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Estate Planning starts with an analysis of —

• Your assets
• Your liabilities
• Your present and future needs and desires
• The present and future needs and desires of your family and relatives
• Your and their future prospects.

Estate planning consists of planning and structuring your assets to meet those needs and desires. Some of the considerations are –

• Determining who is to get your assets
• Naming the executor of your will
• Naming the trustee of any trusts you may create
• Naming the guardian of your children, if both you and your spouse die
• Naming someone who will care for you and your assets if you are disabled.

Wealth building

• Providing for your children’s education
• Providing insurance coverage for illness, disability or death
• Providing for investment and management of your assets after your death
• Tax planning to reduce income and estate taxes
• Avoiding probate.

Contact the Law Offices of Donald Thompson for further information on Illinois Estate Planning Law.

• It is expensive. 
• It takes time. 
• It is public. An estimate of the value of your assets is filed and an inventory of property may be filed 
• It provides a forum for creditors to get paid. 
• It allows a spouse to claim a statutory share of the estate. 

On the other hand –

• It is often just as or more expensive to arrange your affairs to avoid probate and it often does not work. Also many of the expensive things which must be done after death must be done whether or not there is probate.
• Probate allows creditor claims to be barred. If proper notice is given claims are barred unless they are filed within a certain time. Creditors can also attack arrangements meant to avoid probate if they were also meant to avoid creditors. 

Whether or not it is desirable to avoid probate is something which must be determined in each individual case. Many people believe that avoidance of probate avoids estate taxes. That is not so and should not be a consideration.

How can you avoid probate? By not having any assets which require a will or the law to say who gets them when you die. If they pass to someone named in some document other than a will or the statutes you avoid probate. Among devices which will do this are –

• Trusts 
• Joint Tenancies 
• Beneficiary designations 
• Pay on death accounts. 

In smaller estates use of the last three items is often very effective. But if any substantial amount of assets exist in your sole name without any beneficiary designation there will still be probate. If you are going to avoid probate you must make these arrangements for all your property. You must also arrange to have all property you acquire in the future subject to such arrangements.

The same can be said of living trusts which are a very popular way of avoiding probate. There will still be probate if only some of your assets are transferred to the trust. All your property must be transferred to the trust to avoid probate. Just signing the trust document is not enough.

A variety of steps can be taken to protect assets from creditors. One simple step is to transfer your assets to your spouse. This assumes you have a healthy marriage and that your spouse’s creditors are not a problem. It may also interfere with planning to avoid estate taxes. Other devices which are sometimes used are:

Statutory exemptions from enforcement of judgments. By statute a creditor cannot reach certain assets. In most states creditors cannot get your residence if the equity in it is below a certain level. In Illinois this is $7500 for a single person or $15,000 for married persons. In some states the amount of the exemption is unlimited. Under the bankruptcy laws the assets protected by state law are also exempt assets in bankruptcy.

Retirement vehicles. In most states pension, profit sharing and other retirement the entity are at risk, not your other assets outside the entity. This does not work when you do the act creating certain liabilities yourself, such as when you are driving the company truck which runs someone over. It also does not work for certain professionals like doctors or lawyers with respect to their malpractice liability. It does work with respect to contract liability, so long as you sign in the entity’s name and do not personally guaranty the contract. It also does not work against liability generated outside the business. The creditors can get your interest in the business and then liquidate it.

Limited liability companies and limited partnerships. If you own an interest in such a company under some states’ laws your creditors cannot get your interest in the entity. They can only get a charging order which allows them to get distributions which might otherwise go to you, if there are any.

Tenancy by the entirety. This is a type of joint tenancy between spouses in a residence. The creditors of only one of the spouses cannot get the property.

Bearer stock. In some countries corporate stock can be issued only to the bearer. No records of ownership are kept. If your creditors can’t find your assets they can’t get them. However, creditors can require you to tell them under oath what you own so use of this device involves potentially breaking the law. You can be sentenced to jail for contempt of court if your answers are shown to be false.

Foreign asset protection trusts. These are trusts set up, usually, in certain foreign jurisdictions where it is difficult to enforce U.S. judgments. In the time it takes the creditor to get anywhere you can move the assets to another country with similar laws. These arrangements are very expensive and at least one U. S. court has ordered the trust owner who lives here to produce the assets or go to jail.

Living Trusts. After death your creditors cannot get the trust assets.

If you are going to use these devices you must do so before you have lawsuits or judgments against you. Transfer of your assets for less than the full value is a fraudulent conveyance and void if you made the transfer to avoid a creditor. Some of these devices also have a waiting requirement before they become effective.

Welcome to the Chicago Estate Planning Law Blog. This estate planning blog is brought to you by the Law Offices of Donald Thompson. Mr. Thompson is an estate planning attorney located in downtown Chicago. Visit the Wills, Trusts and Estate Planning website for more information.