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How do you choose a good executor?

One of the inevitable questions that comes up in estate planning is who to designate as the executor of your will.

It should be:
– Someone you trust,
– Someone who is organized, and
– Someone who is diplomatic.

Why?

Nominating someone you trust is a clear necessity. An executor will be responsible for collecting information about the assets you own and the liabilities you owe, paying off any debts and taxes, and then eventually distributing the estate according to the terms of the will. You must have confidence in whoever is entrusted with such information and duties.

Gathering the assets and liabilities requires some organization, particularly as statements from creditors and accounts owed roll in. Creditors may include utility service providers, open credit card accounts, home loans and mortgages, car loans, consumer installment contracts, medical service providers, subscriptions, clubs and societies that you belong to, insurance, and on and on. Assets may include bank and brokerage accounts, retirement accounts, insurance policies, real estate, personal property, and more. There potentially can be a lot to get organized, and someone who will approach it systematically is likely to be a strong choice.

Finally, the larger the family, the greater the number of people who have a potential interest. That can also increase the potential for a dispute, whether based on emotions or family history or perceived unfairness. Having a diplomatic executor who can deal with such issues — particularly at a time when emotions can run high — may be best able to keep the family on track and focused on moving forward together, and to diffuse any tensions that build up.

Myth: The Estate Plan We Wrote Will Be Fine Forever.

When Shannon and Joe executed their Estate Plan, they were delighted to have a plan that reflects their true wishes, and even covers a variety of “what if” scenarios.

“Now we have that out of the way,” they thought.

Only a few years later, some things in Shannon and Joe’s life began to change. They became proud grandparents, then decided to move to be closer to them. Joe started talking about selling his business earlier than he originally thought he would. And they began talking about how to help fund college for the grandkids.

These are not rare and unheard of circumstances, but they can impact the estate plans. And other unplanned, less fortunate circumstances can arise too.

So how do you deal with the unplanned in estate planning?

1) Replace “One and Done” with “Estate Planning For Life”

Some things you can see coming and some things you can’t. After all, life has its ups and downs. That’s why the best approach to estate planning is not to have a “one and done” mindset.

Instead, we emphasize revisiting the Estate Plan every so often ,including for each phase of life and each major life event. We don’t want to think about your life’s work being a single conversation or document that you sign and gradually forget about. We want it to be something that grows with you, changes with you, and reflects where you are now as well as where you’re trying to go.

2) Build a plan to address many “what if” scenarios

When you build your estate plan to take certain “what ifs” into account, you can better recalibrate where necessary, such as appointing different agents or reconfiguring the beneficiaries of certain things.

There are also major life events that should be taken in account. Weddings. Births. Job changes. Perhaps divorce. Eventually death. How will these kinds of events impact what you have or want in the estate plan? It’s possible that such an event leads you to change certain allocations, or to add or subtract provisions to take care of certain family members. In addition, there may be insurance or retirement accounts may need to be updated.

So rather than view the structure of your plan as permanent, look at it as a foundation you are continually building upon, re-shaping the structure where necessary.

3) Assume there will be law and technology changes

Over time, the law changes. For example, changes to the estate tax from time to time have changed certain estate planning priorities, and have led to different planning opportunities. Also, the enactment of HIPAA increased the healthcare-related documentation often included in plans.

We’ve also seen technology changes, such as the increase in online transactions through email, financial accounts, and even online photography through Instagram, Facebook, etc. It’s now important for an agent or executor to be able to access these kinds of digital accounts. That wasn’t an issue years ago. However, as technologies evolve, things change — and as they do, certain provisions in your estate plan may need to be updated.

Life isn’t a simple plan – make sure your estate plan can keep up.

If you don’t review an estate plan periodically, you’re taking a chance that you outgrow it. This creates a potential situation where you have documentation that doesn’t reflect your present set of circumstances.

Instead, with an estate plan that’s regularly updated, you can rest easier knowing that for all of life’s changes, you’ve done everything you can to account for where you are today, and what your wishes are for tomorrow. Let Windy City Legal show you how Estate Planning For Life offers a long-term approach you can be comfortable with. To learn more, call Windy City Legal at 312-278-1187 or schedule a strategy session with us right from our Estate Planning page.

Estate Planning for an Ever-Changing Life

John and Jessica are ready for a long and happy life together as they’re getting married in a few months. They’ve even decided to sit down with an estate planning attorney to talk about the long haul and putting some paperwork in place that expresses their wishes.

