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Posts in the ‘Estate Planning & Probate’ category

Estate Planning in a Digital World

Posted on October 10th, 2011 by Holly A. Reese, Teri Havron

Historically, estate plans contained two types of property—personal property and real property. As we continue to move more of our lives to the internet, we are quickly learning our online presence can outlive our physical presence. Our computers and online accounts contain a wealth of our personal information and it is increasingly becoming important to address how to handle these “digital assets” in your estate plans.

“Digital assets” are considered to be any online account that you store on your computer or server. Today, nearly everyone has some type of online account including, but not limited to: multiple email accounts; social media networks like Facebook, Twitter, LinkedIn; photos on Flickr or Shutterfly; videos on YouTube; music libraries; documents on Google docs; medical records; online bank and investment accounts, online bill pay accounts; online shopping accounts like Amazon; and blogs or websites.

Without the proper planning, these digital assets can be very difficult and overwhelming to manage and access after a person dies. Three main questions come to mind: Who do you want to leave in charge—spouse, family member, or third party? How will they locate all of the accounts? And, how will they gain access to each account?

The first step is to create an inventory of all your digital assets. From there, an attorney can help advise you as to whether a will, separate document, trust, or online afterlife company is right for your planning needs.

There are many benefits of planning for digital assets, including: making things easier on executors and family members; preventing identity and content theft; and preventing losses to the estate. Take a few moments and start on your digital estate plan today. As the old saying goes: “failing to plan is planning to fail”.

Should you have a question or would like to discuss your estate plan, please contact Holly A. Reese or Teri L. Havron.

How the July 1, 2011 Illinois Power of Attorney Act Amendments Affect You

Posted on July 12th, 2011 by Teri Havron

Powers of attorney (“POAs”), whether for property or healthcare, have the potential to be the most valuable documents in your estate plan. These documents allow you to appoint a person or organization to act as your Attorney-in-Fact, or Agent, when you are unavailable or unable to do so.

The Illinois Power of Attorney Act was recently amended, and became effective July 1, 2011. The General Assembly amended the law to make the statutory forms more user-friendly while providing more protection to the principal—particularly elderly or disabled persons—from financial abuse. For example, the agent’s standard of care to the principal is elevated to “acting in good faith using due care, competence, and diligence.”

Additional changes as of July 1st include:
• A procedure for the agent to certify that he or she has accepted the position as agent;
• A form for third parties to assure the POA presented is valid;
• Guidance on designating successor agents to act if an initial agent resigns, dies, or becomes otherwise unqualified to serve; and
• Additional limits on who may qualify to witness execution of the POA.

Pre-existing POAs executed before July 1, 2011 will remain valid and enforceable if they complied with Illinois law as it existed at the time of execution. However, this is a good time to review your estate plan to see if your powers of attorney need to be updated.

Should you have a question about the POA Amendments, or would like to discuss your estate plan, please contact Teri L. Havron.

How to Protect Your Wealth With Missouri Asset Protection Trusts

Posted on July 7th, 2011 by Teri Havron

In today’s ever-evolving economic crisis, many have felt the pain from defaulting on mortgages, credit cards, commercial real estate, business and personal loans, and lines of credit. More and more people are questioning how to be proactive in protecting their assets from such creditors. The answer may be found in estate plans.

Currently, Missouri is one of thirteen states to allow self-settled spendthrift trusts or “asset protection trusts”. A Missouri Asset Protection Trust, or MAPT, is an irrevocable trust designed to provide the grantor with protection from the claims of future unknown creditors while still retaining a beneficial interest in and certain powers over the trust. Under a MAPT, creditors cannot reach your trust assets to satisfy your personal obligations even if you become insolvent or bankrupt.

Who Should Consider a MAPT?
Any person wanting to protect their wealth from future risks and has a connection with the State of Missouri should consider a MAPT. Moreover, professionals who are exposed to litigation risk (such as doctors, lawyers, engineers, architects, or accountants), entrepreneurs, business owners and those who serve as officers or on a board of directors should seriously consider a MAPT.

MAPTs are inappropriate for any person who is trying to avoid the claims of current creditors, is currently involved in litigation, or is fraudulently trying to hide assets.

What is Required for a MAPT?
To qualify for a MAPT, the principal place of business or residence of trustee must be located in Missouri, or the presence of all or part of the administration must occur in Missouri. Thus, even an Illinois resident may potentially take advantage of a MAPT by appointing a qualified trustee who is a resident of Missouri or an entity that is authorized to act as a trustee within Missouri, to administer the trust.

Should you have a question or would like to discuss your estate plan, please contact Teri L. Havron.

