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One of the simplest techniques in estate planning for business owners is to give interests in the business to children while alive. The interests can be non-voting interests. The interests will also usually be minority interests and they qualify for a discount in value. Substantial value can be transferred this way by making initial gifts of the tax free amount ($5,000,000) to the children. Also, each year, each parent can give $13,000 worth of business interests to each child. If one of the parents does not own any of the business the owning parent can transfer any amount of the business to the non-owning parent tax free because of the unlimited marital deduction. Over time a very significant value can be transferred to the children this way free of estate and gift tax, especially if the value of the business is appreciating. Note that taxable income can also be transferred to the children this way.

The gifts can be made to the children outright or to the gifts to them can be made to a trust for their benefit.

Use of this device requires an appraisal whenever gifts are made and business appraisals are expensive so that must be considered when using this device.

If you need assistance with your estate planning affairs, contact Chicago Estate planning lawyer Don Thompson at 312-782-0844 or email him at donthompsonlaw@sbcglobal.net

What if you forget minor items of property or it is not convenient to transfer all your property such as your checking account or car? $100,000 or less of personal property can be transferred to your heirs or the beneficiaries of your will without probate by means of a small estate affidavit. This is an affidavit by a survivor which states what property is in your estate (outside the trust or without beneficiary designation), what debts still must be paid, and who is entitled to the property. This authorizes banks and others to release the property to the persons indicated in the affidavit without court intervention.

If you need assistance setting up a small estate affidavit or with other estate planning matters, contact Chicago’s estate planning attorney Don Thompson at 312-201-1436 or email at donthompsonlaw@sbcglobal.net

The estate and gift tax is a tax applying to all lifetime and death transfers. There is an exclusion for gifts not exceeding $13,000 each year. The exclusion applies to all gifts to a particular donee in a year. In other words a donor’s gifts up to $13,000 to each donee each year are exempt. The exclusion is doubled if a spouse joins. Therefore parents can give $26,000 per year to each child without incurring gift tax or having to file a return.

The amount of the exclusion is indexed for inflation so it may rise in the future.

Payment of tuition or medical expenses direct to a qualified school or medical provider is exempt also, even if over $13,000.

Part of estate tax planning can include giving away assets to children during life. Not only the asset, but the appreciation on it, is out of the donor’s estate. The gifts can also sometimes be made at discounted values. The annual exclusion is used to shelter these gifts from gift tax. People with very large estates often make additional gifts for which a gift tax return must be filed and use part or all of their unified credit against tax or even pay some gift tax. (The exclusion also applies to the Generation Skipping Transfer Tax.)

Contact Chicago Estate planning and probate attorney Don Thompson by calling 312-782-0844 today

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.

There are other assets where the type of ownership allows the equivalent of a beneficiary designation. A joint tenancy is an example. When an asset is owned by two people in joint tenancy the survivor winds up with sole ownership. This differs from a beneficiary designation in that all joint owners have a present equal right to full use of the whole asset. Also each joint owner can withdraw the entire asset if it is a bank or brokerage account unless the parties create a restriction on the right. Trusts also allow the designation of persons who will take after the death of an original owner, but the original owner’s rights are restricted. The trustee is the actual owner.

If a beneficiary is designated for an asset, ownership of that asset passes without a probate. Usually the asset is no longer subject to the claims of the decedent’s creditors because they can file their claims only against assets that would be in the probate estate if one were opened.

Call Don Thompson at 312-201-1436 for all of your Chicago, IL estate planning needs.

This is a power of attorney that remains valid despite the disability of the principal. Such a power is created by a statute which sets forth the language to be used. There are two forms. One for health care and personal matters and one for property and financial matters. These can be used to avoid a guardianship for a disabled person if the person creates them before becoming disabled. In view of the cost and limitations of a guardianship this is a very useful device. The person appointed agent however, must be absolutely trustworthy because they will be acting without court supervision. While anyone can petition a court to open a guardianship and revoke the power, that may be done too late to protect the disabled person’s assets.

The powers of the agent under the basic durable power of attorney are limited and do not include powers to make gifts or transfers to trusts or certain other things that are often done in estate plans and when changing estate plans as circumstances change. However, these powers can be added to the power of attorney and often are.

Contact Don Thompson at 312-782-0844 for all of your Chicago Estate planning needs.

What is a marital deduction trust?

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 $3,500,000 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.

NOTE: There currently is no Federal or state estate tax or generation skipping tax. The gift tax is still in effect. Whether or not the estate and generation skipping taxes will be reinstated this year is not known. Many people expect that they will be reinstated, but what will happen is not known. What the rates and exemptions will be if the taxes are reinstated is also not known.

Contact Don Thompson for all of your Chicago estate planning needs.

The organs, tissues or parts of a decedent’s body may be donated to hospitals, doctors, schools, organ banks or storage facilities, organ procurement agencies or individuals for research, therapy or transplantation. The gift may be made by the decedent while alive or by certain persons in the order designated by statute in the case of someone who has died. The persons who may make the gift in the order they may act are:

1) agent under power of attorney for health care;

2) designated health care surrogate at the time of death;

3) guardian of person at the time of death;

4) spouse;

5) any adult child;

6) either parent;

7) any adult brother or sister;

any adult grandchild;

9) a close friend who can provide an affidavit demonstrating facts showing the relationship and familiarity with the decedent’s health, social history and religious and moral beliefs;

10) guardian of estate at the time of death;

11) anyone authorized to dispose of the body.

If the decedent expressed a desire not to donate or there is reason to believe the gift is contrary to the decedent’s religious beliefs or a person with priority objects, the gift cannot be made. Only persons in the highest priority class available can consent.
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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.

NOTE: There currently is no Federal or state estate tax or generation skipping tax. The gift tax is still in effect. Whether or not the estate and generation skipping taxes will be reinstated this year is not known. Many people expect that they will be reinstated, but what will happen is not known. What the rates and exemptions will be if the taxes are reinstated is also not known. Read about Estate tax status.

For more information, contact Chicago estate planning lawyer Don Thompson.

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 IL Estate Planning Attorney Don Thomson Today.

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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.

To learn more contact Chicago estate planning lawyer Don Thompson.

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