By Misty A. Watson
On January 1, 2012, the Illinois Uniform Real Property Transfer on Death Act (Act) goes into effect. The Act permits owners of real property in Illinois to execute a deed which will allow for the property to be transferred to a designated beneficiary upon the owner’s death. If the property is owned jointly, the deed will transfer ownership upon the death of the second owner to the designated beneficiary.
The Transfer on Death Deed varies from its counterpart in other states in that it requires the deed to be executed with the formality of a Last Will and Testament. The deed must be witnessed by two witnesses, notarized, and the witnesses must attest that the person signing the deed is of sound mind. The deed requires certain language such as that it is not effective until the death of the owner and must be properly recorded before the death of the owner.
Prior to the enactment of the Act, owners of real property were forced to have a trust in order to avoid probate of real property, even if the owner’s situation did not warrant having a trust. Also, the Transfer on Death Deed allows for property to be maintained in joint names with a spouse which is a great form of asset protection against the creditors of one spouse.
The Transfer on Death deed will permit greater flexibility in estate planning and cost-effective probate avoidance.
Posted by Attorney Misty A. Watson. Watson’s practice focus is estate-related: planning, administration, and probate. She creates trusts, wills, financial, and health care powers of attorney, guardianships, and conservatorships.
12/29/11 2:44 PM
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Transfer on Death Deed Now in Illinois
By David A. Zobel
Part of a monthly multi-part series of discussions aimed at explaining legal and financial considerations for young professionals as they establish and develop their careers, relationships and lives
It’s probably a safe bet that most people in their twenties and thirties have not given much thought to estate planning. Short of a first child or a friend asking if you want life insurance, planning for what will happen when you die probably hasn’t come up and why should it? You’ve got youth and health on your side. Moreover, you probably don’t have a lot of assets at this point.
So why is it important? I asked estate planning attorney Misty Watson to help explain. According to Watson,
“Planning for the future encompasses much more than where your property goes upon your death. Estate planning can also cover who handles your finances if you are out of town, who makes medical decisions for you in the event you become incapacitated, and who becomes your guardian if a court declares you incompetent.”
With these thoughts in mind, you may want to reflect upon the following considerations:
What Happens to My Assets?
You have more than you think you have. Even if you don’t own a home or a wall safe full of bullion, you still have assets and they need to be distributed somehow and to someone. Consider the following examples: bank accounts, savings accounts, stock, bonds, 401ks, IRAs, other retirement accounts, automobiles, clothes, art, appliances, and furniture. Chances are you have at least one of these things and more than likely you have a few. Maybe you’d like your friend to get your watch or a fund be set aside for your nephew’s college fund. Estate planning assists in sorting out who gets what and when.
What Happens to My Children?
If you have children and are single, chances are you may have spoken with someone about taking care of your children in the event you pass. However, without any sort of document proving these intentions, how will the State know what to do? If you are married with children, your spouse will take on the responsibility, but what if you die at the same time? Or get divorced? Your children’s future should be your decision and not left up to the State or a court system.
Continue reading »
12/12/11 9:32 AM
Estate Planning, Family Law, Probate, Trusts | Comment (1) |
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Estate Planning for Young Professionals: Why Considering Your Death is Important Even at this Age
By Misty A. Watson
Your parent, aunt, grandparent, or friend has appointed you as trustee of their trust. You may have briefly glanced at the document 10 years ago when the trust was formed and never gave it a second thought until you get the call that the trust creator has become incapacitated or has died.
What do you do? What are your duties as trustee? What information are you supposed to give the beneficiaries? What are the steps to collecting assets? What bills do you pay? Are you supposed to file tax returns?
Serving as a trustee can quickly become overwhelming. Timing issues regarding notice to the beneficiaries and reporting to the beneficiaries your activities are often the most difficult for a trustee to know without the help of legal counsel. An accountant and financial advisor can also be valuable resources during the initial trust administration period.
Whether you are currently serving as trustee or know you will be serving as trustee in the near future, a consultation regarding your legal responsibilities as trustee is critical.
The duties of a trustee may include:
- Notice to the beneficiaries of the trust. Notification may be necessary to beneficiaries that you are serving as trustee, and to inform them that they have a right to contest the terms of the trust. Each state differs in how the wording must be stated in the notice and what steps must be taken in order to provide appropriate notice. Some states require that a copy of the trust be provided to the beneficiaries, while others do not.
- Collection of the assets. Many assets may not currently be titled in the name of the trust. Some assets may list the trust as the payable on death beneficiary while other assets may need to be probated in order to transfer those into the name of the trust.
- Proper accounting. As trustee, you will be responsible for accounting for the assets in the trust. Most states require that the beneficiaries be sent an annual report regarding transactions that occurred.
- Taxes. You will be responsible for filing taxes both for the trust and for the decedent.
This is not an exhaustive list of all the duties of a trustee. Being a trustee can be time-consuming and overwhelming, but with the right team of professionals, the burden can be lighter.
