Leave your Trust to your Grandchildren NOT the Government!

A Dynasty Trust in Roselle and Schaumburg Can Help Leave Your Assets to Your Grandchildren – Not the Government!

A lot of people complain about high taxes. Looking at what the government takes from your weekly paycheck can be frustrating. But, it could be worse. Even people who don’t complain about taxes (there are a few) and understand it takes money to run the government would complain if they understood that it is possible for the government to tax the same money over and over and over. And, it happens more than you think.

Here’s a scenario:

You and your spouse leave a very large amount of money to your daughter without a trust – or, in a poorly drafted trust (yikes!). The money is taxed when it is transferred to your daughter. Your daughter leaves money she inherited to your grandchildren without a trust. Guess what? You’ve got it – that money is taxed again!

It is upon learning this that a well-meaning grandparent suggests leaving the money to their grandchildren rather than the child to avoid one of those tax events. Not so fast! In that scenario the federal generation-skipping transfer tax could apply.

Here’s another scenario:

You and your spouse leave $10 million to your child. If her inheritance grew over time, it would be subject to the estate tax at her death. That could result in millions going to pay estate tax.

There is a solution that could be used to stop the government from double-dipping. It’s called a Dynasty Trust. Assets that you put in a dynasty trust, plus any interest earned over the years, are still subject to federal estate tax, but just once – when you transfer them into the trust. The assets will not be taxed again even though several generations can benefit from them.

It’s important to note here that income taxes are still due on any income that is generated by the assets in the trust. Therefore, most people choose to put assets that do not earn money in the trust, such as growth stocks that don’t pay dividends and life insurance policies.

Dynasty trusts are complex legal documents, so they should be prepared by experienced estate planning lawyers in Roselle and Schaumburg who have experience with trust and tax planning strategies. If you are interested in talking with an attorney with this experience, call our office at 630-908-2752 to set up a consultation.

Long-Term Care Insurance

Everything You Need to Know About Long-Term Care Insurance from a Roselle and Schaumburg Elder Law Attorney

Long-term care is one of the most common dangers to the life savings of senior citizens. The fear of losing assets, possessions, and homes drive people to search out ways to protect themselves from the enormous costs associated with long-term care.

Many seniors turn to long-term care insurance, which is supposed to cover them through expensive medical episodes and pay for life in an assisted living or nursing home. However, there is a lot that seniors need to know before buying long-term care insurance and deciding on the best plan for their individual situation. Elder law attorneys in Roselle and Schaumburg have laid out some of the issues seniors should be aware of when thinking about long-term care insurance.

One thing seniors should know when making decisions about long-term care is the average amount of time for stays in nursing homes. Typically, most seniors will not stay in a nursing home any longer than 6 months – if at all. Unfortunately, many long-term care insurance policies lapse before the beneficiary ever makes it into a nursing home, and if benefits are paid to the nursing home through the insurance policy, they’re usually much less than the actual cost of care. As an investment in your well-being, long-term care insurance may not hold up.

In some cases though, long-term care insurance may be a good decision – usually if you look at it in terms of a safety net rather than a be-all, end-all to paying for long-term care. Most experts, including Roselle and Schaumburg elder law attorneys, agree that long-term care insurance is a worthwhile investment only if the premiums amount to less than 5% of your monthly income – keeping in mind that your income will drop as you age while the premiums will rise. In addition, it is advised that you do not even consider long-term care insurance that does not cover assisted living facilities, as it is far more likely that you will stay in an assisted living facility for a greater amount of time than you would stay in a skilled nursing facility.

Once again, with all of this in mind, your individual situation is what will truly determine whether or not long-term care insurance is a sound investment for you. A Roselle and Schaumburg elder law attorney can meet with you to determine your situation and plan out your future needs in order to advise you better when you’re making a decision regarding long-term care insurance.

If you have any questions about long-term care insurance, or if you’d like to have your long-term care insurance policy reviewed to make sure it’s the correct one for your situation, please call our Roselle and Schaumburg elder law firm at 630-908-2752 to schedule a consultation.

5 Steps to Making a Living Trust

Roselle and Schaumburg Wills and Trusts Lawyer: 5 Steps to Making a Living Trust

A living trust is a perfect document for protecting privacy, avoiding probate, and determining who can take care of your affairs while you’re incapacitated and after you’ve passed on. It’s often an essential element for estate plans in Roselle and Schaumburg as it gives an extra layer of protection to estates and gives the trust maker, also known as the Grantor, added peace of mind that their interests will be protected and their wishes will be carried out. So before you visit a Roselle and Schaumburg wills and trusts attorney to set up your living trust, there are some issues you should start thinking about in order to give yourself the best opportunity to achieve your estate planning goals:

  1. Pick the Goals You Want to Achieve with the Trust

Each person has different needs when it comes to estate planning, and there are many goals that a living trust can help you achieve. For instance, if you want to keep your financial and personal affairs private and avoid a long, drawn out probate proceeding, a living trust will ensure your wishes are met.

