How Can An Estate Plan Protect My Assets In Illinois?
Answered by: Devin QuackenbushQuackenbush Legal, PLLC Phone: 312-319-8445
A carefully crafted estate plan can minimize the taxes the federal and state governments can take, especially if you have a high-asset estate worth $15 million or more. If you have a high net worth and die without an estate plan in Illinois, the government will tax your estate significantly. Crafting a plan with experienced legal guidance can ensure that the bulk of what you worked so hard to achieve will go to your heirs and not the government.
Elements Of A Basic Estate Plan
Everyone should do fundamental estate planning. No dollar limit exists; it’s more about ensuring that your wishes are followed and protecting your family after you die. You don’t want them to deal with avoidable expenses and delays during a difficult time. In Illinois, all adults should consider an estate plan that, at the very least, includes these items:
- Will: In this document, you name your beneficiaries, select an executor to manage your estate and designate a guardian if you still have young children at home.
- Power of attorney: A “durable” financial power of attorney (POA) allows someone you trust to manage your finances while you’re alive if you become incapacitated due to injury or illness.
- Living will: Called a “declaration” in Illinois, this document expresses your end-of-life wishes over medical care, medications and the extent of life-saving measures. You should also consider a durable POA for health care, naming someone you trust to make sure your wishes are honored if you cannot make these decisions for yourself.
These four elements represent a “bare bones” approach to estate planning but cover all the essential bases.
Consider The Benefits Of A Trust
While individuals of all income levels may also benefit from establishing trusts, these tools can be extremely valuable for those with complex or high-value assets in Illinois. Trusts offer many benefits, such as minimizing taxes, privacy and avoiding probate, which can be a long, costly and public process. Experienced estate planning and trust attorneys can explain the differences between the two basic types:
- Revocable trusts: Individuals – called grantors – can change the terms or beneficiaries at any time. Assets placed in the trust avoid probate and ensure that the grantor’s wishes are followed.
- Irrevocable trusts: Once the paperwork is signed, no changes can be made. The trust must be managed by a third party chosen by the grantor. In addition to avoiding probate, irrevocable trusts protect assets from creditors and offer tax benefits.
For those with considerable wealth, irrevocable trusts protect assets from gift and estate taxes. In 2023, Illinois’ estate tax exemption is $4 million, while the federal estate tax exemption is $12.92 million.
Depending on your situation, several other trust subcategories exist, which can be beneficial. Knowledgeable attorneys can steer you to those that best fit your needs, such as trusts that protect vulnerable family members. Two examples are:
- Special needs trust: This legal arrangement provides financial support to individuals with physical or mental disabilities. The assets contained in the trust do not jeopardize the recipient’s eligibility for government programs, such as Medicaid and Social Security.
- Spendthrift trust: In many cases, grantors want to protect heirs from themselves. In this case, you can appoint a trustee to oversee distributions from a trust for a beneficiary with poor money-management skills or one who faces addiction or other challenges.
Trusts offer a variety of benefits, which, depending upon the type, go into effect before or after your death.
Estate Planning Is An Evolving Process
A mistake too many individuals make is crafting an up-to-date estate plan, putting it in a drawer and forgetting about it. Estate planning is fluid. Plans should be updated when significant life changes occur, such as marriages, divorces, births, deaths, or major health issues arise.
In addition to making changes to your estate plan, you also need to make sure beneficiaries are updated for assets that bypass probate, such as joint bank accounts, life insurance policies, retirement accounts, property held in joint tenancy and payable-on-death accounts.
Any significant developments in your life can affect your family’s future. That’s why it’s crucial to make revisions when changes occur, but it’s best to review your plan every year. Experienced estate planning attorneys understand how to assess your financial situation, find solutions that fit your unique needs and make necessary adjustments when your circumstances change.
The answer is intended to be for informational purposes only. It should not be relied on as legal advice, nor construed as a form of attorney-client relationship.
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