Just as they head off to their appointment with the attorney, Jessica turns to John and says, “You know, should we really talk to someone about this right now? After all, we’re going through a big change. Let’s just do this a few months after we get settled. Then we’ll have a plan that matches where we are.”

John agrees. A few months later won’t hurt anything. Of course, a few months stretches into a few years. That’s when John asks his spouse, “Hey, I think we should talk to our attorney about a will.” Jessica responds, “I’m all for it. But look, we’ve got a lot of big changes coming up – what with the baby arriving in six months and then we’re planning on moving into a bigger place. Let’s just wait until things settle down. Then we can have a plan that syncs up with our life at that point in time.”

But when is life ever truly “settled”? It seems like there always will be an impending life change happening. The instinct in people like John and Jessica is to wait until the change occurs so they can address estate planning to match their circumstances, but by the time they get past one event, another change will be on the horizon.

How to Break the Cycle of Fear and Make Estate Planning Real

A common fear of doing estate planning is that if you put plans in place today, those plans will be set in stone or inconsistent with your needs in no time. Instead, remember that life isn’t static and change is going to happen. This is not a reason to choose to do nothing at all.

In fact, it’s when you know there’s a change coming up that you have an incentive to create or update your estate plan accordingly. But a significant life event does not always change the structure of your estate plan, and does not necessarily mean having to start from scratch just to account for the update.

If you carry the assumption that you can’t take action right now, however, that attitude may result in you never taking any kind of action.

Plan. Pivot. Repeat.

At Windy City Legal, we see clients who are going through changes great and small. The big changes can consist of events like a marriage, birth of a child, divorce, or the recent sale of a family business. There’s no doubt that these can change the picture of your estate plan. But remember that we can pivot the plan to face such change when we need to. Change, regardless of the degree of it, is not a reason to hold off on estate planning. Nor is it a reason to hold off on updating as you go.

So rather than pressing the pause button and waiting for some mythical point in time when life “settles down,” seize the moment to tackle estate planning with us now. Call Windy City Legal at 312-278-1187 or schedule an estate planning strategy session with us today.

Myth: “Estate Planning Is Just For The Wealthy”

Cindy thought about estate planning for a long time, but when she was finally ready to make an appointment with an estate planning attorney to talk about it, she read that the estate tax at the federal estate tax threshold was over $11 million, and the Illinois estate tax started at the $4 million level.

“What am I worrying about,” she thought. “I’m not anywhere near that level! So my estate isn’t subject to an estate tax anyway. That’s for wealthy people to deal with.”

Not long after, Cindy got in a car accident where she was severely disabled. Her family members were distraught and jumped in to try to act on her behalf. Unfortunately, that’s where the problems began. Though her family all wanted what was best for her, they could not agree on what that entailed. Since Cindy hadn’t done any estate planning, nobody knew her true wishes on healthcare for herself, and she hadn’t designated anyone to act on her behalf. Consequently, dealing with doctors, hospitals, and insurance was a struggle.

Estate planning is for everyone who want to invest in continuity and stability for themselves and their family.

Let’s take a closer look at some of the reasons why estate planning is important, regardless of income level or net worth.

• Healthcare Planning
In the example of Cindy and her family, an estate plan can include healthcare planning. In the event of a disability or incapacity, somebody can step in and act based on instructions that are already written out. That way, the choices that you would make for yourself and take the actions that you would want taken can be implemented by the person designated to step in and help. Estate planning can also give designated people access to medical records so that doctors and hospitals can communicate with them. Some examples of healthcare planning documents that can be implemented include the healthcare power of attorney, living will, HIPAA authorization, and other advance directives.

• Guardianship
If you pass away or are incapacitated, who is going to take care of your children if they’re under the age of 18 or have special needs and can’t be left alone? Estate planning can help you nominate the individual you would like to see designated as guardian for your children. It also helps you think through who best would match your values, the needs of the child, and how care would be funded. Other considerations may include whether the potential guardian is good with children, responsible with money, and has a stable home and work life. Making a careful selection among those qualified and willing to act can minimize the impact of the change on the child.

In contrast, failing to address the question of who to appoint would not make the question go away should the need arise. Instead, there is a chance that your family will be involved in a heated dispute over who should be the guardian of your children – and this is a period of time when the children are going to need as much stability as they can get. Prolonged court activity is not what will bring stability quickly. Or perhaps no qualified family member or friend of the family emerges, and the court appoints someone with no prior relationship to the child or the family. That’s usually a less desirable outcome than making a decision as far as who in the family is qualified and willing to take on that role.

