The Nuts and Bolts of Estate Planning

The Nuts and Bolts of Estate Planning

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What is estate planning? An estate plan is a method to ensure that one’s intentions are carried out when unable to articulate them due to a death or disability. The hope is that such a day does not arrive for a long time, but with enough time it becomes a certainty. The estate plan is a way of making an investment today to minimize the disruption that such an event can cause.

Some people think that estate planning is not for everyone. Ultimately, it is relationships, special needs and objectives, and concise administration that are the central goals of estate planning. The level of assets is secondary to many estate planning issues.

What is in an estate plan?  

Simply put, an estate is the collection of everything that a person owns.  It can include both fixed and portable property, i.e., real estate and personal property.

An estate plan typically consists of several documents that instruct others on what to do when one of life’s contingencies occurs. Central to most estate plans are a will, powers of attorney for healthcare and property, and a living will.

Additional documents, including trusts and other directives, can be added based on the individual’s needs and circumstances.

Why do an estate plan?

Estate planning allows individuals to account for change on many fronts, including:
– the growth and dynamics of the family
– healthcare requirements that have become more complex in recent years
– increasingly diverse asset management and holdings

What Is Estate Planning?

What Is Estate Planning?

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What is estate planning and why should you do it? Estate planning is an opportunity to set out your intentions, values and priorities in the event that you are not able to articulate them in the future. It is more than just about having a will and reaches goals beyond distributing assets or bypassing probate. While those can result from the process, there are bigger goals to contemplate.

One benefit of estate planning that can be overlooked is the opportunity to reflect on whether life goals and opportunities are being pursued in a direct and optimal way. If the process of accounting for present assets, debts, opportunities and revenues does not match the desired direction, estate planning can be a time to implement changes.

Another benefit is to protect and preserve assets as well as to identify and fill in missing pieces. Wealth often is about more than just bank deposits. Sometimes a review of the situation can address imbalances or gaps before a damaging event or market swing.

It also is a means to put mechanisms in place to ensure a more secure future for family members, by providing continuity in business and financial matters and by making provisions for children and persons with special needs.

In summary, those who have put an estate plan in place can say that it’s their way to make an investment today to protect both family members and assets going forward. Changes – even major life changes – are inevitable over time. Beginning to manage them is as easy as asking to do so and the benefits can pay many times over the initial investment.

The Importance Of A Will: Six Ways It Can Help Your Family

The Importance Of A Will: Six Ways It Can Help Your Family

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Many people think the importance of a will is primarily as a document that causes the distribution of their assets after their death. While that is certainly a part of its function, the Will can help the family in several other ways.

1.  The executor.
First, it names an executor or executrix to administer your estate. By designating such a person, one can avoid having no one take action, and will decrease the time until the estate is closed. Also, the will can specify that the executor serve without posting bond, which can avoid that expense.

2.  Guardians.
The importance of a will becomes very relevant when the family includes minor children and persons with disabilities. The Will can designate who will act as their guardian.

3.  Special needs.
Wills can provide for the special needs of beneficiaries that otherwise would not be recognized as a matter of course. For example, the Will can make special provisions for the care of minors and people with disabilities, either directly or through a testamentary trust (a trust that arises from the Will), including provisions not just for the assets themselves but for the care of the individual beneficiary.

4.  Operation of assets.
If the estate includes real estate, personal property, or investments, a Will can authorize their operation, sale or maintenance consistent with the best interests of the beneficiaries. This can be important where assets are likely to decline in value over time, or are in a form that is not well suited to the beneficiaries.

5.  Payments.
A Will can authorize the payment of taxes, funeral expenses, and debts, so that they are not a burden on others.

6.  Peace.
The importance of a will that clearly defines your wishes also can help to avoid conflicts among family members. Those kinds of conflicts can be long and bitter, as well as expensive. Helping to avoid them can potentially be a wise and valuable gift.

The way to secure these benefits for your family is to take the time and draw up an appropriate plan. If you have not done so, you may be subject to certain defaults provided by law, which may not match what you would choose and may not best serve your family. Avoid that situation by getting started today.

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Windy City Legal assists clients in Chicago with real estate, business law, and asset protection matters.

Basic Asset Protection: Three Things That Can Save You Thousands

Basic Asset Protection: Three Things That Can Save You Thousands

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Life can change quickly and without notice.  While we hope it is for the better, one can take steps in the event the news is of an accident or illness.  There are at least three very basic documents that you should have in place for asset protection, so that your choices can be carried out if you are not able to articulate them.

1. The power of attorney for property.
This document allows a trusted person that you designate to act as your agent if you can not act for yourself with respect to  business and financial affairs. Some examples of this include attending to business and monetary transactions, maintaining accounts and operating property, such as for rental purposes. In a period of unexpected disability, your agent can assist in keeping these sorts of affairs in order.

2. The power of attorney for healthcare.
As the name implies, this document allows a trusted person that you designate to act as your agent if you can not act for yourself  with respect to healthcare decisions.  Among other things, it allows you to designate what care you would want and what you would not  accept.  And it allows you to specify whether the length or the quality of life is your primary objective.

3. The living will.
This document, in the event of terminal illness or incurable injury, allows a doctor to withdraw life-sustaining measures that are  artificially postponing death and instead administer measures to maximize comfort. The purpose is to articulate a choice to avoid being trapped in a painful situation prolonged indefinitely.