 

  1. Determine What Assets You Want Protected By the Trust

Once you’ve planned your goals, you will want to decide which assets you’d like to place in a trust. Many people will put their house in the trust since it is their most valuable asset and will likely put them over the threshold when determining whether their estate will go through a large or small probate process. In addition, you may want to consider which financial accounts should go into the trust (typically those held solely in your name) and which should stay out.

  1. Decide Who Will Act as Successor Trustee
    A successor trustee will not only be responsible for the administration of the trust estate once you pass on, but may also be called on to handle your affairs if you become incapacitated, or possibly if you do not want the responsibility of handling your own affairs at a certain point. The successor trustee may also be in charge of managing any property or assets left to minors in your trust, so it is important that you choose someone with a keen financial acumen who you can trust to carry out your wishes.

 

  1. Choose Your Beneficiaries
    It’s your decision as to whom you want to leave a financial legacy for in your living trust, and it’s something that you must think about very carefully. If you make a choice to omit a family member from your estate plan who would otherwise expect to receive an inheritance from you, it may be a good idea to leave behind an explanation of your wishes concerning the matter.
  2. Hire an Experienced Roselle and Schaumburg Wills and Trusts Lawyer to Draft Your Trust
    There are a lot of do-it-yourself programs and cheap alternatives available for creating a living trust, but unfortunately, these documents are often inadequate and will not hold up under probate court scrutiny. That’s why it’s important to research experienced wills and trusts attorneys in Roselle and Schaumburg to draft your trust so you have peace of mind knowing that it’s done correctly and your wishes will be carried out.

If you have any questions about setting up a living trust, or if you’d like to have your existing living trust reviewed in order to make sure it is set up properly for your situation, please give our Roselle and Schaumburg wills and trusts firm, Haugh Law Group, a call at 630-908-2752 to set up a consultation.

Annual Estate Plan Review Checklist for Illinois Resdents

Hopefully you go to the doctor for a yearly physical. Getting a good checkup gives you a feeling of contentment
knowing you are doing all you can do to keep yourself healthy. Have you considered a yearly estate planning checkup? Going through your documents and reassessing your decisions will give you peace of mind knowing you’ve done all you can do to keep your family secure if something happens to you.An annual review doesn’t mean you have to read the legal documents front-to-back. Just go through the most important elements to make sure you would make the same decisions today. Here’s a checklist that will walk you through the process:
  • Major life changes

Have you had any life changes since you last updated your estate plan? Have you gotten married? Have you had a child? Have you recently moved from another state? All of these life changes may impact you estate planning which require your will or trust to be updated.

  • Consider your executor and/or trustee designations
Is the person you selected to be executor the person you would select today? If circumstances have changed and you now question whether this person is responsible and trustworthy you should consider updating your will or trust. Also, if you named one person, you may want to choose co-trustees who would work together. You may also want to set up additional levels in case your first choice of trustee is unable to execute.
  • Grandma’s wedding ring
Is there a particular family heirloom or other item or property that you want to go to a specific person? You might now want to update your will or trust to make sure that happens.
  • Financial power of attorney
Your financial power of attorney will act for you in a wide array of financial and business matters. It is essential that you think about the person you named and make sure that you still consider them the best choice for you.
  • Your health
Review your health care power of attorney to make sure that the person (or people) you named is someone you still trust to make major medical decisions for you. If your health care power of attorney lives in another city or state, you might want to consider naming someone local in case of an emergency.
  • Life insurance and retirement funds
While technically not a part of your estate plan, be sure to assess the choices you made as beneficiaries of your life insurance and retirement plans. Many people forget to update these after a divorce and you certainly don’t want your ex-spouse to inherit those funds.
This checklist should take you quickly through some of the most important parts of your estate plan here in Roselle, IL. If you need to update them, don’t delay. Procrastination is not your friend when it comes to estate planning!

Working with a Business Planning Lawyer to Choose a Business Entity: Part II

A previous post looked at some of the most common business entities that a Cook County business planning lawyer will recommend for clients. From the simplicity of a sole proprietorship to the complexity of a C corporation, that piece shared some advantages and disadvantages of each entity when it comes to implementation, accountability, and taxation.

