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There is a federal tax on estates and gifts. Some states also have taxes. Before 2003 Illinois taxed estates only if there was a federal tax. The Illinois tax was the amount of the federal credit for state taxes so there was no increase over the federal tax without a state tax. However, the federal tax credit
The federal tax is a single tax on all transfers either during life (gifts) or at death. It is progressive and starts at 18% on the first $10,000 of transfers and goes up to 50% after transfers exceed $2.5 million. It is cumulative so each gift adds to the amount to be taxed. Give a non-exempt gift of up to $10,000 this year and the tax is 18%. Give a non-exempt gift of $10,000 next year and you are in the $10,000 - $20,000 bracket where the tax is 20%. If you then die with a taxable estate of $1,000,000 the top tax rate is 41% because now you are in the bracket applicable to $1,020,000.
Or to put it another way - if you give away $1 million of taxable gifts during life and die with a taxable estate of $1 million your remaining $1 million is subject to the marginal tax rate for $2 million estates. For state taxes is being lowered so Illinois now imposes an estate tax in the amount the federal credit used to be.
This allows the deductible gift to the surviving spouse to be made in trust so a trustee can manage the investments. The tax law provides that the gift, while not absolute, still qualifies for the marital deduction if the spouse must get all the income and has the power to say who gets the money remaining in the trust at his or her death.
This is usually used together with a family or credit shelter trust which takes advantage of the credit to pass $1,500,000 tax free. Remember the spouse can get all the income from that trust too, but cannot have the power to say who gets the remaining assets of the family trust on his or her death. That power would cause the family trust assets to be in the surviving spouse's taxable estate.
Contact Marital Deduction Trusts Attorney Don Thompson For More Information. His offices can be reached at (312) 782-0844 or email him at donthompsonlaw@sbcglobal.net
Over the centuries, the human life expectancy has increased substantially. During the Roman Empire, the average life expectancy was 22 to 25. By 1900, it had increased to 30; by 1985, it had increased to 62. Today it is approximately 77. Some people, however, live to be 100. Known as centenarians, they are not as rare as you might think. In 2005, the nited States had the greatest number of centenarians with 55,000. Japan came in second with 25,000. Anyone who reaches this milestone in the nited States receives a letter from the president, while in Japan they receive a silver cup and a certificate from the prime minister. Centenarians are not uncommon, unlike super-centenarians, people who live to be 110 or more.
Norris McWhirter, editor of the Guinness Book of World Records, first used the word "super-centenarian" in his 1976 correspondence to A. Ross Eckler, Jr., an age claim researcher. William Strauss and Neil Howe also used the term in their book Generations. Verifying super-centenarians can be difficult due to a lack of documentation; this, however, is changing with birth registration.
According to the Guinness Book of World Records, Thomas Peters was the first super-centenarian. He was born in Groningen, the Netherlands, on April 6, 1745, and died on March 26, 1857, at the age of 111 years and 354 days.
Due to a lack of evidence to back up Peters' claim, some scholars consider Geert Adriaans Boomgaard the first super-centenarian. Boomgaard was born in Groningen, the Netherlands, on September 21, 1788. Very little is known about his life other than he was born and died in Groningen and his father was a boat captain or a soldier in Napoleon's army. Boomgaard was married twice and lived to be 110 years and 135 days old.
Delina Filkins, one of the earliest American super-centenarians, was born on May 4, 1815, in Herkimer County, NY. Filkins spent almost her entire life, excluding the last two months, within 10 miles of where she was born. Her father, William, lived to be 97, and her mother, 78. Filkins had six children, four of whom preceded her in death. Filkins lived through the presidencies of James Madison to Calvin Coolidge. She died in Richland Springs, NY, at the age of 113 years and 214 days.
The most well-documented case of a super-centenarian was that of Jeanne Calment. Calment was born in Arles, France, on February 21, 1875. In 1896, she married her second cousin, a wealthy storeowner. Well off, Calment chose not to work and concentrated on her hobbies instead. Calment outlived her husband, daughter and grandson. With no heirs, Calment made a deal at age 90 with her lawyer, Francois Raffray, to pay her a monthly sum until she died in exchange for her apartment. When Raffray died in 1995, his widow continued the payments. Calment lived on her own until she was 110 at which time she moved into a nursing home.
