In the past 20+ years as an estate planning and probate lawyer, I have seen many people surprised by the reality of how assets are handled after death. Many misconceptions exist about the best way to transfer your hard-earned money to a family member. The following are some of the most common:
Estate Taxes won’t affect me — I don’t have a lot of money.
Estate taxes can sneak up on you. When calculating the value of your estate, include the value of life insurance proceeds, retirement plans and IRAs. Don’t forget the government changes the rules routinely, and Illinois has a much lower exemption than the federal estate tax exemption.
Joint Ownership with my spouse or child is an effective estate plan.
Without planning, estate taxes on the combined estates of you and your spouse may exceed the exemption resulting in estate tax. Owning property jointly with an adult child could put your assets at risk if your child gets divorced or is ever sued for something.
A Will is all I need.
Not really. A Will plus probate is what you will get. A Will alone is more like a roadmap; it is used to get the probate case going and as a guide for the probate process, which involves publishing for claims and heirs. A Will can nominate an executor to be appointed in probate, eliminate a bond fee in probate, appoint a guardian for your minor children in probate, and can determine who will receive your assets upon your death through probate. Having a Will is a good first step.
It’s no one’s business who I leave money to.
Wills are public records. After a death, the original must be filed Will with the county where the death occurred. Failure to file a Will is a crime. If you want privacy, avoid probate. Create a trust to hold assets.
Life insurance is not subject to taxes.
Although it is true that life insurance proceeds are not subject to income tax, they are included in your estate and can be subject to estate tax. An Irrevocable Life Insurance Trust (ILIT), can keep ownership of life insurance policies out of your name, and out of your taxable estate.
Minor children who are life insurance policy beneficiaries will have access to money.
Nope. The insurance company will not pay proceeds to someone who is under 18 years of age. Someone will need to petition the probate court to be appointed as guardian for the minor, which can be quite costly. The funds can then be distributed to a court-regulated guardianship account. A judge will oversee the investment and use of the funds until the child reaches age 18, at which time the funds will be turned over to the young adult.
My spouse will never remarry.
Maybe, maybe not. Even if they do not remarry, they may form a connection, or be influenced by someone, that results in future estate planning. Consider the “what if” questions. Should you leave everything to your spouse and he or she remarries, what if he or she dies, leaving everything to the new spouse? What will your children inherit?
My Will leaves money to my favorite charity— I am all set.
If a charity is a remainder beneficiary, you should consider giving assets to your favorite charity now, while you are alive and can receive income from your donation through a Charitable Remainder trust.
I had a Trust done 10 years ago. It’s still good.
Your trust can become outdated by changes to the tax law or by changes in your personal circumstances. Get a check-up at least every other year. Specifically, if you have documents from before 2010, you likely have provisions in them that could lead to unintended results.
Should you have any questions about estate planning, probate or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.
Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law, Collaborative Divorce & Mediation.
This article constitutes attorney advertising. The material is for informational purposes only and does not constitute legal advice.
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