Traditionally, heads of families attempt to build a nest egg that they can be proud to pass along to their children and grandchildren. But creating a legacy is not as simple as putting away a few dollars from each paycheck; it takes planning.
The first step is finding the right estate planning attorney to assist you in designing the kind of financial legacy you hope to leave to your family. This person should be an expert on trusts and wills as well as someone who patiently responds to your questions.
Planning vs. Probating Your Estate
When you create an estate plan with an attorney, your assets are designated to specific heirs according to your wishes. Without an estate plan or will, Illinois probate courts decide, by default, who gets your assets according to state law.
The probate process can be lengthy and costly, draining precious resources from your estate while delaying the distribution to your heirs.
Consider the following avenues to creating your estate plan
1. Your Will and Probate: The Default Path
The most basic estate planning tool is a will. This document describes how you want your assets divided and distributed after your death. Very small estates (valued at $150,000 or less and not including real estate) are eligible for expedited processing, but those who own real estate will have theirs probated, with a judge supervising debt payments and asset distribution.
2. Create a Trust for Privacy
Probated wills are open to public scrutiny. Assets that are contained in trusts are kept private. A trust is a legal tool for transferring ownership to a custodian (trustee) charged with managing the assets until they are distributed to heirs. It is the most reliable and common way to shield assets from Medicaid and ensure that your wishes are fulfilled.
In addition, distributions can be scheduled through trusts. Minor children and spendthrift heirs can receive regular support without the responsibility of receiving a large lump sum.
Types of Trusts
- Revocable Living Trust. This tool allows you to continue accessing and using assets during your lifetime, then automatically transfers them to a trustee to manage and distribute upon your death. Trusts avoid probate and allow expeditious transfer of assets to your beneficiaries.
- Irrevocable Trust. This tool requires relinquishment of asset ownership to the trust, including, if desired, retitling your property for later distribution to your heirs. When complete, a five-year lookback period protects assets from Medicare claims.
3. Payout Over Time: Annuities
Insurance companies sell annuities, which are financial products that pay regular sums over time. As owner of an annuity, it’s critical to designate a beneficiary in case you die.
- A direct beneficiary, named on account documents, receives payments or a death benefit outside of probate if you die.
- Without a named beneficiary, the account becomes part of your probate estate and beneficiaries are determined by state law.
- Keeping beneficiaries updated following milestone events like marriage, divorce, and births are part of protecting your assets for your heirs.
4. Designating Beneficiaries
By using Payable on Death (POD) and Transfer on Death (TOD) beneficiary designations, specific accounts like investments, checking, and savings are moved directly to heirs without probate.
- Joint Tenancy with Right of Survivorship. This designation is a way to transfer real estate to a beneficiary without probate but there are important considerations. Usually this arrangement accommodates spouses, but other family members such as children can be joint owners. The concern is that naming an adult child as co-owner can expose the property to claims by the child’s creditors.
Making a Comprehensive Plan is a Legacy
By creating a comprehensive estate plan with a knowledgeable attorney from Legacy & Life Law Firm, you’re establishing your legacy and making a commitment to your family members. This streamlined approach to packaging and distributing assets to your heirs is not only efficient but preserves your wishes. You’ll be glad you made the effort. Call for a consultation today.