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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.

DuPage County Estate Planning Lawyer: What happens to your mortgage after you die?

What happens to my mortgage when I die?

When setting up an estate plan, most people are concerned with what will happen to their belongings: money, jewelry, house, etc. But little thought is ever given to what will happen to their debts when they pass away, notably their mortgage.

For years, many people expected to pay off their mortgage long before they died, but the current financial landscape paints a much different picture, especially as more and more seniors take out mortgages and home equity loans to cover cost of living expenses. An analysis of data from 2001 – 2011 showed the number of homeowners aged 65 and over who held a mortgage increased from 22% to 30%, while homeowners aged 75 and over who held a mortgage more than doubled from 8.4% to 21.2%. These startling figures may prompt estate planning clients in DuPage County to ask themselves, “What happens to my mortgage if I die?”

The simple answer to that question is that after you die, the mortgage belongs to whoever inherits your house. The complications arise when it comes time to determine how exactly the mortgage will be paid off. Below are some common scenarios that DuPage County estate planning attorneys have seen when a person dies while holding a mortgage.

Your estate pays off the mortgage. This may be the most desirable scenario, though it can only occur through careful legal and financial planning. In order for the estate to pay off the mortgage, the estate must of course have enough assets to cover the debt. This may leave your beneficiaries with less cash distributions, but they will own the house free and clear. It is possible to make a provision in your Last Will or Trust to have the mortgage paid through estate or trust assets, but it is recommended that you consult with a DuPage County estate planning attorney to determine what your situation is and how to best address it.

Your beneficiaries pay off the mortgage. Of course, beneficiaries may already have mortgages of their own, so this could lead to some complications. If the beneficiaries are willing and able, they may take over the monthly mortgage payments for your house. In this case, your beneficiaries could refinance to get a better interest rate on the mortgage. If your beneficiaries already own their own home and have a mortgage, they could sell either their home or the inherited home to pay off the respective mortgages.

If the property is worth less than the value of the mortgage, confer with the lender to see if a short sale is possible. If the lender agrees to a short sale, the home would be sold for less than the value of the debt, but the estate would not be held liable for the difference or loss. You can discuss these possibilities with a DuPage County estate planning lawyer to determine what may be the best course of action to take.

It is important to review both assets and debts with your DuPage County estate planning attorney when forming your estate plan. Please contact us immediately at (630)908-2752 to set up a consultation so we may review your estate planning options.