With so much at stake, it’s a good idea to familiarize yourself with all of the choices for setting up your business the right way. Most of the information in these two articles applies to Federal aspects of business ownership, as states have their own requirements. That’s just another reason to work with a qualified Cook County business planning lawyer, as he or she will be able to outline specific state laws and regulations that apply to your situation. This is a very limited view into the different business entities, so consider it a jumping-off point for more research.

Today’s post introduces a few more options that an individual might want to discuss with a business planning lawyer in Cook County before making a decision.

  • Single Member Limited Liability Company: Sometimes a single business person prefers for their business to be treated like an LLC. Of course, the difference is that there is only one member. Like a sole proprietorship, the member may file taxes using his or her individual taxpayer form 1040. However, the member may also choose ‘S’ or ‘C’ corporation taxation.
  • Limited Liability Limited Partnership: Because it is only an option in some states, the input of an Illinois business planning lawyer is particularly helpful when considering this entity. Just as a limited liability partnership works similarly to a general partnership but with limited liability, a LLLP works similarly to a limited partnership with the addition of limited liability. Tax-wise, it works much like a general partnership, too.
  • Professional Corporation: This type of entity is only available to specific types of businesses and limits the business to providing only those services. There are also stringent regulations on who may or may not hold shares in the company. A doctor, attorney, or other professional would likely want to discuss this type of entity with a business planning lawyer when starting their own practice.
  • Corporation Sole: With some rising popularity, this type of entity is generally reserved for religious purposes. The temptation to use this business entity is huge because it can circumvent Federal taxes. That said, the IRS recognizes that businesses are attempting to get out of their legal tax obligations in this way, and they are not pleased. It is highly recommended to consult with an experienced Cook County business planning lawyer before even considering corporate sole.

Whether this list has made your head swim or has cleared your thinking on the subject, choosing a business entity is something that should be done carefully. Working with a Cook County business planning lawyer is a great way to make sure you’re seeing all of the implications before making a legal commitment.

DuPage County Will and Trust Lawyer: Should My Will Have Co-Executors?

When making an estate plan and Last Will and Testament, many people have a difficult time deciding who should be the Executor of their estate. Oftentimes they will consider naming Co-Executors – two or more people who serve as executor of the estate. Each Co-Executor named in your Last Will and Testament will have authority over your estate, and therefore must collaborate and work together to ensure your estate is settled in accordance with your wishes. But is this the right choice for you? Below are some pros and cons to naming Co-Executors in your Will.

Pros for Naming Co-Executors of an Estate

One of the reasons Co-Executors are named in an estate is if there are multiple types of assets that need to be handled. The best example of this would be if you owned digital assets along with tangible assets, yet the Executor you want to name for your estate would not be correctly suited to handle digital assets. In this case, you may want to name a Co-Executor specifically to look after your estate’s digital assets. The same could be said for real estate or automotive properties. DuPage County Will and Trust lawyers often bring this scenario up with their clients and encourage them to carefully consider their options when naming Co-Executors to settle their estate.

Cons for Naming Co-Executors of an Estate

Most DuPage County Will and Trust lawyers advise their clients to think very carefully about the dynamics that exist between the people they would name as Co-Executors. Many times the stresses of being named Co-Executor can lead to fighting, and in some cases litigation, if the Co-Executors do not see eye-to-eye. In addition, if it’s possible that the Co-Executors may not work well together or will have difficulty carrying out their duties because they live in different areas, you may want to consider naming just one Executor. Proper planning and communication with your Executor / Co-Executors may solve some of these problems, but once again it is suggested that those considering naming Co-Executors weigh the potential benefits against the probable risks.

It should also be noted that in some cases, even if Co-Executors are named in a Will, one or more of the Co-Executors will resign from their position in an attempt to make the process a bit easier by reducing the amount of people involved in authoritative roles. This is something that DuPage County Will and Trust lawyers discuss with their clients during the estate planning process, so their clients are aware of the different possibilities that may happen once they’ve passed.

If you have any questions about naming Co-Executors in your Last Will and Testament, or if you want your estate plan reviewed to make sure it is in accordance with your wishes, please contact us at 630-908-2752 to set up a consultation.

