spending time now to plan and document your wishes can help your loved ones cope, and make things easier for them. Each state is different, but this simple checklist will help you get started with estate planning in Illinois.
- Plan for life - Before you begin planning for your estate, you'll want to put together a few things that will help your family should you become ill. A durable power of attorney and a living will can help smooth the way for family should you become ill or incapacitated. You should also ensure that you are carrying the proper health insurance.
- Get organized - Organize your financial records and create a detailed list of financial accounts, loan payments, and other debts. File important documents in a safe place, and include instructions in your will telling survivors where to find them. Create a document listing your personal data, including your VA claim number (if you have one), as well as the names and phone numbers of family members who should be contacted.
Do you Need a Social Media Will?
Social media is still a fairly new phenomenon, but it has made its way into most everyone's lives. What happens, though, to all of those online profiles when the owner ceases to live and maintain the page?
That is answered with an even newer idea of a Social Media Will. Essentially, it is the same as a normal will, with a "trustee" who will be in charge of the belongings and other items listed in the will, in this case, all social media forums. This includes blogs, social media pages like Facebook and all email addresses.
Here are some steps from the Illinois state government on how to go about writing a social media will:
- Before writing anything down, view all of the privacy policies and terms and conditions of every website for which you have an online existence in case there is a clause already about how accounts of the deceased are typically handled.
- Check each website to see if there is a setting for account management after your death, in which case you would not need a trustee.
Obamacare and Estate Planning in Illinois
The Affordable Care Act has recently dominated news across the country. Regardless of what you think of the law, it is going to have an impact on your estate planning in the very near future. Two authors recently wrote a helpful piece in the latest Illinois State Bar Association Trusts and Estates newsletter giving an overview of what to expect.
It is important to understand if and how the Affordable Care Act may affect your estate planning. Some of the provisions may have a relatively uncomplicated impact on your future. For example, non-medical withdrawals from health savings accounts will be taxed at 20%. Additionally, using pre-tax flexible spending accounts on nonprescription medications will be prohibited. Other parts of the ACA's provisions, though, are exceedingly complex. Careful planning and advice will be necessary to ensure that you can reduce your overall tax liability. One of the largest effects to your estate comes from the investment income surtax of 3.8%, which applies to the lesser of the investment income or the amount that income exceeds over the threshold.
Common Estate Planning Mistakes
For some people, going through the process of estate planning is a difficult one because they lack familiarity with what to expect or simply underestimate the role that proper planning can play in your future. As a result, there are several common estate planning mistakes that are completely avoidable with the assistance of a trained Illinois estate planning attorney.
Mistake #1: Assuming You're Too Young For Estate Planning
Talking about estates immediately calls to mind images of grandparents or older adults, so individuals and families in their 30's have a tendency to think that estate planning isn't necessary at their age. Estate planning is actually much more comprehensive than determining what beneficiaries get what assets, and it's prudent to have an estate plan that reflects your needs at all stages of life.
Ways to Transfer a Family Business to a Successor
You have put a lot of time and effort into your business. If you have a family successor in mind, then it is important to make sure that the transfer goes smoothly. Now might be the best time to work up a succession plan while interest rates are still low which means transfer tax costs will be low.
There are a few different ways to transfer ownership rights. Depending on your specific situation each option has certain benefits.
The first way to transfer ownership is an outright sale. Selling your business in this manner allows you to receive payment right away which is nice for your retirement plans or if you need cash right away for any reason. Then your successor will be able to take control of the family business right away.
Another way to protect your business is by making a buy-sell agreement. The benefit of this sort of transfer is that the price and terms of the sale are set up in advance of the sale to protect both parties in case the owner is no longer capable of operating the business. This kind of contract kicks in when a specific event occurs such as retirement, incapacity, and death.
Including Pets in Your Estate Plans
Including your pets in your estate plan is a very important concept that can help to protect your furry family members if something happens to you. In Texas recently, two dogs were spotted roaming the streets for several months after their owner died. The dogs were seen by one community member, Geri Alexander, who finally took the dogs, named Ellie and Hannah, into her home to provide care. Alexander found the dogs emaciated near a discount store and took them to a local veterinarian, where she discovered that the micro chipped pets belonged to a now-deceased owner. The dogs had been in the woman's backyard when she passed away from a heart attack at a local hospital.
A comprehensive estate plan may include a will, trusts, medical directives, and powers of attorney. Including plans for pets, however, is something that many individuals don't think about. Determining where your pets fit into your estate plans can be discussed with your DuPage County attorney, and it can include ideas as simple as carrying around a card with the names of and details about your pets. If someone uncovers this information and something has happened to you, your pets may get some attention and comfort much more quickly. Those who wish to include more specific details should consider setting up a specific trust to fund the care of the animals.
Should I Use An Irrevocable Life Insurance Trust?
It's very likely that during a conversation about estate planning that life insurance has come up as a topic. As a tool for planning for your family, life insurance can be a cornerstone of your financial plan, giving your family a sense of security in case something happens to you. When chosen properly and combined with an irrevocable life insurance trust drafted by your attorney, you can ensure that your family will remain safe and protected in the future.
An irrevocable life insurance trust is one way to protect the proceeds from any life insurance policies you own at death being included in your estate. If the policy owner was able to withdraw cash value and alter the beneficiary, then the IRS views this as "incidents of ownership" and state taxing authorities and the IRS can step in to tax proceeds at death.
This specific type of trust is designed entirely for life insurance policies. You can transfer the ownership of the life insurance policies to the Trustee of your ILIT, therefore giving up "incidents of ownership" and protecting the proceeds from your policies from being taxed.
Trusts, Estate Tax, and Exemptions: The Basics
The term "estate planning" throws some people off because of its association with the very wealthy. Yet estate planning is just as important for families without large financial reserves. According to CNN Money, "such a plan ensures that your family and financial goals are met after you die"—and that's something every family can get behind. CNN Money cites that an estate plan is made up of three major elements: a will, the choosing of a power of attorney, and a living will (sometimes called a medical power of attorney). Every person's estate plan will be different, depending on individual needs, and this is why it's important to work with a qualified attorney to find out what's best for you and your family.
Sometimes a trust, "legal mechanisms that let you put conditions on how and when your assets will be distributed upon your death," is an important addition to estate planning because they allow the reduction of your estate and gift taxes. Trustees will exact the trust. According to the Illinois Trusts and Trustees Act, a trustee can be "appointed by or pursuant to the instrument creating the trust, by order of court or otherwise, and includes an individual and a corporation qualified to administer trusts in this State." The trustee will have access to all processes regarding the estate and estate plan, upon death or incapacitation of the trust's owner.
