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An Introduction to Estate Planning

Chester A. Lizak

It is a well-known fact that most people are motivated to get their estate planning done when they are planning for an exotic far away trip or if they think they are going to face some type of health care crisis. There are many excellent reasons for doing or updating your current estate plan other then a health care crisis or exotic trips.

Consider that an up-to-date estate plan will maximize the chance that your wishes with respect to both your medical and financial affairs will be carried out in the event of your death or disability. Each person has their own set of personal values that should be honored in the event that death or incapacity prevents you from acting on those values yourself.

In addition, for some people, estate planning will be a good step towards minimizing estate taxes.

In general, your “estate” includes all of your assets, less all debt, plus death benefits from all life insurance policies. Thus, for many people, the purchase of life insurance coverage significantly increases the value of the estate.

Estate plans typically include:

  • A Will;
  • Durable Powers of Attorney for both medical and financial matters. Durable Powers of Attorney are unique in that they survive your incapacity;
  • A Revocable Trust. The Revocable Trust, despite popular misconceptions, does not lower taxes however, it can be an effective way for reducing estate taxes for married persons. More importantly Revocable Trusts provide a smooth transition for the management and distribution of your assets in the event of your death or incapacity.

The estate plan documents listed above as well as retirement accounts and life insurance policies are also considered integral parts of estate plans. Beneficiary designations on retirement accounts and life insurance policies specifically direct how these assets are distributed after your death. When properly adapted your life insurance policies and retirement accounts will be funded into your Revocable Living Trust.

So you say to yourself “I am not a multimillionaire nor a world traveler. Is it possible for my spouse and I to benefit from consulting with an estate planning attorney?” The answer is, “Yes.” Here is a list of the most common types of individuals who should consider discussing their personal circumstances with an estate planning attorney:

  1. Parents of minor children regardless of financial status. Anytime minor children are involved, the parents should plan for who would take care of their minor children and assets in the tragic event that their children should become orphaned. If planned properly, orphaned children can stay out of the county court system as long as the documentation is prepared before this tragic event.
  2. Parents with children who are growing older. As our children mature, we tend to increase the responsibility we give to them. Depending on their age, they may be ready to inherit assets outright or we may want to design a system which would encourage further financial maturity in them and allow them to share the responsibility of managing their finances with an adult co-trustee.
  3. Couples in a non-marital relationship. Illinois does not recognize the concept of a common law marriage. Well drafted estate planning documents can empower your non-spouse partner to act for you in the event of your incapacity. Furthermore, in the event of death without estate planning, Illinois does not recognize any form of inheritance to non-marital relationships. Well drafted estate planning documents can overcome this limitation and transfer wealth to a non-spouse partner.
  4. Parents of second marriages. When there are blended families involved, inheritance issues can be complicated. Estate planning documents can set the record straight by insuring that your assets are divided between your new spouse and your children from prior marriages.
  5. People who are concerned with incapacity. If you believe that managing your own medical and financial affairs will begin to become an increasing burden, then getting your estate planning documents in order is a must. With these estate planning documents in place before your incapacity, your family members or other agents can assist you in managing your affairs without a guardianship proceeding through the court system.
  6. Families with estates that are taxable or may be taxable. Currently our country and our state are uncertain as to the future of our federal and state estate tax. Currently there is a division between our federal estate tax and our state federal estate tax. If your estate currently exceeds $1,000,000 then it may be wise to consult your estate planning professional and discuss what options may be implemented to avoid estate tax.
  7. Wealthy people interested in making gifts. If you have been blessed with a sufficient nest egg towards your retirement and your estate is subject to federal estate tax then you will most likely qualify for a gifting program. Gifting programs are useful to reduce the size of your estate and still benefit your heirs.
  8. People with charitable intentions. Our current tax laws still support charitable giving and offer numerous income and estate tax breaks to donors. By working with an experienced estate planning attorney, you can gain detailed knowledge of specific gifting strategies.
  9. Persons newly divorced or separated. Usually during the dissolving of a marriage there is a change with respect to how assets are allocated and what heirs will be benefitted. This is usually a crucial time in updating and modifying your estate plan.

When you consult with an estate planning attorney there are essentially six big questions you’ll want to get answered:

  1. To whom do you want your assets to be distributed?
  2. How do you want them to receive it?
  3. What taxes may your estate be liable for and how can those taxes be minimized?
  4. What are your personal values and convictions and how will they influence the management of your medical and financial affairs in the event of your death or incapacity?
  5. Do you have any unique circumstances that may effect your estate plan? Issues that most often affect this question relate to children from a prior marriage, a disabled child, an unresolved family dispute, major charitable intentions, potential creditor problems or the potential of a large future inheritance.
  6. How flexible should the estate plan be so that in this life of crazy changes your documents are flexible to adapt and adjust to current circumstances?

To answer these six questions, you must provide full and accurate information. We should be made aware of special personal circumstances and your personal convictions and how they all will be adapted to your estate plan. One’s own personal conviction often influences the tone of their estate plan. We can then customize the documents in a fashion that makes them personal in nature.

When you call to schedule your first meeting, we will provide an estate planning questionnaire which will address many of these details. At our first meeting you should bring the estate planning questionnaire and we will begin the process of drafting your estate plan with your preferences and core values in such a way that when we are finished you will have a personal set of estate planning documents. Now that I have laid out the necessary steps to get your estate planning done, hopefully you are motivated to pick up the phone, and make an appointment with us. Then plan that far away trip.

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Di Monte & Lizak, LLC,

216 Higgins Road,

Park Ridge, IL 60068