Posted by Attorney Misty A. Watson. Watson’s practice focus is estate-related: planning, administration, and probate. She creates trusts, wills, financial, and health care powers of attorney, guardianships, and conservatorships.
12/6/11 2:30 PM
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So You Are a Trustee
By Misty A. Watson
There are several ways you can leave your children (or other beneficiaries) your assets upon your death.
One option is an outright distribution. I call this the “here’s your inheritance” method. Upon your death, after payment of expenses and debts, your child receives their full share of the assets outright.
A second option is the staggered distribution method. This method gives your child a percentage of their inheritance at certain ages, dates, or events. A typical example is upon your child turning 30, he or she will receive one-third of their inheritance, at age 35 another third, and final distribution of the entire amount at age 40. In the meantime, your child would typically receive distributions of the principal and income of his or her share for needs such as a house down payment, educational expenses, or even a monthly stipend for living expenses. Another example would be an incentive based trust. With this trust, your child will receive 1/2 of his or her share if he or she graduates college and the remaining distribution if he or she maintains full-time employment for at least two years.
A third method for leaving your child an inheritance is known as a lifetime trust or dynasty trust. With this method, the share remains in trust for the child’s entire lifetime. Your child receives distributions from the trustee for health, education, and support. For example, if your child needs funds for a house down payment or private school tuition for his or her children, the trustee can make a distribution from his or her share. Distributions can be mandatory, meaning your child can compel the trustee to make distributions if the trustee refuses a reasonable request or purely discretionary, where the trustee has sole discretion to make distributions. While a lifetime trust can mean more administrative costs, it is also a form of asset protection. Creditors and divorcing spouses cannot reach the assets in a lifetime trust.
Whatever method you choose when discussing your estate plan with your attorney should be tailored to fit the needs of your family. Each method has pros and cons that should be carefully weighed to meet your goals for your family.
Posted by Attorney Misty A. Watson. Watson’s practice focus is estate-related: planning, administration, and probate. She creates trusts, wills, financial, and health care powers of attorney, guardianships, and conservatorships.
11/4/11 5:00 AM
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Lifetime Trust or Outright Distribution – How to Leave Your Assets to Your Beneficiaries
By Misty A. Watson
Information and strategies abound regarding techniques that should be implemented by parents of a child with special needs to advocate for the child’s education rights, therapies, and treatments. Building a network of resources and support is vital to becoming a parent advocate.
A great tool is available from the Advocacy Group Autism Speaks. They have put together a 100 day kit to help families with a new diagnosis of autism.
Parents also must quickly learn how to navigate the complicated educational laws governing children with special needs. Wrightslaw and other disability advocacy websites offer families a plethora of information regarding the Individuals with Disabilities Education Act (IDEA 2004) and a child’s right to a Free Appropriate Public Education (FAPE).
Blogs, twitter accounts, and other online information can also be useful tools for families, so long as information from such sources is carefully verified. Local support groups can provide families with powerful network of allies and confidantes.
Attorneys, financial advisors, and accountants are also important components of the team. Information regarding special needs trusts, Medicaid rules, investing for the future of your child, and guardianship decisions should be obtained. Finding professionals who focus their practices in special needs is important to building a long term strategy for the family. Often these professionals may know about resources that families have not yet explored.
Becoming an advocate for your child with special needs can feel like a never ending battle; however, with a good team of professionals and a support network of family and friends, the information overload can be lightened.
Posted by Attorney Misty A. Watson. Watson’s practice focus is estate-related: planning, administration, and probate. She creates trusts, wills, financial, and health care powers of attorney, guardianships, and conservatorships.
10/12/11 2:49 PM
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Being an advocate for your child with special needs
By Misty A. Watson
The Illinois Suburban Journal has posted a great article on “Unique first day pressures face kids with special needs.”
Changes in routine can be upsetting for any child with special needs, especially a child with autism.
Prior to the first day of school, if you have a child with special needs, it’s probably a good idea to communicate with the school to set up a time for you and your child to meet the new teacher and see the classroom. The teacher should spend enough time with you and your child to walk through what the new routine will be this school year.
Spending time establishing a relationship with your child’s teacher will help you, your child, and the teacher understand better how to ease your child into that first day of school. If your child’s teacher learns about your child’s special triggers and sensitivities before the first day of school, it can make the transition much better. It can also help the teacher help prepare better for your child if special preparation needs to be made, such as extra visual charts for the class schedule, as suggested in the Journal article.
Once school is underway, your child’s special services will begin. When your special needs child attends public school and is receiving special educational services, the school is required to provide your child with an individualized education plan (IEP). An IEP must be updated yearly to ensure that a child is receiving the necessary services to achieve that child’s goals. It will be important to educate yourself about the IEP process and what can and should be included in your child’s plan.
When you have a child with special needs, you will have to continue to advocate for your child throughout his or her educational process. At times, it will feel like a never ending battle with the school to ensure that your child is receiving necessary services.
But in the end, it is up to you to stay on top of your child’s educational process. Consult the experts, attend seminars your school district provides, and be your child’s educational advocate.