Calment came into international fame in 1988 when reporters arrived in Arles on the centenary of Vincent van Gogh's visit. Calment met the painter at her father's store when she was 14. When she was 114, Calment made a brief cameo in the film Vincent and Me (1990), becoming the oldest actress ever. A documentary on her life, Beyond 120 Years with Jeanne Calment, was released in 1995. A CD reminiscing about her life to rap music, Time's Mistress, was released in 1996.
Calment made her first public appearance as the "world's oldest person" according to the Guinness Book of World Records in 1988. She lost this title in 1990 when Carrie C. White of Florida claimed to have been born in 1874. White's claim was disputed, and after she died in 1991, Calment became the oldest recognized living person, a week shy of her 116th birthday. When she reached 120 years and 238 days on October 17, 1995, the Guinness Book of World Records verified Calment as the "oldest person ever."
Calment never let age make a difference. At age 85, she took up fencing; at age 100, she still rode a bicycle. Calment walked unassisted until age 114, when she fell and had to have hip replacement surgery. Although she used a wheelchair from then on, she remained alert and received visitors. Calment retired from public life due to declining health at age 122. She died at the age of 122 years and 164 days. Calment attributed her longevity and youthful appearance to olive oil, which she rubbed into her skin and poured on all her food.
As of February 15, 2008, American Edna Scott Parker is the oldest-living person in the world. Born on April 20, 1893, Parker became the oldest-living American on February 14, 2007, after the death of Corinne Dixon Taylor, and the oldest-living person in the world, on August 13, 2007, after the death of Yone Minagawa of Japan. Parker was born on a farm in Johnson County, IN, and ate the standard fare of meat and starch. She taught at a two-room schoolhouse in Smithland until she married Earl Parker in 1911. He preceded her in death, along with their two sons. As of October 2007, Parker had five grandchildren, 14 great grandchildren and 13 great-great grandchildren.
Parker lives in the same retirement home in Shelbyville, IN, as Sandy Allen, the second tallest-living woman in the world according to the Guinness Book of World Records. She is still in good health and able to walk on her own. Parker likes to read and recite poetry, especially that of James Whitcomb Riley.
Mother Mary P. Romero Zielke Cota and daughter Rosabell Zielke Champion Fenstermaker also reached the status of super-centenarian. Cota was born in 1870 in Montecito, CA, and died at the age of 112 years and 17 days. Fenstermaker was born in 1893 in Carroll, NE, and died at the age of 111 years and 344 days.
It is unfortunate that these individuals outlived their loved ones and friends, but imagine everything they have seen. What amazing lives they have led.
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Federal legislation passed in 2006 has turned many former procrastinators into pre-planners. The Deficit Reduction Act, signed into law by President Bush in February 2006, extends Medicaid's "look-back" period from three years to five. "Look-back" is the term for the period of time during which financial transactions of a Medicaid applicant/recipient are subject to review in determining whether or not that person is eligible for Medicaid (called MaineCare in Maine).
Larry Raymond has been with the Lewiston Law firm of Isaacson & Raymond for over 50 years. He isn't surprised by the increased interest in planning for the future, "I'll have three or four clients a week call or stop by inquiring about what steps they should take."
Under the current law, when an elder applies for MaineCare, any gift the elder gave to a child within the 60 preceding months will make it more difficult for the elder to qualify for MaineCare. According to Raymond, the word has gone out and many people are asking the poignant questions earlier, "Last minute planning is now more difficult than it used to be. Fortunately most people are aware of the changes and are taking appropriate steps."
The state will not let you just give away your property or your money to qualify for Medicaid. Gifts or transfers for less than fair market value that are made during the "look back" period may cause a delay in their eligibility. For gifts made before February 8, 2006, the ineligibility period begins when the gift was made. For gifts made on or after February 8, 2006, the ineligibility period begins when the applicant enters a nursing home and is otherwise eligible for MaineCare except for having made the gift.
