The will is an estate planning tool surrounded by a myriad of myth and misinformation. Many people believe that merely having a will results in lower estate taxes or higher attorney fees. These ideas are false and contribute to the public’s misconception of wills. Simply put, a will is a person’s written direction as to how that person’s property will be distributed upon death. Plenty of smart, famous, and influential people used wills as the centerpiece of their estate plan. WILLS AVOID INTESTACY
Nonetheless, 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. 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 held in that person’s individual name without any designated beneficiary or joint owner) 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 forth Illinois lawmaker’s best guess as to how a person is likely to distribute property upon death. How often do lawmakers correctly anticipate the needs of their constituents?
To illustrate the Illinois intestate succession law, also known as the “rules of descent and distribution,” assume, for example, the case of a married person with two children and no will. It might seem logical to think that all of the assets of such a person will be transferred to the surviving spouse at the person’s death. Unfortunately, that is only half right. Upon the death of a married person with two surviving children, one half of the estate passes to the surviving spouse while the other half is split between the two children. If one of the children happens to die before the decedent but leaves children of their own, then those grandchildren share the deceased child’s inheritance.
Consider that the decision to not make a will could seriously jeopardize the financial security of a spouse. In the example above, as only half of the probate estate assets are passed to the surviving spouse, that spouse loses a great deal of financial freedom. Worse, the children or grandchildren could be minors and would be unable to legally hold any inherited property without going through the time, cost, and trouble of opening a guardian’s estate for the minor’s assets. Usually, the court appoints the children’s parent as the guardian of the child. Even so, the guardian will still be subject to making annual reports to the court and will need court approval to disburse any of the child’s assets. This is time consuming and financially costly. Other problems could arise as a result of the half estate distributed to the children. The decedent may not have wanted the adult children to inherit at all. This could happen in a second marriage situation. The decedent may have wanted the children’s assets to be restricted. It is also possible that a child may have special needs, disabilities, or other problems that require additional financial protection. Clearly, leaving the decision as to the disposition of property at death up to the government can prove costly to loved ones. By leaving such a crucial decision up to someone else, someone in government no less, a decedent may neglect a surviving spouse and children.
WHAT CAN A WILL DO FOR YOU?
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 testator’s wishes 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 choosing the guardian of the person of 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 more complex estate plan, usually containing a testamentary trust within the will or in conjunction with a separate living trust, 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 YOU DO NOW?
Despite a glut of “do it yourself” will packages available at bookstores and on the internet, a will, even with the most basic of terms, is a complex and important document and should not be left to these simple systems. Many 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, many form wills available in bookstores and on the internet are not 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 may upon it.
HOW TO GET STARTED
The first step our estate planning process is to contact our office. We will be happy to mail you an estate planning questionnaire to fill out and return. Once we have the questionnaire back, we will schedule an appointment to discuss planning options and opportunities with you. To get this process started, please feel free to contact Richard Magnone via email or by phone at 773-399-1122.