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 Legal can show you why estate planning is an outstanding investment in yourself and your family.

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.

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.

Let’s talk about a living trust cost and the bottom line: Namely, is there a significant 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, so the trustee 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, but one that should provide stability into the future. Should you have any questions regarding living trust cost, setting up a living trust and its benefits, talk to us at Windy City Legal.

A couple doing an estate plan struggled with the designation of their agents and executors – the people who would step in to assist them if they were to become disabled, or who would administer their estate should they pass away.

It was apparent that they hadn’t yet spoken with any of the people they were considering. But having such conversations is vital to the strength of the plan.

First, the people being appointed should know what they are being asked to do. If they don’t, they may be taken by surprise when they are needed. Or worse, they may have no idea that they are supposed to step in, resulting in delays and inaction when decisiveness is important.

Second, they should consent to being so designated. Being an agent or an executor requires taking on responsibility. An appointment of someone without his knowledge or consent carries a risk that the appointment will fail – but the principal is unlikely to know until his agent’s service is needed. At that point, if he is not able or not willing to serve, it may be too late to appoint someone more suited to the task.

Third, having such a conversation is an opportunity to ensure that such personal representatives share your values, and will assist you in fulfilling them in the event they must act on your behalf. Alternatively, if there are conflicts, it allows you to appoint someone else. That way, you can be confident that someone suitable will be ready to act for you should the need arise.

Estate planning is an opportunity to build a stronger, brighter future for yourself and your family. Part of that planning should include conversations with your agents. Doing so can ensure that your agents can be effective in the functions you anticipate for them. Keeping your agents in the dark consigns the results, and your legacy, to chance.