Separate from the MaineCare eligibility issue, one of the most common questions that Raymond hears has to do with homes or land, "People always want to know if they should put their home in their kids' names. By asking the client to consider five situations, Raymond says they are able to come to the conclusion on their own. "Do you want your child to own your home if: (1) they get divorced or (2) go into bankruptcy or (3) get sued or (4) pass away before you or (5) have a bad habit you don't know about (an example could be gambling)?"
Raymond says it is important to remember that the Federal Estate Tax threshold currently stands at $2 million dollars and increases to $3.5 million dollars in 2009. In Maine that threshold is currently $1 million dollars.
Raymond says, "It may be a bit of a cliché, but it is never too early to start planning."
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This is also referred to as a life interest. Someone with a life estate has a right to the use of the asset in which she or he has a life estate for her or his life. The right can also exist for the life of someone else. The right extends to the use of the asset and the income from it. The right does not extend to consuming the asset. These concepts arose with respect to land. The holder of the life estate, called a life tenant, could farm the land, sell the crops and keep the proceeds. The life tenant could also live in any house on the land. The life tenant could not sell the land outright.
Nowadays this concept is usually applied to financial assets. The life tenant has the right to income, but not principal. For practical reasons, assets to be used by a beneficiary for life are usually put in trust so a trustee has control over them with power to enforce the terms of the life tenancy.
For Help With Your Estate and Finanicial Assets Contact Chicago Business and Estate Planning Attorney Don Thompson.
Women have three major worries when they think about retirement: inflation, health and longevity, according to a study released yesterday by The Hartford (Conn.) Financial Services Group Inc.
These worries keep women up at night more so than men, according to the study, which was conducted in collaboration with the Massachusetts Institute of Technology AgeLab in Cambridge.
They have reason to be nervous. Women work 12 fewer years than men on average, have less put away for retirement and face high odds of a long life spent alone, Stephanie Chappell, The Hartford’s corporate gerontologist, said during a panel discussion in New York yesterday, during which the firm presented the survey’s results.
At the top of the list, 83% of the women surveyed as part of the study said that they feared that their purchasing power would dwindle due to inflation, compared with 69% of men.
Declining health came in second, with 75% of polled women saying that they were “very” or “somewhat” concerned.
Add the rising cost of health care to fears of poor health, and 87% of the women expressed nervousness concerning retirement.
Sixty-four percent of the women said they were also worried about living too long, compared with 46% of men.
However, advisers can help women get up to speed, not only by encouraging them to look at disability and life insurance but by encouraging them to seek growth in their investment portfolios, said Eric Waller, retirement solutions consultant at The Hartford.
Women have a tendency to be “too cautious” when it comes to their investment choices and should be moved away from being “ultraconservative” investors to help build their nest eggs, he said.
The study was based on a survey of 1,194 adults between 45 and 74.
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As a buyer you should find out all you can about the type of business you are interested in. The more you know the better able you will be to evaluate the particular business you are thinking of buying. One of the best sources of information is to get a job in the field for a year, if possible.
You should also read all the information you can about the business. Look it up on the internet. The U. S. Government Printing Office puts out books on particular businesses and you should get the ones applicable to the type of business you are considering. There are many books on particular businesses available from commercial publishers. Ask in your local book store to let you look through their copy of Books In Print for these. Card catalogues in libraries will reveal other books and articles. You should also look for trade publications in the field.
The information released by public companies in the same business is also a useful source of information. They must file annual (called 10-K) and quarterly (called 10-Q) reports with the Securities and Exchange Commission and they also put out annual and quarterly reports to shareholders. You can obtain the S.E.C. filings from the Commission or on the internet. You can get financial and other information on these companies from internet services like Yahoo. You can get the reports to shareholders directly from the companies or on the internet at the companies' web sites.
It also pays to talk to other people in the business, both about the business in general and about any particular business you are interested in.
Contact Chicago Attorney Don Thompson For more Legal information on buying or selling a business.
