O'Keefe & Carr, P.C. - Chicago Estate Planning Lawyer

ensures that your estate, including your financial assets, real estate, and personal belongings, go to the loved ones of your choosing and directs how your property should be divided between those you want to give it to (your legatees).
directs who should care for your minor children (a guardian).
directs who you want to oversee the distribution process and carry out your final wishes (the executor).
A Will DOES NOT avoid probate. To avoid probate you may need a trust.

2. I am married and have children. Who will inherit from me if I die without a Will?

One-half of your estate would go to your spouse and one-half of your estate would go to your children according to the Illinois rules of descent and distribution. If you have predeceased children with descendants, your predeceased child's descendants would take the predeceased's child's share per stirpes.

The Illinois rules of descent and distribution do not accomplish what many married persons with children would desire upon their death. Many married persons with children, upon death, would desire all of their property to go to their spouse and, if the spouse is pre-deceased, to their children. Additionally, many would desire property going to children to go into trust for children until adulthood - not directly to children.

A Will (or Will and Trust) upon death can cause property to be distributed to a spouse and children as actually desired rather than as provided in the Illinois rules of descent and distribution.

3. I am single with no children. Who will inherit from me if I die without a Will?

Your estate would go to your parents and siblings in equal parts according to the Illinois rules of descent and distribution. A parent would take a pre-deceased parent's portion. The descendants of a predeceased sibling would take the predeceased sibling's portion per stirpes.

You may provide in your Will (or Will and Trust) for your property to go to your family members or non-family members as you desire rather than as provided in the Illinois rules of descent and distribution.

4. How can I plan my estate so that it will not be subject to probate when I die?

An estate generally will not be subject to probate in Illinois if it does not have real estate in Illinois or personal property in excess of $100,000.00.

Generally you can plan your estate to not be subject to probate in Illinois by holding your real estate and personal property in a living trust. Personal property totaling less than $100,000.00 can be transferred with a small estate affidavit from your estate to your heirs or legatees without opening up a probate estate in court. Certain assets, such as retirement accounts or life insurance with beneficiary designations, joint tenancy assets, or payment on death accounts, are separate from the probate estate and, therefore, not considered in determining whether your estate is subject to probate.

5. Will I owe estate taxes when I die?

Whether your estate will be subject to estate taxes when you die depends upon the law in effect during the year that you die and the size of your estate at the time that you die. Flexibility to accommodate future tax law changes should continue to be an important component of your estate plan.

Your Federal taxable estate in excess of the lifetime exclusion ($5,250,000.00 plus your predeceased spouse's unused exclusion) is subject to Federal estate tax if you die in 2013 - unless another exemption, such as the marital exemption, applies to your Federal taxable estate.

The $5,250,000.00 lifetime exclusion applies if you are single or married.

If you are a surviving spouse, your estate may use your predeceased spouse's unused estate tax exclusion amount - provided your spouse died after 2010 and your spouse's estate timely made the appropriate election to preserve the unused estate tax exclusion has been made by your predeceased spouse's estate. This is known as "spousal portability".

Your estate in excess of the $4,000,000.00 Illinois estate tax exclusion is subject to the Illinois estate tax if you die in 2013 - unless, in the case of the first spouse to die, an Illinois qualified terminable interest property (QTIP) election is made. Illinois has no spousal portability.

An estate plan should take into account the differences between the Federal and Illinois estate tax exclusion amounts.

It is important that existing estate plans be reviewed by an attorney because of the many recent legal developments.

6. What is the top Federal estate tax rate for 2013?

The top Federal estate tax rate is 40% for 2013.

7. How do I calculate my estate's likely Illinois estate tax?

The amount of the Illinois estate tax shall be the state tax credit, as defined in Section 2 of the Illinois Estate and Generation-Skipping Transfer Act. Also, see Illinois Estate Tax Calculator.

