Estate Talk Blog

How can I leave real estate to a family member without probate?

How can I leave real estate to a family member without probate? This video addresses different ways to transfer real property, and some of the considerations that go with them.

Some of the ways that may be appropriate include holding the property in a trust, setting up a land trust, or preparing a transfer on death instrument. Each of these has certain costs and benefits.

There also are considerations with holding property in an LLC or in joint tenancy. For example, the interests in the LLC may themselves be subject to probate if they are of sufficient value and not otherwise planned for. Also, joint tenancy is limited to transferring the real estate among the joint tenants, not other heirs, and may create potential asset protection issues.

While no one strategy is optimal to every situation, there are a number of strategies to choose from. Estate planning can ensure the best strategy for your particular situation is the one that is implemented.




Who should be the guardian of your children when you and your spouse don’t agree?

Sometimes couples find the question of who to choose as guardian for their children to be a tricky one — and although they are in agreement on other topics, they do not agree on this important question. Here is a strategy to find an acceptable solution.

Are trusts only for the rich?

Are trusts only for the rich? No — there are a lot of benefits to including a revocable living trust in your estate planning. They can address some very common situations which otherwise may require a trip to the probate court for one reason or another.

The living trust is one estate planning vehicle that can provide value to anyone who wants to avoid the delays, costs, and publicity that accompanies a probate case. For example:

For people who own real estate, holding it in a revocable trust will make it a non-probate asset. Otherwise, a probate proceeding in court may be required to transfer the real estate to an heir. And for those who live in Illinois but own real estate out of state, having a revocable trust to administer the real estate can potentially avoid the need for ancillary probate proceedings in the other states.

If your family includes minor children, a living trust can hold the funds and provide limitations on how the trustee should spend them. That way, you can be sure the monies would be spent on the actual needs and care of the children, and not put to other purposes that benefit the trustee as much if not more than the children.

When the family includes a person with a disability or special needs, a living trust similarly can be used to set aside funds for his care.

Of course, administering assets also is a use of the living trust, but it is not necessarily a prerequisite. Any one or more of the other factors may make implementing a living trust worthwhile.

Because they can offer security, continuity, and some protection and control against the dissipation or misuse of the assets they hold, the revocable living trust is a tool that should be considered by families who are still building their net worth.

How Can Estate Planning Mitigate The Impact of A Sudden Disability?

John never gave much thought to the possibility that he could become disabled until a sudden work injury sidelined him for months.

As a result, his core activities were severely limited. So was his ability to earn income in the same way he had before. He’d need to engage in a lot of rehabilitation to make his way back to normal, and it looked like a slow recovery.

Planning for a potential disability within the scope of estate planning is important. If you work for a living and rely upon an income stream, a disability can hamper your ability to earn income and maintain your standard of living. So if you can’t work – or do as much work as you used to – you need a plan to make up some of the income.

One way to do that is through disability insurance, which will provide a certain level of income replacement to cover basic expenses like food, housing, and certain bills. It acts as a safety net to guard against going from full income to zero income in the event of a continuing disability.

Why Does This Come Up In Estate Planning So Much?

Estate planning focuses on long-term goals, legacy, and accumulation and growth of assets both for yourself and potentially for future generations. It’s important in the estate planning context because to protect your goals – and achievements – against a sudden or unforeseen event from happening.

Also, estate planning contemplates naming an agent who can act on your behalf in the event a disability prevents you from acting for yourself. This is done with powers of attorney, health care directives and documents that allow an agent to step in and help you with day-to-day decisions. This kind of planning determines who will make decisions and administer assets that already exist. This is a different question than ensuring that income is still flowing to cover your needs.

For Business Owners, Estate Planning Couldn’t Be More Critical

Many small businesses are dependent on the owner being present at his firm, running things day-to-day, meeting with current and prospective customers, etc. If he’s not there, he earns no money. Yet, he has to take care of his family, right? They may not have the luxury of sick days, vacation days and personal days. And if you’re unable to work on the business (or in the business, whichever it happens to be that day), the wheels aren’t going to turn. You won’t be actively participating in the business and the income is not going to come in. For the small business owner, planning for disability is essential.

