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- 10 Life Events That Signal It’s Time to Review Your Estate Plan - Part 2
You might think that estate planning is something you can complete one time and then check off your to-do list for good. But the reality is that in order for your estate plan to work for you no matter how your life changes, your plan needs to change with it. To make sure any big changes in your life are considered in your plan, I recommend reviewing your estate plan with your attorney at least every three years. But if any major life events happen before then, it’s crucial to have your plan reviewed as soon as possible so it can be updated if needed. Last week, we started to explore 10 life changes that might affect your estate plan. This week, we’re coving five more life events that mean it’s time to review your plan. 06 | You Became Seriously Ill or Injured A sudden illness or injury can leave you incapacitated and unable to manage your affairs. Therefore, it's essential to review your estate plan to ensure it includes Powers of Attorney for healthcare and finances. These documents let you name someone you trust to pay your bills and manage your assets, as well as make medical decisions for you if you can’t speak for yourself. It’s also important to include healthcare directives that describe what kind of healthcare you want if you become incapacitated. This can include dietary restrictions or preferences, religious beliefs, or limits to certain treatments or life-sustaining measures. By legally documenting your healthcare choices, your Power of Attorney will feel more comfortable in the role and will be able to make medical decisions for you that align with your wishes. 07 | You Moved Here From Another State Each state has its own laws and regulations regarding estate planning, so if you moved here from another state after completing your estate plan, it’s crucial to have your plan reviewed by a local attorney. If your existing plan doesn’t meet our state’s requirements for how an estate plan is signed or witnessed, or contains terms or processes that differ from the processes of our state, this can cause delays when your plan needs to be used and may even require a court to review its validity. Reviewing your plan with a local attorney and making any changes to comply with our laws will make sure that your estate plan can be relied upon at any moment without delay or confusion. 08 | You Got Married Marriage brings about not only joy and celebration but also important legal updates that are easy to put off. When you tie the knot, your estate plan needs to reflect your new marital status. Some states automatically make your spouse a co-owner of some of your property, but that doesn’t ensure an easy transfer of that property to your spouse when you die. In Illinois, marriage does not automatically update your ownership in property. To make sure your assets will go to your new spouse if you die or become incapacitated, it’s essential to update beneficiaries and make arrangements for shared assets. Additionally, you might consider creating provisions to protect your spouse financially and emotionally in the event of your passing. 09 | You Got a Divorce The end of a marriage is a significant life event that requires immediate attention to your estate plan. After a divorce, you’ll likely need to revoke and redo your entire estate plan. This includes creating a new Will and Trust, updating beneficiary designations on life insurance and retirement accounts, and revising asset distribution to reflect your new circumstances and relationships. If you have children from your previous marriage, you may need to revisit guardianship arrangements and provide for their financial needs accordingly. 10 | The Law Changed Tax laws are subject to change, and revisions to estate tax exemptions can have a substantial impact on your estate plan. If there are significant changes in federal or state estate tax laws, it's crucial to review your plan with an estate planning attorney to minimize tax burdens and protect your wealth for your loved ones. Even if you weren’t affected by federal or state estate taxes in the past, changes in federal estate tax law are scheduled for 2026, so now is the time to review whether this change will affect your family’s estate tax filing status. Estate taxes can cost your family tens or even hundreds of thousands of dollars, but these tax liabilities can be significantly reduced or even avoided entirely with proper estate planning. By Your Side Through All of Life’s Changes Your estate plan serves as the bedrock protecting your family and finances, not just for today but also for the future. However, estate planning isn't a one-time task - it should adapt and evolve alongside the changes in your life. At Kaplan Estate Law LLC, our mission is to be by your side through all of life's changes, ensuring your estate plan remains up-to-date and effective no matter what life brings your way. That's why we offer our clients a complimentary review of your estate plan every three years, and I encourage you to reach out at any time before then with questions about life changes or events that might affect your plan. If you’re ready to create an estate plan that protects your loved ones and your legacy, or want your existing plan reviewed, give me a call at (312) 833-2199 or e-mail us at lauren@kaplanestatelaw.com. I’d be honored to help ensure your family’s well-being for years to come. You can also click on my scheduling link to get started. I can’t wait to hear from you.
- 10 Life Events That Signal It’s Time to Review Your Estate Plan - Part 1
Maybe you thought that creating a Will or Trust is something you can do once and then your family and assets are protected forever after. You work with your lawyer, they draft documents, you bring them home in a binder or notebook, put them on a shelf or in a drawer, and you never look at them again. Estate plan, done. But, it’s not, and thinking of it that way could leave your family with a big mess when something happens to you. In reality, life events can drastically affect your estate plan and even cause your plan not to work in the way you intended. To make sure your plan remains up to date throughout your life, we recommend reviewing your plan at a minimum of every three years. Because I am so passionate about this, I offer to review my clients' plans every three years for free. And, if any of these 10 life events happen before your three-year plan review, you’ll want to have your plan professionally reviewed right away. Let’s take a closer look at these 10 life events and how they can affect your estate plan and what changes may be required. 01 | Your Assets or Liabilities Changed Life is full of changes, and your financial situation is unlikely to stay the same over time. Changes in your assets, such as acquiring a new home or other assets, selling property, or incurring debt should prompt a review of your estate plan. You may need to update asset distribution, beneficiary designations, and financial provisions to reflect these changes accurately and ensure that the people you love receive what you intend when you die. Most importantly, you need to update your asset inventory every time your assets change, and if you do not have an asset inventory, you need to call us and update your plan to ensure you’ve got an inventory included. The biggest risk to your family in the event of your incapacity or death is that they do not know what you have, where it is or how to find it. We solve this by creating an updating your asset inventory, regularly. 02 | You Bought, Sold, or Started a Business Owning a business adds another layer of complexity to your estate plan. If you’ve recently bought or sold a business, it's essential to update your plan to reflect what you want to happen to your business when you die, ensure a smooth transfer of ownership (if desired), and create a plan to protect your business assets for yourself and your loved one’s future. The financial and personal value of your business can be a significant gift to your loved ones both today and for years to come - if you know how to incorporate it into your estate plan in the right way. 03 | You Gave Birth or Adopted a Child Welcoming a new child into your family is an incredibly joyful moment. As a parent, it's essential to update your estate plan to include provisions for your child's well-being and financial future. This includes naming Guardians for minor children, creating a Kids Protection Plan, and ensuring their financial security through Trusts or other means. It’s also important to document your wishes for your child’s education, religion, and values in your plan so that their legal Guardians will know how you would want your child raised if something happened to you. 04 | Your Minor Child Reached the Age of Majority (or Will Soon) As your children grow up and reach the age of majority, it’s time to review how they will receive their inheritance, make sure someone can legally make healthcare decisions for them, and manage their money in the event they become incapacitated. Depending on their level of maturity, you may want to consider if they are ready to handle assets on their own and if so, what amount. An even better idea is to provide lifelong protection of your child’s inheritance through the use of a Lifetime Asset Protection Trust. By using this estate planning tool, your child’s inheritance can be used to support your child’s future while safeguarding its use and protecting it from any potential future lawsuits or divorces your child may face later in life. This ensures that your children are financially secure as they head into adulthood while also supporting your children with financial responsibility. 05 | A Loved One Dies The loss of a family member is emotionally devastating, and it can significantly affect your estate plan. If a deceased loved one was a recipient of assets under your Will, Trust, or financial accounts, it's crucial to update these documents to make sure your assets will be distributed to the right people. Additionally, if the deceased individual was designated as a Trustee or Executor of your estate or a Guardian of your minor children, you will need to appoint new individuals to fill these roles. Planning for Life’s Changes Your estate plan is the foundation that protects your family and your finances today and in the future. But estate planning is not a set-it-and-forget-it task; rather, your estate plan should change and evolve with the changes in your life. At Kaplan Estate Law LLC, we’re here to guide you through life’s changes to keep your estate plan up-to-date and effective, so you can have the peace of mind of knowing that your plan will work exactly how you want it to when your loved ones need it most. If you've recently experienced a significant life event or it's been a while since your last estate plan review, now is the time to review your plan. If you haven’t created an estate plan yet, it’s better to plan early than to have no plan at all. To get started, schedule a free 15-minute discovery call to learn more about my Family Wealth Planning Session process where we’ll discuss your family dynamics and goals, address any changes in your life, and create a comprehensive estate plan that brings you peace of mind. Or, if you have questions, feel free to reach out at lauren@kaplanestatelaw.com or (312) 833-2199. Plus, don’t forget to return next week when I’ll be discussing five more life events that signal it’s time to review your plan.
