Estates: It's time to demystify estate planning
Friends, a recent show hosted by Jon Hansen of WGN Radio tackled the essential role powers of attorney can play for everyone, especially 18-year-olds. Mr. Hansen invited me to join him for the conversation. Before taking to the airwaves, preparation was critical so that I, a radio novice, could focus on the conversation with Mr. Hansen while safely ignoring my jitters while on air. I'm happy to report the segment was well-received and even moved some listeners to call into the show.
Post-interview, the drive home could be described as that of relief and gratitude. Naturally, the mood had to be met with some tunes. The deejay selected David Matthews "essentials" as any good Gen-Xer would. The insert-the-band "essential" function on music apps is clutch. A variety of songs curated with a few keystrokes.
For me, the "essential" function is critical because I do not know a lot about music. My only musical encounter was a minor role in the late 1980s production of "West Side Story" at Springman Junior High. Safe to say, music is slightly unknown to me. Experience proves that many people feel uncertain about estate planning because it is an unknown.
To dispel with uncertainty, let's tackle four essential documents in an estate plan. For those who have some or all of these documents, may this be an invitation to locate and revisit them to make sure your team and plan still align with your goals.
For those of you who do not have an estate plan, may this be an invitation to learn how a few essential documents can protect you, your family, and your property from uncertainty, loss, and taxes.
A will is a document that a person writes to identify beneficiaries of property he owns in his own name. The named beneficiaries in his will receive the property when he dies. Why is this important?
• First, a will is created when a person is living but is not effective until a person is deceased. Second, a will does not help a person manage his assets or real estate while he is alive. For a parent, this means a will does not provide for a child when a parent is living with a disability or incapacity. Finally, a will must be filed into the public record when a person dies. This means a will is not a private document.
There are three reasons why a will is essential. First, a parent can name a guardian to step into his shoes to care for minor children. Illinois law requires that a guardian be 18 years old, a U.S. resident and willing to accept the responsibility. A parent can name two people to serve as guardians.
• Second, a person can name an executor to be in charge of his assets when he dies. The executor will ensure assets get to the named beneficiaries, including minor children. The executor can also appear in court if a probate judge must decide who gets a decedent's property. Illinois law requires that an executor is 18 years old, has the capacity to serve in the role, is a U.S. resident, and is not a felon.
• Third, with a will, a person can excuse an executor from Illinois' bond requirement. A bond is calculated by law based on the assets a person owns in his own name on his death. The bond is paid before the judge distributes assets to beneficiaries. If a will does not excuse bond, a probate judge will require it.
Health Care Power of Attorney
A health care power of attorney is a document a person signs to name a trusted adult to make health care decisions for him when he is living and cannot make decisions himself. Illinois lawmakers identified specific requirements for an agent under a health care power of attorney. One is that an agent be at least 18 years old. While there is no U.S. residency requirement, it may be a best practice to name an agent who can get to a doctor or hospital quickly. Also, the document must have one witness and Illinois has laws about who can serve as the witness. Finally, Illinois law prohibits a person from naming two people to be co-agents; however, a backup, or successor agent can be named. Once signed, the health care power of attorney can be provided to doctors to have it on file in case of a medical emergency.
Property Power of Attorney
A property power of attorney is a document a person signs to name a trusted adult to make financial decisions about his property when he is living and cannot make decisions himself. The document must be signed before at least one witness and a notary public. If a person owns property outside Illinois, two witnesses is advisable. An agent must be at least 18 years old. While there is no U.S. residency requirement for an agent under property power of attorney, it may be a best practice to name an agent who can physically get to a bank if the person does not pay bills and manage money electronically.
Living Trust Agreement
A living trust is a contract a person signs with himself that allows him to own property "in trust." When a person signs a trust, a person can think of the trust like a box. With a signed trust, a person can fill the trust box with bank accounts, real property, insurance benefits, business interests, certificates of deposit, stock, and more. A trust does not prevent a person from growing, investing, liquidating, diversifying, or selling assets that are put into the trust box. Also, for parents, a living trust can provide a private road map for guardians to provide for children.
A living trust adds value to estate plans to avoid taxes and to plan for the case of incapacity or disability. Some other reasons to include a trust in an estate plan are:
• to maintain privacy, because a trust is not required to be filed into the public record;
• to avoid a probate judge deciding who gets property;
• to name a backup trustee to handle trust property when the person dies.
To sign a trust, a person needs to answer three questions:
• Who will be the trustee when a person cannot be the trustee?
• What people, charities, or organization receive trust assets when a person dies?
• How often should the trust pay income to children for parents with minor children?
Corinne Cantwell Heggie is a principal of the Wochner Law Firm LLC in Northbrook. Corinne helps people avoid asset loss, court battles and taxes, with wills, trusts and powers of attorney. Corinne lives in Glenview with her husband and law partner where her family is active in sports, ministries that support women and children in crisis, and Boy Scouts.