Do you have a will? If the answer is "no," you have lots of company. Three of four people in the United States die without a will. If asked why they didn't have one, they probably would have given one or more of these reasons:
- I don't have a big enough estate to bother with a will.
- I'm married and my spouse and I have all our possessions in joint names, so we don't need a will.
- I can't afford to pay a lawyer to draw up a will for me.
None of these is a valid reason for failing to have a properly prepared will. Here are some reasons you need a will:
- If you have a minor child, you should name a guardian and create a "children's trust" to prevent the court from having to be the manager of your child's money.
- If you die without a will, the legal term is "intestate." Anything owned in your name alone will be subject to probate and state law will determine how to dispose of your possessions.
- Joint tenancy with a spouse does not help if you die simultaneously in a car or plane crash. And you may well own some things that are not in joint name, perhaps as a result of an inheritance, gift or a promissory note for a loan. These would be considered part of an estate for probate purposes.
- There are many good reasons not to use joint tenancy with anyone. Therefore you may not want to use joint tenancy as your estate planning tool.
- It may not cost as much as you think for a lawyer to draw up a will. I charge $100.00 for a simple will. “no worry...fixed fees”
To be sure, a will does not avoid probate. Before you decide, see the section titled: “Debunking the Myths of Probate.”
“Do-it-yourself forms” don’t help you translate your common sense ideas into plain and simple language that accomplishes your goals. Experience drafting wills helps avoid making a simple matter complicated and potentially expensive.
DEBUNKING THE MYTHS OF PROBATE
“no worry...fixed fees”
In advertisements and seminars, it is popular to describe the "horrors" of Probate. Their clear purpose is to sell a living trust to avoid probate. Although the decision to use such an estate planning tool may be wise and appropriate, do not do it based upon scare tactics. The reason for this analysis is to help you choose between a Will, which does not avoid probate, and a Living Trust which may avoid probate. First of all, probate is the method by which the assets of a deceased are collected, bills are paid and the remainder distributed pursuant to a will or pursuant to statute if no will.
"Probate costs six to ten percent of the gross estate."
Statistics don't lie, but liars use statistics. There certainly was a time when probate was very expensive. However, probate and the legal system has changed dramatically in the past 25 to 30 years. The cost of probate today is a fraction of prior years.
In some special cases, there is no probate at all. It does not take place after the death of the first spouse where all of the assets are maintained in joint tenancy. (Joint tenancy property does not pass to the Estate of the deceased.) Furthermore, estates of personal property having a value of less than $100,000.00 do not require probate. For these types of estates, all probate tasks can be accomplished with a "Small Estate Affidavit." An attorney prepares this document.
Prior to 1980, every probate matter required multiple court appearances to accomplish the goal of collecting and disbursing the assets of a deceased. The philosophy was: the court, and only the court, had the ability to review the fairness of the distribution of an estate. Today, this type of probate is called "Supervised Administration." It still exists and is only appropriate where the beneficiaries under a will cannot resolve their own disputes.
The new type of probate is "Independent Administration." It was developed to permit families or heirs to work together and complete the probate process without the court's supervision. The original Will is filed with the court and admitted into probate. Most Wills are "self-admitting" and require no testimony by the witnesses. (Your attorney should explain this at the time you sign your Will.) Another step in Independent Administration is to obtain a declaration of heirship and the issuance of "Letters of Office." Letters of Office give your executor the power to collect the assets, pay the bills and distribute the funds. Independent Administration is completed when the beneficiaries sign a document stating they are satisfied with all of the results. It is the job of the executor to demonstrate to the beneficiaries that all work has been completed accurately. The executor will provide a detailed accounting to the beneficiaries of all funds collected and how they were distributed.
Someone writing a Will can direct that their Probate estate be administered by "Independent Administration." When so directed by a provision of a Will, Supervised Administration occurs only if it has been proven to the court that there is good cause for the court to participate. For example, the failure of the executor to collect assets or the improper distribution of assets is obviously adequate grounds for the court to get involved. Although stories of these events abound, their occurrence is rare.
Use of Independent Administration in the State of Illinois means probate costs less. The attorney's fees involved should be based upon an hourly rate. An attorney must be prepared to itemize and explain the fees, costs and the necessity for each effort. The bottom line is that the cost of probate can now be far less than in the past. Fees which used to range from five and ten percent of the estate (e.g. $10,000.00 to $30,000.00 for a medium-sized estate) can now be as low as $1,200.00 to $3,400.00. The exact fee depends upon the complexity of the estate. Among other matters, the attorney assists in obtaining letters of office, selling of real estate, timing of disbursements, preparation of the accounting documents, providing income, gift and estate tax advice and selecting valuation dates.
"Probate means public disclosure of the assets and who receives them."
With the advent of Independent Administration, the identity of the assets is not filed with the court and, therefore, there is no public itemization of assets. The final document filed with the court is one signed by the legatees stating that they have approved of all the activities of the executor. In Supervised Administration, on the other hand, you are required to file an "inventory" and a "final account." These documents list all of your assets and the names of the persons who will receive each specific asset.
"Probate means delay in the distribution of assets."
In a typical Independent Administration, assets are not distributed for six months following the issuance of Letters of Office. This allows creditors time to submit claims. The law has long since recognized the problem created by this delay and has provided for a spouse's or child's "allowance." For example, your spouse is entitled to receive the first $10,000.00 of your estate after payment of the funeral bill and expenses of administration. This money can be paid promptly after the appointment of the executor. In most cases, spouses keep their bank accounts and other liquid assets in joint tenancy. Access to those funds is immediate. If the size of the estate is sufficient, the beneficiaries can agree to interim loans to ameliorate emergency situations.
