December 11, 2014

Illinois Law and Independent Estate Administration

Under Illinois law, the executor or administrator of an estate may open the Probate proceedings with the court as an Independent Administration.

Under Independent Administration, the executor or administrator has authority to administer most aspects of the estate without court supervision. He has authority to sell estate real estate without first seeking approval from the court. This reduces the expense of the Probate process.

Most individuals who name an executor in their wills have confidence in the person they have chosen and prefer to include language stating that it is their intent that the estate shall be independent of the supervision of any court. While a judge has the authority to make any independent administration a supervised administration, a judge will give weight to a statement in a Will specifying independent administration and will grant a request to terminate an independent administration specified in a Will only upon demonstrated good cause by the party requesting termination.

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December 5, 2014

Illinois Estate Planning and Retirement Plans

In Kelly Greens’s article in the Wall Street Journal, she points out that having a Will or a Living Trust doesn’t necessarily affect your estate planning for your retirement assets. This is because retirement benefits are passed to the beneficiary named in the plan.

An individual should feel confident that his family has the ability and desire to carry out the prescribed plan. This plan includes the two spouses leaving their retirement benefits to each other, with the surviving spouse rolling over the inherited retirement plan into his individual retirement account (IRA). Then the surviving spouse would name a child and grandchildren as beneficiaries of that IRA. This way the surviving spouse would get the maximum income tax deferral from the assets, and the child and grandchildren could split up the account and stretch their withdrawals across their life expectancies.

However, if the assets are large enough to be subject to estate tax (assets over $5.34 million for federal taxes in 2014), a trust may provide the most benefit. Some income tax deferral may be sacrificed on the assets’ growth, but the savings on estate taxes will likely exceed the lost income tax deferral.

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November 25, 2014

Illinois Law and Your Virtual Estate

In an article in Smart Money Magazine, Tania Karas points out the importance of securing and transferring your virtual estate upon death. Your virtual estate is the body of nontangible, digital assets an individual creates and stores on his computer and the Internet.

One way to address the matter is to make a list of all digital accounts and their passwords and store this information on a flash drive locked in a safe. Another way is to look into websites like Legacylocker.com and AsetLock.net which allow users to release account information to specific individuals after they die.


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November 22, 2014

Funding an Illinois Revocable Living Trust

For a Revocable Living Trust to function property, it is not enough for the Grantor (the individual who made the trust) to simply sign the trust agreement. He must fund his assets in the name of the trust.

Funding refers to taking assets that are titled in the individual Grantor’s name or in joint names with others and retitling them into the name of the Grantor’s Revocable Living Trust, or taking assets that require a beneficiary designation and renaming the Grantor’s Revocable Living Trust as the primary beneficiary of those assets.

The goal of funding a Revocable Living Trust is to insure that the Grantor’s property is governed by the terms of the trust agreement. This allows the Disability Trustee to manage accounts held in the name of the Grantor’s trust in the event the Grantor becomes mentally incapacitated and allows the Death Trustee to easily manage and then transfer accounts held in the name of the Grantor’s trust to the ultimate beneficiaries named in the trust agreement after the Grantor’s death.

The Trustee of a Revocable Living Trust has no power over the Grantor’s property that has not been retitled in the name of the Grantor’s trust. If the Grantor becomes mentally incapacitated, the Grantor’s loved ones will need to establish a court supervised guardianship to manage the Grantor’s assets that are not held in the name of the Grantor’s trust.

This means the Grantor’s property which has not been retitled into the name of the Grantor’s Revocable Living Trust will have to be probated after the Grantor’s death. This defeats one of the main benefits of a Revocable Living Trust which is avoiding probate.

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November 15, 2014

Checklist to Leave with Your Will

Leaving those who survive you an organized estate with accurate records will save time and money.

