Illinois Estate Planning and Elder Law Blog

This week (October 21-27, 2024) is National Estate Planning Awareness Week. Congress passed a resolution in 2008 for this to occur during the third week of October each year as it is estimated that over 120 million Americans do not have up-to-date estate plans to protect themselves and loved ones if they become ill or pass away. If you do not yet have an estate plan in place or if your estate plan is not currently up-to-date, now is the time to begin that process or to revisit your estate planning documents.

You will want to update your plan if your net worth has changed significantly since you created the plan or if you have had any of the following life changes occur:

1. Marriage, divorce, or remarriage. You’ll want to make sure an ex-spouse will not unintentionally inherit your property.

According to recent data, the majority of American investors in committed relationships say they trust their significant other and that both partners share the same retirement goals. However, over half of them have not yet put an estate plan in place.

According to Ameriprise Financial’s “Couples, Money & Retirement” report, which was released earlier this year, 95% of couples agree they are honest and transparent with each other about their finances, with 91% reporting that they share the same financial values.

Even so, many have not reached an agreement when it comes to a number of emotionally-charged decisions related to money.

Estate plans aren’t just important for older adults with large estates, they are also vital for young adults who own any assets to ensure that these assets will be handled according to your wishes should something happen to you. In this post, I’ll share about the documents you need to have as a part of your estate plan.

What Documents Are Needed for An Estate Plan?

The documents you will want to include in your estate plan may vary depending upon the specifics of your situation, but for those who are young and single, you might only need a few relatively simple documents including a will, a durable power of attorney, and an advance directive. You may want a trust to control the management and distribution of your assets if you have substantial wealth. Here are some basics about each of these documents:

There are a number of milestones associated with young adulthood – such as landing your first job with a 401k, opening a savings account, owning a car, or buying your first home – that mean that you have an estate. An estate refers to your possessions, including tangible personal property (your home, car, furniture, jewelry) as well as bank accounts, investments, pension, and life insurance policies. If you do have an estate, it is essential to also create an estate plan. Estate plans aren’t just for those with large “estates” and a lot of wealth. Having an estate plan can ensure that your possessions will be handled how you wish should you become incapacitated or pass away.

What is an Estate Plan and Why is it Needed?

An estate plan is a set of legal documents that you can use to outline your wishes for the management and distribution of your assets upon your death. You can also use estate planning documents to communicate who you want to carry out your wishes in the case of your death or incapacity. Without an estate plan, the court could choose someone you do not want to manage your estate, and your possessions could end up going to individuals you do not wish to have them.

The person you choose to be the executor of your estate could be a relative, trusted friend, or even a professional such as an attorney or financial planner.

In some cases, your choice for executor may be very clear to you. If your spouse, for example, already knows your finances well, is skilled in the types of duties required, and is “ready, able, and willing” to take on the responsibilities associated with this role, it may be logical to designate them as executor. You may also have an adult child who first comes to mind as the best fit for this role. However, there isn’t always an obvious best choice.

Here are aspects to consider when it comes to your choice for executor of your estate:

Like the quarterback of a football team, the executor of your estate is the person who calls the shots for and passes your estate through probate. Deciding who to “draft” for this role requires a lot of careful forethought. This post will focus on some of the responsibilities of an executor.

Responsibilities of an executor

It is the executor’s responsibility to shepherd your will through probate in order for assets that need to pass through probate to be distributed to the beneficiaries you have chosen. The executor must obtain a “letter of testamentary” from the court. This authorizes them to act on behalf of the estate.

In the last post, I began writing about global families and estate planning for non-U.S. Citizen spouses. Today I will write about planning for international assets and bequests.

Planning for International Assets and Bequests

Because estate planning laws can vary greatly between countries, understanding the legal intricacies of your home country, your country of residence, and the residence of your beneficiaries is crucial. Some countries have “forced heirship” laws that often prioritize family members over wishes communicated in one’s will. There are also some countries that have inheritance taxes making it that the beneficiary of a U.S. citizen’s assets may incur considerable taxes if they receive property in that country. Also, expatriates may be subject to estate taxes in both their home country as well as their country of residence unless there is an applicable tax treaty. Laws such as these can have a significant impact on the intended transfer of wealth.

Estate planning can be overwhelming for many people, and it can be even more complex for today’s global families with international loved ones or with assets outside of the United States. For instance, someone whose spouse is not a U.S. citizen must keep unique legal considerations in mind while creating their estate plan. An increasing number of families also have international beneficiaries or own properties and assets in more than one country, and the laws and tax regulations of each jurisdiction need to be taken into account.

Planning for Non-U.S. Citizen Spouses

When it comes to estate planning for a spouse who is not a U.S. citizen, the following remain the same:

For those born between 1981 and 1995, estate planning may be associated with older generations and with being very wealthy. However, many millennials are at the age where they may be starting their own families or caring for aging parents. As millennials take on more responsibility in caring for loved ones, there is a greater need to plan for the possibility of becoming seriously ill or incapacitated as well as for how their family will be cared for after their death.

Where Can I Start?

Starting with the basics can help younger clients prepare for the future and protect their loved ones:

In the last post, I wrote about some of the complexities of art in estate planning as well as some strategies to consider if art assets are a part of your estate plan. Here are some things to consider when it comes to tax implications and valuation in relation to art assets.

Tax Implications And Planning

When it comes to art estate planning, tax considerations are extremely important. The different types of relationships a seller has to the art will present specific challenges as well as opportunities to that seller depending upon if they are an artist, investor, collector, or dealer. Tools such as charitable remainder trusts, qualified opportunity zone funds, and deferred sale trusts can lessen tax burdens while still protecting the collection’s legacy.