Tag Archives: estate planning

Debt and Estate Planning

Theresa

Most people want to make sure their families are taken care of once they pass away. However, in the event of prolonged illness or long term care, that goal may not be possible to achieve.  Medical expenses and long term care can reduce the value of an estate very quickly. Heirs and family members may wonder who is responsible for the payment of debts after death.  The answer may depend upon the status of the estate once the decedent has passed.

Solvent Estate

solvent estate is one that has enough assets to pay off all of the debt of the decedent. The estate representative will pay off all of the debts using the assets of the estate. For example, if the estate is worth $500,000.00 and the debts add up to $200,000.00, after the debts are satisfied, the estate would then be worth $300,000.00. If the decedent has left a Last Will and Testament, the remaining monies would then be given to the people that were named therein.

Insolvent Estate

An insolvent estate results when the decedent left more debts than assets.   For example, if the final debt amounts to $100,000.00 and there is only $50,000.00 in the estate, the estate is considered insolvent. In this case, the representative would then have to prioritize the payment of the bills based on state law. There may be creditors that will be paid in full while others may receive a partial payment or none at all.

The Bottom Line

In the case of an insolvent estate, there will be no monies that will be paid out to those named as beneficiaries in the Last Will and Testament.  The beneficiaries or heirs to the estate will not be responsible for payment of these debts unless one of them was contractually obligated.  For example, if the heir was a co-signer or guaranteed payment of the debt, they may be liable for the debt.  If you have questions regarding the planning of your estate or the impact that debt may have upon your estate plan, an experienced Illinois estate planning attorney can assist you.

Alzheimer’s Researchers Want Increased Funding

Rigs

More than 5 million Americans suffer from Alzheimer’s, a progressive brain disorder that leads to the eventual loss of memory, reasoning and intellect.  According to Centers for Disease Control and Prevention (CDC) statistics, it is the sixth leading cause of death in the United States. While numbers rise for newly diagnosed cases, funding for research to combat the disease is not materializing fast enough.

The National Institutes of Health (NIH) reports an estimated $562 million in funding for Alzheimer’s research in fiscal year 2014. The Alzheimer’s Association estimates that the cost of care will exceed $200 billion this year and reach $1.2 trillion by 2050. A survey of 170 leading biomedical scientists released this year by BrightFocus Foundation, a Maryland-based nonprofit, revealed that:

  • 91 percent of respondents believed funding shortages are related to scientist retention in research
  • 96 percent of those surveyed saw limited funding as a deterrent for attracting new scientists to the field
  • 94 percent of the survey participants felt that the lack of funding is an obstacle to advances in research

Last year, the Illinois Health Department awarded more than $100,000 in Alzheimer’s research grants. Illinois taxpayers have freely contributed more than $4 million to Alzheimer’s research efforts since 1986. Those funds supported 166 research projects. With laws such as the National Alzheimer’s Project Act (NAPA) and legislation introduced in Congress (S. 709/H.R. 1507) bringing attention to Alzheimer’s issues, one can only hope that increased funding is not far behind.

If your family has been impacted by Alzheimer’s, contact an experienced Wheaton, Illinois attorney handling elder law and estate planning issues. Capture and protect your intentions for future care and the well being of your loved ones.

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.

Image courtesy of adamr/FreeDigitalPhotos.net

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.

Image courtesy of stockimages/FreeDigitalPhotos.net

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.

Image courtesy of FreeDigitalPhotos.net

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.

Image courtesy of FreeDigitalPhotos.net

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.

Image courtesy of FreeDigitalPhotos.net

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.

Image courtesy of FreeDigitalPhotos.net

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.

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.

Image courtesy of FreeDigitalPhotos.net