A Look at the New Illinois Civil Union Law

Posted on June 16th, 2011 by Holly A. Reese

The recently enacted Illinois Religious Freedom Protection and Civil Union Act (Illinois Civil Union Act) creates a separate status – what’s called a “civil union” – that is analogous to marriage. Under the Illinois Civil Union Act, two persons – either the same or opposite gender and both at least 18 years of age – may elect to enter into a civil union rather than a marriage.

The primary intent of the Illinois Civil Union Act is to provide same sex couples with the full protection of Illinois law – currently available to married spouses under the existing Illinois Marriage and Dissolution Act (MDA). The Illinois Civil Union Act will, in effect, enable parties to a civil union to claim a right or interest wherever the word “spouse” or similar marital partner designation appears in Illinois law. Accordingly, a civil union is equal to marriage in all but two respects:

1. The act does not provide for marriage, which will remain available under Illinois law solely to individuals of the opposite sex.
2. The law is subject to the restrictions of the Defense of Marriage Act.

The Defense of Marriage Act (DOMA) is the first substantive federal law pertaining to marriage. It may be important to note that marriage has, and continues to be, a matter of state law. DOMA contains two provisions. The first prohibits the recognition of same-sex relationships under federal law. The provision expressly provides that the word “marriage” means only a legal union between one man and one woman as husband and wife and the word “spouse” refers only to a person of the opposite sex who is a husband or a wife. The second permits states to refuse to recognize same-sex relationships authorized by other states.

What’s the Impact of DOMA on Illinois Law?
DOMA will limit the Illinois Civil Union Act by restricting the use and definition of “spouse” under federal law to two individuals of the opposite sex. In cases where the fundamental definition of “spouse” under Illinois law conflicts with the definition of “spouse” under federal law, the rights and interests of parties to federal benefits may be limited based solely upon gender. DOMA will also limit the Illinois Civil Union Act by permitting states to refuse to recognize same-sex marriages from other states. However, the Illinois Civil Union Act will expressly provide that any person who enters into a civil union in Illinois consents to the jurisdiction of the courts of Illinois for the purpose of any action relating to the civil union—even if one or both parties cease to reside in the state. Meaning, parties will have access to Illinois courts for dissolving their civil unions if they live in a jurisdiction where they could not otherwise do so.

Unfortunately, beyond this, the Illinois Civil Union Act does not address the refusal of other jurisdictions—specifically the federal government—to recognize a civil union granted in Illinois. Accordingly, federal law will have a direct and strong impact on the Illinois Civil Union Act. For example: Federal law governs tax filing status which includes calculation of tax rates and amounts, where state tax filings are derivative of federal return. Federal employees are also not entitled to spousal benefits where the spouse does not meet the definition of DOMA. The provision of domestic partner or spousal benefits not recognized under federal law results in taxation to the employee, which is not taxable to employees who have opposite sex spouses.

What’s the Impact of Federal Law on Illinois Law regarding Estate Planning?
As noted in section 1(d), the Illinois Civil Union Act will enable parties to a civil union to claim rights or interests where the word “spouse” or similar marital partner designation appears in Illinois law. These rights and interests will, for example, include the right to acquire and own property jointly—including tenancy by the entireties—and the right to automatic inheritance.

Unfortunately, however, parties to Civil Unions cannot receive federal benefits limited to “spouses” under federal law. This will have an important impact, for example, on the long-established rule that the division of the marital estate incident to a divorce is not taxable to either party—DOMA will not allow such a benefit to same sex couples upon dissolution.

Accordingly, for clients to be protected, they need to continue to secure rights to inheritance through powers of attorney, wills, and trusts and to property by title. The piecemeal pursuit of securing of rights must continue unless uniform recognition is enacted.

In conclusion, where federal law expressly limits recognition and provision of benefits as a matter of federal law to “spouses”, these benefits are not available to same-sex “spouses” under the Illinois Civil Union Law. Additionally, such federal benefits would not be available to same-sex spouses legally married or in valid, recognized same-sex relationships under any other state law or the laws of other jurisdictions.

To learn more, or to discuss your estate plan, contact Holly A. Reese.

Protect Your Life Insurance Post-Divorce

Posted on May 4th, 2011 by Teri Havron

Are you recently divorced? Have you changed your life insurance beneficiary?

Beneficiary designations are often overlooked as divorce can be a long and difficult process. Nonetheless, an ex-spouse could still end up receiving a windfall if the former husband or wife fails to remove the ex-spouse as the designated beneficiary on life insurance policies.