This refers to preventing creditors from getting your assets. There are no magic techniques. A variety of techniques are used which may include:
1. Transferring your assets to your spouse - or someone else who is cooperative. There is an unlimited gift tax exemption for transfers to a spouse.
2. Tenancy by the Entireties. This is a type of joint tenancy between married people for their residence. The creditors of one spouse cannot levy on the residence as they can when it is owned in an ordinary joint tenancy.
3. Putting your assets into a form exempt from execution by judgment creditors. A good example is a retirement plan or IRA (in Illinois.) Another exempt asset is life insurance payable to a spouse or dependant, including the cash value. (Creditors can levy on distributions from these plans or insurance).
4. Putting your assets in limited partnerships or LLC's created under the laws of a few states where the creditors can get only a charging order (a right to get distributions from the entity) rather than an order to sell the ownership interest. You can get the money out in salary - not distributions on the ownership interest.
5. Trusts in general. An irrevocable trust (for someone else's benefit) puts assets in it (but not distributions) beyond the claim of your creditors. A revocable trust that provides how its assets are distributed after your death protects the assets from your (not the beneficiary's) creditor's claims after your death - but not before.
6. Spendthrift trusts. These are trusts that do not allow a creditor of a beneficiary to attach the beneficiary's interests. They are valid, but only if the beneficiary is someone other than the creator of the trust.
7. Domestic irrevocable asset protection trusts are now permissible in several states. In effect they are spendthrift trusts for the benefit of the creator of the trust. They basically provide that a creditor of the grantor cannot get the trust assets. Illinois has no such law. To have the law of one of these other states apply to a trust set up by an Illinois resident that state must have a substantial relationship to the trust such as a trustee being in that state and/or location of the assets there. Since domestic asset protection trusts are new, certain questions, such as what state's laws will apply, are not yet settled.
8. Foreign asset protection trusts. Some countries don't grant "full faith and credit" to a foreign judgment. A creditor having a U.S. judgment cannot enforce it in those countries. The creditor must institute a new law suit there. This alone discourages creditors. If a creditor does sue the trust assets can be distributed to another trust in another country with similar laws before the creditor gets judgment.
9. Limited liability entities. These are corporations, limited liability companies, limited partnerships and limited liability partnerships. If these are set up and operated properly creditors of the business can only get the business assets. They cannot go outside the business and collect from assets of the owners. Note that creditors of the owners can get the owner's interests in the corporation or partnership and to some degree, the limited partnership and limited liability company.
10. Keeping ownership of assets used by a business outside the business. The creditors of a business can get its assets. They cannot get assets it leases. For this reason owners of assets like real estate used by businesses they own often do not put the real estate in the entity owning the business. They lease it to the entity. This goes for any valuable asset and often includes equipment or other things used by the business. If the asset is of a type which can generate claims, then the asset can be owned by another limited liability entity.
11. Separating risks. If two businesses are conducted or a single business is conducted in separate locations each can be owned by a separate limited liability entity. That way if one goes under the assets of the other will not be exposed.
Some of these devices can be attached by creditors under fraudulent transfer laws. If a transfer is not for equivalent value and is intended to defeat known and existing claims and the transferor does not retain sufficient assets there is a fraudulent transfer which a creditor can get a court to revoke.
Contact Chicago Probate Attorney Donald Thompson for further information.
These are often used in estate planning when businesses or farms are involved, especially if there are other owners. All the owners agree to buy out the interest of any owner who dies. This provides cash to the estate of the dead owner for what might otherwise be an unsalable asset and protects the other owners against having to deal with a new owner who they may not want. Sometimes these agreements provide for carrying life insurance to pay for the buy-outs. Buy-outs are also frequently provided for under these agreements if one of the owners wants to sell to an outsider or becomes disabled. These agreements are also sometimes used to fix the price at which shares of the business are valued in the dead owner's taxable estate.
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Carol Wiley, 70, of Madison, Miss., got a late start on retirement saving. A divorced mother of three daughters, she wasn't able to save much until her youngest finished college. By then, she was 60 years old.