• Avoiding Probate
Probate is a process by which a decedent’s affairs are settled, debts are paid and property is distributed. It can take a significant period of time, and it is a public kind of proceeding. Estate planning offers opportunities to implement trusts and other structures that may reduce or eliminate the need to go through probate. Without estate planning, probate should be expected for people who own any real estate, or who have assets of $100,000 or more. That figure applies to everything, including cars, bank and brokerage accounts that are held in your name, any art, jewelry, or collections, household objects and furnishings, and more. With a lifetime of working and accumulating assets, it doesn’t take long to reach this threshold.

Stability. Continuity. A strong family. These aren’t things that should be reserved for the very wealthy. Every person deserves it and estate planning is a key tool to deliver it from one generation to the next. So whether you’re just starting out or have a high level of assets, Windy City Legal can help you customize a plan that addresses your needs, and identify any areas that need to be re-aligned. By having a discussion of what you have and what can be put into place, Windy City Show can show you why estate planning is an outstanding investment in yourself and your family. To get started, call Windy City Legal at 312-278-1187 or schedule an estate planning strategy session.

Myth: “I don’t need estate planning, because my spouse will get everything.”

A group of friends decided to meet up after work the other day. The conversation turned to their families and how much their kids had grown in such a short time.

Joe commented that he and his wife had just done some estate planning. Tom shrugged. “My wife will get everything anyway, so why bother?”

But Tom was both incorrect and shortsighted.

As a father, his wife would only be entitled to half of his estate. Without an estate plan that specifically articulates his intentions, his estate would be governed by the Illinois Probate Act. The default provision under the Act would provide half of his estate to his children, not the whole of the estate to his wife.

Would that arrangement provide enough for her? What would happen to the house? Are the children over 18 and able to care for themselves, or are they still minors? What other problems will manifest themselves?

In addition to those potential problems, what if Tom’s wife were to pass away before Tom? If something were to happen to him too, his lack of action would expose his heirs to the time and costs of a probate court proceeding to settle Tom’s estate, and to potentially avoidable costs and delays.

If his kids are not yet 18, their fate becomes uncertain. Who becomes their guardian, and who will ensure their welfare?
Tom can address these and other potential problems by following Joe’s path and creating an estate plan. And if he does not, Tom’s kids may wish that he had.

Ultimately, estate planning is an investment in stability and continuity. It can be tailored to the needs of the individual and his family, and can be updated over time as goals change. But it remains a foundation that supports the needs of the family, even when the person who first created it is no longer around.

Myth: “If I have a will, I don’t have to worry about probate.”

Sonia smiled to herself. She had just signed a will, and now felt that her children would never have to bear the expense and time of probate court. The house and accounts could all transfer without any hassle. So she thought.

After Sonia had passed away, her family found there was much more to do. Probate was required after all, to deal with Sonia’s house, investments, and other obligations. The process stretched on for months.

Although people sometimes believe that the act of making a will is sufficient to avoid probate, in many instances the will only serves as a map for the probate process. Probate court is not limited to those who die without a will.

A will has some fairly traditional parts. For example, it often describes the immediate family and names someone to serve as the Executor. It may identify certain property to be given to a particular individual. It may specify how taxes and expenses of the estate are to be paid. And it may have other provisions designed to streamline the time, cost, and expense of a probate proceeding.

But it does not avoid probate.

Probate is the process by which any claims and debts are paid, and the remaining assets are distributed. It usually is required for estates with assets over $100,000, and for estates in which the decedent owned land in his own name, unless another arrangement eliminates the need for probate.

One way to dependably avoid probate is by creating a trust. Other estate planning techniques can also provide ways to keep certain kinds of assets out of probate. And real estate, financial accounts, or other personal property titled in joint tenancy would not be required to go through a probate proceeding as long as one of the joint tenants is alive.

By putting the right pieces together, a comprehensive estate plan can provide the continuity Sonia was aiming for. Which ones apply in your family?

What does it mean to fund my living trust?

A living trust is an arrangement that is set up by the grantor – the person giving assets to a trust for the benefit of the trust beneficiaries. The trust sets out the terms and conditions of how those assets are going to be held.

In a sense, a trust is like a box. At the time it is created, it is empty. It will only come to hold what is placed inside of it. Thus, after the trust is created, it must be funded with the assets it is meant to hold and govern. Trust benefits will only apply to the trust assets. If no assets are transferred into the trust, the structure of the trust may remain in place, but only as an empty container – and any intended benefits of the trust will not materialize.