- Trusts & Taxes: What You Need to Know
People often come to us curious — or confused — about the role trusts play in saving on taxes. Given how frequently this issue comes up, here we’re going to explain the tax implications associated with different types of trusts in order to clarify this issue. Of course, if you need further clarification about trusts, taxes, or any other issue related to estate planning, meet with us for additional guidance. TWO TYPES OF TRUSTS There are two primary types of trusts — revocable living trusts and irrevocable trusts — and each one comes with different tax consequences. REVOCABLE LIVING TRUST A revocable living trust, also known simply as a living trust, is by far the most commonly used form of trust in estate planning. And as long as you are living, there is absolutely no tax impact of creating a living trust. A living trust uses your Social Security Number as its tax identifier, and this type of trust is not a separate entity from you for tax purposes. However, a living trust is a separate entity from you for the purpose of avoiding the court process called probate, and this is where the confusion regarding taxes often comes from. But before we explain the tax implications of a living trust, let's first describe how a living trust works. A living trust is simply an agreement between a person known as the grantor, who gives assets to a person or entity known as a trustee, to hold those assets for the benefit of a beneficiary(s). In the case of a revocable living trust, the reason there are no tax consequences is because you can revoke the trust agreement or take the assets back from the trustee at any time, for any reason. In fact, as long as you are living, you can change the terms of the trust, change the trustee, change the beneficiaries, or terminate the trust altogether. However, upon your death, a revocable living trust becomes irrevocable, and this is when tax consequences come into play. Following your death, the trustee you’ve named will step in and take over management of the trust assets, and one of the first things that your trustee will do is to apply for a tax ID number for the trust. At this point, the trust becomes a taxable entity, and any income earned inside of the trust that is not distributed in that year would be subject to income taxes, at the taxable rates of the trust (or at the tax rates of the beneficiaries, if income is distributed to the beneficiaries). IRREVOCABLE TRUSTS An irrevocable trust is created when you make a gift to a trustee to hold assets for the benefit of the beneficiary, and you cannot take back the gift you've made to that individual. When you create an irrevocable trust, either during your lifetime, or at death through a testamentary trust (a trust that arises at the time of your death through your will), or through a revocable living trust creating during your lifetime, the trust is a separate tax-paying entity, and it is either subject to income tax on the earnings of the trust at the rates of the trust or at the rates of the beneficiaries. Unlike a revocable living trust, an irrevocable trust is (as the name implies) irrevocable. This means that the trust’s terms cannot be changed, and the trust cannot be terminated once it’s been executed. When you transfer assets into an irrevocable trust, you relinquish all ownership of those assets, and your chosen trustee takes total control of the assets transferred into the name of the trust. Because you no longer own the assets held by the trust, those assets are no longer considered part of your estate, and as long as the trust has been properly maintained, the assets held by the trust are also protected from lawsuits, creditors, divorce, serious illness and accidents, and even bankruptcy. However, as mentioned earlier, irrevocable trusts also come with tax consequences. As of 2023, the income earned by an irrevocable trust is taxed at the highest individual tax bracket of 37% as soon as the undistributed taxable income reaches more than $13,450. To avoid this high tax rate, in some cases, an irrevocable trust can be prepared so that the tax consequences pass through to the beneficiary and are taxed at his or her rates, which are typically much lower. We often set up a trust in this way when creating a Lifetime Asset Protection Trust for a beneficiary. When set up like this, the trust can provide the beneficiary with protection from common life events, such as serious debt, divorce, debilitating illness, crippling accidents, lawsuits, and bankruptcy, without being taxed at such a high rate on such little income. If you have a trust set up, and would like us to review its income tax consequences for your loved ones upon your death, meet with us. THE ESTATE TAX: WHAT IT IS & WHO PAYS IT The estate tax is a tax on the value of a person’s assets at the time of their death. Upon your death, if the total value of your estate is above a certain threshold amount, known as the federal estate tax exemption, the IRS requires your estate to pay a tax, known as the estate tax, before any assets can be passed to your beneficiaries. As of 2023, the federal estate tax exemption is $12.92 million for individuals ($25.84 million for married couples). Simply put, if you die in 2023, and your assets are worth $12.92 million or less, your estate won't owe any federal estate tax. However, if your estate is worth more than $12.92 million, the amount of your assets that are greater than $12.92 million will be taxed at a whopping 40% tax rate. In Illinois, the estate tax exemption is only $4 million! You can reduce your estate tax liability—or even eliminate it all together—by using various estate planning strategies. Most of these strategies are fairly complex and involve the use of irrevocable trusts, but such strategies are without question worth it, if you can save your family such a massive tax bill. THE FUTURE ESTATE TAX The current $12.92 million estate tax exemption is set to expire on Jan. 1, 2026, and return to its previous level of $5 million, which when adjusted for inflation is expected to be around $6.03 million. Here’s one thing we know for sure: We don’t know what the estate tax exemption will be at the time of your death, and we also don’t know what the value of your assets will be at the time of your death. Because of this, when you plan with us, we will ensure that we put in place planning strategies to protect your estate from estate taxes, regardless of the amount of the estate tax exemption or the size of your assets. WE’RE HERE FOR YOU If you are trying to decide whether a revocable living trust, irrevocable trust, Lifetime Asset Protection Trust, or some other estate planning vehicle is the right solution for you and your family, meet with us. We will support you in making that decision, so your estate can provide the maximum benefit for the people you love most, while paying the least amount of taxes possible. Call us today to schedule your visit.
