Estate Planning Basics
What is an Estate Plan?
An estate plan is a compilation of documents that resolves a persons wishes of their financial affairs, including the disposition of their real estate and personal property to those individuals and entities that one chooses. Also, a proper estate plan can serve other purposes such as planning for your health care when you are physically and mentally unable to do so, as well as determining who will take care of your minor children.
Estate plans are frequently overlooked by individuals and families when planning for their futures. Many put it off because of the time involved and sensitivity of the issue. However, an estate plan can be the single most important plan one can implement to properly take care of you and your family's immediate and long term future needs.
There are many different structures of an estate plan. The complexity of a plan can be determined based on each individual's personal circumstances.
Documents your basic estate plan should include?
A basic estate plan should include a will, living will, and healthcare power of attorney. Having at least these three documents is more than sufficient for a good majority of individuals and families. With these three documents, you can accomplish the following:
1. Provide for your immediate family, relatives, and friends
2. Ensure that your property goes to your chosen beneficiaries quickly
3. Inform your loved ones of your wishes regarding your healthcare, should become physically or mentally incapacitated.
4. Reduce time and expenses involved with the disposition of your property
5. Choosing trusted people to administer your wishes
6. Ease emotional and financial stress on your loved ones
7. Reduce estate taxes (currently 35%-55%)
What Happens if I do not have a Estate Plan?
If you die without having a properly executed estate plan, then your property passes to your heirs through "intestate succession" as determined by the laws of your state. Intestate succession is a default method of distributing your property in the instances you does not have a will. Such a method is determined by the state and may not be the method you would have chosen for your loved ones. These laws are different from state to state.
What is a Will?
A will is a specialized document in which you state the method of distributing your property at the time of your death. The laws on drafting and executing a will are very specific. If not drafted and executed properly, your will may be declared invalid and distribution of your property may pass according to the state's laws of intestate succession, which may be significantly different from your intentions.
As we stated, there are different types of wills. Some of the most popular are simple wills and joint wills. A simple will or a joint will for married couples is the minimum estate planning tool we recommend for everyone. This will ensure that your property is adequately disposed of according to your wishes at the time of death. Illinois does not recognize oral wills or wills not properly executed (i.e. Holographic Wills). Therefore, it is vital to ensure that your will is drafted an executed according to the laws of your state.
It is important that every will be executed by a person of legal age and with the capacity to do so. Your will must dispose of all your property and be voluntarily signed by yourself and two witnesses. Specific language in a will is vital in order to avoid any potential confusion with regards to your intentions. Therefore, if you choose to draft your own will, it is highly recommended that you have your will reviewed by an experienced attorney. Lastly, it is strongly recommended that you have your will reviewed and updated every five years to account for changing circumstances in your life. (i.e. a new child or large asset purchase).
What is a Living Trust?
A trust, commonly referred to as a living trust, has been become very popular in the last several years and is a excellent tool for an estate plan. Though we recommend a Will for everyone as the minimum one should have, many individuals and families can strongly benefit from a living trust. Unlike a will, a trust manages your estate during your lifetime, while a will takes effect upon your death. There are many different trusts but the most common include: Living Trust, Marital Trust, Children's Trust, and spendthrift trusts. Each trust serves a specific purpose and can be joined together to achieve the maximum benefit.
One of the major benefits to having a trust is that, unlike a will, a trust does not go through probate. The probate process can take anywhere from 6 months to over a year, which is how long your family will have to wait to achieve any of your property. A trust will allow your property to pass to your loved ones immediately upon your death. Some other major benefits to having a trust include taking advantage of tax benefits, control over your property now and long after your death, increased privacy, and controlled distribution of property. A trust will also allow you to provide for young loved ones, allowing them to benefit from your estate without giving them full control over the property.
What is a Living Will?
Terry Shiavo case was a well publicized case and the lesson that was learned from the unfortunate circumstance was the importance of a living will. A living will is a very document different from your will. A living will is a document that states your wishes and desires when it comes to your medical treatment. Should you ever become physically or mentally unable to express your desires with regards to your health care, your living will tell your family and medical personnel exactly what your desires are.
What is a Healthcare power of Attorney?
This is a power of attorney given to a representative you choose to carry out your desires described in your living will. This document is vital and should be included as a part of every estate plan. A healthcare power of attorney, will be ready in your representatives hands to instruct them as to how your health care matters are to be handled.
Tax Considerations in Estate Planning?
Gift Taxes: If you have a large estate, you may consider distributing as much as you can during your lifetime to reduce your overall value of your estate, thereby reducing the amount that can be taxed. Currently, you can distribute $11,000 annually to specific recipients without paying estate taxes.
Retirement Plans and Life Insurance: It is recommended that retirement plans (i.e. 401(k), IRA, etc) are kept separate. These items are not considered part of your estate if you are not the beneficiary of the plans and, in so, reduces the value of your estate that can be taxed. Life Insurance is another item that is frequently used to give money to those that need it immediately upon your death, and should not be included as part of your estate.
General Points:
•a. It is highly recommended that you consult with an attorney who specializes in estate planning to help guide you through the estate laws and tax implications, to properly execute your will and/or trust and to allow you to take advantage of all available options.
•b. The "Do-it-yourself" will and trusts: Although there are many services available on the internet, most of these do-it-yourself options are very general, not geared towards the laws of your state, and not provided by licensed attorneys. Therefore, by utilizing these tools, you may be putting you and your loved ones at risk. Remember, you get what you pay for! If you choose to use any of these services, it is highly recommended that you have an attorney review the final product.
Conclusion:
Although planning for your estate can be a difficult, sensitive issue, it is one of the most important things you can do in your lifetime to give to ensure that your loved ones are provided for when you're gone. Don't put it off anymore-talk to an attorney and give yourself peace of mind of knowing that your family's future is taken care of.
The information provided herein is not legal advice nor does it create an attorney-client relationship. This is merely a resource to help better understand the importance of estate planning. The information contained herein cannot be guaranteed as individual circumstances and laws are different and change regularly. We highly recommend consulting with a legal professional.
|
Estate Planning FAQ 
