The Pet Trust: Putting Your Best Friend In Your Estate Plan

When talking with individuals or families to do an estate plan, it’s not unusual to get the question, “Can this plan be used to take care of the family pet?”

Good news: Yes.

Illinois allows you to create what’s commonly known as a pet trust. The pet trust is a legally recognized trust that works in a similar way to a traditional trust that might apply to family members, but with a more narrow purpose.

The pet trust is a useful way within estate planning to make sure that the animal who has been there for you no matter what, day in and day out, is going to be taken care of in the context of your plan. The statute allows pet trusts to provide for a range of different pets or domestic animals.

Upon our first conversation, we’ll take down some key information as well round out the terms of the trust, including a detailed description of the animal or animals to be provided for, appointment of the person who will be the trustee and be able to provide day-to-day care for the designated pet or pets, as well as an allocation of funds to be used in caring for the animals.

One can optionally designate an additional person to verify the trustee is taking care of the animals and using the resources of the trust wisely.

If you have questions about how to set up a pet trust within an estate plan, feel free to contact us to request a consultation and select a time for us to connect.

Child Inheritance: If Under 18, What Can They Receive?

Sometimes couples with young children ask whether a child under age 18 can receive an inheritance. The question of child inheritance is a good one. In Illinois, a minor child cannot receive his or her inheritance while they’re still under 18.

In a probate situation, if both parents were to pass away, the court would set aside assets intended for the child. An order would then be entered allowing the child to claim them upon reaching the proper age, but would not award them to the child outright.

Is there any way you can go about planning for this type of situation involving child inheritance?

Yes, by setting up a trust that will hold the assets for the benefit of the child. Any decisions would be made by the person acting as the trustee and consistent with the terms of the trust. The assets could be potentially used for the benefit of the child prior to reaching age 18.

There are a couple of other advantages of going this route.

First, in a child inheritance situation where the assets are being administered by the trust, there would not be a need for a separate probate court proceeding, at least for this purpose.

Secondly, the trust may allow the delivery of assets to be stretched out over a broader period of time. Therefore, the child would be receiving them later on in life as opposed to inheriting assets all at once upon reaching age 18. This can be a way to protect the assets and ensure they will be available over time.

If you have questions about how to set up your estate to address such considerations, feel free to contact us at Windy City Legal.

Inheritance Rights Of Heirs: What Can You Control?

What are the inheritance rights of heirs? Can you control the money that your heirs, including family members such as your spouse and children, are going to receive from you? The answer depends heavily on how you structure an estate plan.

If your estate plan is focused around a will, you should understand that the will is a document that transfers assets in the manner of a gift in the future. And when you give a gift, you cannot restrict what the recipient receives or how the recipient uses it.

It’s similar to how funds are transferred through a beneficiary designation. The plan custodian or brokerage will simply transfer the assets as directed by the beneficiary designation. Once that transfer occurs, there’s no further restriction on what happens with those assets.

What about situations where there is a joint bank account or financial account already in place? The account is jointly held by the grantor and the beneficiary. In this case, there probably won’t be any restriction on the inheritance rights of heirs – certainly not to the beneficiary using those assets now.

What estate planning does is that it affords an opportunity to implement a trust. Within a trust, you can restrict the age at which assets will be transferred along with the purposes for which they will be paid out. So if the intended beneficiary is either too young to receive assets directly or just does not have the financial sophistication and wherewithal to receive them outright, the trust provides a critically important vehicle.

If you have questions how to best structure your estate, feel free to contact us at Windy City Legal.

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

“Is it possible for me to leave real estate to a family member while avoiding 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 and there’s no sure guarantee for avoiding probate, there are a number of useful 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?

Choosing a legal guardian for your child can be a tricky one — especially if you and your spouse disagree on the selection. Fortunately, Windy City Legal’s Ian Brodsky offers forth a strategy in this video to help you find an acceptable solution.

Let’s talk further about legal guardianship as well as the questions you and your spouse may have. At this stage, with your child’s life ahead of them, it’s a vital conversation for us to have as part of Estate Planning for Life.

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.