Western Suburbs Elder Law Attorney: Getting Tax Deductions from Assisted Living Expenses

The costs of assisted living facilities continue to rise for seniors and their families, leaving them struggling to make sure their loved ones are receiving the care they need and deserve. While it seems like sometimes there is just no relief from these rising costs, Western Suburbs elder law attorneys often advise their clients about tax deductions which may be available to them. Medical expenses (which include many long-term care expenses) that account for more than 10% of gross adjusted income for taxpayers under 65 and more than 7.5% of gross adjusted income for taxpayers 65 and older are deductible. However, there are many qualifications that must be met in order to receive these tax benefits.

When advising their clients, Western Suburbs elder law attorneys list the following criteria that must be met in order for them to receive the tax deductions:

  • A care plan for personal care services must be put in place by a licensed health care provider such as a doctor, nurse, or social worker. While many assisted living facilities make care plans for their residents, do not assume this will always be the case.
  • The senior must be deemed “chronically ill” by a health care provider, meaning they either need to have a cognitive impairment such as dementia or need assistance with at least two of the activities of daily living: eating, bathing, toileting, continence, walking (transferring), and dressing.

However, even if these conditions are met, there are still some matters that need to be clarified in order to receive the full benefit of the assisted living tax deductions. For example, room and board are typically not allowed as tax deductions – unless the senior meets the above requirements and is in the assisted living facility primarily to receive medical care, as the room and board is then considered a medical expense. In addition, any medical costs reimbursed by an insurance policy cannot be used when calculating the deduction.

Western Suburbs elder law attorneys advise that even if the seniors are in the assisted living facility for non-medical reasons, there are still some options for receiving tax deductions. Assisted living entrance fees are often counted as medical expenses for tax purposes, and assisted living facilities are required to outline the portion of their fees that are medical-related.

Adult children and family members that claim seniors as a dependent are sometimes eligible for assisted living tax deductions as well, once again as long as they meet certain criteria. The adult family members, either singularly or together, must contribute at least half of the senior dependent’s support for the year. If there are multiple family members supporting the senior, each contributing family member must pay more than 10% of the senior’s total support for the year and needs to sign a Multiple Support Declaration.

If you have questions about qualifying for the assisted living tax deduction, please contact our office at 630-908-2752 to see how we may help you.

Schaumburg Wills and Trusts Lawyer: How to Handle Underage Beneficiaries

Many grandparents wish to leave a legacy behind for their grandchildren; however, they may run into some issues if those children are underage. A Schaumburg Wills and Trusts attorney can help you determine what the best options are for leaving assets to underage beneficiaries, whether those assets are held in a Will or Trust, financial accounts, or as part of a life insurance benefit.

Underage Beneficiaries in a Will or Trust

Schaumburg Will and Trust lawyers will always ask their clients if any of their beneficiaries are underage, or even if they would like to keep younger beneficiaries from accessing their full inheritance until they’ve reached a certain age, which is usually 25. If the children are underage, an adult property guardian must be named since minors are not allowed to own property. If a significant amount of property is left to the minor, a Trust should be set up to manage the property until the child comes of age. In fact, Trusts can be used to ensure the minor only receives their full inheritance once they reach a certain age or milestone, such as graduating from college, while at the same time providing assets to make sure the child can achieve that milestone. A Schaumburg Wills and Trust lawyer can speak with you about leaving an inheritance to an underage child and will help you choose the best option for administering the distributions.  

Underage Beneficiaries of Financial Accounts

Many people choose to make beneficiary designations directly on their financial accounts, such as savings accounts, annuities, and retirement plans. Schaumburg Wills and Trusts attorneys urge their clients to carefully examine the details surrounding these beneficiary designations, as minor beneficiaries often cannot directly inherit assets after your passing. It is important to consult with a Schaumburg Will and Trust lawyer to determine the best way for your underage beneficiaries to receive the inheritance you leave for them at the time when they can make informed financial decisions on their own. Directing the assets to a Will or Trust is often the best bet in these situations, but consulting with an attorney will give you a much better idea of how this should be done.

Underage Beneficiaries of Life Insurance

Many parents and grandparents name their children or grandchildren as beneficiaries on their life insurance policies. As with the cases above though, an adult guardian or a Trust must be named in order to hold the life insurance proceeds until the minors come of age. It is generally not advised to name minors as beneficiaries to life insurance policies, as courts will often appoint an adult to look after the proceeds until the child comes of age – and that adult may not be someone you would have wanted appointed to such a role. Speaking with a Schaumburg Will and Trust lawyer may help you determine the best way to handle your life insurance beneficiary designations.

If you have any questions about the best ways to leave an inheritance to underage beneficiaries, please contact us at 630-908-2752 or s.haugh@haughlawgroup.com to set up a consultation.