- Create a Stronger Blended Family Through Estate Planning
Blended families were once considered “non-traditional” families, but today, blended families are becoming just as common as non-blended families. Currently, 52% of married couples (or unmarried couples who live together) have a step-kin relationship of some kind, and 4 in 10 new marriages involve remarriage. If you’re part of a blended family, you’ve probably recognized the extra layer of complexity that comes with planning for your family’s needs and accommodating the many relationships that exist between step-parents, step-kids, and step-siblings. Topics that might be straightforward for a “traditional” family - such as where to spend the holidays or who gets the old family car - are more complex. Feelings tend to be more sensitive, as the person in a “step” role may feel self-conscious about their place as the “outsider” of the family, whereas on the other hand, one parent’s children may feel put out by the addition of a new step-parent, step-sibling, or half-sibling when their mother or father remarries. In a blended family, you work hard to navigate these complexities to keep the family unified and happy. But what you might not know is that our laws for what happens if you become incapacitated or die are still very much based on the traditional family model, which means that your blended family will likely end up in court and conflict without planning for them in advance. What Estate Law Says About Blended Families Every state has different provisions for what happens when you become incapacitated or die, and the laws of the state where you become incapacitated or die may or may not match your wishes. What’s more, even though you may see your step-family members the same way as your blood relatives, the law does not. For example, in Illinois, if you are survived by a spouse, your surviving spouse would only receive half of your estate if you have living children, and your living children would receive the other half. In contrast, in California, all community property assets would go to your surviving spouse, and separate property assets would be distributed partially to a surviving spouse and partially to children, if living, in amounts depending on the number of surviving children. In Texas, it can get very complex, depending on whether your assets are separate or community, and whether you have children from the marriage, no children from the marriage or living parents or siblings. As you can see, what’s true for what happens when you die may not result in the outcome you want for your loved ones, especially in a blended family situation. That’s why it’s so important to create an estate plan for your blended family well in advance, and I encourage you to discuss your plan with the members of your family to avoid hurt feelings, confusion, or pain in the future. Avoid Conflict in Your Blended Family Through Open Communication Estate planning is often seen as a highly private affair, but it doesn’t have to be, and oftentimes, shouldn’t be. In the case of a blended family, having open conversations with your loved ones about your estate plan and your goals for the family can save them from hurt feelings and even court battles in the future. Like all families, how you plan for your blended family will depend entirely on your family dynamics, your family members' situations, and your own personal values for how an inheritance should (or shouldn’t) be received and what kind of legacy you want to leave behind. Maybe you have step-kids and biological kids but want all of your children to inherit an equal share from you and your spouse. Maybe there’s a large age gap between your step-kids and biological child, so you want to make sure that your youngest has the financial support they’ll need if something happens to you whereas the older children are able to support themselves. Maybe you have a step-parent or step-sibling that you would want to gift a special item of yours like a watch or necklace. Well, for better or worse, a person you have a step-relationship with has no right to inherit from you under the law, unless you put your plan in writing. You don’t need to give away every detail of your Will or Trust, or tell everyone who you named to make decisions for you if you’re incapacitated. Instead, start by having an open conversation about the general goal of your estate plan, such as wanting everyone to have an equal share, or that you want to provide more for your biological children because your step-children will already receive a full inheritance from their other parent. By taking the mystery out of your estate plan goals, your stepchildren will feel included in the discussion and feel like they are knowledgeable about your plan rather than feeling hoodwinked or hurt if they find out later that your plan doesn’t align with the expectations they created for it in their minds. Most importantly, let the people in your life know you value and love them, and that no matter how they’re related to you, you care about them and want them to inherit not just material things from you, but also your values, stories, and legacy. Create More Than a Plan, Create a Family Legacy To make sure your wishes for your blended family are followed in the event of your death or incapacity, it’s essential to have a well-crafted estate plan created by an attorney experienced in serving blended families. At Kaplan Estate Law LLC, we know all too well the importance of planning for blended families and can help you navigate your options and desires for your family’s plan. We know that your material possessions are only a small part of a successful estate plan. What will really matter to your family members, no matter how they became your family, is your legacy. Instead of leaving your family a mess to be battled over in court, leave your family an example of financial wellness, of a plan filled with personal values and family history. To do this, I include what I like to call a Family Legacy Interview with all of my estate plans. During this interview, I give you the opportunity to leave your most important assets - your values, stories, and heart - to your family in a meaningful way that they’ll cherish for years after you’re gone. And for a blended family, the Family Legacy Interview can be even more valuable, because it gives you the opportunity to really speak to your loved ones about the plan you created for them and how much you value the place they hold in your heart. If you want to protect your blended family from a court battle and emotional conflict, give me a call today to schedule a Family Wealth Planning Session. During the Session, I take the time to really get to know you and your family’s unique situation and educate you about what exactly will happen to your family under the law if something happened to you right now, so you can make confident decisions about what’s right for your family. Even more, I welcome you to invite the members of your blended family to be a part of the conversation. Click this link to schedule your session today. If you're not quite ready for the Family Wealth Planning Session, you can schedule an Initial Consult here, or email lauren@kaplanestatelaw.com.
- The Importance of Customized Estate Planning for LGBTQ+ Relationships - Part 2
Last week we started the discussion of why it’s so important for LGBTQ+ families to invest in custom estate planning. While major strides for LGBTQ+ rights have been made in recent years, estate planning law is still written with hetero, cisgender couples in mind, which means that your wishes and your rights may not be respected when you die or if you become incapacitated without proper planning in place. This week, I’m covering two more reasons why every LGBTQ+ family needs custom estate planning. And if you missed last week’s blog, make sure to read it here to get the full scoop. Let’s get started! 3. Custom Estate Planning for LGBTQ+ Families is Still New Territory for Many Lawyers Although same-gender and LGBTQ+ relationships are more publicly recognized now than ever, creating effective estate plans for LGBTQ+ clients is still new territory for many traditional lawyers. Some lawyers simply lack experience serving LGBTQ+ families because these families didn’t have the same rights as cisgender couples until just eight years ago. The same is true for many LGBTQ+ families. In addition to same-gender marriage being relatively new, many LGBTQ+ families haven’t pursued estate planning due to a lack of knowledge about its importance or its availability to them. After all, only about 30% of American adults have an estate plan, (yikes!), and only a small portion of that 30% are in a LGBTQ+ relationship. Because of this, it’s crucial to work with an attorney who isn’t just comfortable working with LGBTQ+ families, but is passionate about getting to know your family on a personal level and creating a plan that celebrates all that you’ve done and all that you hope for your family in the future. 4. Keep Your Kids with the Ones They Love If you’re in an LGBTQ+ relationship, you know that family isn’t just about bloodlines - it’s also about your chosen family and the bond and love you share for each other. And if you have children, you know that ensuring their well-being and protection is of the utmost importance. In the event that something happens to you, it's crucial to have a plan in place that addresses who will be your children’s legal guardian, and this is especially true if the children in your family aren’t biologically related to one of the parents, such as step-children or children born to same-sex parents who aren’t married. Not only can these situations create some unique legal planning, but LGBTQ+ parents may also face resistance from family members who may not support children living with a biologically unrelated guardian or an LGBTQ+ guardian, whether you and your partner were married or not. Similarly, if your family is resistant to certain lifestyle or parenting choices you have made - such as gender fluidity in how you raise your child or the topics you discuss within your family - it’s incredibly important to name guardians who align with your beliefs and who will honor your wishes for how you want your children to be raised. Legal Guardians Are Even More Important for LGBTQ+ Families To avoid potential disputes and ensure the continuity of care for your children, it’s essential to designate legal guardians for your children explicitly in your estate plan. By doing so, you can legally establish who you want to care for your children in your absence regardless of the guardian’s relationship to your children or their sexual orientation. By documenting who you would want to raise your children clearly and legally, you help ensure that your children will always be raised by the people you choose and the people your children love. Otherwise, you leave space for relatives who do not agree with your beliefs to try to take over the position of guardian and raise your children in a way you would not agree with - possibly even keeping them away from the other parent figures in their life. Choose a Lawyer Who Understands and Honors Your Unique Family Finding a lawyer who truly understands your unique situation is crucial in making sure your loved ones are taken care of by people who love and respect them, regardless of biology or sexual orientation. You deserve a plan that celebrates your love, family, and future. This Pride Month, celebrate all that you are by protecting everything you love. At Kaplan Estate Law LLC, we understand the unique challenges that LGBTQ+ families face. We put heart at the center of our practice - making sure to truly get to know you, your loved ones, and your needs so you can not only protect your family and document your wishes but create a legacy and a story for your loved ones that they’ll cherish for years to come. To learn more about how I serve LGBTQ+ families differently, schedule a free 15-minute discovery call at the link below. Happy Pride Month!