Funding a trust means transferring assets into the trust. For example, real estate is transferred by recording a deed that names the trust as the owner. For bank and brokerage accounts, the accounts themselves may need to be retitled so that the ownership of the accounts are properly reflected with the financial institution. Transfer of various kinds of personal property may be reflected through documents that memorialize the transfer, together with any filings required by law or any pre-existing contractual arrangements.

What are the advantages?

One advantage is that trust assets do not go through probate when the grantor passes away. Instead, the trust will continue to own them. The trust may provide that the property is distributed to beneficiaries, or it may provide that the property is to be held in the trust and, for example, the income used for a beneficiary’s health, education, or welfare. The administration of trust assets also enjoys greater privacy. When property goes through probate, it is a matter of public record, which potentially may be reviewed by third parties. A trust avoids that, as the trustee is responsible for administration of trust assets.

What is a trustee?

The trustee is the person who administers the trust, who makes sure that the provisions in that trust agreement get followed, and who maintains and manages the property that the trust holds. In a living trust, the grantor may also be the first trustee during his life. Successor trustees are named to serve after the initial trustee is either no longer alive, no longer wants to serve, or is no longer able to serve.

What, then, is the effect of the transfer?

When property is transferred into trust, legal title passes from the individual to the trust. That does not necessarily mean that the individual becomes unable to use that property, however. Use of the trust property depends on the terms of the trust, but a living (or inter-vivos) trust generally provides that the trustee may use the trust property, enjoy it during his lifetime, and perhaps even sell, gift, or transfer it. (In contrast, some irrevocable trusts are structured to limit such uses.)

The risk of not funding the trust

Although it is possible to have a trust agreement in place without funding it, the intended benefits of such a trust may go unrealized. The assets of the person will remain titled to him individually, but will therefore remain subject to probate, as well as to personal liabilities which may accrue. The trust would be able to receive assets in the future, but will remain as an empty vessel until actually funded.

Do I need a probate attorney?

When someone close to you passes away, there may be some steps needed to handle the decedent’s estate and wrap up his affairs properly. Here are eight common signs that you need a probate attorney. If any sound like your situation, then proceed directly to the bottom of this list for the next step to get you the clarity you need right now.

#1: A Bank Requests Letters of Office

If the deceased had a bank account or a safety deposit box, the bank likely will require that the executor of the will provide Letters of Office. A Letters of Office are issued by the probate court, and indicate that a certain individual is authorized to deal with the affairs of the deceased person. The bank will then see that the person named in the Letters of Office is, in fact, the person they are supposed to be talking to regarding the accounts or safety deposit box in the name of the person who has died.

#2: The Deceased has Bank or Brokerage Accounts

If the decedent has bank or brokerage accounts, an executor can expect the financial institutions will request proper documentation. In the state of Illinois, if a deceased individual had over $100,000 in total assets in his name, probate is going to be required. If he had less than $100,000 in total assets titled to him, then it may be possible to use a small state affidavit to avoid probate. Whether probate is ultimately required or not, having a conversation with a probate attorney about the total amount of the decedent’s holdings and what steps to take can be immensely valuable. A probate attorney can help the executor assess next steps and prepare any essential documentation.

#3: The Deceased has Over $100,000 in Assets

While bank and brokerage accounts are one way to reach the $100,000 threshold, other personal property also can trigger the need for probate. Did the decedent own, for example, pieces of art, cars, boats, planes, rare stamp and coin collections, sports memorabilia, or other collections? These assets can have substantial value, and either alone or in combination with financial holdings, can result in a probate proceeding.

#4: The Deceased Owns Real Estate

In most cases, real estate owned by the decedent individually must go through probate to allow the adjudication and transfer of title to the decedent’s heirs or legatees.

There are some exceptions to probate, such as if the decedent had prepared and recorded a Transfer on Death Instrument, or TODI. A TODI allows real estate owned by an individual to pass without need for probate. Also, real estate held in a trust or land trust would be administered according to the terms of the trust agreement, rather than through probate. Finally, if the decedent owned the property together with another person in joint tenancy, then the surviving joint tenant would become the owner of the property. Of course, this sparks the question of what steps that person should take from an estate planning perspective in order to avoid putting his or her heirs into the position where a probate is required.

A probate attorney can provide guidance as to how the real estate is titled, and what steps, if any, need to be taken.

#5: The Deceased has Unmet Obligations or Liabilities

Bills. Expenses. Loans. If these liabilities are out there, there could be claims by creditors who want to get paid. Are these claims valid and properly made? Are they timely or not? A probate attorney can assist with these types of questions.