Wiley is working hard to catch up. She's paid off her home and is contributing the maximum to her company 401(k) plan. She also has a small individual retirement account. She has no plans to retire anytime soon from her job as a legal secretary.
Yet, Wiley has a problem. Because she turns 701/2 in December, she'll be required to start taking distributions from her IRA by April 1. "As long as I'm working, I don't need it," she says. But the consequences of failing to take a distribution are severe: a penalty of up to half the amount of her required withdrawal.
A growing population of workers who postpone retirement, either by choice or necessity, could find themselves in a similar fix. The Department of Labor projects that the number of workers age 65 and older will increase by nearly 30% by 2010. The number of workers age 75 and older is expected to increase by nearly 14%. Many of the 70-plus workers don't want or need to take withdrawals from their retirement savings, but under current law, they have no choice.
Congress is considering raising the age for mandatory withdrawals to 75. In the meantime, however, there are strategies older workers can use to keep their money working longer. Among them:
* Contribute as much as possible to your 401(k) or other company plan. Even if you're over 70, you're not required to start taking distributions from your 401(k) plan until April 1 of the year you stop working, says Martin Nissenbaum, national director of tax planning for Ernst & Young. You can continue contributing to your 401(k) as long as you're working.
There are caveats, especially for small businesses. You can't delay taking distributions if you own more than 5% of the company. Also, the exception applies only to the 401(k) with your current employer. If you have 401(k) plans with former employers, you must start taking distributions from those plans when you turn 701/2, says Martha Priddy Patterson, author of The New Working Woman's Guide To Retirement Planning. You can avoid that by rolling the money into your current employer's 401(k), if your plan allows it.
In addition, some plans require retirement-age workers to start taking distributions from their 401(k) plans even if they're still working, says David Wray, president of the Profit Sharing/401(k) Council of America. But most companies have no interest in forcing workers to take withdrawals, he says.
* Roll your IRA into your 401(k) plan. A federal law that took effect Jan. 1 makes it much easier to combine different sources of retirement savings in one place. You can roll an IRA into your employer's 401(k) if the plan allows it, Wray says. Unfortunately, few companies have gotten around to amending their plans to permit such rollovers, Wray says. But it's worth asking your company to make the change. Once you roll your IRA into your 401(k), you can postpone withdrawing that money until you stop working.
* Convert your IRA to a Roth. Roth IRAs, which are funded with after-tax contributions, have no minimum withdrawal requirements. You don't have to start taking money out when you're 701/2. And withdrawals are tax-free if you're over 591/2 and have had the Roth for five years.
When you convert a traditional IRA to a Roth, you will pay taxes at your ordinary income tax rate on any pre-tax contributions plus any gains. If your job puts you in a high-income tax bracket, the cost of converting may exceed any future tax savings. But suppose you're retired and planning to return to work. Converting while your income is low may make sense, Nissenbaum says. Remember, too, that you don't have to convert your entire IRA. You can convert just part of it, which will result in a lower tax bill.
* Use your distributions to buy security for yourself or your family. Dennis Hebert, a financial planner in Syracuse, N.Y., sometimes advises clients to use their IRA distributions to buy long-term care insurance.
Another of Hebert's clients invests her IRA distributions in an education fund for her five grandchildren. She still has to pay taxes on the withdrawals. But because the money will benefit her grandchildren, "She doesn't mind so much taking it out," he says.
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There is allowed as a deduction from the taxable estate any gift to a
qualified group organized and operated exclusively for religious, charitable, scientific, literary or educational
purposes. A gift to a trustee for the benefit of any such organization also generates the deduction. A gift of a
remainder interest also generates the deduction. A gift of a
remainder interest also qualifies. For instance if you will
assets to a trustee on your death to be held for the benefit of your spouse while he or she is alive and then to be paid to a charity. The value of that interest at the time of your death is deductible. Actuarial tables provided by IRS are used to make the valuation.
Contact Donald Thompson Today.
QUESTION: What is the impact on the tax burden of my child if I add his name to the deed [of my home]?