- The Importance of Customized Estate Planning for LGBTQ+ Relationships - Part 1
June is a time of celebration and reflection for the LGBTQ+ community as Pride Month shines a spotlight on the progress made in the fight for equal rights. While significant strides have been made, such as the legalization of same-gender marriage and increased recognition of LGBTQ+ families, there is still a large gap in estate planning for LGBTQ+ individuals that could leave your loved ones with a big mess. Estate planning laws are still written for hetero, cisgender individuals, and many lawyers aren’t well equipped to customize their estate plans to account for the unique family dynamics and wishes of LGBTQ+ clients. Sadly, if you have LGBTQ+ family members or are in a non-traditional family dynamic of any kind and don’t have a custom estate plan, the people you love most could find themselves accidentally disinherited from your estate or stuck in a lengthy and expensive court battle. To make sure your family is well-cared for no matter how the law defines you, keep reading to learn why customized estate planning is so crucial for LGBTQ+ and all non-traditional humans. Care for Your Family as You Define It The concept of family has expanded far beyond the confines of the traditional "nuclear family." Gratefully, we now celebrate the beautiful diversity of family structures, encompassing same-gender couples, unmarried partners, civil unions, polyamorous relationships, and an array of other unique family dynamics. However, when it comes to death or incapacity, the law still lags behind, often failing to accommodate non-traditional family units in ways that you would choose. If you die without an estate plan in place, the law will apply the state’s default estate plan to your unique situation. Under the law’s default plan, your possessions and money will pass to your next closest relatives by blood or marriage. If you aren’t legally married to your partner or partners, the people you love will be automatically disinherited in the event of your death. Likewise, if you have children that are unrelated to you genetically who you haven’t formally adopted, like a partner’s child or stepchild, those children will not receive anything from your estate after you die. Even if you’re married to the child’s parent, the law does not recognize a stepchild as a direct descendant and therefore doesn’t include them in its default plan. To make sure the people you love -- your chosen family - are taken care of, no matter how the law labels your family, it's important to create a custom estate plan that ensures your assets are distributed according to your wishes and that your partners, children, and chosen family members are protected and cared for if something happens to you, even if may not be recognized under default inheritance laws. Protect Your Financial and Health Care Rights If you ever wondered who would take care of you and your things if you become ill or incapacitated, your first thought is probably your partner. Right? After all, it seems like common sense that your partner of ten years (or 2 years, or 5 years, or 20!) should be the one to make healthcare decisions for you or pay your bills. But unfortunately, the law doesn’t operate based on what might seem like common sense when we look at our everyday lives and relationships. The law doesn’t assume that you’d want any particular person making decisions for you if you become incapacitated. Instead, your family members will need to go through a stressful court guardianship procedure to be granted decision-making power by a judge. If your family members can’t come to an agreement on who should be your decision-maker, the court may assign a professional guardian - a complete stranger - to make decisions for you instead! To avoid court involvement altogether, it’s vital to name your chosen decision-makers - your Powers of Attorney - long in advance of ever needing them. This is especially important if you want to choose a decision-maker who isn’t related to you by blood or if you want to make sure that any certain lifestyle choices or beliefs such as a special diet, style of dress, or hormone therapy are still carried out if you’re incapacitated. If you don’t put these wishes on paper and name someone you trust to uphold them, it’s likely a judge won’t appoint your chosen decision-maker. In this case, the person the judge chooses can make whatever decisions for you they feel is best, even if that means ignoring your chosen gender expression or identity. No one expects to become incapacitated due to an illness or injury, but sadly, it happens. Legally naming a decision maker in advance and talking about your wishes with them and your extended family helps safeguard your rights and ensures that your wishes for how you are cared for are honored while avoiding family conflict as much as possible. Work With a Lawyer Who Understands You Protecting your family and your wishes as an LGBTQ+ individual requires the guidance and expertise of a lawyer who understands your unique circumstances and desires for your family. That’s where we come in. While the law may still fall short in accommodating the diverse family structures and dynamics that exist today, we understand that every family is different, and we know how to craft a custom plan that not only protects your loved ones and ensures your wishes are honored, but also embodies the values, beliefs, and stories that make your family unique. If you want to make sure your LGBTQ+ family will be cared for and supported no matter what the future holds, schedule a free 15-minute discovery call at this link to learn more about how I serve LGBTQ+ families or e-mail Lauren at lauren@kaplanestatelaw.com. Then, check back next week when I cover part two of this blog. T
- Protect Your Assets From The Anti-Hero: Safeguard Your Legacy Through Estate Planning
"I have this dream my daughter-in-law kills me for the money. She thinks I left them in the will. The family gathers 'round and reads it and then someone screams out 'she's laughing up at us from hell'." You may not have thought anything of these Taylor Swift lyrics when you first heard them, but they actually allude to the importance of proper estate planning to safeguard your legacy from unexpected and unsettling scenarios. What am I referring to? The Slayer Rule. At first glance, the Slayer Rule sounds like something out of a Stephen King novel, evoking images of dark forces and sinister plots. However, it's an essential legal concept that serves as a shield, protecting your assets and preventing those who commit acts of violence from benefiting from your estate. So, let's explore how the Slayer Rule can help you ward off potential anti-heroes and ensure your legacy remains intact. Understanding the Slayer Rule The Slayer Rule acts as a formidable barrier, preventing individuals who unlawfully cause the death of another person from receiving any financial benefits from the deceased's estate. In the scenario where your daughter-in-law is found guilty of a Bad Reputation, the Slayer Rule stands strong, denying her any share of your hard-earned assets. But How Does It Work? To activate the Slayer Rule, specific criteria must be met. Typically, a criminal conviction or a finding of guilt is required. If your daughter-in-law were to be found guilty of your murder, the Slayer Rule would automatically come into effect, ensuring that she does not inherit a single penny. It's like a legal superhero that swoops in to protect your assets from falling into the wrong hands. Your Best Defense: Proper Estate Planning While the Slayer Rule provides crucial protection, relying solely on its existence would be unwise. To strengthen your defense and protect your legacy from potential anti-heroes, proactive estate planning is essential. Here are a few steps you can take: 1. Work with an Estate Planning Attorney: Prevent any "Bad Blood," and work with an attorney who will keep your family out of court and out of conflict. Partnering with an experienced estate planning attorney will ensure that your wishes are clearly and legally documented, incorporating specific provisions related to the Slayer Rule. 2. Draft a Comprehensive Estate Plan: A comprehensive estate plan covers all aspects of your assets, including your will, trusts, and other legal instruments. By leaving no Blank Space, you can establish a roadmap for the distribution of your assets that aligns with your values and intentions, while ensuring the Slayer Rule acts as a guardian to prevent any undeserving individuals from benefiting. 3. Regularly Review and Update Your Estate Plan: We know All Too Well that circumstances change, relationships shift, and new family members may enter the picture. To ensure that your estate plan remains relevant and effective, it's crucial to review and update it periodically. This way, you can adapt to life's twists and turns and keep your legacy protected. Taylor’s allusion to the Slayer Rule in her song lyrics, even if unintentionally, emphasizes the importance of proper estate planning in protecting your assets from potential anti-heroes. By understanding the Slayer Rule, working with an estate planning attorney, and regularly reviewing and updating your plan, you can ensure that your legacy remains intact and that your assets are distributed according to your wishes. Otherwise, You’re on Your Own, Kid. If you have questions about the Slayer Rule or if you are ready to get started with your comprehensive Estate Plan, Speak Now with Lauren at lauren@kaplanestatelaw.com or schedule online here.
