Many 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.

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.

Estate planning continues to evolve as federal and state laws change over time. A recent Financial Planning article highlighted the significant impact of the fiscal cliff tax deal on the world of estate planning.

One of the hallmarks of the tax deal was making the estate tax $5.12 million exemption permanent. Furthermore, the exemption is now adjusted with inflation, and is now portable between spouses. The practical effect of these changes is that the vast majority of individuals, except those with extreme amounts of wealth, will never fear the federal estate tax again.

For most Americans, tax cuts enacted in 2001 have now become permanent, which means that their tax rates will continue unchanged. For wealthier individuals, however, income taxes may be significantly higher. For instance, Congress has developed a new 20% tax rate on dividends and capital gains. A 3.8% Medicare tax will apply to investment income. Additionally, itemized deductions and personal exemptions will now phase out at incomes of $250,000 for single individuals and $300,000 for married couples who file a joint income tax return. It is estimated that in some cases, individuals could face a combined tax rate of more than 50%.

The 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 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.