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To ensure compliance with the requirements imposed on us by IRS Circular 230 (31 C.F.R. 10.33 – 10.37, et. Seq.), we inform you that to the extent the information on this page mentions any federal tax matter, it is not intended or written and cannot be used, for the purpose of avoiding Federal Tax penalties.

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Wednesday, October 24, 2012

Make Sure You Understand Your Estate Plan

I have met with several widows and widowers over the past few weeks that have been surprised by the mechanics and requirements of their own living trust plans after the recent death of their spouse. These plans were drafted and prepared by other attorneys. It is imperative that when you create an estate plan, you fully understand what will happen when either you or your spouse dies or becomes incapacitated.

When drafting estate plans, the experienced estate planner has no problem understanding the plan he or she created. Unfortunately, many of the clients are confused or don't bother to consider the real-life consequences of what they are signing. When it becomes a problem, it may be too late to rectify.

There is nothing wrong with an attorney explaining in lay terms portions of your estate plan that are necessarily complex and you relying on those explanations. However, if the explanations are unclear, you must insist that the estate planning attorney spend some extra time with you so that you are comfortable and that you understand what will happen when things in your life change. Insist on clarification.

Monday, October 15, 2012

Picking Agents For Your Powers of Attorney

In Illinois, many estate planners use the Statutory Short Form Powers of Attorney for Property and for Health Care. This is usually a wise choice, as the forms are easily recognizable by financial institutions (for the Property POAs) and health care providers (for the Health Care POAs).

A request that I frequently receive is to have multiple persons act as co-agents under a power of attorney. The form does not allow for co-agents, and with good reason.

One of the major reasons to have a power of attorney is to appoint an individual to be your decision maker if you are unable to make decisions for yourself. Appointing co-agents would complicate matters, particularly if the co-agents cannot agree. This may render your power of attorney form useless.

There is no problem with naming successor agent(s), but only one may serve at a time. Also, there is no problem having different agents under your Property POA and Health Care POA. If you are married, you do not have to list the same agents as your spouse.

Wednesday, October 3, 2012

Leaving Your Assets to Your Adult Children in Trust

When designing an estate plan for clients with adult children, it is common that I am asked to make the distribution to kids upon the death of the parent(s) outright and free of trust. This is true when the  parent(s) consider the children to be mature and fiscally responsible.

Unfortunately, a valuable planning opportunity is lost with this type of set-up. Why not consider leaving the funds to the adult children in trust and allow them to receive income and principal as needed? You may even make them co-trustee or sole trustee of their own trust!

You may ask "What's the point, then?" and the answer would be that leaving the assets to your children in trust, even one that they may control, provides valuable protection for the children in case of creditor problems or divorce.

Consider this type of planning and you will be providing a valuable benefit for your children.

Thursday, April 19, 2012

Monday, January 16, 2012

Estate Taxes in Illinois

The uncertainty surrounding the exemption amounts for Federal and Illinois estate taxes for 2012 and beyond has caused confusion for many clients. For 2012, the Federal estate tax exemption rises to $5.12 million (adjusted for inflation from the 2011 amount). After 2012, unless new laws are passed by Congress, the exemption amounts reverts to $1 million.
In Illinois , the exemption amount was increased to $3.5 million for 2012 and $4 million for 2013 and thereafter.
Therefore, in 2012, we have the same situation as in 2011, where an estate may be exempt from Federal estate tax, but subject to the Illinois estate tax.
Unless Congress extends the higher exemption amounts after 2012, 2013 could have estates subject to Federal estate tax and not subject to Illinois estate tax.
The bottom line is to have your plan reviewed to make sure that you are ready for any possibility.