Estate Planning and Administration FAQs
With Illinois Estate Attorney James C. Provenza
1. What is estate planning?
Estate planning is a process that allows you to preserve and expand your estate and leave it to your family or charity when you die. The process can be as simple as drafting a will or as complex as setting up a charitable foundation.
2. What documents does every good estate plan include?
A good estate plan can include the following:
- A will is a written document in which you direct how your property is to be distributed at your death. A will does not avoid probate but it does make probate less expensive.
- A trust is a document that lays out how you want your property managed during your life and distributed at your death. Common reasons for trust to be set up are to avoid probate, protect property in you estate and reduce estate tax liability. You need to change asset titles if you want a revocable living trust.
- A property power of attorney is a document in which you name an agent to carry out a wide range of transactions for you such as signing checks, buying and selling assets, signing your tax return, or accessing your safe deposit box, if you are unable to complete these tasks on your own.
- A health care power of attorney is a document in which you name an agent to make medical decision for you that you couldn’t make. You can also state your wishes about when life-sustaining measures should be taken on your behalf, and what treatments the agent should allow.
3. What happens if I don’t do any estate planning?
If you don’t do any estate planning, the state of Illinois makes the decisions for you. You might be surprised as to who will inherit your estate after you pass away. Your probate assets (assets in your name alone, excluding retirement plans and life insurance) go ½ to your spouse and ½ to your children.
4. What is probate?
Probate is a court procedure that is designed to make sure your executor pays your creditors and beneficiaries according to your desires. Assets that are in your name alone, such as real estate, stocks bonds, mutual funds and bank accounts, will go through probate.
There are many ways to avoid probate including joint tenancy, payable on death and transfer on death. You should still consult an attorney because using these probate avoidance devices incorrectly can result in property going to the wrong people.
5. What is an estate?
An estate consists of all the property a person owns. It includes houses, buildings, cars, bank accounts, stocks and bonds, mutual funds, stock options, cash, furniture, jewelry, art, collectibles, all business and business interests, life insurance, annuity contracts, pension benefits, IRAs, 403(b)s, 401(k)s, all debts you owe to others and all claims you have against others.
6. What information does an estate planning attorney need to help me plan my estate?
In order to help you plan your estate we would need information on your family, assets, liabilities and your goals.
7. What are the primary decisions that I need to make?
Beneficiaries – You not only have to decide who will inherit and how much, but you also must decide when, how, in what form and if there are any terms and conditions that need to be met before the distribution is made to the beneficiaries. You should also think about contingent beneficiaries if any of the primary beneficiaries predecease you. These are decisions we can help you with.
Fiduciaries – Fiduciaries are the people that you will designate to serve as your executor(s), trustee(s) and agents(s). If you have minor children you will also need to designate people to serve as guardian(s). This is a very important aspect of your estate plan and you should take the time to consider the people that you name.
8. Do I need an attorney to prepare my estate plan?
Do-it-yourself estate planning often results in costly mistakes. A qualified estate planning attorney can help structure and implement your estate plan according to your wishes and needs and give advice you won’t get on a website.
9. Does every attorney do estate planning?
No, not every attorney does estate planning. With the changing of the state and federal tax laws estate planning have become very complicated over the years. Attorneys who concentrate in estate planning and administration are usually the best ones to help you with the estate planning process.
10. What does it cost?
The cost of an estate plan depends on how complicated your situation is and what types of documents you want prepared. However, a well prepared estate plan can save income taxes and other expenses. Therefore, more will go to your beneficiaries.
11. How often should I review my estate plan?
You should typically review your estate plan every three to five years, but if there has been a change in the law, taxes, your family situation, finances or residency you should review you estate plan sooner.
12. What is probate?
Probate is a court procedure that is designed to make sure your executor pays your creditors and beneficiaries according to your desires. Assets that are in your name alone, such as real estate, stocks bonds, mutual funds and bank accounts, will go through probate.
There are many ways to avoid probate, including joint tenancy, payable on death and transfer on death. You should still consult an attorney because using these probate avoidance devices incorrectly can result in property going to the wrong people.
13. How long does probate take?
The probate process typically takes 9 to 12 months; however, it can take longer if there are unforeseen difficulties.
14. What is an executor?
An executor is the person named in a will who is designated to carry out the wishes of the deceased individual. If a person dies without a will, the person is called an administrator.
15. What about retirement plans and life insurance?
Retirement plans and life insurance are controlled by the beneficiary form you filled out when you opened the retirement plan account or bought the insurance policy. If you name individuals or charities they are not subject to probate.
Your choice of beneficiary is important because choosing the wrong beneficiary on a retirement plan can cost you substantial income taxes. Life insurance is not subject to income taxes except in rare circumstances.
Do not name your estate as a beneficiary. Only rarely do you want to name a trust. If you name an individual or charity as a beneficiary the retirement plan or life insurance is not subject to probate.
