Category Archives: Beneficiaries

Keeping Track of Beneficiary Designation Forms

There are many assets such as bank accounts, brokerage accounts, insurance policies, annuities and retirement funds that allow a beneficiary to be named on the account. In the event of the account owner’s death, those funds go directly to the person named, avoiding a lengthy probate waiting period. An article in the Wall Street Journal highlighted the importance of keeping accurate and up-to-date documentation of those who have been named as beneficiaries and the serious issues that can arise if beneficiaries are not updates.

 beneficiariesFor example, it is important to remember that despite who is designated in a will, it’s the person named as the beneficiary on the account, policy, etc., who will receive the funds. It’s all too common for people to forget the beneficiary they named on as beneficiary on accounts opened years ago. Your will may be written so that your entire estate is left to one person, but if someone different is named as beneficiary on your bank accounts,the beneficiary on the accounts will receive the funds, not the person named in your will.

Another common oversight people make is forgetting to update beneficiaries when an event such as a death, marriage, or divorce occurs. Financial experts point out that it’s important to choose a beneficiary when you roll over a 401k or an IRA to a new plan or to a Roth IRA because the person who you had previously designated does not automatically carry over to any new accounts.

Experts also advise against choosing a different beneficiary for multiple accounts. For example, if you have three children and each one is the sole beneficiary on three separate accounts and the accounts experience different rates of growth over the years, there will be an unequal distribution of assets upon your death. It may be advantageous to designate all three children as equal beneficiaries on all three accounts.

Careful consideration should be given before naming a minor child as a beneficiary without a trust in place. If a trust is not in place and a minor child is the beneficiary, the court will appoint a financial guardian over those funds until the child becomes of legal age. In addition, not all young adults of legal age are fiscally mature enough to handle a large sum of money responsibly.

Trusts for disabled children and disabled adult children should be set up as supplemental trusts so as not to interfere with any government assistance these children receive. Keeping your beneficiaries up to date and setting up the most strategic estate plan requires the guidance and knowledge of a DuPage County estate planning attorney.

Problems with Deathbed Planning

End-of-life preparations are not easy, even when an experienced estate planning attorney is involved. Things become even more complicated when one makes said preparations later in life. In these cases, the probability of disputes from the beneficiaries increases because of the suspicion that elderly people are prone to undue influence.

 Thus, litigation may follow whenever a person makes drastic changes to their will shortly before dying, especially when they disinherit family members for the benefit of non-family members.

Even high-worth individuals may encounter difficulties with their estate plans. Take the case of the copper mining heiress Hugguette Clark, who left behind an estate worth nearly $300 million.

Ms. Clark died at the ripe old age of 104.

She spent the last two decades of her life in a hospital, where she was cared for at $400,000 per year. In 2005, she executed a new will that disinherited most of her distant relatives, and gave significant sums to people involved in her everyday care, including her lawyer, doctors, hospital, goddaughter and her nurse (who received several millions dollars).

However, another will that was in existence only six weeks prior to the new will had left her distant relatives nearly $30 million. Needless to say, the sudden and significant change would cause even the most trusting of minds to be suspicious.

The relatives, who were disinherited in the second will, filed suit to void the second will. They argued that the non-family beneficiaries took advantage of their close position with Ms. Clark to exert undue influence on the elderly person. The beneficiaries of the new will, on the other hand, argued that Ms. Clark seldom spoke to her distant relatives and that her decision to execute the new will reflected her appreciation for the care and dedication that her caregivers had shown toward her.

The dispute ended in a tentative deal that included the distant relatives in the distribution scheme and excluded her lawyer and nurse (the doctor relinquished his portion of the inheritance).

An experienced Illinois estate planning attorney can assist clients with addressing these types of issues. If you have questions regarding your estate plan, or the will or trust of a recently departed family member, contact an attorney today.

Common Mistakes To Avoid When Planning Your Estate

Estate planning can be a daunting task. If you do it right, your family will be well cared for long after you are gone. Without an estate plan, your family could be scrambling to pick up the pieces and paying expenses that would not be necessary with an estate plan. According to AARP Magazine, there are some simple but common mistakes people make when beginning to plan their estate. With the availability of online and do-it-yourself documents, many think hiring an attorney is a waste of money. In fact, one of the most important parts of estate planning is the assistance of someone familiar with the complicated legalese you will have to wade through. Retaining an experienced estate planning attorney could end up saving you and your family both money and frustration.