- Keep the Government and Lawsuit Happy Opportunists Away From Your Children’s Inheritance
If you have a current estate plan, I'll bet you plan to leave your assets to your children outright and unprotected by age 35, or maybe a little later. Go take a look at your estate plan, and see what it does right now. And, if you don’t have an estate plan, and you have kids or other people you care about, contact us today and let’s get that handled for you. If you do have a plan and it distributes your assets outright to your kids -- even in stages, over time, some at 25, then half of what’s left at 30, and balance at 35 (or something along those lines), you’ve overlooked an incredibly valuable gift you can give your children (and the rest of your descendants for generations); a gift that only you can give them. And a gift that, once you’ve died and left them their inheritance outright, is lost and cannot be reclaimed. Leave your kids' inheritance protected from lawsuits, divorce, and estate taxes. While you may think to yourself, my kids’ inheritance doesn’t need to be protected. They aren’t going to get sued. You may be right, but you may also be overlooking one of the most common “lawsuits” that causes inheritances to be lost everyday, and that’s divorce. If you want to protect the money you are leaving to your children from their future divorces, even if you love their spouses nor or expect you will, in the future, you can easily do so using a protected trust. And, if your child is ever involved in a lawsuit, for example, a simple car accident, or if a business transaction goes bad, what you leave to your child can be protected from all future lawsuits or claims against them. The best part is that if your child has their own taxable estate when they die, your planning now could save your family 40 cents on every dollar (or more) handed down from one generation to the next. Save your family Up to 40 cents on every dollar -- currently -- at each generation. As of 2023, the current federal estate tax rate is 40% -- meaning that every dollar passed on over the estate tax exemption rate is taxed at 40%. And it has been as high as 55%. On top of that, many states have estate taxes as well, including Illinois. This all adds up fast, and can decimate your family’s financial legacy, over time For every million dollars you leave outright to your children, if your children have a taxable estate when they die, could result in your grandchildren receiving only $550,000, with $450,000 going to the government ... unnecessarily. So, if you want to know that everything you’ve worked so hard to create will stay in your family for generations to come and not be lost to outsiders, leaving your assets to your children protected in a trust we call a Lifetime Asset Protection Trust, instead of outright is the way to go. And, it can be easily built in to your existing estate plan or trust, you just need to ask us to help you get a Lifetime Asset Protection Trust added to your plan. But how will my kids get to use what I leave to them? Here’s the best part about leaving your assets to your children in a Lifetime Asset Protection Trust. Not only is what you leave protected, but your children control what you leave them when you decide they are ready. After your death, the assets you leave behind will pass to your children (and your grandchildren, great-grandchildren, and so on for successive generations) in a Trust that your child can control, as the Trustee of the Trust. You can decide when your child is mature enough to act as a Trustee. As the Trustee of the Trust, your child decides how what you’ve left is invested and what to do with the Trust assets. And your child will even be able to determine the amount of control vs. the amount of asset protection he or she wants based on his or her specific circumstances. Is this still important if I don’t have much money? If you only leave your children a small amount of money, this is still incredibly valuable for protection, if you are leaving assets that will be invested and grown, and not just spent right away on consumables. Some might say it’s even more important because your family has less to lose to taxes, lawsuits, and divorce each generation. And the impact of such losses is much greater. A mere $10,000 protected now can become millions for the people you love for generations to come. Imagine that you leave just $10,000 to your child in a Lifetime Asset Protection Trust, and instead of spending that $10,000 or losing it in a divorce, they invest that $10,000 in creating their own business inside their trust, and then grow that business into a million dollar or multi-million dollar venture because of how you chose to leave your child that $10,000 gift … and it’s fully protected for generations. Secure the future of your family today by speaking to us. We review estate plans and inherited funds with you, ensuring that all legalities are in place so generations can enjoy the benefits according to your wishes. Don't wait, get peace of mind now - contact us today at (312) 833-2199 or lauren@kaplanestatelaw.com to get started, or book an appointment now.
- 10 Common Estate Planning Mistakes Your Family Can't Afford to Make - Part 2
Because estate planning involves actively thinking about and planning for frightening topics like death, old age, and crippling disability, many people put it off or simply ignore it all together until it’s too late. Sadly, this unwillingness to face reality often creates serious hardship, expense, and trauma for those loved ones you leave behind. To complicate matters, the recent proliferation of online estate planning document services, such as LegalZoom®, Rocket Lawyer®, and Trustandwill.com, may have misled you into thinking that estate planning is a do-it-yourself (DIY) affair, which involves nothing more than filling out the right legal forms. However, proper estate planning entails far more than filling out legal forms. In fact, without a thorough understanding of how the legal process works upon your death or incapacity, along with knowing how it applies specifically to your family dynamics and the nature of your assets, you’ll likely make serious mistakes when creating a DIY will or trust. And the worst part is that these mistakes won’t be discovered until you are gone—and the very people you were trying to protect will be the ones cleaning up the mess. Estate planning is definitely not a one-size-fits-all endeavor. Even if you think your particular situation is simple, that turns out to almost never be the case. To demonstrate just how complicated estate planning can be, last week in part one, we highlighted the first five of 10 of the most common estate-planning mistakes, and here we wrap up the list with the remaining five mistakes. 06 | Not Updating Beneficiary Designations In addition to reviewing and updating your core estate planning documents like your will, trust, and power of attorney, it’s crucial that you also update the documentation for your other assets, especially those with beneficiary designations. Some of your most valuable assets, like 401(k)s, IRAs, and life insurance policies, do not transfer via a will or trust. Instead, these assets have beneficiary designations that allow you to name the person (or persons) you’d like to inherit the asset upon your death. Oftentimes, people forget to change their beneficiary designations to match their estate planning goals, which can lead to disaster. For example, if you get remarried and forget to update your 401(k), your ex-spouse from 20 years ago could end up inheriting your retirement savings. Additionally, some people assume that because they’ve named a specific heir as the beneficiary of their IRA in their will or trust that there’s no need to list the same person again as beneficiary in their IRA paperwork. Because of this, they leave the IRA beneficiary form blank or list “my estate” as the beneficiary. But this is a major mistake—and one that can lead to serious complications and expense for your loved ones. It makes no difference who is listed as the beneficiary in your will or trust; you must list the person you want to inherit the asset in the beneficiary designation, or your heirs will have to go to court to claim the asset. And you should never name a minor child as a beneficiary of your life insurance or retirement accounts, even as the secondary beneficiary. If a child inherits assets, the assets become subject to control of the court until they reach the age of 18, and then, the assets are distributed outright without any protection or direction. If you want a minor to inherit assets, you can create a special trust to hold the asset until the child comes of age, and name someone you trust to serve as a successor trustee to manage the assets until that time. At Kaplan Estate Law LLC, we can support you to choose the appropriate trust for this purpose to ensure your child gets the maximum benefit from their inheritance. 07 | Improper Execution You could have the best estate planning documents in the world, but if you fail to sign them, or sign them improperly, they will fail. This might seem trivial, but we see it all the time. A loved one dies, their family brings their estate planning documents to us, and we can’t help them because the documents were either not signed or were signed improperly. To be considered legally valid, certain estate planning documents like wills must be executed (i.e. signed, witnessed, and/or notarized) following very strict legal procedures. For example, many states require that you and every witness to your will must sign it in the presence of one another. If your DIY service doesn't mention that condition (or you don’t read the fine print) and you fail to follow this procedure, the document can end up worthless. 08 | Choosing the Wrong Executors or Trustees In addition to laws regarding execution, state laws are also very specific about who can serve in certain roles like executor, trustee, or financial power of attorney. In some states, for instance, the executor of your will must either be a family member or an in-law, and if not, the person you choose must live in the state. If your chosen executor doesn’t meet those requirements, he or she cannot serve. Moreover, some states require the person you name as your executor to get a bond, which is like an insurance policy before he or she can serve. Such bonds can be difficult to get for someone who has a less-than-stellar credit score. If your executor cannot get a bond, it would be up to the court to appoint your executor, which could end up being someone you would never want managing your assets or a third-party professional, who could drain your estate with costly fees. 09 | Unintended Conflict Between Family Members Family dynamics are—to put it lightly—quite complex. This is particularly true for blended families, where spouses have children from previous relationships. If you try to go it alone using a DIY document service, you won’t be able to consider all of the potential areas where conflict might arise among your family members and plan ahead to avoid such disputes. After all, even the best set of documents will be unable to anticipate and navigate these complex emotional matters—but we can. Every day we see families end up in lifelong conflict due to poor estate planning. Yet, we also see families brought closer together as a result of handling these matters the right way. When done right, the estate planning process is actually a major opportunity to build new connections within your family, and we are specifically trained to help you with that. 10 | Failing to Properly Name Guardians for Minor Children If you are a parent with children under the age of 18 at home, your number-one estate planning priority should be selecting and legally documenting both long and short-term guardians for your kids. Guardians are the people legally named to care for your children in the event something happens to you. If you’ve named guardians for your minor children in your will—even with the help of another lawyer—your kids could still be at risk of being taken into the care of strangers. For instance, if you’ve named guardians for your kids in your will, what would happen if you became incapacitated and were no longer able to care for them? Did you know that your will only becomes operative in the event of your death, and it would do nothing to protect your children in the event of your incapacity? Or perhaps the guardians you named in your will live far from your home, so it would take them several