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Young parents: your children trust their future to you
Parents experience indescribable and immeasurable joy as their children grow. They shudder at the thought of life without their kids – or of their children's life without them. No wonder, then, that only 36% of parents with minor children have written a last will and testament. In the absence of that legal document, though, a minor child could confront emotional and financial uncertainty.
Intestacy means only the law matters
When one dies without a will, or intestate, state law determines much of a child's future. Illinois, for example, distributes intestate assets per stirpes, which roughly means equally. Importantly, the number and type of other surviving kin will dictate what a child, or children, receives.
Naturally, young parents also could assume a family member will care for their children – but without a will, the courts will play an active role in that determination. A guardian will assume legal custody of the child should unforeseen events in either the parents' or the presumed caretaker's lives occur. In Illinois, guardianship and its cousin conservatorship require court approval.
What are the benefits of a trust as part of an estate plan?
Trusts are a potentially valuable part of estate plan to consider and to understand. For that reason, estate planners should be familiar with the benefits of including a trust in their estate and what they do.
Advantages of a trust
There are a variety of different potential advantages of a trust to be aware of including:
- Placing conditions on how and when the estate planner's assets are distributed;
- Reducing estate and gift taxes;
- Distributing assets to beneficiaries efficiently without the cost, delay and publicity of the probate court. Probate can cost between 5% to 7% of the estate planner's estate and may be costly and time consuming;
- Better protecting the estate planner's assets from creditors and lawsuits; and
- Naming a successor trustee who will manage the trust after the estate planner passes and is also empowered to manage the trust assets if the estate planner becomes unable to do so.
The basics about Chapter 7 bankruptcy
Many people in Illinois probably think of bankruptcy options as a “last resort” when it comes to financial problems. And, some will even think that there is “shame” involved in considering bankruptcy options. In many cases, these concerns may come from a lack of knowledge when it comes to the basics about the bankruptcy process, particularly Chapter 7 bankruptcy.
Chapter 7 bankruptcy basics
Chapter 7 bankruptcy is, perhaps, the most common form of bankruptcy that individuals and families pursue. It is commonly known as “liquidation” bankruptcy. At its most basic, this form of bankruptcy allows an individual to list assets alongside debts, have the assets sold off by a bankruptcy trustee and then have the proceeds from those sales applied toward outstanding debt. In the end, any debt remaining is discharged and the filer has a “clean slate.”
Of course, there is more to it than that. For example, not all of your assets will be included in the bankruptcy case. Some assets are “exempt” from the bankruptcy process. And, another perk is that as soon as you file your bankruptcy case an “automatic stay” is implemented, which means that creditors can no longer harass you about your debt or missed payments.
What will happen if there is no will?
Like other states, Illinois has a law which determines how a deceased person's property will be divided if the person did not leave a will.
The law also applies if the person did leave a will, but the will does not get admitted to probate or later gets invalidated in a will contest. Finally, the law will apply if a person has a valid will, but the will does not cover all of the person's property.
It is important to remember that the law will not apply to property which by law does not pass through probate. Property held in trust, life insurance proceeds, retirement accounts like 401(k)s, joint bank accounts and jointly held real estate.
Spouses, children have priority under Illinois' intestate succession rules
When a person in the greater Chicago area dies without a will or other estate plan, the person's spouse or children will get first dibs on the property which passes through probate.
How might a bankruptcy help with estate planning?
When residents of the western Chicago suburbs are considering estate planning, the last thing on their minds might be the filing of a bankruptcy
However, depending on a person's circumstances, a Chapter 7 bankruptcy may be in their best interests as they move into their retirement years.
Claims do not necessarily die with a person
Debts do not always automatically go away when a person dies. The creditor has an option to file a claim against the person's estate. A valid claim will get paid first, meaning the person's loved ones get what is left over.
Likewise, lienholders, including banks and mortgage companies, will still have a right to be paid and may choose to foreclose if payments are not forthcoming.
A bankruptcy may help an Illinois resident preserve some of their wealth
What are some of the reasons that an estate plan is needed?
There are a variety of important reasons to have an estate plan. Estate planners should understand why an estate plan is needed and how they can develop an estate plan that protects the estate planner and expresses their wishes.
Avoid the probate process
One reason to have an estate plan is so that the estate planner can avoid the probate process. The probate process includes validating the estate planner's will, valuing their assets, paying outstanding debts and taxes of the estate and distributing what is left over to beneficiaries.
