Estate Planning

As of July this year the statutory forms for powers of attorney for health care and property were modified in Illinois.  This means a number of different things for everyone who is a resident of Illinois.  First, if you do not have one or both of these documents as part of a complete estate plan, you need them.  Unless your attorney recommends using a non-statutory form but then you have to be comfortable not using the updated form and be confident that their non-statutory form comply with the statutory requirements (old or new)?  Second, if you do have older forms do you need to update them?  The statute amendment did ensure that documents executed prior to July were still valid but you may want to get the updated ones.

Part II - Sonny Bono

Clients often ask me whether they need a Will or not.  Although the answer is different for everyone, I am a strong believer that not everyone needs a Will or even a Trust.  In the case of Sonny Bono, he probably needed both types of documents but had neither.  Here is what happened...

Sonny Bono was no stranger to success.  He was a wildly successful entertainer throughout the 70's and 80's.  Then in 1988, he started a political career which included mayor of Palm Springs, California, and later a Member of Congress.  He died in 1998 in a tragic skiing accident.

After his death, Sonny's third wife, Mary, set out to collect assets, pay bills and issue a distribution.  But without a Will or Trust, she had no set of instructions from Sonny to accomplish these goals.  She initially identified the estate as having a value of $1.7 million, which included music rights which she did not have the authority to exercise without specific permission from the probate judge.  Instead of grieving his loss, Mary needed to immediately open the probate estate, w

Part 1:  Michael Jackson

The king of pop had tried to live a very private life despite a career in the limelight.  He did much throughout his lifetime to also shield his children from the paparazzi to provide them with much desired privacy.  Although Michael Jackson took steps during his lifetime to create an estate plan and ensure that privacy at death, he forgot one very Important part.  He forgot to fund his trust.  When he died suddenly in 2009 at the age of 50, his private world became very public.

When clients come to my office to prepare an estate plan, we will meet initially to create the strategy and determine what the client wants in their plan, whom they want to provide benefit for and how.  In Michael's case, he provided  40% to be split among his children, 40% to his mother and 20% to charity.  We then draft the documents with the specific instructions that are needed to accomplish those goals, review them with the client and when the documents are right, we will sign them in the presence of a notary and witnesses. 

The next step is the most important

With the end of school upon us and the beginning of summer heat, everyone in the neighborhood is preparing for their summer plans.  These will include participating in summer sports, attending different sporting events, spending time with friends and neighbors outside and the annual family summer vacation.  Preparing for these things will include practice, cleaning, organizing, planning, cooking, buying and completing all of our checklists.  Many things will be accomplished through these processes that were unanticipated or unplanned.  These may include cleaning the garage, basement, painting or redecorating a room or a new purchase.

Though this is not a typical estate planning goal that a parent starts with when they think about estate planning it is all too often accomplished through the following process.

1. Have a child or children.
2. No longer be married to their other biological/adoptive parent (your choice death, divorce or never married).
3. Marry or become involved with another significant other.
4. Put all your property (real estate, bank accounts, cars, 401k beneficiaries, life insurance beneficiaries, etc.) in joint tenancy with this “new” partner.
5. Die

Now everything is owned by this new partner.  Many of the individuals whom I’ve ever talked with who have done this type of “planning” say they know that this partner will use it for their children’s benefit.  Let’s assume that they do.  How do they get around gift tax issues?  What if they are sued?  What if they remarry?

                OPTION A

  6. This partner remarries.

  7. They put everything in joint tenancy with the new spouse.

  8.

Estate Planning is about showing your loved ones that you care enough to leave written instructions that let them know how much you care.  The failure to leave a plan leaves a hole that you cannot comprehend and without knowing who is going to trip because of it.  I know a few people who have told me that they can’t think about their estate plan because that forces them to think about death and therefore there death will come sooner.  Try to imagine what it is like without a plan.

You die.

If you are very fortunate everyone in your family gets along there are no arguments and they all agree to do what you would have done without your plan.  I have never seen this happen and it doesn’t alleviate the expense of probating an estate where individuals have not been selected.  The first fight may be over the funeral arrangements.  These are not typically included in a will but they can be, and a complete estate plan should give you the opportunity to express those, if not in your will, somewhere where your desires regarding your final rest need to be found.  Just to be clear, if you haven’t completed an estate plan, you do have a will

Many people think that estate plans are for someone else, not them.  They may rationalize that they are too young or don't have enough money to reap the tax benefits of a plan.  But as the following list makes clear, estate planning is for everyone, regardless of age or net worth.

1.

If you are like most people, now is the time to take inventory and set goals for the New Year!

Estate planning is primarily about how to pass your property on after your death to the recipients of your estate with a minimum of fuss, expense and taxes.  But, it is about a lot more as well.

Whether and how you plan your estate can mean that your children will or will not be on speaking terms after you're gone.  It can determine whether they will be short-changed by Medicaid claims or estate taxes, or will be less financially pressed due to what you are able to leave them.

There's the father who set up a trust for his life insurance, but never transferred the policy into the trust and who had a large IRA with no named beneficiary.  More than half of his estate went unnecessarily to estate and income taxes.

There's the uncle who wanted to leave his estate to one niece.  We know this from a series of statements found in his safe deposit box.  But he never executed a will.  As a result, another niece and nephew also shared the estate.  There are also many instances of funds going to disabled beneficiaries receiving pub

With the recent publicity about the tax law changes, with respect to the Bush Tax Cuts not getting repealed, there has been some change to the estate tax law.  This has resulted in receiving a variety of questions with respect to the tax law, and its effects, and should someone plan their estate now?  Estate Planning is not done for tax reasons and should not be the primary motive for planning.  An Estate Planning attorney should be able to highlight and address what estate tax issues are involved in a client’s overall estate planning goals.

I have never started an initial interview with a client asking, “How much in taxes do you want to save?”  The main focus of a good estate plan is what the client is trying to accomplish.  Typically I get the answer of,” I want to leave everything to my spouse and then to my kids.”  Though this is the most common answer, (and the most commonly assumed way an estate goes – IT DOES NOT) it is incomplete.  Though it covers the broad overreaching goals it will not address a variety of issues.  What about during their lives, how do they want their financial estate handled?  How do we best ac

As election season winds down, many of us are wondering who will win the seats that are open and how the party lines will change.  As you know, the results of the election will affect some things in our daily lives, and others that might not affect us noticeably at all.  In particular, I have heard that some portions of the Health Care Reform Act may be amended if the Republicans take control of Congress.  In Illinois, the senior community is eagerly awaiting implementation of the Deficit Reduction Act, which will significantly impact individuals and their families when nursing home care is needed.  Additionally, the federal tax laws are in a state of flux and will continue to be for some time even after the election.

Now I realize that not everyone follows the federal tax laws as much as I do, but the one part that impacts the families that I work with is the federal Estate tax portion.  As you may know, an estate tax is assessed only one time, at the time of death, and only if your “estate” is more than the exemption amount.  So when we break this down into English instead of “legalese” what does this mean for most of us?  It means th