Category Archives: Illinois Lawyer

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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Funeral Plans as Part of an Estate

Funeral Plans as Part of an Estate IMAGEPart of estate planning invariably involves making plans for a funeral. Many estate plans involve the notion of a pre-paid funeral, but unless the specifics are laid out with the assistance of a qualified estate-planning attorney, a pre-paid funeral could end up being a “grave error,” at least according to AARP Magazine. In some cases, such as that of Mississippi resident Evie McComb, a person will purchase a pre-paid funeral, file away the paperwork without alerting his or her family to the decision, and after his or her death, the paperwork will not surface. As was the case with McComb, the surviving family ended up paying for what had already been paid. “Evie’s daughter, Johnnye Denman, presented the document to the funeral home and asked for a refund,” according to AARP Magazine. “Too late, they said.”

According to the National Funeral Directors Association and as reported in AARP, “the average price of a burial with vault is about $8,000.” That is a lot of money for your family to come up with upon your death, but it is a directive that can be included with other important money plans. According to a publication from Ohio State University, the costs of dying include a funeral, a gravestone and cemetery plot (or cremation costs), and any medical expenses that might be incurred if the person dies in a hospital. Your specific wishes for your funeral and where the money will come from to pay for it can be explicitly laid out in your estate plan, making a frustrating and sad scenario like McComb’s impossible.

One way to set up funeral plans in an estate plan, as the executive director of the Funeral Consumers Alliance Josh Slocum told AARP Magazine, is to set up a “payable upon death” bank account. “It will earn interest, be available for an emergency, and still provide financial support to your family when you pass away,” according to AARP.  However, payable on death accounts may create unintended consequences.

Determining how funeral costs will be covered is only one step in estate planning. Do not go through it alone. Contact an experienced Illinois 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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Estate planning is essential

Lucy

Make sure that important documents are easily accessible to those who will need them.

Among other things, an estate plan helps to distribute your assets when you pass away. If your children are under 18 at the time of your death, you can name your chosen guardian in your estate plan. Sometimes, all you need is a simple will, however, if your life and finances are complicated, then your estate planning will most likely also be complicated.

If you have done some estate planning in the past, it is important to keep your documents up to date. Adoptions, births, marriages, divorces, and other life changes can require updates to your estate plan.

Estate planning documents are very important, and should be carefully safeguarded.  It is very important that the individuals you name to handle your legal affairs know where you keep the original documents.  Often, it is helpful to provide copies and instructions to those individuals in advance.

Estate planning documents that you may need during your lifetime include your Power of Attorney for Healthcare and Property and your Living Will. It is very important to give copies to those who you named in those documents as your agent, and health care directives should be given to your physician for inclusion in your medical records.

If you have also set up a Living Trust, you will want that document readily available and also accessible to the person whom you have named as your successor trustee as well. It is helpful to have a listing of assets owned by the Trust updated regularly.

The executor of your will should know where your original will is kept, along with any additional instructions, for example, your funeral arrangements.

If you have any questions or concerns about your estate planning, contact an estate planning attorney today. The Law Offices of Cynthia Hayes Hutchins, P.C. can help you with your estate planning in DuPage County today.

Transferring the Family Home to Your Children

UntitledThe act of passing on the family home is no longer as simple as just handing over the deed to your children. According to Smart Money magazine, “there are nearly a dozen ways to give a home to your child. And a couple are tax-free.” Yet to make this kind of exchange or transfer possible, it cannot be done last minute, and definitely needs to happen before you are no longer able to handle your affairs. “In order for the transaction to work properly,” according to Smart Money, “you’ve got to plan ahead.” The most important first step of planning is to hire an estate planning attorney to begin the complicated process.

According to CNN Money Magazine, the federal estate tax exemption, the amount you may leave to heirs free of federal tax, is permanently set at $5 million, indexed for inflation. In 2013, “estates under $5.25 million are exempt from the tax. Amounts above that are taxed up to a top rate of 40 percent.” Rather than gifting the home to your children while you are still living there, states Smart Money, it is much better to stay in your home until you die, providing that your home is below the estate-tax exemption ($5.25 million). “Even if you pay a market-rate rent to your child, the IRS might argue the home’s full date-of-death value still belongs in your taxable estate.” This could leave your children with a higher tax burden than you intended.