days to get there. If you haven’t made legally-binding arrangements for the immediate care of your children, it’s highly likely that they will be placed with the authorities until those guardians arrive. And does anyone even know where you will is located and how to access it? How can they prove they are your children’s legal guardians if they can’t even find your estate plan? These are just a few of the potential complications that can arise when naming legal guardians for your kids, whether in your will or as a stand-alone measure. And if just one of these contingencies were to occur, your children would more than likely be placed into the care of strangers. At Kaplan Estate Law LLC, we offer a comprehensive system known as the Kids Protection Plan, which is included with every estate plan we prepare for families with young children. If you have already named long-term guardians in your will or as a stand-alone measure, either on your own or with a lawyer, we can review your existing legal documents to see whether you have made any of the most common mistakes that could leave your kids at risk. From there, we will revise your plan and put the proper protections in place to ensure your children are fully protected. Life & Legacy Planning: Do Right By Those You Love Most The DIY approach might be a good idea if you’re looking to build a new deck for your backyard, but when it comes to estate planning, there are much better options. If you’ve yet to do any planning, contact us to schedule a Family Wealth Planning Session, which is the first step in our Life & Legacy Planning Process. During this meeting, we’ll take you through an analysis of your assets, what’s most important to you, and what will happen to your loved ones when you die or if you become incapacitated. If, as a result of this process, we determine that you really do have a very simple situation and you want to create your own estate planning documents yourself online, we will support you to do that. However, if as a result of the process, you decide you would like us to create a plan for you, we’ll support you to find the optimal level of planning for a price that’s right for you. And if you’ve already created an estate plan—whether it’s a DIY job or one created with another lawyer’s help—contact us to schedule an Estate Plan Review & Check-Up. With our support, we will ensure your plan is not only properly drafted and updated, but that it has all of the protections in place to prevent your children from ever being placed in the care of strangers or anyone you’d never want raising them. In either case, working with us will empower you to feel 100% confident that you have the right combination of estate planning solutions to fit with your unique asset profile, family dynamics, and budget. At Kaplan Estate Law LLC, we see estate planning as far more than simply planning for your death and passing on your “estate” and assets to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning. Contact us today to get your plan started.
- 10 Common Estate Planning Mistakes Your Family Can't Afford To Make - Part 1
Because estate planning involves actively thinking about and planning for frightening topics like death, old age, and crippling disability, many people put it off or simply ignore it all together until it’s too late. Sadly, this unwillingness to face reality often creates serious hardship, expense, and trauma for those loved ones you leave behind. To complicate matters, the recent proliferation of online estate planning document services, such as LegalZoom®, Rocket Lawyer®, and Trustandwill.com, may have misled you into thinking that estate planning is a do-it-yourself (DIY) affair, which involves nothing more than filling out the right legal forms. However, proper estate planning entails far more than filling out legal forms. In fact, without a thorough understanding of how the legal process works upon your death or incapacity and applied specifically to your family dynamics and the nature of your assets, many people make serious mistakes when creating a DIY will or trust. And the worst part is that these mistakes won’t be discovered until you are gone—and the very people you were trying to protect will be the ones stuck cleaning up the mess. Estate planning is definitely not a one-size-fits-all endeavor. Even if you think your particular situation is simple, that turns out to almost never be the case. To demonstrate just how complicated estate planning can be, here are 10 of the most common estate planning mistakes, starting with the worst blunder of all: failing to create an estate plan. 01 | Leaving No Estate Plan at All If you die without an estate plan, the court will decide who inherits your assets, and this can lead to all sorts of problems. Who is entitled to your property is determined by our state’s intestate succession laws, which hinge largely upon whether you are married and if you have children. Spouses and children are given top priority, followed by your other closest living family members. If you are single with no children, your assets typically go to your parents and siblings, and then more distant relatives if you have no living parents or siblings. If no living relatives can be located, your assets go to the state. It’s important to note that state intestacy laws only apply to blood relatives, so unmarried partners and close friends would get nothing. If you want someone outside of your family to inherit your assets, having a plan is an absolute must. If you’re married with children and die with no plan, it might seem like things would go fairly smoothly, but that’s not always the case. If you’re married, but have children from a previous relationship, for example, the court could give everything to your spouse and leave your children with nothing. In another instance, you might be estranged from your kids or not trust them with money, but without a plan, state law controls who gets your assets, not you. Moreover, dying without a plan could also cause your surviving loved ones to get into an ugly court battle over who has the most right to your property. Or if you become incapacitated, your loved ones could even get into conflict around your medical care. You may think this would never happen to your loved ones, but we see families torn apart by it all the time, even when there’s not significant financial wealth involved. At Kaplan Estate Law, we will help you create a plan that handles your assets and your medical care in the exact manner you wish, taking into account all of your family dynamics, so your death or incapacity won’t be any more painful or expensive for your family than it needs to be. 02 | Thinking a Will Alone is Enough Lots of people believe that a will is the only estate planning tool they need. While a will is a fundamental part of nearly every adult’s estate plan, which can ensure that your assets go where you want them to go in the event of your death, using a will by itself comes with some serious limitations, including the following: Wills require your family to go through the court process known as probate, which can not only be lengthy and expensive, it’s also completely open to the public and frequently creates ugly conflicts among your loved ones. Wills don’t offer you any protection if become incapacitated by illness or injury and are unable to make your own medical, financial, and legal decisions. Wills don’t cover jointly owned assets or those with beneficiary designations, such as life insurance policies and 401(k) plans. Wills don’t provide any protection or guidance for when and how your heirs take control of their inheritance. Naming guardians for your minor children in your will can leave them vulnerable to being placed in the care of strangers. Given these facts, if your estate plan consists of a will alone, you are missing out on many valuable safeguards for your assets, while also guaranteeing your family will have to go to court if you become incapacitated or when you die. Fortunately, all of the above issues can be effectively managed using a trust. That said, as you’ll see below, trusts are by no means a cure-all —these documents come with their own unique drawbacks, especially if you try to prepare one on your own. 03 | Creating a Trust & Not Properly Funding It Many people now know that a trust can keep your family out of court, and you may think you can just go online to set up your own trust, or have a lawyer do it with you as a one-size-fits all solution. And while that might be true, particularly if you have very simple assets and few family members, even in that case, you are likely to overlook one of the most important parts of creating a trust: “funding” it. An unfunded trust is a trust that exists, but that doesn’t hold any of your assets because you didn’t retitle them properly, or because you acquired new assets after creating your trust. This is all too common, and if this is true for you, it will leave your family with a big mess, even though you have officially created your trust. Funding your trust properly is extremely important, because if any assets are not properly funded, the trust won’t work, and your family will have to go to court in order to take ownership of that property. And when you acquire new assets after your trust is created, you must make sure those assets are properly funded into your trust as well. At Kaplan Estate Law, we will not only make sure all of your assets are properly titled when you initially create your trust, but we will also ensure that any new assets you acquire over the course of your life are inventoried and properly funded to your trust. This keeps your assets from being lost, and prevents your family from being inadvertently forced into court because your plan was never fully completed. 04 | Not Leaving an Up-To-Date Inventory of Assets As mentioned above, even if you’ve properly funded your assets into your trust, your estate plan will be worthless if your heirs don’t know what you have or where to find it. In fact, there’s more than $58 billion dollars worth of lost assets in the U.S. Department of Unclaimed Property right now. And that’s all because someone died or became incapacitated without letting anyone know how to locate their assets. This is especially critical for digital assets like cryptocurrency, social media, email, and data stored in the cloud, because if you haven’t properly addressed these assets in your estate plan, there’s a good chance they will be lost forever if something happens to you. For all of these reasons, creating and maintaining a comprehensive inventory of all of your assets is a standard part of every estate plan we create. With our support, you can rest assured that your family will know exactly what assets you own and how to locate them should anything happen to you. 05 | Failing to Regularly Review & Update Your Estate Plan In addition to keeping an updated asset inventory, it’s vital that you regularly review and update all of your planning documents. Far too often people prepare a will or trust , then put it into a drawer or on a shelf, and forget about it. Yet, an estate plan is not a one-and-done deal. As time passes, your life circumstances change, the laws change, and your assets change, you must update your plan to reflect these changes—that is, if you want your plan to actually work for your loved ones and keep them out of court and conflict. We recommend reviewing your plan annually to make sure its terms are up to date. And be sure to immediately update your plan following major life events like divorce, births, deaths, and inheritances. We actually have built-in processes to make sure this happens—be sure to ask us about them. Beyond sheer necessity, an annual life review can be a beautiful ritual that puts you at ease, and helps you to set the course of your life and keeps your life on course, knowing that you’ve got your affairs in order, all handled, and completely updated each year. Next week, in part two, we’ll wrap up our list of the 10 most common estate-planning mistakes. Until then, if you are ready to get your estate planning handled and taken care of the right way with ease and affordability, start by contacting us for a Family Wealth Planning Session. Your Family Wealth Planning Session is custom-designed to your assets, your family, your wishes, and to educate you on the best way to reach your objectives for the people you love most. If you'd like to learn more, click here to schedule a free 15 minute Initial Consult or contact Lauren at lauren@kaplanestatelaw.com.