Western Suburbs Probate Lawyer: Issues to Consider with an Out-of-State Probate

It’s become more and more common now to see clients come in with probate cases that need to be dealt with in multiple states. Many seniors today are “snow birds,” meaning they spend their winters in states with warmer climates while keeping their actual residency in the state they’ve spent most of their lives in. These seniors often own property in the state where they spend their winters, whether it’s real property like a vacation home or timeshare, or even tangible property like a car, boat, or financial account.

When the senior passes away, a situation is created where an out-of-state or ancillary probate proceeding must take place to administer the out-of-state property. Whatever the case may be, clients dealing with an out-of-state probate often need help since they are dealing with two or more sets of probate rules and regulations, all of which differ from state to state.

Western Suburbs probate lawyers find that one of the biggest issues involving an out-of-state probate proceeding is cost. Typically, you will need to pay probate court fees for each property held under a different probate court jurisdiction. In addition, you may be faced with extra accounting and legal fees. If possible, you should try to find an attorney who is licensed both in the home state of the deceased and the state where the ancillary probate is taking place. While the fees may be higher than usual due to multiple probate filings, it will still likely be cheaper than hiring more than one attorney to deal with property and assets in each respective state.

Another serious issue can arise if the decedent did not leave behind a Last Will and Testament. When this happens, the probate court will often order distributions of the estate based on the laws of intestacy. The problem with out-of-state probates is that every state has different laws of intestacy, meaning the heirs in one state may not be the same as the heirs in another. This is a very tricky situation and one where Western Suburbs probate attorneys urge their clients to proceed with caution as it may cause additional stress for already grieving family members.

Are there ways to avoid an out-of- state probate proceeding? Yes, but it all depends on the state where the additional property is held since, as noted before, every state has different laws concerning probate. Some of the techniques Western Suburbs probate lawyers use to get around an out-of-state probate often involve placing the property into a revocable living trust, owning the property jointly with someone else, or drafting a type of deed where the property is transferred upon death.

However, Western Suburbs probate lawyers caution that this type of planning must be done BEFORE death, and attorneys must be consulted to make sure these techniques will actually work in the state where the property is held.

If you are currently dealing with the complexities of an out-of-state probate and need assistance, or you would like to plan ahead to avoid the possibility of an ancillary probate for your loved ones, please contact us at 630-908-2752 or s.haugh@haughelderlaw.com to set up a consultation.

Developing a Qualified Personal Residence Trust with a DuPage County Estate Planning Lawyer

Most people recognize that DuPage County estate planning lawyers work hard to protect their clients’ assets to maximize an estate after the individual’s death, but this is really only one aspect of the job. Estate planning lawyers help families and individuals to plan for their own futures with retirement planning, help with investment strategies to increase personal wealth, and provide legal advice on lowering the amount of taxes their clients are required to pay.

A Qualified Personal Residence Trust is a tool that can play into each of these concerns. Often referred to as a QPRT, this allows a client to transfer ownership of a personal residence to his or her children while retaining the right to live in the home rent-free for an agreed upon period of time. The parent basically has free-rein over the house, but it legally belongs to the children.

Estate planning lawyers in DuPage County might suggest this option to clients who are seeking ways to lower the value of their taxable estate. When the parent passes away, the home isn’t subject to estate taxes because the trust is not considered a part of the taxable estate. It can be a pretty great deal, especially since it also affects gift taxes positively, with less taxes owed overall due to the decreased value of real estate that comes with the stipulation that someone else can live there without paying rent.

While the parents are in residence, they are responsible for upkeep of the property. Whether it’s regular maintenance, remodeling, or real estate taxes, the beneficiaries of the trust are off the hook during the time the parents remain in the home. Money paid for these purposes is considered to be a gift to the trust. These things can get a little complicated, but a good DuPage County estate planning lawyer will be able to thoroughly discuss the advantages and disadvantages of a QPRT.

Speaking of disadvantages, there are some to consider. For example, if the property appreciates in value, there may be capital gains taxes for the children to pay. Additionally, the trust won’t lower the taxable estate value if the parent passes away before the agreed upon term has expired.

As mentioned, the QPRT is a tool that an estate planning lawyer may suggest in order to fulfill multiple needs: planning for retirement, lowering taxes, investing, etc. It’s not the right choice for every family situation, but it is something worth considering with your DuPage County lawyer.

If you are interested in learning more about QPRTs and other estate planning strategies, please contact us at 630-908-2752 or s.haugh@haughlawgroup.com to set up a consultation.