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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!

A Helpful Look at the Differences between Estate Planning and Asset Protection in DuPage County

Estate planning lawyers in DuPage County are most often considered by folks who want to put their end-of-life affairs in order. The lawyer helps them to draw up important documents such as powers of attorney and medical directives, as well as to develop a plan for how an individual’s property will be distributed upon his or her death. Wills, trusts, executors…these are all typical topics that a DuPage County estate planning lawyer will discuss with clients.

There is also a need to protect one’s assets during his or her lifetime. Not only is this important to the quality of life, but it also helps ensure that there is property that can be left behind! Asset protection is about choosing the best strategies to minimize the potential negative consequences of liability. That includes protection from claims made against an individual, as well as claims against your assets. The former would include things such as property damage or physical harm to another that was caused by you. The latter would have to do with damage caused by something you own, such as a sole proprietorship business or property.

Commonly, if a claim is made against an individual or their property, just about everything that person owns can be put at risk. For example, a judgment against you in a court of law can give creditors the ability to go after your assets in order to be compensated for damages. It can be an unpleasant eye-opening experience for a small business owner to discover that because someone was injured in their place of business, creditors may be able to take away personal assets that have nothing to do with the business itself. If someone slips and falls in your restaurant, as the owner, you could lose your home.

While estate planning focuses pretty heavily on wills and trusts to distribute assets after death, there are advantages to utilizing these tools during an individual’s lifetime, too. A trust can be especially helpful in keeping a person’s assets out of harm’s way, which is why working with DuPage County estate planning lawyers is such an important part of a solid asset protection strategy.

Using a trust for asset protection doesn’t come without its limitations, though.

  1. Generally, the trust should be for the benefit of the beneficiaries, rather than the person setting it up. There are, however, exceptions to this.
  2. While Beneficiaries cannot be involved in the management of the trust and cannot make any changes to its terms with regard to “tax purposed trusts,” different rules apply to our new breed of “asset protection” trusts that do allow for maintaining control.

There are other advantages and limitations to using a trust for asset protection during life, and a good DuPage County estate planning lawyer will be able to work with clients to determine whether it is a useful strategy based on each individual’s needs.

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.

Common Pitfalls of Non-Spouse Inheriting IRAs | DuPage County Estate Attorney

Non-spouse inheriting IRA

Inheriting an IRA can be a financial blessing but you have to be extremely careful about withdrawing the funds. There are a number of mistakes you can make that can result in a missed opportunity for tax-deferred growth, or worse, a huge tax bill.

Luckily, surviving spouses have some leeway. It’s still tricky to transfer from spouse to spouse. But the rules for spouses are different than non-spouses.

If you have more than one child, it may seem logical to name the estate as beneficiary. This is not always a good idea. In this case, your children will be required to take all of the money out of the IRA by the end of the fifth year after your death – missing the opportunity to accumulate interest and enjoy the tax sheltering benefit.

Owners of traditional IRAs must start taking the required minimum distribution (RMD) when they turn 70 ½. Non-spouse beneficiaries must start taking RMDs upon inheriting. This means you can’t leave the entire amount in the account, allowing it to draw interest. The penalty for not taking RMDs on time is steep: A full 50% penalty on the amount that should have been withdrawn for the year!

Unfortunately, non-spouse beneficiaries can’t roll an inherited IRA into their own IRA. A separate account Inherited IRA must be set up and titled so that it includes the decedent’s name, the name of the person inheriting, and an indication of the purpose of the IRA. For example, it might say, “Rhonda Smith (deceased January 7, 2015) IRA for the benefit of Roy Smith.” If the account is split among beneficiaries, the original IRA must be split into separate IRAs and each one must be titled in the same manner.

To avoid this pitfall, name a separate share trust drafted by an experienced estate planning attorney to qualify as a permissible beneficiary of the IRA ( or your children directly if asset protection is not important to you or your children), and not the estate. By doing so, they will have a lot more flexibility. They can take annual distributions based on their own life expectancy which allows them to leave the money in the account and defer taxes.
Roth (not traditional) IRAs can usually be withdrawn tax-free. But, your beneficiaries will be prohibited from depositing them into their own IRAs and they’ll have to pay taxes on the whole amount.

The issues above are just some of the traps you can fall into when inheriting an IRA. When it comes to transferring IRAs, it is critical to seek the advice of a qualified, experienced estate attorney in DuPage County. They can help you decide whether or not to withdraw the funds or set up an Inherited IRA.

If you have questions about how to inherit an IRA or if you want to make sure the beneficiaries on your IRA are set up correctly, give our DuPage County estate planning law firm a call at (630) 908-2752 for assistance.