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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.
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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%.
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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.
Source

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.

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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.

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     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.

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      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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