What is estate planning?
Estate planning is the process of legally preparing for eventual death and potential incapacity while you are still competent. During this process, you name the guardian of any minor children, decide who will make personal, medical and financial decisions for you if you are unable, direct distribution of your assets, give directions regarding the disposition of your remains and more. Estate planning turns your wishes into an eventual reality with binding legal documents.
What estate planning documents do I need?
At least four essential documents make up a typical estate plan: a will, HIPAA authorization, power of attorney for health care and power of attorney for property (financial matters). For many people of moderate means, the fifth essential document is a revocable living trust.
Estate plan documents cover the fundamental decisions you’ll need to make regarding your health care and guardianship over minor dependents, along with preservation and distribution of assets.
When do I need estate planning?
Every legal adult can benefit from estate planning. When you reach legal adult age (18 or 21), you become responsible for deciding what you want to happen upon incapacity or death. If you don’t have legal documents selecting the person who controls financial and healthcare for you or determining where your assets go, a court of law will make these decisions for you. The results may be contrary to your wishes.
Estate planning is something that you may do gradually and incrementally over your entire adult life to accommodate growing assets, children, elderly parents and more.
Do I need estate planning if I have no heirs?
Yes. Everyone has heirs, depending on your state intestacy formula. If you truly have no legal family connections, the state becomes your heir. Upon your death, without an estate plan, your assets will be distributed to someone, according to the law. The result may be an outcome that is unintended.
Even if you’re single and don’t have any children, you should still have a HIPPA authorization, living will, healthcare power of attorney, durable power of attorney for property and will. Many people also benefit from having a funded revocable living trust.
Can you plan your estate without an attorney?
Few people benefit from “do-it-yourself” estate planning. State laws have specific rules that dictate what can and cannot be in a will, trust and overall estate plan.
If you write your estate plan without a lawyer’s counsel, you could accidentally end up with a plan that is not legally valid. If this happens, your family could spend thousands of dollars in probate fees in a court of law, with your estate eventually being distributed in a way that you would not desire.
We recommend working with a lawyer who concentrates his or her practice on estate planning and understands the process that will help you create an estate plan that meets your goals.
Are estate planning legal fees tax-deductible?
If your estate plan includes documents that have to do with the collection of income, management of income-producing property or tax advice and planning, the fees related to the construction of these particular documents may be tax-deductible according to IRS Publication 529.
Generally, fees related to the preparation of a will, power of attorney or medical directive such as HIPAA authorization or health care power of attorney are not tax-deductible.
What is the difference between estate planning and estate administration?
Estate planning is a task you and your attorney complete before your death or incapacitation to select your fiduciaries (executor of the will, agent under power of attorney, trustee and successor trustees of trusts) and determines how your assets will be handled.
Estate administration includes trust administration, which may be done without court involvement, and probate, which is done under the auspices of the appropriate state court. In either case, estate administration occurs after certain death and potential incapacity.
What is probate?
Death probate is the legal process of distributing a deceased person’s estate. A judge determines the validity of a will, if one exists, grants authority to a legal representative of the estate (an executor if a valid will exists) and presides over the process of liquidation and distribution of assets. Eventually, the probate estate is closed. Probate can be a complicated public ordeal, though in some cases it is a simple formality.
Living probate, also known as guardianship or conservatorship, involves persons who are, or who are alleged to be, incapable of handling their assets. Durable powers of attorney for property, along with revocable trusts, can often minimize or completely avoid the legal stress of transition from full capacity to incapacity.
How do I avoid probate?
The best way for many people to avoid probate upon death is to have a fully funded revocable living trust. When you place your assets in a revocable living trust, you can use them any time during your life — and however you want. Once you die, the assets in your revocable living trust are passed to your beneficiaries with minimal effort. To state the obvious, trusts don’t die, though they cease to exist upon full outright distribution or when they no longer own any assets.
You may also avoid probate over a financial account, retirement plan or insurance policy by naming beneficiaries using a form provided by the financial institution with whom you work. In some states, you can record a document that names a beneficiary of your real estate, transferring it more or less automatically upon your death.
Owning assets in joint tenancy with rights of survivorship may also avoid probate. For a variety of reasons, joint tenancies work best in limited situations.
What is the difference between a will and trust?
A will only goes into effect after you die. A trust may benefit you both during your lifetime and after your death.
A will directs distribution of your individually owned assets after you die, names an executor to administer your estate and a guardian for any minor children. A revocable living trust can be used to manage and distribute your property before and after your death.
Both wills and revocable living trusts may provide for testamentary trusts to control assets following your death.
What is the difference between a Living vs. Testamentary Trust and a Revocable vs. Irrevocable Living Trust?
A living trust is a trust that you create during your lifetime and may either distribute its assets to other beneficiaries upon your death or morph into a testamentary trust to further control the manner in which assets are distributed to beneficiaries. If your will creates your testamentary trust, then the testamentary trust can only go into effect via probate after death.
You can change or rescind a revocable living trust after its creation, but you give up control over assets owned by an irrevocable living trust. A revocable living trust becomes irrevocable upon your death, though upon death both revocable and irrevocable trusts may either distribute its assets outright to beneficiaries or continue to control them via testamentary trust provisions.
What kind of trust should I use?
A revocable living trust is typically the centerpiece of many estate plans, encompassing distribution of your assets as you wish. Since trusts do not die, assets owned in trust are not subject to probate. Revocable living trusts can be changed or revoked at any time throughout your lifetime to accommodate life’s journeys. We recommend revocable living trusts for many people of moderate wealth.
We sometimes suggest an irrevocable living trust for people with estate tax “problems,” including those with large life insurance policies. We may also recommend them to people divesting their estates for other reasons, including creditor protection arising from employment in a profession that puts assets at risk from lawsuits. In many instances, when you place assets into an irrevocable living trust, they are no longer yours and therefore cannot be taken by your creditors.
Chicago’s Trusted Estate Planning Partner
At Matlin Law Group, our goal is to help as many families as possible feel comfortable with the estate planning process. Our initial estate planning consultation is intended to be a get-acquainted session to see if we’re comfortable working together and generally lasts 45 minutes to an hour.
What Our Clients Are Saying About Us:
Dear Eric, I just want you to know how much I appreciate everything you've done for me and the thoroughness with which you did it. You are indeed a most impressive will-maker, including the the serendipitous coverage your "compulsivity" supplies. You truly lift the experience from the quotidian to an art-form. In addition, you are a real mensch, in its best sense: open, warm, caring, understanding and honest. Again, my thanks to you and your staff for your help. With best wishes, S.B
Eric and Julie: On behalf of the Edgebrook Women's Club would like to thank you and express our gratitude for your wonderfully informative presentation to our group. As was evident from the many questions your information was needed, very well received and your situational examples registered with many in the audience. Thank you again for providing a much needed and informative presentation.
"Eric, Thanks again for helping me get this signed and completed. It's a big comfort knowing that my will and estate is in order. Thank you again for your generosity and friendship. I really appreciate being able to get this taken care of and with a certain level of confidence. I trust you and feel really comfortable with your advice. I've already referred some friends to you. I will continue to be your advocate and biggest fan!"
"We felt very comfortable with both attorneys. We would feel comfortable if we had to call to have questions answered. The atmosphere with Mr. Matlin was great, and we left the office feeling positive about something that is so important to us."
"I believe Eric did an excellent job communicating the related issues, options and was very helpful in assisting in making final decisions. The process was very helpful and resulted in us making the right decisions for ourselves. It was very easy and educational to work with Eric Matlin and his team."
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