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The Legal Pad of Richard Magnone |
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The Legal Pad of Richard Magnone
this month: You'll live forever, right?
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DO I REALLY
NEED A WILL? The will is an estate planning tool surrounded by a myriad of myth and misinformation. Many people believe that having a will results in lower estate taxes or higher attorney fees. These ideas, and many others like them, are false and contribute to the public's misconception regarding wills. Simply put, a will is a person's written direction as to how his or her property will be distributed upon his or her death. Plenty of famous people have had wills. A will is not a one size fits all planning document. It may be right for some and wrong for others. For many people, a will may be the best estate planning tool. WHAT IF I DIE WITHOUT A WILL? When a person dies without a will, that person is said to have died "intestate", which is really just a big word for "without a will". When a resident of the State of Illinois dies "intestate," that person's probate estate (ie. the assets of that person in his or her individual name) is distributed according to Illinois' "law of intestacy." This law, enacted by the Illinois State legislature as part of the Probate Act of 1975, sets out our lawmaker's best guess as to how a person is likely to distribute his or her property at death. Ask yourself how often our lawmakers correctly anticipate your needs. To illustrate the Illinois intestate succession law, also known as the "rules of descent and distribution," assume, for example, that you are a married person with two children and no will. You may think that all of your assets will be transferred to your spouse at the time of your death. Unfortunately, you are only half right. Upon your death, one half of your estate passes to your spouse, while the other half is split between your two children. If one of your children happens to die before you but leaves children of his or her own, then those grandchildren share your deceased child's inheritance. Consider that you could be jeopardizing the financial security of your spouse, as only half your assets are passed to him or her. In addition, your children or grandchildren may be minors and therefore would be unable to legally hold the property without the court appointing a guardian to monitor the property and report to the court on a regular basis. Usually, the court appoints your spouse as the guardian of your child. Even so, your spouse will still be subject to making annual reports to the court and will need court approval to disburse any of the child's assets, both of which are time consuming and financially costly. Other problems may arise as a result of one half of your estate being transferred to your children. You may not want your adult children to inherit from you at all, you may not want your children to have unrestricted access to their inheritance, or you may have adult children with disabilities or other problems that require additional financial protection. Clearly, leaving the decision as to the disposition of your property up to the government may prove costly to your loved ones, especially your spouse. By leaving such a crucial decision up to someone else, in government no less, you may be neglecting your duties to your spouse and children. WHAT CAN A WILL DO FOR ME? A will, in its most simple incarnation, sets out the distribution of a testator's estate. A testator is a person who writes a will. A testator has free reign to allocate the assets in his or her estate, subject only to certain statutory requirements for a testator's spouse. A basic will provides peace of mind that the wishes of the person making the will are to be followed, rather than the wishes of legislators in Springfield. Determination of who takes what and how much are only one function of a will. A number of other planning opportunities can be exploited by a testator such as the designation of an executor, establishment of a trust, and choice of guardian for the testator's children. A will allows a testator to choose an executor, also known as a personal representative, for the estate. In even the smallest of estates, a great deal of asset management is required. It is up to the executor to preserve, gather, and distribute the testator's assets in accordance with the will. An executor may be required to sell a home or other property, collect various benefits, handle large sums of cash, and distribute assets to those who will inherit property through the will, known as legatees. If a person dies without a will, the court will appoint an "administrator" to complete the functions of the executor. In many cases, the court, to avoid family infighting, will appoint a "neutral" party who will, for a fee, administer the estate. It is important that a testator choose a competent and trusted person to act as executor. In many estate plans, a testator may create a trust as a way of exercising "control from the grave." A testator may leave gifts to family or even to charities. In many cases, a testator may wish to limit the use of inherited property to schooling, medical care, or housing. In addition, the testator may have children, parents, or relatives who require special care which can be dictated by the terms of a trust to ensure the protection of the trust beneficiary. Finally, a trust can be used in larger estates to take advantage of the marital deduction to avoid certain estate taxes. As with executor designations, the testator may appoint the trustee of his or her choice. Perhaps the single most important non-financial concern that may be addressed by a will is the designation of a guardian for the testator's minor children. That choice is controlling assuming that the testator's spouse dies before the testator or the surviving spouse is unfit to care for the children. A guardian can be named to manage the "person" and "property" of a minor. A guardian need not be responsible for both aspects of guardianship, so a financial institution could be appointed guardian of the minor's property, while an aunt or close friend could be responsible for the child's day to day care. Remember however, that a guardianship ends once the child reaches the age of majority. As a result, a testator might want to consider utilizing a trust to avoid the undesirable result of an eighteen year old child controlling vast sums of money before possessing the requisite maturity. WHAT A WILL DOES NOT DO Despite the many advantages provided by a will, the document can only do so much. A will, alone, will not save estate taxes. Although a will, as part of a larger and complex estate plan, can be employed to save hundreds of thousands of dollars in estate taxes. Further, a will only controls the disposition of property included in a testator's probate estate. This property does not include most life insurance, annuities, IRAs and pension plans, or other property where the testator may directly designate a beneficiary. Other property that does not pass by will is property owned by the testator as joint tenancy with right of survivorship or tenancy by the entirety. WHAT SHOULD I DO NOW? Despite a glut of "do it yourself" will packages available at bookstores, a will, even with the most simple of terms, is a complex and important document and should not be left to these simple systems. Most of these systems apply only to the most basic estate planning situations and provide a basic framework without giving much thought to any particular special needs. In addition, these books are rarely designed specifically for Illinois law. Because of the delicate nature of your estate plan, you should obtain professional advice and have your attorney prepare your will. Your family's future depends upon it. For more information, contact Richard Magnone or any of our attorneys at 773-399-1122 Reda | Ciprian | Magnone, LLC, 8501 W. Higgins Suite 440, Chicago, Illinois 60631 DISCLAIMER This website is intended to supply general information to the public. Although the information is generally accurate, it cannot be guaranteed. The nature of Legislation is that laws change quickly, and visitors should always insure that legal information is accurate before relying on it. The above information applies the law of the State of Illinois. The law in your jurisdiction may be different. This information is necessarily brief and may or may not apply to your situation. In all cases, PLEASE, consult a lawyer before acting. This website is intended to be advertising, not solicitation, nor legal advice. Thus, the reader should not consider this information to be an invitation for an attorney-client relationship, should not rely on information provided herein, and should always seek the advice of competent counsel in the reader's state. |