At a minimum, leave information regarding the following in a place where your heirs can easily find it:

• Your personal history including names, addresses and telephone numbers for yourself and all of your current family members and family members from previous marriages;
• Your military service including your branch and dates of service;
• Your employment including present employer and employment benefits (life insurance, stock options, pension plans and contact information for each);
• Real estate you own including copies of deeds;
• Financial accounts including name of institution and account numbers;
• Stocks and bonds held in brokerage accounts and the name and phone number for the brokerage firm;
• Automobile make, model and year and location of title and any loan information;
• Business interests including type and amount of ownership
• Safe-deposit boxes
• Insurance policies
• Funeral/Burial instructions
• Tax returns
• Wills
• Trusts
• Power of Attorney for Property
• Power of Attorney for Health Care
• Living Will
• Name and phone number for your lawyer, accountant and doctor
• Important friends to notify upon your death.


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November 8, 2014

Small Estate Affidavits and Illinois Probate

A small estate affidavit may be used in place of a formal estate proceeding (opening an estate before a judge) to collect the decedent’s personal property when the total value of the deceased individual's (decedent's) personal property is less than $100,000 and the decedent owned no real estate.

An affidavit must be completed which states the names and addresses of the heirs at law if the decedent died without a will or the beneficiaries’ names and addresses if the decedent had a will. The affiant (individual who signs the affidavit) must state that no estate proceeding before a court is pending nor is one contemplated. He must also state that all funeral expenses have been paid and that there is no known claimant (debtor) and no known claims against the property. All assets must be listed on the affidavit as well.

No notice is required to heirs, beneficiaries or creditors. The affiant holds harmless all creditors and heirs of the decedent and other persons relying upon the affidavit who suffer a loss because of their reliance.

The affidavit does not need to be filed with the Court.

It is a useful tool when there is no question about debts of the decedent and there are assets in the decedent's name which need to be accessed.

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October 31, 2014

Chicago Estate Planning and Inherited Roth IRAs

Withdrawals are usually tax-free when one inherits a Roth IRA, but minimum withdrawals are required each year using the same rules as for any inherited IRA.

A non-spouse beneficiary should have the account retitled as an inherited Roth IRA using this format: “John Doe, Deceased (date of death) Roth IRA F/B/O (for the benefit of) John Doe, Jr., Beneficiary”.

Roth IRA owners are not subject to required withdrawals during their lifetimes; however, their heirs are, beginning the year after the owner’s death. The IRS Publication 590 provides the amount to take out each year based on the heir’s life expectancy. A 50% penalty is imposed for not taking a distribution from an inherited IRA.

For multiple beneficiaries, it is preferable to split the original account into separate inherited accounts for each heir before taking the original owner’s distribution for the year he died, if it was not already withdrawn before the death. This way each heir can take distributions using his own life expectancy – a big advantage if the heirs range widely in age.

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October 25, 2014

Illinois Law and Children with Disabilities

A concern for parents or grandparents of children with disabilities is how to assist with the child's financial future. One way to assist is to set up a Third Party Special Needs Trust.

Any funds left for a disabled child, whether from an estate or the proceeds of a life insurance policy, should be held in trust for the child's benefit. Leaving money directly to anyone with a disability jeopardizes his public benefits. Many people with disabilities cannot manage funds, especially large amounts. Some families disinherit disabled children, relying on their siblings to care for them. This approach has potential problems including the sibling being sued, getting divorced, disagreeing with other siblings regarding responsibilities and taking the funds for the sibling's own use. It can also cause tax problems for the sibling. The best approach is a Third Party Special Needs Trust for the disabled child.

If a Third Party Special Needs Trust is created for the benefit of the child, grandparents and other family members should be told about it so that they can direct any bequest they may like to leave to that child through the trust.

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October 17, 2014

Third Party and Self-Settled Special Needs Trusts

When parents set up a Third Party Special Needs Trust, it is created by and funded with the assets of the parents. The parents are considered to be the “third party”. The trust is not set up with the assets of the special needs child and the transfer may not be created to make the parents eligible for Medicaid paid nursing home care.