- Probate: What It Is & How To Avoid It - Part 2
Unless you’ve created an estate plan that works to keep your family out of court, when you die (or become incapacitated) many of your assets must go through probate before those assets can be distributed to your heirs. Like most court proceedings, probate can be time-consuming, costly, and open to the public, and because of this, avoiding probate—and keeping your family out of court—is often a central goal of estate planning. To spare your loved one’s the time, cost, and stress inherent to probate, last week in part one of this series, we explained how the probate process works and what it would entail for your loved ones. Here in part two, we’ll discuss the major drawbacks of probate for your family, and outline the different ways you can help them avoid probate with wise planning. WHAT’S AT STAKE FOR YOUR FAMILY Probate court proceedings can take months, and sometimes even years, to complete. In the immediate aftermath of your death, that’s the last thing you likely want your loved ones to have to endure. And the cost of their time and emotional strain are just the start of the potentially devastating consequences your family could face if you don’t plan ahead. Without easy and immediate access to your assets, your family could face serious financial hardship at a time when they need the most support. Not only that, but to help them navigate the legal proceedings, your loved ones will almost certainly need to hire a lawyer, which can result in hefty attorney’s fees and the real risk of them hiring a lawyer who is uncommunicative, which only creates more stress for them. All of that is on top of the court costs, executor’s compensation, and all of the various other administrative expenses related to probate. By the time all of those costs have been paid, your estate could be totally wiped out, or at the very least, seriously depleted. Another drawback of probate is the fact that it’s a public process. Whether you have a will or not, all of the proceedings that take place during probate become part of the public record. This means that anyone who’s interested can learn about the contents of your estate, who your beneficiaries are, and what they will inherit, which can set them up as potential targets for scammers and frauds. Probate also has the potential to create conflict among your loved ones. This is particularly true if you have disinherited someone or plan to leave significantly more money to one relative than the others, in which case, a family member may contest your will. And even if those contests don’t succeed, such court fights will only increase the time, expense, and strife your family has to endure. HOW TO AVOID PROBATE Before we discuss the more advanced ways you can use estate planning to allow your loved ones to avoid probate, it’s important to point out that not all of your assets will have to go through the probate process—and that’s true even if you don’t have any estate plan at all. Assets That Do Not Require Probate Certain assets, such as those with beneficiary designations like 401(k)s, IRAs, and the proceeds from life insurance policies, will pass directly to the individuals or organizations you designated as your beneficiary, without the need for any additional planning. The following are some of the most common assets that use beneficiary designations and therefore, bypass probate: Retirement accounts, IRAs, 401(k)s, and pensions Life insurance or annuity proceeds Payable-on-death (POD) bank accounts Transfer-on-death (TOD) property, such as bonds, stocks, vehicles, and real estate Outside of assets with beneficiary designations, other assets that do not go through probate include assets with a right of survivorship, such as property held in joint tenancy, tenancy by the entirety, and community property with the right of survivorship. These assets automatically pass to the surviving co-owner(s) when you die, without the need for probate. However, it’s critical to note here that if you name your “estate'' as the beneficiary of any of these assets, those assets will go through probate before being distributed. The same goes if you overlook a beneficiary designation, or if you die at the same time as a joint property owner—each of those assets will also go through probate, even though they have beneficiary designations. In addition, we generally recommend that you do not rely on beneficiary designations to handle the distribution of your assets. These designations give you little to no control over how your assets are distributed, and they can result in negative outcomes you did not intend, especially if you have a blended family with children from a prior marriage or if you have no children at all. Although there are several different types of assets that automatically bypass probate, the majority of your assets will require slightly more advanced levels of planning to ensure your loved ones can immediately access them, without the need for any court proceedings in the event something happens to you. The primary estate planning tool for this purpose are trusts. AVOIDING PROBATE WITH A REVOCABLE LIVING TRUST Trusts are a popular estate planning tool for avoiding probate. Although there are a variety of different types of trust, the most commonly used trust for probate avoidance is a revocable living trust, also called a “living trust.” A trust is basically a legal agreement between the “grantor” (the person who puts assets into the trust) and the “trustee” (the person who agrees to manage those assets) to hold title to assets for the benefit of the “beneficiary.” With a revocable living trust, this agreement is typically made between you as the grantor and you as the trustee for the benefit of you as the beneficiary. You act as your own trustee during your lifetime, and then you name someone as a “successor trustee” to take over management of the trust when you die or in the event of your incapacity. It might seem odd to make an agreement with yourself to hold title to assets for yourself in order to benefit yourself. Yet by doing so, you remove those assets from the court’s jurisdiction in the event of your incapacity or when you die. Instead, those assets transfer to your successor trustee, without any court intervention required. At that point, your successor trustee is responsible for managing the trust assets and eventually distributing them to your beneficiaries, according to the terms you spell out in the trust agreement. This is how a trust avoids probate, saving your family significant time, money, and headache. The Key Benefits of a Living Trust Unlike a will, if your trust is properly set up and maintained, your loved ones won’t have to go to court to inherit your assets. Instead, your successor trustee can immediately transfer the assets held by the trust to your loved ones upon your death or in the event of your incapacity. And since you can include specific instructions in a trust’s terms for how and when the assets held by the trust are distributed to a beneficiary, a trust can offer greater control over how your assets are distributed compared to a will. For example, you could stipulate that the assets can only be distributed upon certain life events, such as the completion of college or marriage, or when the beneficiary reaches a certain age. In this way, you can help prevent your beneficiaries from blowing through their inheritance and offer incentives for them to demonstrate responsible behavior. And as long as the assets are held in trust, they’re protected from the beneficiaries’ creditors, lawsuits, and divorce—which is something else wills don’t provide. Finally, trusts remain private and are not part of the public record. So, with a properly funded trust, the entire process of transferring ownership of your assets can happen in the privacy of our office, not a courtroom, and on your family’s time. Transferring Assets into a Living Trust For a trust to function properly, it’s not enough to simply list the assets you want the trust to cover. When you create your trust, you must also transfer the legal title of any assets you want to be held by the trust from your name into the name of the trust. Retitling assets in this way is known as “funding” a trust. Funding your trust properly is extremely important, because if any assets are not properly funded to the trust, the trust won’t work, and your family will have to go to court in order to take ownership of that property, even if you have a trust. In light of this, it’s critical to work with us to ensure your trust works as intended. While many lawyers will create a trust for you, few will ensure your assets are properly inventoried and funded into your trust, and then ensure the inventory of your assets is kept up-to-date as your life and assets change over time. We will not only make sure all of your assets are properly titled when you initially create your trust, but we will also ensure that any new assets you acquire over the course of your life are inventoried and properly funded to your trust. This will keep your assets from being lost, as well as prevent your family from being inadvertently forced into court because your plan was never fully completed. LIVING TRUSTS, TAXES, CREDITORS, & LAWSUITS When you create a revocable living trust, you are free to change the trust’s terms or even completely terminate the trust at any point during your lifetime. Because you retain