Posted by Attorney Misty A. Watson. Watson’s practice focus is estate-related: planning, administration, and probate. She creates trusts, wills, financial, and health care powers of attorney, guardianships, and conservatorships.
08/12/11 1:03 PM
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Back to School Time for Children with Special Needs
By Misty A. Watson
With the advent of electronic banking and e-statements, the face of our financial recordkeeping has changed over the past few years. Along with this change has come the limited knowledge of and access to your financial information. This is great for security now – but it can cause problems for your family when you are no longer around if you do not plan ahead.
Prior to online banking, when a person died the family could easily discover assets of the departed through statements delivered via “snail mail” – the U.S. mail. Bank statements would arrive in the mail on a monthly basis. Most brokerage statements would arrive at least quarterly. Worst-case scenario would be the annual statement from a life insurance policy, but there was usually a previous year’s statement available for reference.
Today, most people do their banking online and access retirement account/401(k) information online as well. They receive statements online with notifications via email, and dividends are electronically deposited.
Your family may not have a list of all of your accounts and policies – especially if they are accessed online. Without a forensic expert, it may be impossible for family members to determine where the information is located. And remember: all of these records are password protected. In some instances, people are even using fingerprint recognition to access their computers and other password protected websites.
In order for your family members to be able to discover your assets (bank accounts, life insurance, brokerage accounts, retirement accounts, etc.), it is vital to keep a list in hard copy of where you hold your accounts. While account numbers are helpful, those concerned about security do not need to provide this information. Keep this information with your estate plan documents and update it when you do your taxes each year.
Be sure also to provide your family members with important information such as the name of your lawyer, accountant, and financial advisor. By taking this important step, you can ensure that your assets are left to the beneficiaries you have set up through your estate plan.
Posted by Attorney Misty A. Watson. Watson’s practice focus is estate-related: planning, administration, and probate. She creates trusts, wills, financial, and health care powers of attorney, guardianships, and conservatorships.
08/10/11 9:31 AM
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Electronic Estates – Keeping a Record of Your Assets
By Misty A. Watson
For trustees and personal representatives of 2010 estates, new legislation passed on December 17, 2010, provides two options for tax treatment of assets from an estate created in 2010.
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 made sweeping changes to estate taxes for 2011 and 2012 and retroactively made several changes for estates in 2010.
The new estate tax law allows an estate created in 2010 to elect out of the estate tax for 2010 which results in the application of the modified carryover basis rules.
Option One – Modified Carryover Basis
Elect out of the estate tax and complete IRS Form 8939 to allocate which assets in the estate will have their basis increased to the value of the assets as of the decedent’s date of death. This allocation is limited to $1,300,000 for non-spouse beneficiaries and $3,000,000 for a spouse beneficiary.
The executor of the estate is given the authority to complete the Form 8939 and make such allocations of the basis. There are also additional increases for capital loss carryovers and other losses. The proposed allocation must be provided to the beneficiaries prior to the election.
The basis step-up still does not apply to property which is considered “income in respect of a decedent” which includes traditional IRAs and 401(k)s.
Option Two – Five Million Dollar Estate Tax Exemption
Elect to subject the estate assets to estate tax and obtain a basis increase for all assets of the estate. The estate tax exemption amount was increased to $5 million for 2010 at a rate of 35% tax for assets over the $5 million.
For 2010 estates under $5 million, electing into the estate tax makes perfect sense.
If the decedent’s total value of assets on his or her date of death was under $5 million, electing into the estate tax allows the basis of the assets to be increased to a maximum of $5 million (depending on the date of death value) without paying estate tax. Even 2010 estates which have assets over $5 million need to evaluate whether electing to pay the estate tax would result in less tax than electing to allocate the limited basis amounts.
Similar to the modified carryover basis rules, IRAS, 401(k)s, and other qualified retirement plan assets are not eligible for a basis increase.
Action Steps
Whether to elect in or out of the estate tax exemption is unique to each situation.
Trustees and personal representatives of 2010 estates are advised to seek professional advice on which election is best. A fiduciary for a 2010 estate making the modified carryover basis election should carefully weigh each election against the duties the fiduciary owes to each beneficiary of the trust or estate.
Notice of the election and which assets are being chosen for the carryover basis step-up should be provided to each beneficiary prior to the election being made. All elections should be completed in a timely manner to comply with the Act’s requirement of filing such elections with the IRS within nine months from the date of enactment.
01/18/11 6:00 AM
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Important Tax Options for Estates of Those Who Passed Away in 2010
By Thomas G. Glick
Most people don’t realize that in Missouri Probate Courts have jurisdiction to involuntary commitment of people who are mentally ill. These can be initiated by the police, by doctors or by the friends and family of the person with a mental illness.
Locking up a person who hasn’t committed any crimes is a pretty extreme measure but this provision is for people who are so sick that they represent a threat to themselves or others. My associate Misty Watson and I recently wrote an article [download PDF] aimed at other lawyers on the subject. The relevant lengths of time may also be helpful to non-lawyers as well.
07/1/09 8:02 AM
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Helping a Family Member with Mental Illness
