In our experience, the questions listed below are the ones that we most frequently encounter. If you have a question that is not listed below, please contact us and we will try to answer it.
Estate Planning can mean many different things to different people.
Despite what you may have heard, Estate Planning isn’t about documents, it’s about people. Each client, and his or her beneficiaries, have unique goals and circumstances. Your Estate Plan should address these goals and circumstances. We would like to assist you in developing and implementing such an Estate Plan.
Over the years, we have developed a general definition of Estate Planning that has proven to be meaningful for our Clients, at least as a starting point:
To be sure, having the proper estate planning documents in force is an important part of Estate Planning. Typically, these documents can include Living Trusts, Wills, Financial Powers of Attorney, Health Care Powers of Attorney, Living Wills, Health Care Memoranda, and HIPAA Authorizations. In some instances, other types of estate planning documents may also be called for.
However, Estate Planning involves much more than simply signing the proper estate planning documents, and then filing them away.
Rather, Estate Planning is a process. In order for it to work as it has been designed, your estate planning documents, and your Funding, must be periodically reviewed and maintained. After all, not only will your family and financial situation change over the years, so will the tax and other applicable laws.
Probate is a legal proceeding that takes place in the Probate Court. Probate has been established to take care of people who, generally, have been unable to make their own personal, financial and health-care decisions. There are 2 types of Probate:
Living Probate, which seeks to provide protection for Minors (in Illinois and most states, persons younger than 18), and for Disabled Adults; and
Death Probate, which seeks to ensure that all debts, taxes and expenses that are connected with a decedent’s death and estate are properly paid, and that all remaining assets are distributed to the decedent’s surviving beneficiaries or heirs.
Probate can be expensive and time consuming. In addition, Probate is public, as anyone can examine all documents and information in a Probate Court file.
Many people establish estate plans that avoid Probate. In that way, they can save their surviving beneficiaries time, money and legal hassle, and also keep their affairs private.
Note: Please see our Glossary for a more detailed description of how Probate works.
A Will is a written document that is properly signed and witnessed. It identifies (a) how, and to whom, a decedent’s solely-owned property and assets are to be distributed after a person dies, (b) the Executor who will be responsible, with the assistance of the Probate Court, for administering the decedent’s Probate estate, and (c) who will act as Guardian(s) for any minor children of the decedent.
In almost all cases, relying upon a Will to dispose of your solely-owned property and assets means that you are requesting that a Probate proceeding be opened after your death.
Note: Please see our Glossary for a more detailed description of how a Will works.
People often confuse Living Will with Living Trust. Although they both use the word “Living”, they are totally different types of documents.
A Living Trust almost always refers to a Revocable Living Trust. As you will see later on, one of the “Frequently Asked Questions” is “What Is A Living Trust?”
A Living Will, on the other hand, is a written document that is not, technically, a Will, as it does not dispose of a person’s solely-owned property and assets upon his or her death.
Rather, a Living Will is a written document that expresses a person’s end-of-life preference that death-delaying procedures shall not be used to prolong life. This document will only be effective if the person who has signed the Living Will is suffering from a terminal condition and cannot then actively participate in decisions about himself or herself.
An adverb that describes a person who dies without having a valid Will in effect (“Bill died intestate”), or an adjective that describes the estate of such a person (“an intestate estate has been opened for Bill”).
It can also be a delightful question to ask after a cocktail party has been underway for a period of time: “By the way, I used to be intestate, but last Thursday I officially became testate, and so did Barbara. How many of you are currently intestate?”
Notes: Unless a Small Estate Affidavit can be utilized, an Intestate estate can require Probate. Please see our Glossary for a more detailed description of how the Probate of an Intestate estate works. Please also see the sample of the Last Will and Testament that is provided by the State of Illinois for all Decedents who die Intestate—it is located in the Resources Section of our Website.
In Illinois, there are basically 2 different types:
Durable Power of Attorney for Property, which is a written document in which you, as the “principal”, designate an “agent”, and one or more “backup agents”, to represent you in all Financial matters--this document can be designed to take effect immediately when it is signed, or only if and when you ever become incapacitated; and
Durable Power of Attorney for Health Care, which is a written document in which you, as the “principal”, designate an “agent”, and one or more “backup agents”, to make all Health-Care and End-of-Life decisions for you if you are ever unable to do so yourself—this document takes effect if your doctor ever believes that you lack capacity to give informed consent to any health care the doctor believes is necessary.
In our view, everyone.
By signing this document, you are designating who your Agent, and Backup Agents, will be, and are providing them, in the document itself, with the legal authority they will need to represent you in Financial matters.