LisetteAccording to AARP Magazine, one common mistake people make is “failing to tie your business to your estate plan.” As one attorney told AARP, “parents sometimes do not want to talk to their kids about it and just leave the business to the kids.” This method does not take into consideration how to provide for children who work outside of the business. Sometimes failing to adequately plan for a family or small business means that the business ends up being sold under market, and distribution is not always uniform.

Another common mistake is to leave lump sums of money in cash instead of in a trust. A different attorney told AARP the anecdote of a father who left $250,000 “to his heroin-addicted son, who was penniless six months later.” A trust, according to AARP, “stipulates how you want the property distributed… the trustee holds your property and doles it out per your instructions.”

A third common mistake is failing to keep your estate plan updated. “Each time the law or your family changes,” reports AARP, “revisit your estate plan.” Even with all this, the most important aspect of estate planning is retaining an experienced estate planning attorney. Do not go through planning your estate alone. Contact a dedicated Chicago-area estate-planning firm today.

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Different Types of Trusts

There are several aspects of estate planning, and while independent research can help to begin the process, the most important first step is to hire an experienced estate-planning attorney. While determining what type of trust or will is best for you can be begun on your own, navigating the subtle differences between them is best done with the assistance of an attorney.

Attorney Cynthia HutchinsThere are five different types of trusts that can be used when beginning estate planning, according to CNN Money Magazine. A trust, according to Fidelity.com, “is a fiduciary agreement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries.” A trust specifies how you would like your assets to be passed on to the people who you have designated as beneficiaries, and differs from a will because it deals only with specific assets owned by the trust rather than an overall plan for your estate upon your death.

The first type of trust, according to CNN Money Magazine, is a credit-shelter trust. This is also known as a family trust, in which you designate “an amount to the trust up to but not exceeding the estate-tax exemption.” The rest of your estate can then be passed to your spouse upon your death tax-free. Another type of trust is known as a generation-skipping trust, which “allows you to transfer a substantial amount of money tax-free to beneficiaries who are at least two generations your junior—typically your grandchildren.”

The next type of trust, according to CNN Money Magazine, is a qualified personal residence trust, which “can remove the value of your home or vacation dwelling from your estate.” This type of trust is very useful if your home “is likely to appreciate in value.” Another type of trust is called an irrevocable life insurance trust. It can be helpful when your heirs need money quickly after you are gone, for example, to keep a family business running. The fifth type of trust is a qualified terminable interest property trust, which is particularly useful if “you are part of a family where there have been divorces, remarriages, and stepchildren.”

Determining which type of trust is best for you is only one aspect of estate planning. When you are ready to begin planning for your family, the most important first step is to seek the counsel of a lawyer. Do not go through the planning process alone. Contact an experienced DuPage County estate-planning attorney today.

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Appointing a Guardian for Your Children

Estate planning is not just about deciding where your money will go. When planning for your family after your death, your assets are not the only things about which you will need to decide. Especially if your children are young, you will need to take into consideration what will happen for them upon your death. It may seem morbid to think about, but planning ahead is far less morbid than not having a plan—which leaves your family to make decisions without you. Naming a legal guardian in the event of your death, if your children are minors, is an important part of estate planningAppointing a Guardian for Your Children IMAGE

According to IllinoisLegalAid.org, a “guardian is a person who has been appointed by the court to handle the personal or financial affairs of another person.” Many parents opt to appoint a trusted relative or friend as the guardian of their children. It is important that the person who you prefer to have as your child’s guardian is trustworthy and close to the child—this person will be handling all the financial, as well as day-to-day, decisions in your child’s life if you are unable to do so. If your child is developmentally disabled and relies solely on you, even if your child is over 18 you will need to consider naming a legal guardian. According to IllinoisLegalAid.org, “many important decisions may need to be made concerning matters such as health care, living arrangements, and habilitation.”