If Employed, Seek Adequate Coverage.

If you are employed by a larger organization, there may be a form of disability insurance in your benefit package. If so, it’s important that you look at it to see what exactly that covers, and when. It may not provide everything that you would want, for example:

– It may be time limited
– It may have a delayed starting point
– It may apply to a very reduced portion of income
– It may cover the salary only

In other words, there can be many limitations to it to be aware of, so you want to make sure that it’s not less coverage than what you want and need.

Unless you are financially independent from needing to do any kind of work, it is important to know how income will flow if you are unable to work. Estate planning is not just for what you can control. Estate Planning For Life includes addressing less predictable things too. For a strategy session, call us at 312-278-1187.

The Unintended Consequences of Holding Real Estate in Joint Tenancy

Marsha knew she wanted to leave her house to her only son. She didn’t want anything too complicated.  Then she had what seemed like a good idea: If she put a property in joint tenancy with her son, perhaps both of them might be able to avoid issues with probate later on.

Life was smooth for a while, but as the years went by, the relationship between Marsha and her son deteriorated. Now she wants to sever the joint tenancy, but finds that it is harder to do than she expected.

What is Joint Tenancy?

Joint tenancy is a form of co-ownership where multiple people own an undivided share of an asset and its attendant responsibilities. Each person has the right to use it. The last person left alive becomes the owner of the asset.

In this example, when Marsha passes away, her son will own the property outright. If her son passes first, Marsha will own the property outright. There will be no probate proceeding at that time. The ease of transfer to the surviving tenant usually is viewed as a positive benefit.

Things in life can change, however, whether due to family dynamics, financial considerations, business pressures, or something unexpected. Suddenly, the joint tenancy potentially can become an impediment. For example, if one party wants to sell the property and another wants to keep it, the joint tenants need to reach an agreement over what to do. Disagreement among joint owners can lead to disputes, soured relations, and even litigation to partition – or divide up – the ownership interests. Similarly, one cannot readily change or reverse the joint tenancy without agreement.

Another problem is that most joint tenancies do not provide protection against creditors of one of the joint tenants. (There is an exception for a marital residence held in a type of joint tenancy called tenancy by the entirety) If one of the joint owners has debts, at least some of the jointly-held assets may be utilized to satisfy those debts.

Other Pathways

Fortunately, there are other alternatives to joint tenancy. Marsha, for example, had other options to make sure that her son received the property without the need for probate after she passed away, while preserving her rights to potentially modify or to sell the property if necessary.

She could have set up an appropriate kind of trust. In the case of real estate, she could also set up a land trust, or she could have recorded a transfer on death instrument. Each of these options would have avoided the need for probate of the real estate, and, if set up appropriately, would have had mechanisms to allow her to make changes during her lifetime. The respective benefits of these options is outside the scope of this post – but is within the scope of estate planning.

If you’re considering a joint tenancy for real estate or other investments, talk to us first. Setting up the right plan can minimize the risks and unintended consequences that can impact you in years to come. Call us today at 312-278-1187 to schedule a strategy session.

Cornerstones of Estate Planning

Although the goals and design of estate plans vary from person to person, there are a few cornerstones of estate planning. Here are three things to keep in mind to make the process as easy as possible.

Estate planning is a confidential process.

Estate planning takes into account your needs, goals, objectives, beliefs, and values. In order to shape the plan to best fit all of these considerations, estate planning involves some questions that are not necessarily a part of everyday conversation. It touches on some sensitive subjects, such as your family, relationships, assets, liabilities, and personal values. But the answers only are used to formulate the best plan possible.

We can only plan for what we know about.