Alternatively, if you become incapacitated and have not signed such a document, it may be necessary to open a guardianship estate for you in the Probate Court. The Guardian appointed by the Probate Court will then receive, from the Probate Court, the necessary legal authority to represent you in Financial matters. The Guardian appointed by the Probate Court may not necessarily be the person or institution you would have chosen.
Again, in our view, everyone.
By signing this document, you are designating who your Agent, and Backup Agents, will be, and are providing them, in the document itself, with the legal authority they will need to make Health-Care and End-of-Life decisions for you if you are ever unable to do so yourself.
Alternatively, if you become incapacitated and have not signed such a document, the provisions of the applicable Illinois statute will take effect to determine who will make such decisions for you. The person designated in the Illinois statute may not be the person you would have chosen to make such decisions.
A written document that provides the persons named in your Power of Attorney for Health Care with your instructions as to how they should make Health-Care and End-of-Life decisions for you if you are ever unable to do so yourself. This document acts like a “road map” to assist your health-care decision makers in remembering, and then following, your instructions.
In our view, everyone.
Simply discussing with the persons named in your Power of Attorney for Health Care your instructions as to how they should make Health-Care and End-of-Life decisions for you, and then hoping they will remember your instructions, has not worked well in the past.
It is an extremely popular type of estate planning document. A revocable Living Trust is a written document that many clients sign to ensure that (a) probate can be avoided if they ever become incapacitated, as well as upon their death, and (b) their affairs will remain private.
It is an agreement having 3 parties:
(1) the Trustmaker(s)—the person(s) signing the written Trust Agreement that establishes the Trust;
(2) the Trustee(s)--the person(s) and/or institution signing the written Trust Agreement who will be responsible for managing the Trust pursuant to the language in the Trust Agreement; and
(3) the Beneficiary or Beneficiaries—the person(s) and/or institution(s) who will benefit from distributions made by the Trustee from the Trust.
The same person(s) may be the Trustmaker(s), the Trustee(s), and the initial beneficiary or beneficiaries.
After it is signed, the Trust Agreement may be revoked or amended by the Trustmaker(s).
A revocable Living Trust typically includes provisions detailing how the Trust assets are to be expended during any period in which a Trustmaker is incapacitated, as well as provisions describing how the remaining Trust assets are to be disposed of after a Trustmaker’s death.
Assets that are payable to, or titled in, a Living Trust are not subject to Probate if the Trustmaker becomes incapacitated, or upon a Trustmaker’s death.
Persons meeting all of the following qualifications should consider establishing a revocable Living Trust:
Those who own any real estate, and
Those whose assets consist solely of bank accounts, stocks, bonds and other types of personal property, and the total value of such personal property is more than $100,000, and
Those who want to avoid probate in the event they ever become incapacitated, and when they die, and
Those who want to keep their affairs private and confidential, and
Those who agree that proper Funding (please see the following question) is an essential part of establishing and maintaining an effective estate plan.
In order for your Estate Plan to work as it has been designed, proper Funding of your assets must be completed, and kept up to date.
Funding consists of the following:
Since it is such a critical part of Estate Planning, we assist you in completing the necessary Funding.
If your IRA is a Roth IRA, the answer is “No”. You don’t ever have to withdraw funds from your Roth IRA.
However, if it is your Traditional, Rollover, Simple or SEP IRA, then you will need to begin withdrawing Required Minimum Distributions (“RMDs”) for the year in which you reach age 70 1/2. You will then be required to withdraw RMDs for each subsequent year.
If you inherit an IRA, or certain types of retirement plans, from a deceased person, the “Age 70 ½ Rule” described above does not apply to you. In that case, regardless of your age, you must begin withdrawing annual RMDs in the year following the year in which the deceased person dies. The amount of each annual RMD will be based upon your remaining life expectancy under the IRS Single Life Table.
Note: Please see the item in our Glossary entitled “RMD (a/k/a Required Minimum Distribution)” for a more detailed description of the rules that apply for making required annual withdrawals from your IRAs.
There are a variety of ways that you can own, or hold title to, property and assets:
Before we can answer this Question, we need to know exactly what “it” is. Each client’s estate plan reflects his or her philosophy and goals, and is designed to provide for his or her beneficiaries. As such, each estate plan is, and should be, unique to that particular client.
Please review the various topics under the portion of our website entitled Becoming A Client. These topics will acquaint you with our Process, and how Attorney’s Fees for each of our Practice areas are charged.
© 2020 Joseph C. Johnson, P.C.