Attorneys At Law

Attorneys practicing in and around the Chicagoland area. Experienced in the practice areas of Real Estate Law, Mortgage Foreclosure Defense Litigation, Social Security Disability, Business Law, & Estate Law.

Attorneys At Law - Attorneys practicing in and around the Chicagoland area. Experienced in the practice areas of Real Estate Law, Mortgage Foreclosure Defense Litigation, Social Security Disability, Business Law, & Estate Law.

The Most Common Estate Planning Mistake

Estate Planning This Way

Estate Planning is an important step for planning how your assets are distributed to your heirs.

In the article below, we discuss how to avoid one of the most common estate planning mistake so your loved ones can avoid this costly headache.

 

This story originally ran in Forbes:

How To Avoid One Of The Most Common Estate Planning Mistakes

There’s a mistake families at every level of wealth often make when they go through their estate planning process, and decide how to allocate money to their heirs and to charity.

An extremely common practice is to list charities as part of a will, or revocable trust, and in many cases (perhaps most)—that’s a mistake.

Property tax bills Kane & DuPage CountyWhat you need to consider is the inherited value of the holdings after tax. Throughout their working lives, most people have some form of retirement account: an IRA, 401k, thrift savings plan (TSP), etc. Those assets usually don’t pass through a will or a trust but by beneficiary designation.

So let’s examine how most people have set up their plans, and look at an alternative tweak that can make sure as much of their assets as possible go where they intend.

Most people leave their IRA assets to their spouse and kids, and if they are charitably inclined they allocate some dollars to charity through their wills or trust.

Here’s how that looks:

 

Common Scenario

A couple has a $1 million home, $1 million in after-tax savings account, and $1 million in an IRA. And upon the second spouse to pass, the $1 million in an IRA and the house to go the kids. Of the after-tax savings, the estate donates $100,000 to charity, and the remainder ($900,000) goes to the kids.

The problem here is that as the children receive the IRA funds, and whether they take the IRA distributions immediately or over time, these funds are income-taxable to the kids. What if they handled this an alternative way?

 

Alternate Scenario

First Time Home Buyer Mortgage WorkshopSame couple – $1 million home, $1 million after-tax account, and $1 million IRA. The couple leaves $100,000 of the IRA to charity. The kids receive the $1 million in savings and the home and $900,000 of the IRA.

Why is this special or better? By donating to charity from the IRA, the couple is donating the least tax-efficient assets to charity. What most people don’t realize is that when a charity receives these dollars, they don’t pay any tax on the funds.

If this family makes this change, they accomplished the same result of the charity receiving 100K, but ensure that the kids will receive more on an after-tax basis.

Related post: Millennial Estate Planning – What You Should Know

Keep in mind there are two forms of coordinating this. The will or trust is typically drafted or amended by an estate planning attorney. The IRA beneficiary designation is a simple form filed with the brokerage firm or through their employers. It’s important to make sure you coordinate the two to prevent confusion and make your intentions clear.

Social Security Retirement CoupleOne important disclaimer—this change doesn’t make sense with a Roth IRA of a Roth 401(k). Since these distributions to the heirs will be free of income tax, it does not make sense to leave these funds to a charity.

 

The purpose of estate planning is making sure that your money flows where you intend. Usually the government is last on that list. By tweaking not who gets what, but who gets which, there’s a chance for more to pass to the people and organizations most important to you.

Related post: End of life planning essentials

 

This story originally ran in Forbes
Original unaltered sign image by Max Pixel


* Advertising Material: To the extent that the information in this post is interpreted as attorney advertising in accordance with the Illinois Rules of Professional Conduct or within the meaning of state bar rules from all other localities, this statement is made pursuant to those rules.

Specialties: Specialization claims are prohibited by Illinois Supreme Court Rules and we do not claim to be specialists. The content of this e-mail is organized and presented for the sole purpose of general information. None of the included content should be construed as legal advice. Viewing this e-mail or e-mailing the account holder does not create an attorney-client relationship. NOTICE: This page may be considered advertising material.


 

The Law Offices of Lora Fausett P.C. provides estate law representation, including power of attorney, living wills, probate law services, trusts, wills, and more.