Estate planning can be forward-looking in its approach, but will focus on the goals, people, and assets that you identify. It usually is best to address all of the considerations together in one plan if possible. Planning for only some of the assets, or omitting real estate located out of town, may cause one or more undesirable outcomes.  These may include having to open an ancillary probate case, needlessly giving up certain tax strategies, or other costly results. Therefore, it is best to aim for one plan that addresses everything together.

Focus on the future.

When doing estate planning, do not worry about the shape of your family tree. Everyone has one. It undoubtedly is made up of many people, each with many stories accumulated over hopefully many years. Some of these people and their stories will be a source of pride. Others may be less so.

With that as a starting point, estate planning involves looking forward, choosing what you want for your family – in terms of stability and security, and knowledge and values, as well as personal and financial health – and then deciding what parts of the past and the family tree are useful in constructing the plan. The planning process will help you take stock of what to account for and build upon, without getting mired in the past. At its best, estate planning can strengthen and improve the prospects for a brighter future.

 

Now it’s up to you. One way you can choose to get started is by contacting Windy City Legal for an estate planning strategy session.

Are Trusts Recorded?

As a part of their estate plan, Jim and Mandy decided to create a trust for their home and certain accounts they wanted to set aside for their children. Then Jim wondered whether the trust would be a public record.

The central governing document for a trust is the Trust Agreement. The Trust Agreement functions similarly to a contract. They typically are not public records, so their terms – and the trust holdings — usually would be private.

There are some situations where certain aspects would be evident from the public record, however. For example, the transfer of real estate into or out of a trust occurs by recording a deed. The same procedure applies to other types of real estate sales and transfers. And at closing, the trustee may be required to certify that the trust still is in existence.

Similarly, a bank or financial institution may require certain documentation to establish the genuineness of the trust before opening a new account or re-titling existing accounts.

As a general matter, however, the terms governing the trust are intended to be private. This is a stark contrast to the nature of a probate proceeding, which may be necessary when someone dies without having established a trust, and relies instead on a will alone – or has no will at all. In such cases, the filings made in the probate case will be accessible as court records.

The privacy of a trust is one aspect that makes them popular. Their ability to avoid probate proceedings for the assets they hold is another, as is the continuity, stability, and security they can provide.

The trust that Jim and Mandy chose had these features.  When they learned this, they realized that their trust could become very beneficial to their family over time.

Have questions about how to start on an estate plan? Call us today at 312-278-1187 to schedule a strategy session.

Are probate records public?

Jaclyn’s sister Mary had just passed away, and Jaclyn was struggling to understand her late sister’s records and accounts. Although Mary had been well off, she had never put a will or other estate plan in place. With a mountain of paper surrounding her on the kitchen table, Jaclyn wondered how much of it would become public.

The general rule is that probate records, like other court records, are public.

Probate begins with the filing of a petition with the probate court, either to have the will admitted or to have a representative appointed to administer the estate of someone who died without a will. Other proceedings in the probate court may follow. The probate process also involves publishing a legal notice to the creditors of the person who died.

The documents filed with the probate court, the court orders, and the notice to creditors all will be public.

Because probate records are public, it is important for the executor or representative of the estate to be aware of the potential for people trying to exploit the probate process for their own benefit. Communications related to the estate or its assets, or the probate process itself, should be evaluated with caution.

The public nature of such proceedings and the cost and time they can take are reasons people prefer to avoid probate proceedings. However, there are only a few ways to do so.

One way to ensure that one’s own estate will not be subject to probate proceedings is to establish an estate plan with a trust or other mechanisms to ensure that the assets will be transferred at death to the beneficiaries. With proper planning, one can avoid exposing the assets to undue risk, which can sometimes occur with joint tenancy. With a trust, the beneficiaries will enjoy a seamless transition and privacy not possible with a probate case.

Mary could have done this for Jaclyn, saving her time and stress, and possibly a lot of expenses too. Estate planning has the potential to do so for families everywhere.