control over the assets held by a living trust during your lifetime, those assets are still considered part of your estate for estate tax purposes. Similarly, assets held in a living trust are not protected from your creditors or lawsuits during your lifetime. This is an important and often misunderstood point. Again, a revocable living trust does not protect your assets from creditors or lawsuits, and it has no impact on your income taxes. However, as mentioned earlier, as long as the assets are held by a living trust or a Lifetime Asset Protection Trust, those assets can be protected from your beneficiaries’ creditors, lawsuits, and even divorce settlements. Be sure to ask us about the different trust-based estate planning options we offer to find one that’s best suited for your particular situation. The primary benefit of a living trust is to pass your assets to your loved ones without any need for court or government intervention, and to ensure your assets pass in the way you want to the people you want. LIFE & LEGACY PLANNING: DO RIGHT BY THOSE YOU LOVE MOST Although a living trust can be an ideal way to pass your wealth and assets to your loved ones, each family’s circumstances are different. This is why us, your local Personal Family Lawyer® will not create any documents until we know what you actually need and what will be the most affordable solution for you and your family—both now and in the future—based on your family dynamics, assets, and desires. The best way for you to determine which estate planning strategies are best suited for your situation is to meet with us for a Family Wealth Planning Session, which is the first step in our Life & Legacy Planning Process. During this process, we’ll take you through an analysis of your assets, what’s most important to you, and what will happen to your loved ones when you die or if you become incapacitated. Sitting down with us will empower you to feel 100% confident that you have the right combination of estate planning solutions to fit with your unique asset profile, family dynamics, and budget. We see estate planning as far more than simply planning for your death and passing on your “estate” and assets to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning. Contact us today to get started at (312) 833-2199 or lauren@kaplanestatelaw.com.
- What Your Last Will & Testament Will (And Will Not) Do — Part 2
Last week, in part one, we looked at the different things having a will in place allows you to do. Here, in part two, we detail all of the things that your will does not do, along with identifying the specific estate planning tools and strategies that you should have in place to make up for the potential blind spots that exist in an estate plan that consists of only a will. If you have yet to create your will, or you haven’t reviewed your existing will recently, contact us to get this vital first step in your estate planning handled right away. WHAT A WILL WON’T DO While a will is a necessary part of most estate plans, your will is typically a very small part of a comprehensive estate plan. To demonstrate, here are the things you should not expect your will to accomplish: 01 | KEEP YOUR FAMILY OUT OF COURT Following your death, in order for assets in your will to be transferred to your beneficiaries, the will must pass through the court process known as probate. During probate, the court oversees the will’s administration, ensuring your assets are distributed according to your wishes, with automatic supervision to handle any disputes. Like most court proceedings, probate can be time-consuming, costly, and open to the public. Moreover, during probate, there’s also the chance that one of your family members might contest your will, especially if you have disinherited someone or plan to leave significantly more money to one relative than the others. Even if those contests don’t succeed, such court fights will only increase the time, expense, and strife your family has to endure. Bottom line: If your estate plan consists of a will alone, you are almost guaranteeing your family will have to go to court if you become incapacitated or when you die. Fortunately, it’s easy to ensure your loved ones can avoid probate using different types of trusts, which we will discuss in further detail. 02 | PASS ON CERTAIN TYPES OF ASSETS Since a will only covers assets solely owned in your name, there are several types of assets that your will has no effect on, including the following: Assets with a right of survivorship: Property held in joint tenancy, tenancy by the entirety, and property with the right of survivorship, bypass your will. These types of assets automatically pass to the surviving co-owner(s) when you die. Assets with a designated beneficiary: When you die, assets with a designated beneficiary pass directly to the individual, organization, or institution you designated as beneficiary, without the need for any additional planning. Common assets with beneficiary designations include retirement accounts, IRAs, 401(k)s, and pensions; life insurance or annuity proceeds; payable-on-death bank accounts; and transfer-on-death property, such as bonds, stocks, vehicles, and real estate. Assets held in a trust: Assets held by a trust automatically pass to the named beneficiary upon your death or incapacity, so these assets cannot be passed in your will. This includes assets held by both revocable living trusts and irrevocable trusts. 03 | PASS OWNERSHIP OF A PET AND MONEY FOR ITS CARE Because animals are considered personal property under the law, you cannot name a pet as a beneficiary in your will. If you do, whatever money you leave it would go to your residuary beneficiary, who would have no obligation to care for your pet. It’s also not a good idea to use your will to leave your pet and money for its care to a future caregiver. That’s because the person you name as beneficiary would have no legal obligation to use the funds to care for your pet. In fact, this person could legally keep all of the money and drop off your pet at a shelter. 04 | LEAVE FUNDS FOR THE CARE OF A PERSON WITH SPECIAL NEEDS There are a number of unique considerations that must be taken into account when planning for the care of an individual with special needs. In fact, you can easily disqualify someone with special needs for much-needed government benefits if you do not use the proper planning strategies. For this reason, a will should never be used to pass on money for the care of a person with special needs. If you want to provide for the care of your child or another loved one with special needs, you must create a special needs trust. However, such trusts are complicated, and the laws governing them can vary greatly between states. 05 | REDUCE ESTATE TAXES If your family has significant wealth, you may wish to use estate planning to reduce your estate tax liability. However a will is not the best vehicle for this purpose. To reduce or postpone your estate taxes, your best option is to set up special types of trusts. 06 | PROTECT YOU FROM INCAPACITY Because a will only goes into effect when you die, it offers no protection if you become incapacitated and are no longer able to make decisions about your financial, legal, and healthcare needs. If you do become incapacitated, your family will have to petition the court to appoint a guardian to handle your affairs, which can be costly, time-consuming, and traumatic for your loved ones. And there’s always the possibility that the court could appoint a relative as a guardian that you’d never want making such critical decisions on your behalf. Or the court might select a professional guardian, putting a total stranger in control of your life, which leaves you open to potential fraud and abuse by crooked guardians. However, using a trust, you can include provisions that appoint someone of your choosing—not the court’s—to handle your assets if you are unable to do so. When combined with a well-prepared medical power of attorney and living will, a trust can keep your family out of court and out of conflict in the event of your incapacity, while ensuring your wishes regarding your medical treatment and end-of-life care are carried out exactly as you intended. GET PROFESSIONAL SUPPORT WITH YOUR ESTATE PLANNING Although creating a will may seem fairly simple, you should always consult with an experienced estate planning lawyer like us to ensure the document is properly created, executed, and maintained. And as we’ve seen here, there are many scenarios in which a will will not be the right estate planning solution, nor would a will keep your family and assets out of court. Meet with us for a Family Wealth Planning Session, which is the first step in our Life & Legacy Planning process. During this process, we’ll walk you through an analysis of your assets, what’s most important to you, and what will happen to your loved ones when you die or if you become incapacitated. From there, we’ll work together to put in place the right combination of estate planning solutions to fit with your asset profile, family dynamics, budget, as well as your overall goals and desires. We see estate planning as far more than simply planning for your death and passing on your “estate” and assets to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning. Contact us today to schedule your visit to ensure that your loved ones will be protected and provided for no matter what happens to you.