Illinois Estate Planning and Elder Law Blog

Amy Winehouse’s death at age 27 illustrates the importance of having a Will, at any age. Ms. Winehouse and Blake Fielder-Civil were married briefly. Under English law, marriage negates any Wills made before the marriage, but if a couple divorces and there is no new Will, the ex-spouse is the favored beneficiary. Ms. Winehouse updated her Will to ensure that Fielder-Civil, who is currently in jail for burglary and possession of an imitation fire arm, would not inherit any of her estate. Under Winehouse’s Will, her estate estimated at $16 million, will go to her parents and her brother.

In Illinois, if you die without a Will, state law will determine who will inherit from you. If you are married, your spouse gets one-half of your estate and the rest is divided equally among your children.

If you have young children who will need a guardian, a Will is an important document to put in place to allow you to nominate that guardian. Planning your estate with a Will and a Trust is the best way to ensure that your assets are distributed as you want without the value of your assets and the beneficiaries who receive them made public. Continue Reading

When making gifts to charities, keep in mind the following:

• Give away appreciated stock which you have held for more than a year. You can deduct the market value of the stock, and you do not owe capital gains tax.
• Get receipts in writing from the donee for gifts over $250.
• If you are over 70 1/2 years old, transfer up to $100,000 from an IRA to charity and none will be included in your income. It will also count toward the required minimum distribution.
• If you donate a car, you can deduct only what the charity actually sells it for.

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More and more seniors are living together without getting married. According to U.S. Census date, the number of cohabitating seniors nearly doubled between 1989 and 2000. For some seniors, marriage is not financially worth it or they do not want to lose their former spouses’ military pension or Social Security benefits. Other seniors do not want to have to pay their partner’s medical expenses or deal with the objections of children worried about their inheritance.

If you and your partner plan to live together without getting married, you can take a number of steps to ensure that you are protected and your wishes are followed.

Sign a cohabitation agreement. The agreement can state your intentions not to marry or to make any claims against each other. It can also specify the division of household expenses and what will happen to your house in the case of death or breakup.

Provide access to health care decision making. If you are not married, you have no right to participate in your partner’s health care decisions or even, in some circumstances, to visit your partner at the hospital. To avoid this situation, you need several documents. You can sign a Health Insurance Portability and Accountability Act (HIPAA) medical release to allow each other access to the other’s medical information. In addition, a Power of Attorney for Health Care allowing your partner to make health care decisions will give the partner those health care decision making rights.

Sign a durable power of attorney. A Durable Power of Attorney for Property allows your partner, or whomever you appoint, to make financial decisions for you if you become incapacitated. Without a Durable Power of Attorney for Property, the court will have to appoint a guardian to make those decisions. Annual filings with the court regarding your estate’s assets will be required along with other filings with the court.

Update your will. Your will should be clear about what happens to your possessions when you die, including your house and its contents. It is particularly important to specify what will happen to your house if it is owned by only one partner. Continue Reading

1.  LOSS OF CAPACITY. What if you become incompetent and unable to manage your own affairs? Without a plan, the court will select the person who manages your affairs. With a plan, you pick that person through a power of attorney.
2. MINOR CHILDREN. Who will raise your children if you die? Without a plan, a court will make that decision. With a plan, you are able to nominate the guardian of your choice.
3. DYING WITHOUT A WILL. Who will inherit your assets? Without a plan, your assets pass to your heirs according to your state’s laws of intestacy. Your family members will receive your assets without benefit of your direction or of trust protection. With a plan, you decide who gets your assets and when and how they receive them.
4. BLENDED FAMILIES. What if your family is the result of multiple marriages? Without a plan, children from different marriages may not be treated as you would wish. With a plan, you determine what goes to your current spouse and to the children from a prior marriage.
5. CHILDREN WITH SPECIAL NEEDS. Without a plan, a child with special needs risks being disqualified from receiving Medicaid or Supplemental Security Income benefits and may have to use his inheritance to pay for care. With a plan, you can set up a Supplemental Needs Trust which will allow the child to remain eligible for government benefits while using trust assets to pay for non-covered expenses.
6. KEEPING ASSETS IN THE FAMILY. Would you prefer that your assets stay in your own family? Without a plan, your child’s spouse may wind up with your money if your child passes away prematurely. If your child divorces his current spouse, half of your assets could go to the spouse. With a plan, you can set up a trust that ensures that your assets will stay in your family and pass to whomever you wish.
7. FINANCIAL SECURITY. Will your spouse and children be able to survive financially? Without a plan and the income replacement provided by life insurance, your family may be unable to maintain its current living standard. With a plan, life insurance can mean that your family will enjoy financial security.
8. RETIREMENT ACCOUNTS. Do you have an IRA or similar retirement account? Without a plan, your designated beneficiary for the retirement account funds may not reflect your current wishes and may result in burdensome tax consequences for your heirs. With a plan, you can choose the optimal beneficiary.
9. BUSINESS OWNERSHIP. Do you own a business? Without a plan, you do not name the successor, thereby risking that your family could lose control of the business. With a plan, you choose who will own and control the business after you are gone.
10. AVOIDING PROBATE. Without a plan, your estate may be subject to delays and excess fees, and your assets will be a matter of public record. With a plan, you can structure avoidance of probate.

