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Part of estate planning involves providing for the event of your illness or disability. In fact for most people the odds of becoming disabled and unable to work for at least a short period are higher than the odds of dying. Disability insurance provides a monthly income if that happens. And many more people incur high medical expenses at one time or another without becoming disabled. Both types of insurance are a desirable part of any estate plan.

Although things of this nature are never pleasant to think about and seemingly plan on, but there possibility is a reality and they should be taken care of when properly planning an estate in Chicago, IL. Contact Chicago Estate Planning and Wills lawyer to plan your estate.

Today: Income splitting in Illinois

Sometimes it is possible to shift income within a family from someone in a higher tax bracket to someone in a lower bracket. This is difficult with children under 14 since their unearned income (except for the first $1600) is taxed at their parent’s tax rates. However, not all children are under 14. Basically income is split by giving property to children. Thereafter the income from it belongs to the children. Interests in family businesses or farms are ideal. Gifts of cash work too if available. Employing your children also is a good way to shift income to them. However, they must actually work and the pay cannot exceed a reasonable amount for what they do.

If this sounds like something that could work for you contact Chicago Estate Planning Attorney Don Thompson for further information.

Living Wills

These do not dispose of property. Instead they tell your doctor or hospital not to keep you alive artificially. They must be signed with witnesses and all the formality of wills. To be effective you must give them to your doctor and to whoever will have charge of your care. For instance, if you are going into a hospital give it a copy to be kept with your medical records.

Living Trusts

This is a trust created while someone is alive. It is usually a revocable trust – the person who creates it can revoke it or alter it. For this reason all income is taxed to the person who creates it and it is in that person’s taxable estate. The person creating it is usually the trustee and gets the income from the trust. When he or she dies the trust assets usually continue in trust with another named trustee for the benefit of the surviving spouse and children. Eventually the assets are paid out of the trust to the children at specified ages. These trusts are used —

1. To avoid probate.

2. To avoid creditors who cannot file claims against the trust assets. They can file only against the probate estate. This is good for people in risky occupations. However, the protection against creditors exists only after death.

3. To disinherit a spouse and get around his or her right to a statutory share of the probate estate regardless of what a will says.

4. For privacy. The trust assets do not go through probate court where an estimate of the value of the assets is part of the record and where an inventory of the probate assets may be filed and is a public record.

5. To avoid probate of out of state real estate. If you own real estate in another state the probate of your estate in that state is often required in addition to the state where you live. By holding title to that real estate in trust you avoid the probate. If you are trustee the title passes to a successor trustee on your death by terms of the trust and not by virtue of your will or the probate act of the state in question.

To learn more or to plan your Chicago, Illinois will and or trust contact Chicago Estate Planning Lawyer Don Thompson.

This is a written agreement entered before a marriage that usually deals with what happens to the parties’ assets and income in the event of divorce or death. For instance, it can specify what a surviving spouse gets on the death of the other spouse. It can increase or decrease inheritance rights. To be enforceable each party should have separate legal counsel, each party should make full disclosure of all income, assets and other material facts, and no duress should be involved. This is also called a antenuptial agreement.

To learn more contact Chicago Estate Planning Attorney Don Thompson.

Last week I had a working lunch with “Bill,” a client who had sold a significant portion of his family-held business about two years ago.

Over the course of our discussion, Bill told me a close friend from his university days had called him last month. The friend’s father passed away back in March, leaving a sizable estate. Unfortunately, that estate was now in the process of an extensive legal battle, as four siblings (from two different marriages), a widow, and an ex-spouse bickered and fought over their share of the pie.

“What a mess,” Bill said, shaking his head as he waited for his grilled salmon. “When I go, I want things to be well-organized – easy to deal with.” Bill paused for a moment before looking at me and adding: “And I want everybody to know exactly what I want done with my money.”

Bill’s concern is well founded. In my experience, there’s a direct relationship between the size of one’s estate and the potential for conflict. The higher the stakes, the higher the chances for litigation.

Unfortunately, as I told Bill, there is no such thing as a litigation-free estate. Even the most well-organized, well-constructed estate may be challenged by disgruntled heirs or creditors. That said, there are things high-net-worth individuals can do to discourage litigation, and diffuse inter-family conflict before it leads to courtroom drama.

Read further or Contact Chicago, Illinois estate planning and probate lawyer to learn more from the best.

When spouses (or anyone else) together create one trust it is called a joint trust. These trusts are common in community property states, but are not widely used in Illinois because of the adverse estate and gift tax consequences that may result. Recently the tax rules have been eased in some private letter rulings and there are also many non-taxable estates so the use of joint trusts is increasing. There are still many technical pitfalls and separate trusts are usually advisable.

These should not be confused with joint wills. When both spouses share one will it is called a joint will. Joint wills, for a variety of reasons, should not be used.

Contact Chicago Estate Planning Lawyer Don Thompson to learn more about joint trusts and joint wills.

Estate planning often involves lifetime gifts to children. This gets appreciation on the assets out of the parents’ estates. This was also done in the past to shift income to children who were usually in a lower tax bracket. Now a child under 18 pays tax at the parents’ highest marginal tax rate on the child’s unearned income over $1900 if that would be higher than the child’s tax. The tax also applies if the child’s earned income does not exceed one-half of the child’s support and the child is 18 or is a full time student aged 19-23.

To learn more contact Chicago Estate Planning Attorney. Call 312-782-0844.

Gifts in trust usually do not qualify for the annual gift tax exclusion unless the beneficiary has a right to withdraw the funds. Under Section 1503(c) of the Internal Revenue Code the annual exclusion can be had without withdrawal rights. There must be a single beneficiary. The funds must be available for withdrawal by the child at age 21. The trustee must have unrestricted discretion to distribution principal and income for the benefit of the beneficiary.

If the trust continues after the beneficiary reaches 21, the gift tax annual exclusions are no longer available.

Contact Chicago probate and Estate Planning Lawyer Donald Thompson to learn more:

55. W. Monroe – #3950
Chicago, IL 60603
Phone: 312-782-0844
Fax: 312-201-1436
Email: donthompsonlaw@sbcglobal.net

The state dictates who gets your property and who will be the administrator (manager) of your estate and who will be guardian of your children if your spouse has already died and who will be your guardian if you are disabled.

If you die without a will survived by a spouse and children, the spouse gets one-half and the children get the rest. There are no exceptions.

Guardianships are expensive and time consuming and if money or property is involved court approval is needed for everything.

All your property must be collected and sold unless all the beneficiaries agree to keep it. The family business or farm must be sold.

There is no provision for professional management of your estate.

There will be probate of your estate if it exceeds $100,000. This is court determination of who is entitled to your property and supervision of its collection and distribution.

Taxes may be a lot higher.

Contact Chicago Estate Planning Lawyer to see how you can plan your estate and will.

The Federal estate tax used to allow a credit for state death taxes. The Illinois estate tax was the amount of the credit allowed under Federal law. Under this scheme the total Illinois and Federal tax was the same as the total Federal tax before the credit.

The Federal law has been changed and the credit for the state death taxes is being phased out beginning in 2002. Because of this, as of January 1, 2003 Illinois has a new estate tax law. This provides that the Illinois estate tax is the amount that would have been allowed as a credit for state death taxes under the Federal tax before 2002. The net effect is a substantial increase in the total of Illinois and Federal estate taxes.

The pre-2002 Federal credit was based on the adjusted taxable estate which is the taxable estate less $60,000. The Federal state death tax credit schedule was (and thus the Illinois estate tax schedule is):

View Illinois Estate Tax Schedule.