8. What is the Federal lifetime gift tax exclusion and tax rate for 2013?

For 2013, the Federal lifetime gift tax exclusion is $5,250,000.00 and the gift tax rate is 40%. There is spousal portability for the unused spousal gift tax amount provided the appropriate election is made upon the death of the first spouse.

9. What estate planning documents should every person have?

Every person, whether married, single, young or old, should have a will, a Power of Attorney for Health Care, and a Power of Attorney for Property.

Depending on your circumstances and desires, your estate plan may also include a revocable living trust, an insurance trust, various other types of trusts, a Living Will, a Cremation Authorization, an Appointment of Agent to Control Disposition of Remains, a Mental Healthcare Directive, and/or a HIPAA (The Health Insurance Portability and Accountability Act) Authorization.

Estate planning documents should be prepared by an attorney.

10. What is a living trust?

A living trust holds property, including real estate or personal property, while you are alive - and beyond. It is created by an agreement signed by the person creating the trust (the "trustor") and the trustee. Often the trustor and trustee of a living trust is the same person. A living trust can provide that it be amended or revoked by you. A living trust provides for what happens to the trust property upon death, and the death of a spouse, children, or other loved ones.

You may also create an irrevocable trust, which you may not amend or revoke.

A trust is an effective tool to look after your loved ones. The trust agreement may address the special circumstances of minor children and disabled adults. A Trust should make provision for managing your trust and trust assets should you be disabled.

With a revocable trust you have created for your benefit while you are alive, the trust income is reportable under your social security number. Upon your death, generally the trust would get its own taxpayer identification number under which its income would be reported.

11. What is a pour over Will?

A pour over Will is a testamentary document like any other Will. However, it provides upon death that the property you did not previously transfer into your trust be transferred into your trust.

12. I am married. How can I minimize estate taxes when I die?

If you expect your estate is to exceed the Federal and/or Illinois estate tax exclusion amounts, your estate plan can take full advantage of the Federal marital exclusion and an Illinois QTIP election so as to postpone payment of estate tax until the death of the surviving spouse. Because of the differences in the estate tax rates which may exist between the spouses' estates, at the time of the death of the first spouse to die it is important to analyze whether it is more tax efficient to pay the estate tax at that time - rather than at the surviving spouse's death.

13. My estate is large enough that it would be subject to the estate tax when I die. Beyond planning to take advantage of the Federal marital exemption and the Illinois QTIP election, is there estate planning that can be done to minimize the payment of estate taxes upon my death or, if I am married, my spouse's death?

Yes. Various tools exist to plan to reduce estate taxes. Such tools may or may not be exempt from the gift tax.

14. What is the annual gift tax exemption for 2013?

In 2013, the annual Federal gift tax exclusion is $14,000.00 for an individual donor and $28,000.00 combined for married donors.

As such, you may give $14,000.00 to each child, grandchild, or other person (non-spouse) in 2013 and not be subject to the Federal gift tax. A married couple can give $28,000.00 to each child, grandchild, or other person in 2013 and not be subject to the Federal gift tax.

Gifts to a spouse who is a United States citizen are exempt from the gift tax by the marital exemption. Although not eligible for the marital exemption, gifts from a United States citizen to his or her spouse who is a permanent resident are subject to an annual gift tax exclusion for 2013 of $143,000.00.

There is no Illinois gift tax.

15. What are tax exempt ways to reduce the size of my estate?

Making annual gifts below the Federal annual gift tax exclusion is a tax exempt way to remove property from your estate. Qualified charitable, medical, and educational gifts also are examples of tax exempt ways of reducing the size of your taxable estate. As stated above, Illinois does not have a gift tax.

16. What is an irrevocable insurance trust?

An irrevocable insurance trust is a trust that can not be amended or revoked and that owns insurance policy(s). Typically gifts to the trust are made in amounts below the annual gift tax exclusion and the trustee of the trust pays premiums on the life insurance policy(s) owned by the trust with the annual gifts made to the trust. The life insurance proceeds paid out upon death of the insured person would not be included in the estate of the insured person because the premiums for the life insurance policy were purchased with gifts in amounts below the annual gift tax exclusion. Irrevocable insurance trusts should only be prepared by an attorney.