Under Illinois law, dissolution of marriage will automatically revoke provisions of wills, revocable trusts, and powers of attorney that pertain to a former spouse. However, a former spouse’s designation as a beneficiary to a life insurance policy is not automatically terminated by law upon divorce. A carefully drafted marital settlement agreement could waive the beneficiary’s rights to the life insurance proceeds, but it’s best to change your policy designations immediately upon divorce.

In Richard v. Martindale, 2010 U.S. Dist. LEXIS 58518 (N.D. Ill. 2010), the parties divorced after 22 years of marriage but the husband never removed his ex-wife as beneficiary of his life insurance policy. His sons, the named successor beneficiaries, sued for the proceeds, claiming that the ex-wife waived her right in the parties’ marital settlement agreement. The federal district court held the unambiguous waiver in the agreement was sufficiently specific to bar the ex-wife from collecting the life insurance proceeds.

Unfortunately, not all successor beneficiaries have been as successful. There are numerous cases in Illinois where the marital settlement agreement was not so carefully drafted or no steps were taken to change the beneficiary designation in a life insurance policy. In these cases, the ex-spouse, not the decedent’s children or successor beneficiary, received the proceeds or benefits. See In re Marriage of Myers, 257 Ill. App.3d 560 (1st Dist 1993); O’Toole v. Central Laborers’ Pension and Welfare Funds, 12 Ill. App.3d 995 (3d Dist 1973).

Any significant change in your family circumstances, including divorce, is a good time to review your entire estate plan. Updating and maintaining your plan, through properly drafted estate documents, is necessary to provide safety and comfort to you and your loved ones.

Should you have a question or would like to discuss your estate plan, please contact Teri L. Havron.

The 2011 Estate Tax Band-aid

Posted on January 3rd, 2011 by Holly A. Reese

Also known as the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, the new law signed by President Obama on December 17, 2010 provides little in the way of certainty for those involved in Estate Planning.

During 2010, the year of the estate tax repeal, the estates of several billionaires were able to slip though the loophole untaxed, including the estate of famed Yankees owner, George Steinbrenner. All told, it is estimated that this loophole resulted in several billion in lost revenue. What a year!

So as we look ahead to 2011, what can we expect from the new estate tax laws?

First, we can expect that the new laws will be temporary, as they are scheduled to sunset on December 31, 2012. That doesn’t give estate planners a lot to work with considering we have no idea where things will be in just two short years.

Second, we will see an estate tax exemption of $5 million per person, and a maximum estate tax rate of 35%. This is a significant change from 2009, where the per person exemption was $3.5 million, and the maximum tax rate was 45%.

Third, we will see an elimination of the modified carryover basis that was previously in place (which allowed for only $1.3 million of stepped-up basis), and a new stepped-up basis rule in its place. The new stepped-up basis rule provides that property will receive a basis equal to the property’s fair market value on the date of the decedent’s death.

For the estates of those who died in 2010, the new law allows for an option of applying the 2010 rules of no estate tax, but limited stepped-up basis, or the 2011 rules of $5 million exemption and unlimited stepped-up basis.

The fourth item we can expect under the new law is spousal portability. Spousal portability allows the surviving spouse to take advantage of the unused portion of the deceased spouse’s estate tax exemption. This effectively gives each married couple a $10 million exemption. It would appear, however, that to take advantage of the portability option, both spouses must die before December 31, 2012.

Only time will tell what will come in 2013. All of this uncertainty further increases the need to have your estate plan reviewed by an attorney in light of the current band-aid situation.

To learn more, or to discuss your estate plan, contact Holly A. Reese.

Wills, Trusts and Estate Planning – The Gift that Keeps on Giving

Posted on December 16th, 2009 by Holly A. Reese

Since the holiday season is upon us, it seems only natural that we take some time to slow down and reconnect with our family. Spending time with the generations in your family may have you thinking about future generations, and specifically, how to make sure they are taken care of if something should happen to you.

This is an unpleasant topic that many of us want to ignore, put off, or just pretend won’t happen to us. Far be it from me to tell you that you are wrong – but you are wrong. The unfortunate truth is that we all need to think about our future generations, and to ensure that they are provided for, and we need to do it today – not tomorrow, not next month, not next year.

I would propose that you think of an estate plan much like you think of insurance – something that is vitally important and necessary, but that you hope never to use. Think about not only the tangible items that you want to leave to your loved ones, but also what you don’t want to leave them – the burden of probating an estate without a will, trust, or any direction from you.

Consider an appropriate estate plan your gift to those you may one day leave behind. It may not be a partridge in a pear tree, but it is better than a lump of coal. Happy Holidays to all!

To learn more or contact this author, Holly Reese, click here.