Illinois Estate Planning & Elder Law Blog

When considering how to minimize or avoid the time and expense of going to court and becoming involved in the probate process, it is important to be familiar with the distinction between probate and non-probate property.

Upon death, an individual’s assets are divided into two categories: probate property and non-probate property. Those assets which are non-probate property bypass the probate process. Examples are real estate held in joint tenancy, insurance policies payable to a named beneficiary (other than the estate), IRA accounts, Keogh plans, 401(k) plans and pension and profit sharing plans.

Another asset which is non-probate in Illinois is real estate held by a land trust. A separate agreement is entered into which provides that the trustee holds title to the property and the beneficiary has a power of direction over the trustee and the right to receive the earnings, avails and proceeds of the property. It can be provided in the agreement, that upon the death of the beneficiary, his interest passes to a particular person thereby avoiding probate.

In addition, bank accounts can be set up in a way that avoids probate. These accounts are P.O. D. (payable on death) accounts to which a named beneficiary has the right to the balance in the account upon the death of the account holder. The beneficiary presents a certified copy of the death certificate of the account holder to receive the balance in the account.

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Posted by Anne Rabuck | Permalink | Email This Post

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Like all insurance policies, Long-Term-Care insurance policies require a good deal of research before they are entered into. Often different insurance companies offer coverages that at first glance appear similar, but upon closer examination are very different.

A recent Wall Street Journal article titled, Insurer Casts Off Long-Term-Care Policies written by M.P. McQueen references seven ways to protect yourself before signing up for a long term care policy.

First, look into the stability of the premium payments. Long-term-care policy premiums are not like life insurance policy premiums which remain constant. Long-term-care policies can rise unexpectedly. It is often the case that large insurers which are financially stable and have high credit and financial strength ratings initially charge a higher premium but the premiums increase very little over the years.

Second, know how much the policy will cover in daily costs. Because the daily cost of nursing home expenses varies widely from state to state, it is important to know if the policy will cover the costs in your state.

Third, be aware that the length of coverage is limited. Coverage for a lifetime is difficult to obtain and very expensive. Policies covering two to four years are typical. It is unlikely that a nursing home stay will exceed four years.

Fourth, be aware that many policies require you to pay for the first three months of care before the policy takes over. If you want to shorten or eliminate paying for the first three months, the cost of the premium will increase.

Fifth, seek built-in inflation protection which increases at a rate approximating the increase in care costs. This rate should be well above the current rate of inflation.

Sixth, look into expense-incurred benefits. This is additional money paid directly to you or the care provider to reimburse for eligible costs up to a daily benefit maximum.

Finally, look into indemnity benefits. Although this coverage is more expensive, it is often worth the cost as it provides cash to you to cover costs which are not always eligible expenses.

Continue reading "Illinois Long-Term-Care Estate Planning" »

Posted by Anne Rabuck | Permalink | Email This Post

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A recent holding by the U.S. Supreme Court in Kennedy, executrix of the estate of Kennedy, deceased v. Plan Administrator for DuPont Savings and Investment Plan, et al. makes clear the importance of keeping on top of estate planning matters.

In that case, a divorced father did not take all of the steps necessary to change with his pension plan the name of the beneficiary of his plan. When he died, the pension plan paid all of the benefits to the person named as the beneficiary. That person was his ex-wife. The father's estate sued, claiming that it should have received the benefit because the ex-wife had waived her right to receive the benefit.

The law in that state held that a divorce ends the right of a spouse to an interest in the other spouse's pension benefits.

The trial court ruled that the estate should receive the benefit. The 5th U.S. Circuit Court of Appeals reversed and ruled that the ex-wife should receive the benefit. The U.S. Supreme Court confirmed.

When naming beneficiaries, it's good to keep the following in mind:

1) It's easy to change beneficiaries. Most financial firms make copies available online or you can call and ask for them. The forms are simple. Once completed, it is good to make a copy of the form after submitting it and include the form with other estate planning documents;

2) Name an alternate beneficiary. This addresses the situation where the primary beneficiary dies before you do. It also provides for the instance where the primary beneficiary disclaims the interest.

3) Your will has no effect regarding who receives accounts with beneficiary designations like IRAs, 401(k)s, insurance policies and annuities. You must designate a beneficiary on the account's forms. If you don't designate a beneficiary, the account will be distributed according to state rules on distribution.

Continue reading "Probate Law Regarding Beneficiaries" »

Posted by Anne Rabuck | Permalink | Email This Post

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When most of us talk about asset protection, we usually think of protecting assets from the claims of creditors. But what about protecting assets from failure of the institution in which the assets are placed?

For example, what happens if a mutual fund fails? The answer is two-fold. First, no mutual fund company has failed. Second, even if a mutual fund family were to go bankrupt, the money in the funds would be safe. That is to say, an IRA, a 401(k) or any other account would be safe.

As Walter Updegrave points out in his piece in the February issue of Money magazine, unlike when you buy a CD at a bank, the money you invest in a mutual fund remains separate from the assets of the parent firm. It goes to the particular mutual fund you buy. Each mutual fund is a separate entity. The fund company doesn’t own the funds under the firm’s name. It only has an agreement to manage the assets and sell the shares. If the parent company went bankrupt, the assets of the individual funds would not be available to the firm’s creditors. In addition, federal law requires funds to have insurance that covers embezzlement, fraud and other similar matters.

Continue reading "Asset Protection and Mutual Funds" »

Posted by Anne Rabuck | Permalink | Email This Post

Posted In: Asset Protection

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