17. What is a power of appointment?

A power of appointment is a right given by the person creating a trust to another person, while the person is alive or upon death, to distribute money from the trust.

For estate tax purposes, a general power of appointment is a power which is exercisable in favor of the decedent, his or her estate, his or her creditors, or the creditors of his or her estate. Unlike a limited power of appointment, a general power of appointment created after October 21, 1942 is considered part of the taxable estate of the person possessing the power of appointment. Special tax rules exist regarding joint powers of appointment and a lapse of a power of appointment.

A limited power of appointment for estate tax purposes is a power which is neither exercisable in favor of the decedent, his or her estate, his or her creditors, or the creditors of his or her estate nor limited by an ascertainable standard relating to the health, education, support, or maintenance of the decedent possessing the power.

Should you be the beneficiary of a trust or know that you possess the power of appointment under a trust, it is important to inform your estate planning attorney of this in order that this information may be considered in developing your estate plan.

Incorporating powers of appointment into an estate plan may allow for post-death estate planning in a tax efficient manner depending upon the circumstances.

The possession of a power of appointment also may have Federal gift tax implications that should be analyzed.

18. What is a beneficiary designation?

For assets distributable by a beneficiary designation, upon your death the asset passes to the person or persons properly designated by you in the beneficiary designation.

Beneficiary designations are in writing and must be made in the proper manner.

Life insurance policies, certain retirement plans, payment on death accounts/Totten Trusts and certain other assets allow you to designate the beneficiary of that asset upon your death.

Retirement accounts, such as 401(k)'s and IRA's, generally are tax preferred. Beneficiaries of retirement account assets upon the death of the account owner should consult with retirement plan professionals as rules exist for how long a person has to rollover the funds into new retirement accounts and/or to withdraw the funds. A retirement account under which a TEFRA election (section 242(b)) had been made prior to December 31, 1983, although rare, may be subject to different mandatory distribution rules.

Before designating a Trust or other non-natural person as a beneficiary, you should consult with an attorney.

19. Are assets distributed pursuant to beneficiary designations part of my estate?

Your assets distributed pursuant to beneficiary designations such as life insurance proceeds, retirement accounts, payment on death accounts, and other assets generally are not included as part of your probate estate but are included as part of your taxable estate. Some or all of certain qualified retirement account assets where the owner separated from service prior to 1985 may not be part of the owner's taxable estate.

20. What is joint tenancy?

Joint tenancy is a form of ownership by which more than one person jointly own undivided interests in the property. Upon the death of a joint tenant, by operation of law title to the property is in the name of the surviving joint tenants. Joint tenants may, but need not, be spouses.

Real estate and bank accounts are examples of property that may be held in joint tenancy.

Joint tenancy is not the preferred estate planning device for many reasons. For example, that a person adds another person to a bank account as a joint tenant for convenience purposes does not mean that, upon the death of the joint tenant contributing the property, the other person is the absolute owner of the property in Illinois. Placing persons on a joint tenancy account for convenience purposes, although sometimes appropriate, is the source of litigation in Illinois and often should be avoided.

21. What is tenancy by the entirety?

Tenancy by the entirety is a unique form of joint ownership by which spouses own undivided interests in property. Like joint tenancy, tenancy by the entirety has survivorship rights. Tenancy by the entirety has creditor protection that joint tenancy does not have.

22. What is an Illinois land trust?

An Illinois land trust is a trust that has the limited purpose of holding title to real estate. The trustee is obligated to only convey title upon direction of the holder of a power of direction. Although not necessarily, the beneficiaries of a land trust generally hold the power of direction. A trust agreement may provide that the power of direction be a power separate from the beneficial interest and held by person(s) other than the beneficiaries.