Protect assets and reduce estate taxes
Estate planning can help protect both the estate planner's beneficiaries and can also help protect the estate planner's assets. For that reason, trained estate planning guidance can be helpful to help with estate planning complexities.
A variety of different taxes typically need to be paid by the estate. By utilizing estate planning tools such as trusts, it may be possible to curtail or even eliminate the amount of taxes that are due.
How living trusts protect you and your assets
Sitting down with one's family to discuss the future of one's assets can seem like a daunting experience. Planning one's estate may seem final and cumbersome to those who have growing assets with many moving parts.
A living, or revocable trust is meant to solve these problems. Flexible, very powerful and highly adaptable instruments, living trusts are a great asset that can be included when planning your estate.
What a living trust does
Living trusts are established during the owner's life and can be maintained by the owner or other named trustees. The purpose of the living trust is to create an easy path for one's assets to be more seamlessly passed down to the estate's beneficiaries.
It also allows for the trust to be funded when the owner chooses to make the transfer. In this way, the assets do not need to be set aside in advance; however, they do need to be transferred at some point in order for the living trust to take effect.
What do I have to disclose when selling a home?
You may be ready to move somewhere new right now, but you have a fair amount of work ahead of you if you intend to sell your home. Of course, you will probably have to do a lot of cleaning and a fair amount of repair work to make your lived-in home look appealing to buyers. You may even have to stage the home with temporary furnishings so it seems welcoming to a wide variety of potential buyers. You will probably want an agent to help you secure buyers and arrange showings.
And after you have got through all these steps, once you get into the actual transaction of selling you home, you have more paperwork to do. One of the most important tasks you have is to make legally required disclosures of issues with the property.
Federal and state disclosures
Disclosure requirements are designed to protect homebuyers from dishonest sellers who would try to sell them hazardous properties. The requirements come from both federal and Illinois law. For instance, the Residential Lead-Based Paint Hazard Reduction Act of 1992 is a federal law that requires sellers to inform buyers of any lead-based paint or chipped paint in any home built before 1978.
A power of attorney is a useful planning tool
Many people are aware that estate planning may include completing a will or trust, but sometimes overlook the usefulness of a power of attorney.
A power of attorney for finances and a power of attorney for healthcare allow a person to designate someone to act on their behalf. The person who creates a power of attorney is called the principal and the person he or she appoints to act is called an agent.
Finances
A power of attorney for finances allows the agent to make financial decisions for the principal, which may include managing the principal's money. It can also include acting on behalf of the principal for insurance and tax matters, claims and other transactions.
The principal can choose which powers to grant the agent and the agent must act in accordance with the powers allowed by the principal.
Unless it states otherwise, it will apply throughout the principal's lifetime.
Healthcare
A power of attorney for healthcare allows the agent to make healthcare decisions for the principal. These powers may include deciding to accept or decline medical treatment, admitting the principal to a hospital and accessing and disclosing medical records.
Pro hockey player files for Chapter 7 bankruptcy
In Illinois and across the United States, people are experiencing a range of financial worries because of the ongoing health crisis still engulfing the nation. That has led to major medical expenses, lost income, the inability to pay debts, the need to use credit cards for everyday necessities and more. When the bills reach a level where they cannot be paid, people are frequently unsure of what to do. There may be a reluctance to file for Chapter 7 bankruptcy because of fears about the process, how it could negatively impact the future, and the perceived stigma surrounding it. In truth, Chapter 7 is a perfectly legal and reasonable way to get into a stronger financial situation and move forward.
Even people with significant income may need Chapter 7
For those who are fearful, it might be beneficial to know there are people who have substantial assets and major income whose debts become so onerous that they need to file for Chapter 7 to get into a better position. A National Hockey League player, Evander Kane, has filed for Chapter 7 bankruptcy in California where he is under contract with the San Jose Sharks. Mr. Kane, 29, owes almost $27 million and is facing legal claims for his debts.
From our office in Geneva, Illinois, we serve clients throughout the region, including the communities of St. Charles, Batavia, Aurora, Elgin, Elburn, Sugar Grove, North Aurora, South Elgin, West Chicago, Fox Valley, Winfield, Wayne, Big Rock, Naperville, Wheaton, and Downers Grove, as well as other municipalities in Kane County and DuPage County.
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