Located in Glen Ellyn, Illinois and serving clients in DuPageCookKane, Will, and Kendall Counties.

For Information Call 630-858-0090


End of Life Planning – The Essentials

End of Life Planning

An unexpected medical diagnosis can leave a person in shock.

It can also leave a person realizing that their end of life planning is not in order and they may not have as much time as they thought to complete it.

When that happens, here is what we recommend:

 

Seek professional help

It might seem outside of your comfort zone, but seeking the help of a mental health professional for guidance could be helpful to you. It could also help your family as well.

 

Get financial documents in a single place

Social Security Retirement CoupleIt’s important to begin getting your financial documents together. We recommend you gather them all in a single place and put them together in an easy to get to a location such as a three-ring binder.

This will save your relatives the struggle of trying to find all the information they need.

Start by getting your will. If you don’t have one, make a list of your assets: financial accounts, real estate, and any retirement accounts.

A will is the best way to ensure your assets get distributed to the person you want them to. Without specifying your wishes, there can be family disputes and even court cases. Property distribution is best spelled out in a will

 

Choose your beneficiary

Loan Modifications and WorkoutsOne of your first tasks should be designating your beneficiaries on your financial accounts.

It may be basic but it is more powerful than a will. It can save time and money for your assets going through probate.

Your brokerage will let you attach transfer-on-death instructions to your non-retirement account. Transfer-on-death deeds can also be used in real estate in Illinois.

After you have designated beneficiaries, detail your liabilities, for example, mortgage, loans, credit card debt, and insurance policies for health, home, and vehicles.

Create a contact list of people your family can reach out to for help. This should include your lawyer, accountant, insurance agent and financial advisor. Write down the name and contact information of everyone who needs to be involved.

Even if you already have an estate plan, it is a good idea to consult with an attorney experienced in estate planning. In the time since you made your estate plan, laws may have changed or even your financial goals or beneficiaries.

 

Decrease the tax burden

Cook County Property Tax AssessmentsThere are ways that you can decrease the tax burden on your beneficiaries.

One way to leave money to heirs is through a Roth individual retirement account.

Another is a brokerage account because any capital gains tax will be wiped out due to the step-up in basis on the original price paid.

Here is how this works: If the owner sells a stock that has gained in value, they would have to pay capital gains based on that higher price. If the owner leaves that stock to an heir, the new owner receives the stock at the new price. They will only have to pay taxes on any gains in price after that point, not the original price.

If some asset has dipped significantly in value, though, you might consider selling the stock, mutual fund or ETF. As the original owner, you can deduct the losses by selling and deducting the loss. Your heirs are not able to take this step-down since they’d inherit the stock at a new, lower basis.

If you are older than 70½, take any required minimum distribution from your retirement accounts. Heirs may not know to do this, and there is a significant penalty for not taking it.

Another way to minimize taxes for your inheritors is through charitable donations. While your heirs would have to pay tax on the money in a retirement account, a charity would not.

 

Paying off a mortgage

Property Tax Assessment - CalculatorMany people consider paying off a home mortgage, but because individual circumstances vary greatly, this is not always the best course.

Consider the amount of funds available, the current tax bracket and the size of the mortgage balance. It would be a good idea to have a financial planner run several scenarios to see how you can minimize the tax hit from withdrawing a large sum from a traditional IRA or 401(k) plan – or if you should leave it as a loan to be transferred to your heirs.

 

Have a record of password for your heirs

Collect all of your passwords in your binder with your financial records. Include a copy of the previous year’s tax return. When a final tax return is prepared, there might be some carryover items, such as long-term alternative minimum tax or long-term gains buildup.

List all service agreements, such as landscaping, utilities, cleaning and insurance, and auto payments. Arrange for their continuation or cancellation.

Keep track of your pension and Social Security benefits, since there could be survivor benefits that flow from those.

Other areas to consider in your binder: arrangements for your pets and talking to the financial aid office if you have a child in college. You’ll want to inform them of your change in financial status.

 

Source: When end-of-life planning is suddenly a lot closer than you thought by Jill Cornfield for CNBC

 


The Law Offices of Lora Fausett P.C. provides excellent legal counsel in the areas of estate law, including estate planning, living wills, living trust, probate, power of attorney, letters of office and more.