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Prenuptial agreements have become an important estate planning tool. Without a prenuptial agreement, a second spouse may be able to invalidate your existing estate plan. Prenuptial agreements are especially helpful if you have children from a previous marriage or important heirlooms which you want to keep on your side of the family.

It is important to make sure that your prenuptial agreement is valid. The following need consideration:

• IN WRITING. To be valid, a prenuptial agreement must be in writing and signed by both spouses. A court will not enforce a verbal agreement.
• NO PRESSURE. A prenuptial agreement will be invalid if one spouse is pressured into signing it.
• REVIEW. Both spouses must read and understand the agreement. Each spouse should seek advise from separate attorneys.
• FULL DISCLOSURE. Both spouses must fully disclose assets and liabilities. If either spouse lies or omits information about his or her finances, the agreement can be invalidated.

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One simple way you can reduce estate taxes is to give some of your assets to your children (or anyone else) during your life. There is no limit on how much you may give during your lifetime, but if you give any individual over $14,000 (in 2016) in one year, you must file an IRS Form 709 reporting the gift to the IRS. The amount over $14,000 will be counted against the $5.45 million lifetime tax exclusion for gifts.

The $14,000 figure is an exclusion from the Form 709 reporting requirement. You may give $14,000 to each of your children, their spouses and your grandchildren (or to anyone else you choose) each year without reporting these gifts to the IRS. In addition, your spouse can duplicate these gifts. For example, a married couple with four children can give away up to $112,000 in 2016 with no gift tax implications and no need to file anything with the IRS. However, if spouses elect to split a gift of $28,000 to one individual, Form 709 must be filed for both spouses to use the $14,000 exemption.

So an individual with $6 million in assets and two children and two grandchildren could gift to them in one year $56,000 (4 times $14,000) without filing anything with the IRS. If that individual made these gifts for ten years, he would have reduced his $6 million in assets to a figure under the current $5.45 million exemption and would owe no Federal Estate Tax at his death. Continue Reading

In Illinois, assisted living facility residents covered by Medicaid are not at risk of being evicted if they leave the facility for a temporary hospitalization.

The Illinois Medicaid program pays for services not just in nursing homes but in assisted living facilities which are meant to provide a home-like alternative to nursing homes. The Nursing Home Reform Law authorizes Medicaid to pay a nursing home to hold a room for a Medicaid recipient who is temporarily absent due to hospitalization and entitles the resident to return to the first available room.

Medicaid does not make similar payments on behalf of residents of assisted living facilities and the facilities are not required to give admission priority to returning residents. Illinois is one of only a handful of states which makes retainer payments to assisted living facilities on behalf of residents who are temporarily absent. Because of this law, Illinois assisted living facility residents covered by Medicaid are not at risk of being evicted if they leave the facility for a temporary hospitalization. Continue Reading

The Estate Tax was put in place in 1916 to raise revenue to finance World War I. In a recent article in the Wall Street Journal, Laura Saunders explains how this tax started as a levy with a top rate of 10% and an exemption of $50,000 (about $1,000,000 in current dollars) and today has a top rate of 40% and an exemption of $5.45 million.

The Estate Tax has never affected many people, often only affecting 2% of individuals who die each year. Also, the Estate Tax can be reduced or eliminated by putting in place planning techniques, such as gifting up to $14,000 each year to as many relatives and friends as one would like to reduce the estate size at death.

Proponents of the Estate Tax point to the goal it seeks to achieve of limiting concentrations of wealth. Opponents of the tax claim that it damages the nation’s economy by forcing sales of assets at depressed prices.

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Oregon has passed a law which allows the appointment of an individual to access the digital assets of someone who has died. This authority must be provided for in a Will, Trust or other estate planning document.

Illinois currently has no laws regarding digital assets after an individual dies.

Google and Microsoft have their own set processes regarding accessing an account when the owner has died. Yahoo and Twitter have no set processes. Facebook allows naming a “legacy contact” who can access your account after you die.

One way around the issue is to use an on line password manager, e.g. LastPass, which allows you to store account information in one place. If you were to die, the individual you had provided the information regarding the master password could use it to access all of your digital accounts. Continue Reading