The savings.
The law provides certain defaults, but they may not be the ones you would choose. Getting relief once an emergency or disability has  already occurred can involve a long trek through the courts, resulting both in legal costs as well as the health care or financial costs affiliated with maintaining the status quo. And should a disaster hit, these costs can quickly rise into the thousands.

Clearly, these documents preserve values that can be deeply personal.  Whatever one’s choices, it is important to declare them rather than let the default choices provided by state law prevail.

For personal estate planning, the Will, rather than the documents above, comes to mind for many people. The Will is certainly an  important part of every estate plan, but it does not become operative until the person who executed it has died.  Powers of attorney and a living will protect your interests and choices while you are alive. If you do not have them in place, then make an appointment today to secure your future.

Can I transfer my property into an LLC?

Can I transfer my property into an LLC?

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Many landowners and real estate investors recognize that holding property in a limited liability company can offer certain asset protection benefits. When are they attainable?

If the property is mortgaged, then it probably can not be transferred to an LLC. Mortgages often contain provisions restricting such transfers, and the LLC is considered to be a separate legal entity. A mortgage secures the borrowed money with the real estate, and lenders typically do not want their collateral to be transferred away to a third party.

If the property is owned free and clear of any loans, then it may be able to be transferred. Liens, judgments, and pending litigation may inhibit the transfer, however.

Assuming there are no encumbrances, one would need a properly formed entity and appropriate documents to effectuate the transfer. The transfer itself is tax-exempt, but the local municipality’s requirements must be met. Without the necessary approvals, the deed can not be recorded to complete the transfer.

In Chicago, these requirements include a certification from the Water Department, and for smaller buildings, the Zoning Department as well. Some municipalities also impose an inspection requirement, or other mandates. Also, some condominium and homeowner associations require notice or fees to approve the transfer. We can help you identify and fulfill these requirements.

When the transfer is completed, the LLC would own the property, placing a level of protection between the assets of the owners of the LLC, and any liabilities generated by owning and operating the property.

If you currently own or are thinking about acquiring rental property or vacant land, call us today to see if you are able to implement an LLC or other asset protection strategy.

Taking title

Taking title

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If you are buying real estate, or doing estate planning as a property owner, one question that is likely to come up concerns how you want to hold title to your property. Depending on the circumstances, there may be several choices.

If one person owns the property, he or she can own it individually. That is a simple form of ownership, but also is most readily subject to the claims of any creditors. Sometimes these risks can be mitigated by appropriate insurance and other planning.

If there are multiple owners, the property can be owned as tenants in common, or in joint tenancy with right of survivorship.  A tenancy in common gives the parties a set portion of ownership of the asset as a whole, which can be equal or different amounts. Those ownership interests potentially can be transferred or inherited. Alternatively, a joint tenancy with right of survivorship gives the parties mutual ownership while alive, and results in full ownership by the person who lives longest.

For married couples, tenancy by the entireties is an option. This is a special form of joint tenancy in which the marital unit essentially owns the property. In some circumstances, this form of ownership can shield or delay the exposure of the asset to a creditor with a claim against only one spouse.

Regardless of the number of interested persons, the property also can be held by an entity, such as a limited liability company, series limited liability company, trust, or land trust. The documents that govern such entities can set forth the nature of each person’s interest.

How to choose?

  • When taking title, consider how the assets will be held, and what exposure they may have to any liabilities that could arise.
  • Think about how the property fits with your other assets and estate plans.
  • Consider what is required for financing.  For example, lending terms may vary depending on how the property is held, and may be more stringent for investment properties and corporate entities.

If buying property, think about how you will be taking title as early in the process as possible. As an owner, consider whether a major life event makes a change sensible. If you are not sure which form is best, give us a call today!

About homeowner insurance

About homeowner insurance

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Generally, homeowner’s insurance refers to coverage of the dwelling and the personal property at the home in case of damage from various occurrences and perils.  Some amount of insurance is needed if one is not readily and comfortably able to pay cash to rebuild the dwelling and replace the personal property in the event of a disaster.  Consider that personal property also may include furnishings, fixtures, appliances, flooring, window and wall treatments, and the like, which, though easy to take for granted on a daily basis, collectively may be expensive to replace.   It also frequently includes liability protection in case another person suffers injury or property damage on your premises.

Maintaining sufficient insurance also is a condition of many mortgages, because the loan is secured by the real estate, and the lender wants to make sure that it has sufficient collateral.  If you are financing or refinancing a loan involving the residence, proof of insurance almost certainly will be needed to close the transaction.

If the property is a single family home, the insurance needs to address the entirety of the dwelling and personal property.  In a condominium, the unit owner is responsible for insuring what is inside of the condominium unit, sometimes described as everything from the walls in.  The condominium association generally will be responsible for providing insurance for the common elements, which often include the building structure, mechanical systems, corridors, and amenities.

Typically the unit owners pay their share of the cost of insurance in the assessments.  In an incident, the association will have to address damage to the common elements, but will not necessarily be responsible for restoring or redecoration the interior of a damaged unit.  That is where the unit owner’s policy comes into play.

There are various types of policies, as well as exclusions, so it is important to review any policy carefully to make sure that it provides coverage to the extent intended.  Also, specialized policies can be obtained for coverage of incidents not included within general homeowner policies.  Flood insurance is one example of this.   Therefore, it is important that homeowners consult an insurance professional and obtain the relevant information and coverage for themselves – before a potential claim arises.