#6: The Deceased has Children Under Age 18

Children under the age of 18 need a guardian, if neither parent has survived. Therefore, a guardian would need to be appointed and properly designated. Hopefully, during his life the decedent nominated someone well-suited to serve in that capacity. If not, there would be an additional process to identify and appoint somebody able to serve as guardian, as minor children may not be left to fend for themselves.

#7: The Deceased has Business Interests

When the decedent owned a closely-held business, either individually or with others, a few vital questions need to be addressed, such as:

  • Will the business continue?
  • Would business assets go to waste if allowed to sit or not acted upon immediately?
  • How will the business or business interest be sold or transferred? Are agreements in pace for any transfer, valuation, or sale?

Any business interests should be discussed with a probate attorney to best preserve their value.

#8: The Deceased has Pending Claims or Litigation

If the decedent has an ongoing court case, or has claims that could be litigated, they become matters for the estate to pursue. These can vary from business and commercial claims to personal injury cases resulting from accidents or improper care. In any event, the estate would need somebody to make decisions on the course of litigation and on those claims. A probate attorney can help you analyze the best course of action on such claims, as well as the time in which to do so.

Do any of these signs appear to apply?

If so, contact us at Windy City Legal for a consultation specific to your particular situation. Even if you think you are entirely outside of probate, a strategy session can help ensure you’re taking the necessary steps for the estate.

To schedule that session with us today, call Windy City Legal at 312-278-1187 or click here to reserve one online.

Creating A Living Trust: Is There A Cost Savings?

A living trust arises from and is governed by a trust agreement. The trust continues after the grantor (or settlor) of the trust dies. The assets held by the living trust are not subject to probate, so it has the potential to save costs and expenses affiliated with a probate proceeding.

Instead of probate, a trustee (or successor trustee) administers that trust and its assets, and can make decisions regarding the operation, preservation, and distribution of trust assets. The trustee also can address situations such as guardianship of minors or persons with special needs, to the extent allowed by the trust agreement. Avoiding the need for court time and costs on these types of issues can streamline decision-making.

A living trust can also preserve money. It can preserve assets by putting a structure in place so that a beneficiary does not have a sudden windfall of a large amount of money but rather receives the benefit of the trust assets over time or in connection with certain milestones, or may be tailored to a particular purpose, such as educational attainment, acquisition of real estate, or launching a company.

By limiting the uses of trust assets, a living trust can preserve them and avoid dissipation. Saving costs is one benefit, and preservation of assets is another.

What If A Beneficiary Isn’t Good With Handling Money?

When a family member or other beneficiary traditionally hasn’t been responsible with managing money, a trust can include appropriate restrictions that limit the amount and tempo of distributions to them.

For example, distributions can be limited by age, by amount, or by purpose (such as for health, education, and welfare). They can also be subject to trustee approval in some situations, such as when the beneficiary is a minor or under a disability. This ensures that the beneficiary is not given more than he can handle, and limits the ability of a beneficiary to deplete the trust assets needlessly.

Ultimately, a main purpose of the living trust is to set up a structure that maintains the trust assets, preserves them, and benefits the family or other beneficiaries. It’s not just an approach made for today — it’s what we call Estate Planning For Life.

What is a Power of Attorney?

A power of attorney is simply a grant of authority by the person making it – the principal – to someone that he trusts to carry out his instructions in the event of his absence or incapacity. The latter person is known as an agent.

Generally, powers of attorney either govern healthcare decisions, or address property and financial affairs. Powers of attorney may be for a limited purpose, such as a particular real estate transaction, or they may grant more general powers. They also may be for a fixed duration, with particular start and end dates, or may be continuous until the death of the principal, unless they are revoked earlier.

Comprehensive estate planning usually includes a general, durable power of attorney for property and healthcare, which may cover a whole range of issues. But because powers of attorney automatically end at the death of the principal, they are not a substitute for other elements of an estate plan – which would usually include a will, and often trusts or other vehicles.

After power of attorney ends upon death, the will becomes effective, and any trust will continue on. The will focuses on the person’s wishes after passing away; the trust is considered a separate entity than the person individually, but its provisions only apply to the assets that it holds.

In a perfect world, an estate plan will have different elements that complement each other, from powers of attorney to wills and trusts. If you’re not sure that all those pieces are in place, then it is time to give the plan a review so that you get a sense of what is in place already, whether it is still working as intended, and whether any additional elements are needed to cover you and your family.