The Trustee has wide discretion in making distributions to or for the benefit of the special needs child. For this reason, the Trustee should be familiar with and responsive to the particular needs of the special needs child, should have knowledge of the government benefit programs and the effect the trust may have on eligibility for these programs, and should be in good health, reliable and financially astute.

If a special needs child has received an inheritance, gift, bequest, lawsuit award or settlement, child support, alimony or divorce property settlement, the receipt of these assets can disqualify a child for means tested benefits such as Medicaid and Supplemental Security Income. In cases like these, a Self-Settled Special Needs Trust should be established to preserve the child’s eligibility for the government benefits. Better practice is to have a Third Party Special Needs Trust already in place so that the inheritance, gift, bequest, lawsuit award or settlement, child support, alimony or divorce property settlement can be made payable to the Third Party Special Needs Trust thereby allowing any Special Needs Trust funds remaining after the death of the special needs child to be distributed to remaining family members.

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October 10, 2014

5 Ways Your Will Can Become Useless

Wills do not expire, but certain changes can render them useless. It is important to review your will periodically to ensure it still does what you want. The following are five ways your will can become out of date.

1. Your beneficiaries have died. For example, if your will leaves your estate to your two siblings and both die before you, your will is still valid, but it will have no effect on who will inherit from your estate. Instead, your estate will be distributed according to the law in your state, just as if you had died without a will.

2. You have potential new beneficiaries. A will that was written before you got married will be of little assistance in distributing your estate. Illinois law includes provisions that provide for a spousal share. In this case, Illinois law is dictating where your estate is going, not you.

3. Your executor is dead or unable to serve. The executor is the person named in your will who oversees the distribution of your property. If the person you named as executor is unable to serve, the court will have to appoint someone else. Beneficiaries may have a say in who is chosen, but it may not be someone you would have wanted in the position.

4. You no longer own property named in the will. If your will attempts to divide your estate equally by giving cash to your daughter and property of equal value to your son and the property is sold before you die, your son will receive nothing. In this case, your will is no longer ensuring your estate is divided equally.

5. The law changes. If your estate plan was designed specifically to avoid estate taxes and the estate tax law changes, your will may no longer serve its purpose.

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October 3, 2014

Illinois Living Will Act

The Illinois Living Will Act has been in effect since 1984. It is based on the common law doctrine of informed consent. This right gives individuals the authority to refuse medical treatment. It also gives individuals the ability to record directions about future medical care should they become terminally ill and unable to communicate their choices. A Living Will can authorize the withdrawal or withholding of medical procedures which delay death for terminally ill patients.

A Living Will is often executed by an individual at the same time he executes a Power of Attorney for Health Care. A Living Will can provide a clear indication of the individual’s wishes to family members who are reluctant to withhold or withdraw medical procedures. In the case where the provisions of a Living Will conflict with a Power of Attorney for Health Care, the Power of Attorney supersedes the Living Will.

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September 19, 2014

Making a Will in Illinois

The ability to make a will involves the issue of mental capacity.

In Illinois, there is a presumption that every man is sane until the contrary is proven and the burden is upon him who asserts the lack of testamentary capacity. In other words, everyone is presumed to have the mental capacity to make a valid will. It is up to the person challenging the validity of the will to prove otherwise.

Illinois courts also recognize that someone who suffers from some mental impairment can still have testamentary capacity. There is a case where a 74 year old woman executed a will after she was diagnosed with senile dementia and had the intelligence level of a 12 year old child. Despite these short comings, she read newspapers, was aware of and interested in current events, knew her relatives and asked about their well being and could transact business. The court ruled that she had the capacity to execute a valid will.

In summary, Illinois law requires three things for someone to have the mental capacity to make a valid will:

1) He must know who his spouse, children, grandchildren and other relatives are;
2) He must generally understand what assets he owns; and
3) He must be able to form a plan in his head regarding how he wants his property distributed.

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