Located in Glen Ellyn, Illinois and serving clients in DuPage, Cook, Kane, Will, and Kendall Counties.

For Information Call 630-858-0090

 


Estate Planning for Same Sex Couples

In this post, we discuss five steps that same-sex couples should take to make sure they have the proper estate plan in place to avoid legal issues.

Same sex marriage estate planning

Estate planning is important for all adults, whether single or married. If something should happen to you without an estate plan in place, the courts and the state will decide what happens to all of your assets.

If you are a part of a same-sex couple, then you are likely to face special situations that require extra planning.

This is especially true for unmarried couples because they are at risk for leaving the couple’s surviving member without any assets.

Below are five steps that same-sex couples should take to make sure they have the proper estate plan in place.

Confirm your marital status

Same-sex marriage was legalized nationwide in 2015 by the U.S. Supreme Court. Because of the pre-existing patchwork of state laws that were in place before that time, some issues regarding the marital status of couples that were married before 2015 could exist.

A common issue is with same-sex couples who married in states that recognized same-sex marriages but then moved to states that didn’t recognize those marriages.

In some cases, those couples later broke up while living in states that didn’t recognize their marriages. Because of this, some former couples have mistakenly believed that they did not need to legally dissolve their marriages. In other states, there were couples who had their registered domestic partnerships or civil unions automatically converted into legal marriages.

These two factors have resulted in several instances nationwide of couples who have found out they are married and didn’t know it.

Same-sex couples may need more than a will

You are probably aware that you should have a will in order to make it clear where assets should go when one member of the couple dies. This is especially important if there has been a previous marriage or children involved.

Besides having a will, a Power of Attorney is also a good item to take care of ahead of time. A power of attorney gives a spouse the power to act on your behalf in when you are unable to give consent to certain medical of financial decisions.

Setting up a trust might also be right for some couples who have concerns about legal battles over your assets when you die. It is not uncommon for same-sex couples to be estranged from their families, which can lead to their estates being contested in court if the correct steps have not been taken. Because trusts do not go through probate, they are less likely to be contested.

Related: Can I Keep My Heirs from Having to Go Through Probate?

Plan for your medical needs

Same-sex spouses are more likely to be challenged when they make medical decisions for partners who are incapacitated. Because of this, they should make sure to document their medical wishes ahead of time.

Your options include designating a health care surrogate, which is essentially a power of attorney to make medical or spiritual decisions for you if you are incapacitated. They can also authorize who your medical information can be shared with.

Another option is a living will, which gives instructions on issues such as life support and medical treatment.

Plan for your children

In Illinois when a parents die, their assets pass to their children if there is no will in place. With same-sex couples, it is more common for only one parent to be biologically related to the children. You may need to make adoption part of your estate planning if you haven’t already.

Don’t count on DIY estate planning

There is do-it-yourself estate planning documents and services online, but they typically don’t account for the needs of same-sex couples. Because same-sex couples estates are more likely to be contested in court, you may not want to count on these services.

Talking with an estate planning attorney who understands the unique needs of LGBTQ couples can save your spouse from difficult legal, financial and emotional difficulties


The Law Offices of Lora Fausett P.C. provides estate planning services including power of attorney, probate lawwills, trust administration, and more.

Located in Glen Ellyn, Illinois and serving clients in DuPage, Cook, Kane, Will, and Kendall Counties.

For Information Call 630-858-0090


* Advertising Material: To the extent that the information in this post is interpreted as attorney advertising in accordance with the Illinois Rules of Professional Conduct or within the meaning of state bar rules from all other localities, this statement is made pursuant to those rules.

Specialties: Specialization claims are prohibited by Illinois Supreme Court Rules and we do not claim to be specialists. The content of this e-mail is organized and presented for the sole purpose of general information. None of the included content should be construed as legal advice. Viewing this e-mail or e-mailing the account holder does not create an attorney-client relationship. NOTICE: This page may be considered advertising material.