ANSWER:
For most people, "there are a lot of negative impacts and no real positives" to adding a child's name to the deed, says Kevin Flatley, director of estate planning at Fleet Bank in Boston.
Adding your son's name will mean he owns half your home. It will also mean he automatically becomes sole owner upon your death, eliminating the need for the property to get tied up in probate court, says Eric Strulowitz, an attorney and certified public accountant in Roseland, N.J.
But unless you're very wealthy, or use this strategy early, it won't save you much in estate taxes. True, the value of the half you give your son will be considered a gift, rather than part of your estate. But under gift-tax rules, you're only allowed to give $10,000 ($20,000 for a couple) tax-free to any one individual during a year. The remaining value of that half will simply be deducted from your $675,000 estate-tax exemption anyway. The other half — though it becomes your son's at your death — will also be considered part of your estate.
This strategy might be worth the drawbacks if you know your estate is going to exceed the exemption, your house is very valuable, and you're willing to pay gift taxes now. Then, the amount you spend on gift taxes will be removed from your estate. (For an explanation, see our story "Why Gift Tax Beats Estate Tax.") Also, if you expect the house to appreciate a great deal before you die, giving half to your son now will reduce the amount of gain attributable to your estate by 50%.
Estate Planning Issues? Contact Don Thompson Today.
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Q. What does a will really do?
A. It probably does more than you think. For example:
* It lets you designate who will inherit which of your assets.
* It lets you name a guardian for your children and an executor of your estate. (The executor can be an individual you know or a trust company.)
* It lets you specify when your children will receive what. Otherwise, an 18-year-old may end up receiving his entire inheritance before he's mature enough to not spend it all on stereos and cars.
* It lets you save money by waiving the probate bond, which will otherwise be required.
* It can let you authorize the sale of some of your assets during probate administration. This can be important, because sometimes such a sale is necessary to raise money needed to pay taxes and expenses related to death.
* It can permit your business to continue operating.
* It can save you some money in taxes.
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This is also referred to as a life interest. Someone with a life estate has a right to the use of the asset in which she or he has a life estate for her or his life. The right can also exist for the life of someone else. The right extends to the use of the asset and the income from it. The right does not extend to consuming the asset. These concepts arose with respect to land. The holder of the life estate, called a life tenant, could farm the land, sell the crops and keep the proceeds. The life tenant could also live in any house on the land. The life tenant could not sell the land outright. Nowadays this concept is usually applied to financial assets. The life tenant has the right to income, but not principal. For practical reasons, assets to be used by a beneficiary for life are usually put in trust so a trustee has control over them with power to enforce the terms of the life tenancy.
Contact Donald M. Thompson Today.
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.
Contact Don Thompson Today.
In re Estate of Hoellen, 367 Ill.App.3d 240, 305 Ill.Dec. 182, 854 N.E.2d 774 (1st Dist. 1006). In a citation proceeding to recover property under the Probate Act the court has the authority to hear claims of undue influence and breach of fiduciary duty and has authority to render judgment for money damages and punitive damages. Punitive damages are appropriate to punish and deter an intentional breach of fiduciary duty.
In re Terrell L. v. Dept. of Children and Family Services, 368 Ill.App.3d 1041, 307 Ill.Dec. 113, 859 N.E,2d 113 (1st Dist. 2006). Under the Juvenile Court Act a court may appoint the Department of Children and Family Services as guardian of a minor if that is in the best interests of the child, even though the child has a current guardian that has not been found unfit, unable or unwilling to serve, once the child has been found abused or neglected.
Estate of Malik v. Lashkariya, 369 Ill.App.3d 457, 308 Ill.Dec. 207, 861 N.E.2d 272 (1st Dist. 2006). Equitable apportionment means that certain expenses, like taxes, are allocated to the beneficiaries of both probate and non-probate assets in the same proportion as the assets caused the expenses to be incurred. This doctrine applies where there is no express direction to the contrary. Where a will says, "all taxes shall be paid by my estate" the doctrine does not apply and the burden of the taxes falls on the probate estate even though they were generated by the assets passing outside probate.
