Author Topic: Does this Illinois couple need a revocable living trust?  (Read 5602 times)

aj_yooper

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Does this Illinois couple need a revocable living trust?
« on: June 25, 2013, 03:09:00 PM »
The thread topic “Legalzoom or Lawyer-need a will” inspired me to consider whether my wife and I really needed a revocable living trust, which I was fairly certain we needed.  I really did not look forward to a big legal bill.  I am hoping for comments on the rationality of the following estate plan. 

Summary:

My wife and I live in Illinois and we each have older Illinois wills that our attorney wrote to convey our property and establish a guardian choice for our only child; he is now an adult.  We have three retirement fund accounts, a Roth IRA, a taxable investment account, a checking account, and a credit union savings account.  Our home has no mortgage and is filled with the usual stuff.  We own two cars.  We each also have term life insurance and pensions.  Our families have not in the past been into drama or contesting wills.  Our son has a great accountant to help, if needed.

This is my current estate plan:

We have joint tenancy in the checking and credit union accounts and have established a payable on death agreement for those two accounts to allow payment of any smaller expenses for our estate.  Our taxable investment account is in joint tenancy with our son as a named beneficiary.  Our retirement accounts have the other spouse as the first beneficiary and a second named beneficiary.  Our home is in joint tenancy; we will execute a transfer upon death instrument to our son which must be done through an attorney .  Our two cars are currently in both names; we will have a transfer upon death title change for the car, but will need to title each vehicle individually with the transfer of death title.  The term life insurance has the other spouse as a beneficiary and our son as the secondary beneficiary.  Our pensions have primary and secondary beneficiaries.  That is it for our assets. 

In Illinois our son can execute the small estate affidavit procedure on his own as the remainder assets (house contents) would be under the limits ($100,000) for probate.  We are also under the limits for Illinois and federal estate taxes.

*We would also use a living will, durable power of attorney for health care, and durable power of attorney for property, if needed.

This seems to be a good plan for us.  I am interested in your comments and critical thoughts.

References:

Illinois State Bar Association “Probate Ensures Orderly Distribution of Assets After One’s Death”  http://www.illinoislawyerfinder.com/articles/you-and-the-law/estate/probate-distribution-of-assets-illinois

Reda Ciprian Magnone, LLC  Illinois Probate Estates for Decedents  http://www.illinois-attorney.com/practice-areas/probate/probate-estates-for-illinois-decedents/

Estate Planning-Real Estate:  The Transfer on Death Instrument Comes to Illinois
http://www.isba.org/ibj/2011/12/thetransferondeathinstrumentcomesto

Small estate procedure:
http://www.cyberdriveillinois.com/publications/pdf_publications/vsd275.pdf

Payable on Death Accounts

NOLO “Avoiding Probate in Illinois”  http://www.nolo.com/legal-encyclopedia/illinois-avoiding-probate-31807.html

Estate Tax:

NOLO “Illinois Estate Tax”  http://www.nolo.com/legal-encyclopedia/illinois-estate-tax.html

Living Trusts and Probate:

Southern Illinois University Legal Clinic article “Living Trusts and Avoiding Probate”  http://www.law.siu.edu/selfhelp/info/health/livngtru.pdf
« Last Edit: June 25, 2013, 04:24:46 PM by aj_yooper »
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mstryin

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Re: Does this Illinois couple need a revocable living trust?
« Reply #1 on: June 25, 2013, 08:10:58 PM »
I hesitate to answer because estate planning is such a loaded area of practice.  You certainly have done your homework.  In general, I personally believe that trusts do have a tendency to be used when not always necessary. Even if an estate must be probated, it is not the end of the world. It is good to avoid though - - easy transfer and less expense for your heirs. You didn't mention your worth - and there are certainly tax implications to think about that can be much more significant than probate. 

My suggestion is to talk to friends or co-workers about a good estate planning lawyer - you have plenty of them in your area.  In particular you want one who's a nice person - yes, they do exist - and ask the attorney for a consult or pay for an hour of his or her time.  It is worth it to get personalized professional advice for your situation. Then you can make an even more educated decision.

I do strongly personally think that powers of attorney for property and for health care are important.  Often people procrastinate on these and then get behind the 8 ball.  An attorney can be very helpful with these - you see things from your perspective - the attorney has likely seen hundreds of perspectives and can give good advice on pitfalls that a program like legal zoom can't even touch.

my personal opinion only!

aj_yooper

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Re: Does this Illinois couple need a revocable living trust?
« Reply #2 on: June 25, 2013, 09:15:52 PM »
Thanks for your comment. 