According to CNN Money Magazine, “if you die without a will—a status known as intestate—you leave it up to the court to decide who will take care of your child.” First-time, young parents often name their own parents as guardians of their children, which can be a good decision at an early age, but given the fact that grandparents usually die before their children this may need to be amended at some point thereafter.

If you or someone you know is beginning estate planning, do not go through it alone. Contact a dedicated Illinois estate-planning attorney today.

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Bequeath Your Frequent Flier Miles and Points | Illinois Estate Planning Lawyer

Many people do not know that many travel and credit-card programs allow customers to pass on their frequent flier miles and points to heirs. However, it is not an easy process, according to an article in the Chicago Tribune.

Illinois estate planning lawyer(Leevi) The average American household has signed up for almost 20 programs. U.S. households earned slightly over $600 a year of points and miles, studies show. Customers who wish to bequeath their points to beneficiaries should first decide whether to include them in a will. Furthermore, it is best to ensure that your executor knows how to access your account number and email address associated with the loyalty program. You should always obtain the help of an experienced lawyer in order to create an effective and enforceable will.

All the rules and regulations can make point transfers complicated. In one case, the airlines needed a copy of the deceased’s death certificate and a letter from the executor. Other loyalty programs can have even more restrictions. For example, the Marriott Rewards program allows point transfers only to spouses or domestic partners. Hilton Honors points expire after a year of inactivity.

There is no IRS guidance on airline, hotel or credit card points. However, according to the IRS, your “gross estate includes the value of all property you own partially or outright at the time of death.” Additionally, it can be very difficult to evaluate some kinds of loyalty points because their value changes depending on their use.

It is in your best interest to sort out the details of your will with the help of a capable lawyer. If you or someone close to you is considering drawing up a will, please contact a highly skilled estate planning attorney in DuPage County today.

Prenuptial Agreements: The Beginning

Prenuptial Agreements IMAGEMany people avoid estate planning because they feel it is either not for them—perhaps only for the wealthy—or because it seems too morbid a task to undertake early in life. Yet estate planning is not just for the rich, and it is never too early to begin planning for the future. In fact, many experts think that estate planning should begin before marriage, before kids. The earliest form of estate planning can be considered to be obtaining a prenup before marriage. According to the AARP Magazine, “a prenuptial agreement… is a legal contract, between you and your spouse-to-be, setting forth what will happen to the money when you die or divorce.” Having one, even at the beginning of a healthy, young marriage, can save headache not only for you and your spouse but for your children as well when it comes to estate planning.

While for some, a prenuptial agreement feels as though it is plan enough, it’s only the very beginning of an estate plan, and sometimes people overlook important aspects of estate planning because they feel protected by agreements such as this. According to the New York Times, the top oversights that should be double-checked in estate planning—likely with the help of a qualified estate planning attorney—include, but are not limited to:

  • The designation of wrong beneficiaries.  People commonly forget to update documents years after they were originally filled out. Things like new spouses, new children, and new bank accounts must be current on all documents in order to avoid confusion.
  • Liquidity deficit. Estate taxes are due nine months after death. Your heirs will need enough liquid cash to pay them.
  • Deciding on an executor. Your spouse may be the love of your life, but that spouse may not be the best with money.

Prenuptial agreements are just the beginning to estate planning, a long process that is best undertaken with the assistance of a dedicated estate planning attorney. Contact our offices today.

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New IRS Surtax Pays for Healthcare Reform

With tax season upon us, it’s may be a good time to look at the 159 pages of new rules the IRS has come up with for  investment income taxes on capital gains and dividends earned by high-income individuals that passed Congress as part of the 2010 healthcare reform law. All of the new rules went into effect January 1, 2013.

It is important to understand these new laws when planning your finances. A qualified Illinois estate planning attorney can help you ensure that your finances will be handled according to your wishes even when you are gone. The following is a short summary of some of these new rules, however your attorney can help you to understand how the new regulations will affect you.

This is the first surtax to be applied to capital gains and dividends. The 3.8 percent tax is earmarked to pay for healthcare. Individuals who have a modified adjusted gross income (MAGI) of more than $200,000 and married couples who file jointly and have a MAGI of more than $250,000 are those who will be affected.