Like other trusts, the land trust is created by the trustor entering into a trust agreement with a land trustee and by conveying the title of the real estate to the land trustee. The trust agreement would designate the identity of the beneficiaries, may provide for successor beneficiaries upon death of the initial beneficiaries, may designate the holder of the power of direction, if different from the beneficiaries, and other terms.

It is risky to designate a non-bonded/non-professional land trustee as the trustee of a land trust.

A beneficial interest in a land trust is personal property and not real estate. Therefore, a land trust is not subject to partition.

23. What is a payment on death account?

Payment on death accounts are bank accounts that provide for the disposition of money in an account to named beneficiaries upon the death of the account owner. The account agreement with the financial institution names the account's beneficiaries and generally is what dictates whether an account is a payment upon death account. The assets in a payment upon death account are not part of your probate estate but are part of your taxable estate. In Illinois, a payment on death account is also known as a "Totten Trust".

24. What are Living Wills and Powers of Attorney for Healthcare and Property?

The Power of Attorney for Healthcare and the Living Will, also called advanced directives, document your wishes for medical treatment in the event of a serious illness or injury.

The Power of Attorney for Healthcare is a detailed document that appoints an agent to make medical decisions on your behalf when you are unable to do so yourself.

The Living Will simply tells medical professionals not to administer medical procedures that will artificially postpone your life. A Living Will does not direct anyone to "pull the plug". However, this maybe designate in the Power of Attorney for Healthcare.

The Power of Attorney for Property appoints an agent that can act on your behalf if you become unable to act independently concerning your personal and financial property. Therefore, if you are seriously ill or injured, or simply need assistance in maintaining you real and personal property, your agent can access your bank accounts to pay your bills and can maintain your investments, et

25. I am a permanent resident of the United States. Can my spouse make unlimited lifetime gifts to me?

No. As stated above, the marital exemption that exists to allow tax free unlimited lifetime gifts from a person to his or her spouse who is a citizen of the United States does not exist for gifts to a spouse who is not a citizen of the United States. However, gifts to a spouse who is not a citizen of the United States have an annual gift tax exclusion for 2013 of $143,000.00, rather than $14,000.00.

26. I am a citizen of the United States. My spouse is a permanent resident. Can my spouse make unlimited lifetime gifts to me free from the Federal gift tax?

Yes. As stated above, only the recipient spouse need be a citizen of the United States to take advantage of the marital exemption to the Federal gift tax.

27. How can a person take advantage of the estate tax marital exemption when his or her spouse is a permanent resident rather than a U.S. citizen?

A qualified domestic trust may be utilized. The creation of a qualified domestic trust should be included in an estate plan for the spouse of a non-citizen to facilitate the surviving non-citizen spouse taking advantage of the marital estate tax exclusion.

28. Does Illinois have a gift tax?

As stated above, Illinois does not have a gift tax.

29. What is the Federal lifetime generation skipping tax (GST) exemption for 2013?

$5,250,000.00 is the Federal lifetime exclusion from the GST for 2013. There is no spousal portability of the Federal unused spousal GST exemption.

30. When should I update my Will and estate plan?

You should review your estate plan whenever a life-changing event has occurred, such as:

An individual named in your will (or other estate planning documents) has passed away
There is a new person in your life that should be named in your will (birth or adoption of a child, marriage, etc.)
After a divorce
If there has been a change in the state or federal law
You wish to change the guardian, executor, trustee, or agent named in any of your estate planning documents
All of your children have reached the age of 18
You have had a substantial change in the value of your estate
You have acquired a significant asset you would like specifically named and distributed through your will or trust
There is a person, charity, or other entity that you would like to add or remove from your estate plan

It is always a good idea to periodically review your estate plan with a lawyer because the state and federal laws may have changed or your wealth my have changed so that the laws apply differently to you now.

For more information on estate planning, consult our Estate Planning page or Contact Us.

Also see Trust and Estate Administration, Probate FAQ.

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