The most frequent question I am asked about estate planning is “when should I start thinking about estate planning?” The answer is easy – now. Many people think that estate planning is only for individuals who are retired or thinking about retiring, or those individuals with significant assets. The truth of the matter is everyone can benefit from some form of estate planning. Unfortunately, all of us will pass away at some point and with the correct planning, you can be in control of what happens after you pass away.
While some of us aren’t overly concerned about what happens to our physical property after our death, we should be concerned about what happens before our death and what happens to our minor children after our death. General estate planning not only provides for what happens to your assets, but also can provide for your wishes with respect to what happens to you or your property if you become incompetent or unable to handle your own affairs. Equally if not more importantly, correct estate planning can also provide for the care and welfare of your existing minor children if something unexpected were to happen to you tomorrow. This blog will provide an overview of some of the basic estate planning tools you can use to protect yourself and your loved ones now, and after your death.
Power of Attorney
One of the more basic estate planning documents is a power of attorney. There are two main categories. The first is a Power of Attorney for Property and the second is a Power of Attorney for Health. This section will discuss both. The State of Illinois has created statutes that provide for what is required in Illinois for both the Power of Attorney for Health and Property. The statutory act that creates durable powers of attorney in Illinois is found at 755 ILCS 45/1-1.
A. Power of Attorney for Property.
A power of attorney for property controls who may act as an agent for you while you are still living with respect to your property decisions. You can grant the agent as much or as little power as you wish. The statutory powers include:
(a) Real estate transactions.
(b) Financial institution transactions.
(c) Stock and bond transactions.
(d) Tangible personal property transactions.
(e) Safe deposit box transactions.
(f) Insurance and annuity transactions.
(g) Retirement plan transactions.
(h) Social Security, employment and military service benefits.
(i) Tax matters.
(j) Claims and litigation.
(k) Commodity and option transactions.
(l) Business operations.
(m) Borrowing transactions.
(n) Estate transactions.
(o) All other property transactions.
However, the statute also provides that you may eliminate, add, or modify those powers above for your specific needs. For example, if you are purchasing or selling real estate, you can modify the powers above to only pertain to 123 Estate Lane, thereby limiting the powers of your agent to the sale or purchase of that specific property.
Another benefit to a power of attorney for property, or health, is that you can decide when you want the powers to start. Many of our clients prefer to begin the powers to their agent at such time as a court determination of their disability or a written determination by their physician that they are incapacitated. This allows our clients to have the freedom to continue to maintain their autonomy without interference until they are deemed incompetent or can’t handle their own affairs. You can also determine when you want the powers to terminate.
B. Power of Attorney for Health
A power of attorney for health is also sometimes referred to as an advanced directive. It provides your doctors and loved ones with direction as to what your wishes are if you were to become seriously ill or injured and unable to make decisions yourself. For example, the statutory form invites individuals to think about the following things when preparing to sign a power of attorney for health: “How important is it to you to avoid pain and suffering; If you had to choose, is it more important to you to live as long as possible, or to avoid prolonged suffering or disability; Would you rather be at home or in a hospital for the last days or weeks of your life; Do you have religious, spiritual, or cultural beliefs that you want your agent and others to consider; Do you wish to make a significant contribution to medical science after your death through organ or whole body donation?” These items can be provided for in your Power of Attorney for Health. We never know when something can happen to us so it is important to make sure your wishes are set forth in a legal document that your agent and doctors should follow.
Many people have heard of trusts but don’t quite understand what they are. I’ve had many clients tell me I want to put my property into trust. I ask them – why? The response usually is something along the lines of my neighbor did it and said I should too. While your neighbor might be right, it’s important that you understand what a trust is and why it is beneficial. In a very simplistic description, a trust is a legal document whereby an individual or a settlor transfers property to a trust where a trustee administers the trust according to the terms of the trust. Basically, the document you draft tells the trustee how to manage your property you have put into the trust. You can be the trustee or name someone else. Something many of my clients didn’t know is that the trustee and the trust is the legal owner of the trust assets and is responsible for administering the assets on behalf of the beneficiaries. Once transferred to the trust, the individual person will no longer by the legal owner of the asset. Some of the benefits of a trust are that the assets avoid probate, they are held out of state property, and the trust can plan for future incapacity. A trust can also replace what people think of a will. A trust can usually provide for the distribution of your assets without the need for court intervention or approval.
Most everyone has heard of a will and thinks about a will when it comes to providing how the decedent’s property will be distributed upon their death. A will allows our clients the ability to designate how his or her assets should be distributed after death and choose someone to carry out those wishes. Something that many people don’t realize is that a will can also provide for caring for a minor child after your death or other post-death concerns.
Each client is going to have different needs and wants depending on their individual situation. Something to also keep in mind is that some of your assets are already provided for depending on how title is held or how the beneficiaries are set up with respect to those assets. We will discuss your options with you and set up the most advantageous plan that works for you. Give us a call today to set up your free consultation.
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