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.

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.

In 2019, he signed a contract with his team for seven years and $49 million. He has stated that he might not play in 2021 due to the health crisis and that he has a newborn baby. He would not be paid for 2021 if he left because the opt-out date for this season was on Christmas Eve. For his career, he has earned approximately $53 million. His assets are reportedly around $10.2 million. According to the bankruptcy petition, he suffered $1.5 million in gambling losses since last year. He had other gambling costs and supports much of his family including his parents and his child.

The year 2020 made everyone think about their own mortality, which made estate planning a hot topic last year. And, as this year has started off much like last year has ended, estate planning is still a hot topic. However, many worry about the expense.

Who needs an estate plan?

In a word, everyone. Remember, estate plans include living wills (advance directive), powers of attorney, traditional wills, etc. It is not just about property division; it is about how one wants to be treated when they cannot make their own medical decision and even what one wants to happen to their body once they pass. This is why everyone needs an estate plan.

However, even though it is so important and has been such a hot topic last year and this year, less than a third of us have even drafted one such document, according to a survey by Caring.com and YouGov at least. Unfortunately, cost may be a factor in this.

Filing for bankruptcy helps protect assets if debt becomes overwhelming. While Chapter 7 may provide a fresh financial start, bankruptcy law does not protect all debtor property from creditors.

Chapter 7

A Chapter 7 bankruptcy allows the discharge, or remove liability, of most debt owed on the date the bankruptcy is filed. It is typically a three-month process.

Some property may be lost in this bankruptcy. Property transferred before the bankruptcy filing may be reversed to the debtor.

Everyone should have an estate plan, no matter how healthy, young, or old they are. Planning what will happen to assets after death can help people ensure that their property is distributed according to their wishes. There are many options in the state of Illinois to legally bind what happens to property after death.

Types of trusts

There are two types of trusts in Illinois: revocable and irrevocable. A revocable living trust is a trust account that is set up by a person while he or she is still alive that can be changed or completely revoked (cancelled) at any time. An irrevocable living trust cannot be modified or revoked after its creation.

Creating a trust

Creating a trust is done by drafting a trust document that states the property to be put into the trust, who the trustee is (the person put in charge of day to day management of property in a trust – can be an individual or a bank, or both) and who the beneficiaries are. The trust document also spells out how to distribute the property that has been placed in the trust.