I think I talked myself into not doing a living trust.  Our asset accounts are either payable on death or beneficiary so they are not in a probate mix.  Life insurance is not probated.  The house can be conveyed by a transfer on death instrument (done by an attorney) so my only probate property left is in the house.  We don't own any out of state property (which would have to be probated in that state, if it is not in a trust).  Our overall estate net value would not be taxable by Illinois or federal tax (under $4M).  So I keep the will which can be probated by the executor under the small estate affidavit, not a lawyer, as the total of the household property is under $100,000.  Everything is transferred except the house contents.  If my reasoning is correct, the change in Illinois laws allow a DIY estate plan, if you have a will and a transfer on death instrument for a house.
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DoubleDown

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Re: Does this Illinois couple need a revocable living trust?
« Reply #3 on: June 26, 2013, 08:25:00 AM »
I am not a lawyer (just a vocal contributor on these topics!), and it sounds like you've made up your mind, but I think you've reached a very solid conclusion. As you probably already know, the usual primary reasons for setting up a trust are:

1. Avoiding probate, which you can already largely accomplish for the bulk of your estate as you've outlined

2. Avoiding challenges to your wishes since trusts are much more difficult to overturn, which you've indicated is not a concern

3. Distributing assets in a way other than lump sums all upon your death (usually more important for providing for minor children, or young adults who might not be mature enough to handle a large inheritance)

4. Protecting large estates from certain forms of taxation, which won't be an issue for you (at least not at present)

5. Handling estates with more complicating factors, like prior marriages, business holdings, children from previous marriages, etc. Also protecting assets from possibly greedy, future ex-spouses of your children, as an example.

6. Privacy, since probate is avoided (I think probate proceedings are a matter of public record in many or most states). Sounds like this is not a concern for you at all

7. Providing for future generations such as grandchildren, great-grandchildren, etc. This MIGHT be one area you could think about, if there was ever any desire to set aside funds for future generations, or fearing that one of your children could wind up with a spouse who could run off with half the assets you bequeathed to them. Another concern sometimes expressed is if you die before your spouse, they remarry and co-mingle assets, and your children potentially wind up with nothing when your (former) spouse dies. Only a trust can likely provide protection in these kinds of situations

Anyway, great job on being so educated for how things are handled in your state!
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aj_yooper

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Re: Does this Illinois couple need a revocable living trust?
« Reply #4 on: June 26, 2013, 09:11:26 AM »
DoubleDown.

Thank you for your comments.  You are pretty knowledgeable yourself about trusts.  On #6, probate will see an inventory of my household golds, which is pretty ordinary, so I am good with that.  Our executor can do this on their own too.  On#7, that is a good point.  So far, no grandchildren, but if that were to happen we could designate some to that end.  Also, I believe in Illinois that inheritances are separately owned unless the assets are commingled after they are received.  At least, that's what my wife told me-he he.  I appreciate your review of the plan. 

Many states have the same features as Illinois so I am thinking this may also work for others.
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Rebecca Stapler

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Re: Does this Illinois couple need a revocable living trust?
« Reply #5 on: June 26, 2013, 10:10:19 AM »
This is not legal advice, and should not be substituted for legal advice. Just some thoughts that come to mind:

There can be a situation that arises whereby one spouse becomes incapacitated and it becomes necessary to sell the joint residence (for money to pay for a nursing home) or desirable (because the other spouse would prefer a smaller residence). In that situation, it's important to set up a way to sell the home in a way that doesn't require the incapacitated spouse's consent. I'm not sure how Illinois structures this, but in some states a POA is not enough for a real estate transfer. Sometimes it is. The lawyer drafting the POA will have the answer. Just something to keep in mind.

A healthcare proxy, or what you call a healthcare POA, shouldn't need a lawyer for you to draft. Your state should have some google-able forms for this. Use a template from a trusted state resource, like the DOH or Council on Aging. Or one provided by a hospital.

You should also be able to find info on whether your state allows living wills. Some states don't, so you can cross that off you list -- although, providing written guidelines to your healthcare proxy can be a good idea if they're guidelines, and not explicit instructions. 
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aj_yooper

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Re: Does this Illinois couple need a revocable living trust?
« Reply #6 on: June 26, 2013, 12:19:57 PM »
stan,

Thank you for your comments.  The durable power of attorney for property allows the sale of real estate in Illinois;it also recognizes living wills and power of attorney for healthcare. 

http://www.providencelifeservices.com/pdfs/healthinfokit/PowerOfAttorneyForProperty_QandA_Illinois.pdf
The constant lesson of history is the dominant role played by surprise. Just when we are most comfortable with an environment and come to believe we finally understand it, the ground shifts under our feet.  Peter Bernstein

''It's not so much what folks don't know that causes problems, it's what they do know that ain't so.''   Artemus Ward