Jane Doe v. Dilling, 371 Ill.App.3d 151, 308 Ill.Dec. 487, 861 N.E.2d 1052 (1st Dist. 2006) The tort of fraudulent misrepresentation applies outside a noncommercial or nontransactional setting if physical harm is involved. But the plaintiff must be justified in relying on the truth of the statements.
Estate of Beckhart, 371 Ill.App. 1165, 309 Ill.Dec. 761, 864 N.E.2d 1002 (3rd Dist 2007). A marital settlement agreement that requires an insured to name his or her child as a beneficiary of a life insurance policy vests the child with an equitable right that can be enforced against the insured's estate. A constructive trust may be imposed on the estate if it receives the funds. Delay in asserting the claim does not give rise to the defense of laches because that does not apply to minors. There is a five year statute of limitations on claims for a constructive trust.
Grate v. Grzetich, 373 Ill.App.3d 228, 310 Ill.Dec.886, 867 N.E.2d 577 (3rd Dist. 2007). A trustee who has converted trust funds for personal use cannot have his attorneys fees incurred in defending a suit for the conversion paid from the trust.
Chicago Probate
Minors do not have legal capacity to contract or deal with assets. They have no capacity to sue or be sued. For this reason minors do not usually hold title to property in their own name. Instead title to a minor's assets is usually held by a guardian or property is given to a trustee to hold for the benefit of the minor. Guardianships and trusts are expensive and for that reason, among others, are not suitable for smaller amounts of money or other property. For this reason Illinois and most other states have statutes similar to the Uniform Transfer To Minors Act.
In Illinois the Act allows a transfer to be made to a custodian for the benefit of the minor. The Act specifies the consequences of the transfer and the rights and duties of the parties. There are no documentation requirements beyond the form of the transfer itself. There are particular requirements for different kinds of property, but generally the document of transfer must state that the transfer is being made to a named custodian to hold for a named minor and the document must state the transfer is being made under the Illinois Uniform Transfers to Minors Act.
The transfer can be made to any adult or a trust company except in certain cases such as a transfer from a trust or estate where the adult must be a member of the minor's family. The transferor can be the custodian.
The transfer can be accomplished by any written document which is effective to transfer title. The Act covers all types of property, including real estate.
The transferor, an adult member of a minor's family, a minor's guardian and the minor if over 13, have various rights to an accounting and to enforce the terms of the transferor.
The custodian is obligated to invest and reinvest the custodial property as would a prudent person of discretion and intelligence who is seeking a reasonable income and the preservation of capital, although the custodian may keep it in a bank account. The custodian who does not take compensation, is not liable for investment losses unless they result from bad faith intentional wrongdoing or gross negligence or failure to meet the standard of investing required by the Act.
The custodian is not personally liable for custodial contracts if the custodian makes clear that the custodian is contracting in the custodial capacity.
The custodian is entitled to reimbursement of expenses and reasonable compensation.
When the minor reaches age 21 in the case of gift transfer, or age 18 for some other transfers, the custodianship terminates and the ex-minor holds title in his or her own name.
During the custodianship the custodian can pay the custodial assets to the minor or pay them to third parties for the minor's benefit. The standard is what the custodian considers advisable for the use and benefit of the minor.
This Act allows parents to make yearly gift tax exempt gifts to their children without creating expensive trusts. The drawback is that the children get the assets without restriction at age 21. The Act also allows smaller amounts to be distributed from estates or trusts to custodians for minor beneficiaries without guardianships or trusts being set up.
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Donald M. Thompson is licensed to practice law by the Supreme Court of Illinois, U.S. District Court in Chicago, U.S. Circuit Court of Appeals for the 7th Circuit, and the U.S. Tax Court. He is a member of the Federal Trial Bar. He is a 1966 graduate of the University of Chicago Law School, where he was in the top quarter of his class and received the Mandel Legal Aid Award. He was assistant professor of law at I.I.T.-Chicago Kent College of Law from 1966 to 1970 teaching tax and property subjects.