A taxpayer’s MAGI is found by taking the adjusted gross income and adding back certain items such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.

Many investment securities ranging from stocks and bonds to commodity securities and specialized derivatives are included in the tax. Also included in the new tax laws is a 0.9 percent healthcare tax on wages for high-income individuals.

A report about the new regulations appeared in Reuters. The publication offered an example of how the new tax works, citing an individual filer, with $180,000 in wage income plus $90,000 from investment income. The person’s MAGI is $270,000. According to the IRS calculations, the 3.8 percent tax applies to the $70,000, and the individual would pay $2,660 in surtaxes.

According to a Joint Committee on Taxation analysis, the new tax revenue to be raised is estimated at $317.7 billion over 10 years.

The new changes to capital gains and dividends can be confusing and costly if not handled correctly. Consult with a qualified Illinois estate planning attorney to make sure that your finances are protected, even after you’re not here to take care of them in person.

Determining The Need For a Trust

Determining The Need For a Trust IMAGE

There is plenty of legal jargon when it comes to estate planning, and the difference between a trust and a will is often confused. A will, according to CNN Money Magazine, “governs the distribution of nearly everything in your estate.” A trust, on the other hand, deals with specific assets, “such as life insurance, or a piece of property.” While the idea of drawing up a trust may seem like something that is only necessary for very wealthy families or real estate magnates, that’s not so. According to a different CNN Money Magazine article, a trust is useful if your family has a net worth of at least $100,000 and meet one of the following conditions:

  • you have some real estate holdings, money invested in business, or money invested in fine art
  • you think it’s best that your belongings be stratified upon distribution to your heirs—that is, they don’t receive everything at once, or you want to set parameters (ie: they’ve graduated from college first, etc.)
  • you want your surviving spouse to be taken care of, but you want the majority of your assets to be left to your children after your spouse dies
  • you’d prefer to maximize estate-tax exemptions
  • you’d like to provide for a disabled relative without disqualifying him or her from Medicaid or other governmental assistance

There are several different types of trusts. According to the National Association of Financial and Estate Planning, one such trust is an IRA Checkbook Control Trust, “a special purpose trust which is either fully or partially owned by a self directed individual retirement account.” This can be useful if your retirement savings are in an IRA, of which very few permit direct ownership of real estate or other non-traditional investments.

Determining the best estate plan for you is a complicated process, and is best figured with the help of a qualified estate-planning attorney. Contact a dedicated Illinois estate-planning attorney today.

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Ray Charles’ Children Win Legal Battle to Reclaim Song Copyrights

Ray CharlesSeveral of late singer Ray Charles’ children have won their legal battle to reclaim the copyrights on 60 of the entertainer’s most famous songs. A lawsuit filed by the Ray Charles Foundation attempted to block his children’s’ right to ownership.

In 1976, a revision to the Copyright Act gave authors the ability to reclaim their works assigned to publishers after a certain period of time. However, works “made for hire” cannot be reclaimed. If an author is deceased, then the heirs of the estate are allowed to recover works.

In 2010, seven of Charles’ twelve children filed termination to reclaim ownership of the 60 compositions from Warner/Chappell Music. Warner/Chappell did not challenge the validity of the termination notices. The Ray Charles Foundation did, however, because it reaps royalties from the copyrighted music.

According to a report in Variety, the judge would not rule on whether or not the songs were “made for hire” but instead wrote that “because the foundation is not a grantee of the rights to be terminated or its successor, Congress did not even require the statutory heirs provide it with statutory notice of the termination, let alone give it a seat at the table during the termination process.”

The foundation was also claiming breach of contract, claiming that in 2002, the children entered into an agreement with their father under which he set up a $500,000 trust for each of them and they waived “any right to make a claim against his estate.” The judge ruled that the termination notices were not claims against the estate because the estate had been probated and closed in 2006, prior to the notices being sent out. Therefore, there was no breach of contract.

Foundations, trusts, and any other estate planning issues can be very complicated and through knowledge of the law is important. Make sure you consult with a qualified Illinois estate attorney for all your estate planning needs.