 

Millennial Estate Planning – What You Should Know

estate planning for millennials

In this post, we discuss the hows and whys of the most critical items Millennials should consider in regards to your estate planning.

Estate planning is important for everyone. Though some may think that an estate is something that only older or wealthy people have, the fact is, everything that you own is part of your estate.

If you don’t have a will and plan what happens to your estate if something should happen to you, the government and the court system will make those decisions.

Establishing an estate plan allows you to decide what happens to all of your assets and possessions, even your pets.

For obvious reasons most people, millennials or otherwise, would rather make these decisions themselves.

 

Millenials should plan for unexpected

estate planningAs a young adult, it’s easy to think that you still have decades of time ahead of you for estate planning.

The thing about the unexpected is that it only happens when it is unexpected. Unfortunately, even young people can be involved in accidents or become incapacitated. We probably all know someone who has passed away at a young age.

Incapacitation

No one expects to be incapacitated, but unfortunately, it does happen. If it does, there are several documents you will need.

The first is a durable power of attorney (POA) that identifies who will make financial decisions on your behalf if you are unable to do so.

The second is a health care advance directive (including a living will) that will outline your instructions for medical care if you become unable to communicate or manage these yourself.

Death documents

These documents will include a last will and testament and the establishment of a trust (either revocable or testamentary).

Beneficiary designations

For younger people, your life insurance policy and 401k programs may account for the bulk of your assets, so it is important to keep your beneficiary designations up to date.

We advise parents of children to have a durable power of attorney and health care advance directive for all their children once they reach the age of 18. Generally, the parents will be designated initially, but you have the right to designate whomever you wish.

 

Default estate laws in Illinois

State of IllinoisAll states have default laws specifying where assets will go by default when there is now will or estate plan.

If you are married, your estate will go to your spouse. In Illinois, if unmarried Millenials die without a will and have no children, the property ascends the family tree to their surviving parents and siblings. If you have two brothers and two sisters, they would each receive 1/6 of your estate and each parent would receive 1/6 of the estate.

If you are an unmarried Millennial without a spouse or children and want to select which of your siblings receive your estate or designate a significant other as a beneficiary instead of your parents, you must specify that choice in the appropriate legal documents.

The selection of an executor of your will or a personal representative is a decision you should make when your will is drafted. Most people would prefer to make these decisions themselves rather than the default laws of the state making the decisions for them.

 

Millennial Assets

Oftentimes, younger millennial individuals are surprised about the number of assets they actually have. It’s very common to be focused on things such as student loan debt and income rather than the asset side of your balance sheet.

Your assets may include:

  • 401K and retirement accounts
  • Life insurance policy
  • Family and collector memorabilia
  • Real estate and property
  • Vehicles, boats, jewelry, electronics, home furnishings
  • Digital assets, social media accounts, websites, photos
  • Pets

Millennials may be the first generation who all have to deal with the issue of what happens to their social media accounts when they pass away. Should they be maintained? Should they go offline? That decision should be up to you, but since this is still a relatively new area, there may be default rules you are not aware of.

 

How Millennials should plan their estate

Property Tax Assessment - CalculatorEstate planning doesn’t have to be a painful process. The important thing is to begin working on a plan. Millennials, like all adults creating an estate plan, can view it as a series of multiyear plans. Every few years or after major life changes, it can be reevaluated and updated.

We hope it’s something you will put some consideration into.


* Advertising Material: To the extent that the information in this post is interpreted as attorney advertising in accordance with the Illinois Rules of Professional Conduct or within the meaning of state bar rules from all other localities, this statement is made pursuant to those rules.

Specialties: Specialization claims are prohibited by Illinois Supreme Court Rules and we do not claim to be specialists. The content of this e-mail is organized and presented for the sole purpose of general information. None of the included content should be construed as legal advice. Viewing this e-mail or e-mailing the account holder does not create an attorney-client relationship. NOTICE: This page may be considered advertising material.


The Law Offices of Lora Fausett P.C. provides estate planning services including power of attorney, probate lawwills, trust administration, and more.

Located in Glen Ellyn, Illinois and serving clients in DuPage, Cook, Kane, Will, and Kendall Counties.

For Information Call 630-858-0090


Image credit: Pixabay