He is a member of the Chicago, Illinois, State, American and 7th Federal Circuit bar associations. He serves on the Chicago Bar Association's tax, trust, probate, securities law and corporation law committees and is past chairman of the corporation law and legal education committees.
He is a member of the Chicago Bar Association's estate planning, probate, corporation and tax referral panels. He is an Arbitrator for the National Association of Securities Dealers and the Circuit Court of Cook County.
Contact Donald M. Thompson Today.
Hopper v. Beavers, 362 Ill.App, 3d 913, 299 Ill. Dec. 287, 841 N. E.2d 1019 (5th Dist., 2005). When a spouse renounces a will the spouse's 1/3 share is to be paid from the residue of the testamentary estate, even though it is 1/3 of the entire testamentary estate. When the residue is disposed of in parts or fractions it is necessary to determine whether the testator intends the respective parts or fractions to constitute subdivisions of the entire residue or to constitiute preliminary parts after which the true residue, meaning all the rest, is disposed of.
In Re Estate of Rex B. Lower, 365 Ill.App.3d 469, 302 Ill.Dec. 346, 848 N.E.2d 645, (2nd Dist., 2006). 755 ILCS 5/18-1.1 provides that a spouse, parent, brother, sister or child of a diabled person who dedicates him or herself to the care of the disabled person by living with and personally caring for the disabled person for at least 3 years shall be entitled to a claim against the estate upon the death of the disabled person. The claimant does not have to physically provide the care or be physically capable of doing so. it is sufficient if the claimant superivises the care.
Common estate litigation involves disputes over the validity of a will or
the meaning of a valid will. There are also disputes over who the heirs or legatees are or over who owns property claimed by the estate. Litigation where an interested party charges the executor or administrator with wrongdoing is also common. There are also suits by estates to recover
amounts owed or for wrongful death. Similarly there are suits against estates for amounts owed or for property damage or personal injuries.
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n estate planning this phrase refers to planning for the transfer of business ownership and control to the right persons while minimizing the tax cost. The concept usually applies to closely held family owned businesses.
In a typical situation a business is owned by a father whose wife will
probably survive him or it is owned by both spouses. They have children who they wish to share equally in their wealth after their deaths. However, not all of the children are able to run the business nor are all of them interested in doing so. The business comprises most of the parents'
assets.
The parents want to retain control of the business up to the date of their
death or at least up to the date of their retirement. After they give up control they want to retain a right to income.
Since the children have to share equally and the business is the bulk of the estate, they will all get an interest in the
business. However, maybe only one of them should be put in control. That one, however, may pay him or herself very well and not distribute any funds to the other children. If they are all in control they may fight over the
business.
One way to solve all these problems is for the parents to sell the business
while they are alive. If none of the children can run the business this may be necessary anyway unless plans can be made to hire a qualified manager. The cash from a sale is easier to divide. On the other hand it (or the securities it is invested in) will be valued at the market in the parents'
estates. Transferring business interests to children allows for some estate tax savings because of using lower values for tax purposes.
If the children are going to wind up owning the business then consideration must be given to how it will be structured to allow one or more to run it while the rest are protected. Voting and non-voting interests can be used to allow equal ownership, but not equal control. Contractual arrangements can be instituted, such as a shareholder's agreement. This can set
restrictions on transfer of the stock, provide for buyouts, call for income distribution and in general provide a framework for handling a variety of business issues.
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Many assets are structured in such a way that the owner can designate who will be the new owner upon the present owner's death. The form used to do this is often called a beneficiary designation. The act of designating the beneficiary or the
fact of a beneficiary having been designated are also
referred to by the term. Examples of assets which often allow beneficiary designations are life insurance policies, retirement plan interests (such as pension, profit sharing and 401k plans), and IRAs. Bank accounts often allow the equivalent of a beneficiary designation. This can be referred to as a pay on death account or a tentative or Totten trust account. The designated beneficiary gets it on the death of the owner, but has no rights as long as the owner is alive.
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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:
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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 pre-nuptial agreement.
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