Review of Estate Planning Basics

In the state of Illinois, you need to be at least 18 years of age to make a valid will.  You also need to be of sound mind and memory.  The will must be in writing and must be witnessed by at least two people who cannot also be beneficiaries.  A will allows you to distribute property, select a guardian for any minor children and name an executor.  The executor oversees the process of moving your will through probate and distributing your property.  Changes in your life that should bring about a review of your will include marriage, divorce, the birth or adoption of a child, new property ownership or relocating to another state. Changes to an existing will are known as codicils.

The most significant decision made in any estate planning instrument is usually whether property you want to leave should be put into a trust, before (or after) your death.  Most people want to avoid dying without a will, which is known as dying intestate. In Illinois, this means your assets will be divided equally among your immediate family.  For example, if you have a surviving spouse and only one child, each will be given 50% of your remaining assets.  Since this statutory distribution is not always what one intended, a consultation with an attorney to make sure your wishes are followed is highly recommended.


Gift Tax Issues Coming to Illinois?

The IRS is looking for back taxes owed in a new pilot program they are starting in selected states.  Experts believe large metro areas, such as the Chicago area, might be slated.  They are basically tapping into large, easy to access data sources to locate any new sources of income for Uncle Sam.  What are they seeking?  Property transfers that involve unpaid gift taxes.

The law allows you to transfer up to $13,000 to anyone without filing any special paperwork.  But think back to any properties or assets you transferred above this value and make sure you filed a Form 709 or gift tax return, if needed.  Note that there is no such thing as a joint 709 form, so married couples need to file separately.  If your transfer has been to a living trust or other revocable grantor trusts, those transactions don’t trigger gift taxes.

Estate Law:
Removing a Personal Representative

Because some “executors” (the person a will designates to manage things) cannot serve and courts appoint “administrators”, we often classify anyone performing such duties as a “personal representative” of the estate.  Many heirs and beneficiaries have issues with how an estate is being managed.  Here is a quick checklist of things you need to be aware of when considering the removal of a personal representative:

  • First, know that he or she should have been given “letters” granting them approval by the court to act in this capacity.
  • Before a personal representative (who voluntarily resigns) can be replaced, they must provide a written resignation to the county clerk after giving at least 15 days notice to all interested in the estate.
  • Realize that state laws create “hierarchies” to determine which individuals have priority to be appointed as personal representatives.
  • In Illinois, the conviction of a felony is a cause for removal.
  • Also in Illinois, someone who conceals oneself “so that process cannot be served” can also be disqualified.

Other grounds range from the obvious, such as “intentional misrepresentation” of material facts or inability to discharge duties – to the more subjective, such as “when removal is in the best interests of the estate”.

The most productive “first step” is to engage an attorney and have them speak to the personal representative (or their attorney who is helping them manage the estate.)  In many instances, you can avoid a drawn out legal proceeding by simply expressing your concerns through professional channels.  This eliminates the emotion that is often involved and there is less chance of things escalating.  Since the personal representative realizes their approaching a legal confrontation, they might simply resign or alter their practices sufficient to make everyone happy.

How a Life Estate can ease Property Transfers

A “life estate” establishes ownership in property, through an individual, until the time of their death.  At this time, the property is returned to its ‘remaindermen’ (whomever is named in the agreement).

This temporary ownership agreement is useful when you want to pass down a home to a loved one and bypass some of the common legal issues, such as probate. Individuals that transfer title before death and remain in the home under these types of agreements are known as “life tenants”.

The main caution is to make certain that whoever stays in the home is capable of maintaining it.  Since most agreements prohibit life tenants from devaluing the property, this can be a source of friction.  Also, in situations where a life tenant remarries, the document must be updated to reflect a new spouse intending to carry on in this capacity.