Other options are to give the house as a gift to your children, but, according to Smart Money, “you will probably have to dip into your $5.25 million gift-tax exemption.” You can do this by using your annual $14,000 gift-tax exclusion—bear in mind that it is $14,000 per person, so if both you and your spouse gift the house to your child and his spouse, “you can offset $56,000 of the home’s value.”

Figuring out how to get your property transferred to your child is only one of the many complicated processes of estate planning. Do not go through it alone. Contact a dedicated estate planning attorney today.

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Long-Term Care Planning

When you are ready to think about your financial future and what it means for your family, drawing up an estate plan is essential. It is a complicated process with plenty of room for mistakes and omissions, and hiring the help of a qualified estate planning attorney is important. As you begin to think about your estate plan, one major aspect is long-term care planning, which may be necessary for potential future illness or disability. The National Clearinghouse for Long Term Care Information defines long-term care (LTC) as “a range of services and supports you may need to meet your health or personal needs over a long period of time.” The Clearinghouse was developed by the U.S. Department of Health and Human Services to help Americans get a grip on what it means, and to help families get started—but again, no website or information bank is a substitute for an estate planning attorney.

DuPage County Estate Planning AttorneyAccording to the Clearinghouse, “almost 70 percent of people over 65 need LTC.” In 2008, that was 21 million people in America. Many people put off planning because “they do not want to think about a time when they might need it.” However, putting it off can leave you without the LTC services you need and leave your family in a difficult situation. When you begin to plan, according to the Clearinghouse, there are some major considerations to make. You cannot predict how much money you will need, or what type of care you will require, but you can make educated guesses based on personal factors, housing considerations, and assistive technology.

Personal factors, according to the Clearinghouse, include how old you are now and your family history. If you have a disability, LTC may need to begin earlier. “Between ages 40 and 50, on average, 8 percent of people have a disability that could require long-term care services.” Housing considerations include an evaluation of your home to determine if it will be appropriate later on—is it one story? Would you need to make modifications in the event of a disability? Assistive technology refers to devices that you may need that help you communicate or move. Is there a good chance you will need special software? A walker? These can cost money, and should be taken into consideration when beginning to plan for your LTC. You can work with your estate planning attorney to determine how you will pay for the care you will need, whether it is an in-home caregiver, or living in a care facility. It is important to discuss with your lawyer the available assets and resources you have for your long-term care needs.

Long-term care is just one aspect of estate planning. It is never too late—or too early—to begin planning. Contact a dedicated estate planning attorney 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.

Consider Long Term Care in your Estate Plan

  LucyThe idea of the fiscal-cliff has taken over the country with an increasing intensity about whether or not the deficit and debt will be reduced quickly enough. Many people fear, however, that this decision will be made without consideration for our retirees, veterans, elderly and disabled citizens.

The fear is that the long-term care costs will knock many people off of their own fiscal cliff. Congress has been surrounded by industry lobbyists that have been liberally dispensing their generosity to Congressmen for the last few months. These lobbyists have also been assembling a campaign to have the friendly congressmen dismantle the social and medical safety nets that are currently available to senior, veterans and disabled citizens through the federal Social Security, Medicare, Medicaid and VA programs.

Long-term care insurance does make a lot of sense to consider, according to the 2012 MetLife Market Survey of nursing Home, Assisted Living, Adult Day Services and Home Care Costs, including:

  • There is a 70 percent chance that one person in a couple turning 65 will need long-term care.
  • For people over 75, 65 percent already need long-term care.
  • By 85 years, 97 percent of people need long-term care.
  • An average nursing home stay is three years.
  • The average cost of a semi-private room in a Southern Illinois nursing home in 2012 was $152 per day and the cost for a private room was over $360 a day.
  • Assisted living is between $2,675 per month to about $5,300 a month.
  • Lastly, home health costs in 2012 ranged from $17-$28 per hour for home health aides and homemaker services ranged from $16-$25 per hour.

With these prices, long-term insurance may be worth considering. With long term care costs only going up and a high potential for federal benefits to become limited, estate planning is more important than ever. Estate planning attorneys at The Law Office of Cynthia Hayes Hutchins can help you relieve the stress with planning for long term care costs. Let Cynthia Hayes Hutchins help you today.