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We receive frequent questions regarding estate planning matters. Some of these questions include: 1. What is probate? 1. What is probate? Probate is a court procedure to transfer the assets of a person who has died to the persons named in his Will, or if he does not have a Will according to state law. Before the assets are distributed to the beneficiaries, creditors must be given the opportunity to come forward and state they are entitled to payment before the beneficiaries of the estate. After a specified period of time-generally six months from the commencement of probate in Illinois-the creditors have no further claim against the assets of the estate. If probate is not started, creditors have a two-year period under Illinois law to assert their claim against a decedent's assets. 2. How do I name a guardian for my minor children? One of the most important features of a Will is to name a guardian for minor children. Upon your death, the Probate Court will admit your Will and consider your appointment of a guardian for any minor children. 3. What is an executor? An executor is an individual or company you name to act as your personal representative after your death to carry out the terms of your Will. The executor has many duties and legal responsibilities, including, finding and inventorying all of your assets, paying your debts and last illness expenses, distributing your remaining assets according to the terms of your Will, filing your final income tax returns, and filing any estate income and death tax returns, if necessary. The executor's job is more than an honor. It is time consuming and the executor has many legal responsibilities. The appointment of an executor is a critical aspect of any estate plan. 4. How can I avoid probate? There a number of ways to avoid probate. The most common is to utilize a revocable living trust to hold the title to assets and to transfer the assets to the trust beneficiaries at the death of the trust creator. While there are other ways to avoid probate, they must be used with caution because of the adverse and unintended consequences which can result. 5. If I own all of my assets in joint tenancy with my spouse, do I need a Will? Yes, because if your spouse dies before you, as the surviving joint tenant, you own all of the assets in your name alone which would then be governed by the terms of your Will at the time of your death. In addition, a Will designates a guardian for any minor children. A Will is an inexpensive tool to make sure your assets are distributed at your death as you (and no one else) determine. 6. If I don't have a Will, will my assets go the State upon my death? In almost no case do assets go to the State upon a death. If you do not have a Will, State law determines who is to receive your assets. These people are called your heirs. Assets would only go to the State in the unlikely event you do not have any heirs, that is, if you are not survived by children, grandchildren, brothers, sisters, nieces, nephews, etc. 7. What is a trust? A trust is nothing more than an agreement with an individual, bank or professional trust company, who is called a trustee, to hold title to your assets-generally for your lifetime-and to distribute your assets at the time of your death. Trusts can be very simple or complex. 8. What is a 'living trust'? A 'living trust,' which is sometimes referred to as a 'revocable living trust,' or a 'declaration of trust' is a superb estate planning tool to avoid probate at death and provide for the administration of assets during lifetime. 9. What are 'Advanced Directives'? Advance directives refer to the Illinois Statutory Living Will Declaration and the Illinois Statutory Short Form Power of Attorney for Health Care. With these documents, you designate in advance your desires for such things as organ donation, life-sustaining treatments, burial instructions, etc. 10. If I have a Living Will Declaration, do I need a Health Care Power of Attorney? A living will is a statutory declaration to your physician which directs that when "death is imminent" use no heroic medical procedures and merely keep you comfortable. Note this is a designation to your physician and it is only applicable when "death is imminent." Because of this, the medical community generally does not want to be put into this position. The medical community prefers that an agent, often a family member, under a health care power of attorney, make medical decisions on your behalf should you become incapacitated. In our experience, the health care power of attorney is the more effective advanced directive. 11. Will my estate be subject to federal estate or 'death taxes'? All assets owned by a decedent in excess of the federal estate tax exemption are subject to federal estate taxes. The exemption amount is based upon the year of death, as follows:
Assets owned include assets in your name alone, life insurance proceeds, most joint tenancy assets, trust accounts, individual retirement accounts, 401K plans and annuities. 12. What are TOD, or 'transfer on death accounts'? Transfer on death accounts are accounts used by many brokerage houses wherein you name a beneficiary to receive the assets in the account at the time of your death. While TOD accounts are useful estate planning tools, care must be taken with the use of these accounts. Depending upon the wording of these accounts, your intended beneficiaries may not receive the assets in the account. For example, if a child dies, do the assets in the account go to the child's children or are they divided among your remaining children? Often there are no provisions for assets passing to minors causing expensive guardianships. Care with the use of TOD accounts is recommended and a careful review of the TOD account agreement is necessary. 13. Am I protected from creditors if I own my home as tenants by the entirety? Under Illinois law, if you are married you may own your primary principal residence as tenants by the entirety, which offers limited liability protection of the home in favor of an innocent spouse. If one spouse has a judgment creditor, the creditor cannot attach the house if it is owned as tenants by the entirety. However, this protection is not absolute. If the innocent spouse dies, the house is now owned solely by the 'guility' spouse and is available for attachment. In addition, the United States Supreme Court has recently ruled that tenants by the entirety does not prevent the Internal Revenue Service from attaching the house for back taxes against one spouse. 14. What is a land trust? A land trust is a type of trust where a bank holds the legal title to real estate. The beneficiaries of the land trust are the true owners of the real estate. The bank acts on the written direction of one or more persons as specified in the land trust agreement. A common misconception is that a land trust offers protection from creditors-it does not. It does offer privacy of the true owner of a parcel of real estate. 15. What is a 'special-needs trust'? A special needs trust, also called a supplemental needs trust, is a special type of trust designed to provide extra non-support items to either a disabled child or adult without impairing federal and state benefits which the disabled child or adult is receiving or may be entitled to receive. 16. How often should I update my estate plan? An estate plan should be updated frequently, including at any time a major event occurs in your life, such as marriage, divorce, birth of children, moving to a new state, significant change of income or assets. In any event, we recommend estate plans be reviewed at a minimum every five years. 17. Is it better to inherit assets outright or in trust? It is almost always preferable to inherit assets in trust. Properly drafted trusts offer significant asset protection from creditors. Creditors include the typical tort creditors, as well as spouses in the event of divorce. Trusts may be drafted to give the child/beneficiary significant control over the assets, the investments, and ultimate asset distribution, while protecting the asstes from lawsuits and divorcing spouses. 18. Who should be the trustee of my trust? You may name either an individual, bank or professional trust company as trustee. Trustees have various legal duties and responsibilities. Factors to consider in the selection of a trustee include investment experience, fees, the size of the trust and the duration of the trust. |