"Probate serves no purpose."
Probate has two purposes. The first is to provide an orderly collection of assets, payment of debts and distribution of the decedent's estate. The other purpose is to bar late claims of creditors.
In those cases when problems do arise in either the garnering of the assets or distribution of the assets, the court has developed procedures to solve the problems. In Cook County and some other Illinois counties, the judges assigned to these matters handle only Probate cases and they, therefore, develop an expertise in the efficient and expeditious resolution of these types of disputes. If problems arise with distribution from a Living Trust, where there is no probate, they are handled by the “Chancery Court,” which is not so specialized or so well equipped.
Creditors have six months from the date that "letters of office" are issued to file a proof of claim. If an unknown creditor fails to file the claim on time, it is barred forever. The purpose of this rule is to allow creditors six months to submit their claims. However, assets distributed after this point are "free and clear" of all creditor's rights. Those who use the Living Trust as their means of passing their assets cannot bar creditor's claims for two years.
Reasons for Using Living Trusts
The following are some of the reasons why you, like many of my clients, may wish to establish a living trust:
- A living trust would provide for the management of your assets in the event that you become disabled or no longer wish to manage your assets. Without a living trust, a person who becomes seriously disabled might need to have assets administered by a court-appointed guardian, which is a costly and burdensome procedure.
- If you place assets in a living trust, probate court proceedings should not be necessary with respect to those assets in the event of your death. You might also transfer into your living trust assets located in another state so that such assets need not be probated there.
- A living trust is a private document. Unlike a will, it is not filed with the Probate Court and does not become a matter of public record. A living trust also can be changed more easily than a will because amending or revoking it does not require witnesses and other formalities associated with executing a codicil (amendment) to a will.
- A living trust provides a smooth, prompt administrative transition upon the death of the grantor. There is no delay in administering trust assets which may be encountered when a probate proceeding is required. Trust income and principal can, in many circumstances, be used to support named beneficiaries almost immediately.
- Income from a revokable Living trust is reported on the income tax return of the grantor.
- A living trust may be adapted to include provisions to avoid Federal Estate Tax.
Some disadvantages associated with the use of a living trust are:
- A person who sets up a living trust, as opposed to merely executing a will, commonly will need two estate planning documents: the trust and a short "pour-over" will. Additionally, if the goals of facilitated management and avoidance of probate are to be achieved, substantially all of a persons's assets must be registered in the name of the trustee. This registration, although easily accomplished, does require contacting various institutions and preparing additional documents (such as assignments) to complete the transfers. Thus, the preparation of trust documents, a "pour-over" will and the transfer of assets to the trust may require greater initial expense than would be incurred through preparation of a will only.
- Some assets, such as general partnership interests, should not be held in living trusts, primarily for tax reasons. Thus, these assets may need to pass through probate even though other assets are held in a living trust.
- Amendments to a living trust, which reflect changes in the estate plan, will remain part of the trust record. Thus, after the grantor's death, a beneficiary of the trust may be able to review the grantor's "changes of mind" with respect to disposition of the trust assets, choice of trustees, etc. In contrast, if a new will is executed with different provisions, generally the prior will can be destroyed.
- In Illinois, as well as other states, a person can execute a simple "durable" power of attorney which may be used instead of a trust to manage assets if the person becomes disabled. A living trust, however, may be superior to a power of attorney in a number of respects, including the management of real estate.
DURABLE POWERS OF ATTORNEY
FOR HEALTH CARE
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DURABLE POWER OF ATTORNEY FOR HEALTH CARE
A Durable Power of Attorney for Health Care confers upon an agent the authority to act for the principal for the purposes of making both life saving and life terminating medical decisions.
Contrary to the Living Will, the statutory Durable Power of Attorney for Health Care also may authorize the agent to direct the withholding or termination of food and fluids to the principal.
Positive Features of Durable Power of Attorney for Health Care
- Authorized by statute
- Recognized expression of intent regarding life-sustaining measures
- Continues after onset of incompetency
- Does not require a doctor's determination in order to become effective
- Principal may name anyone as agent
- Successor agent may be named
- Agency may be authorized to consent to or refuse any and all types of medical care, treatment or procedures
- Power relates to life-sustaining treatment as well as life terminating decisions
- Agent may admit or discharge principal from all types of health care institutions
- Agent may contract for all types of health care services and facilities in the name of the principal
- Agent has the right to examine, copy and consent to disclosure of principal's medical records.
- Saves substantial attorney's fees and court costs on a Disabled Person's Estate.
Negative Features of Durable Power of Attorney for Health Care
- Requires willingness of agent to exercise power
- May be viewed as burden on person appointed
- May not name "co-agents" to act at same time
A Living Will declares a person's wish to withhold or terminate life-sustaining procedures in the event the person becomes incompetent to give directions regarding his or her care. The person must be emotionally and mentally competent at the time of signing the Living Will, and the signing must be witnessed by at least two individuals.
For life-sustaining treatment to be withheld or terminated, the attending physician must determine that the person has an incurable disease, illness or injury and that death is imminent, except for the life-sustaining procedures.
A copy of the Living Will should be made part of the declarant's medical records as well as with all other health care providers which may potentially be consulted.
Positive Features of Living Will
- Authorized by statute
- Recognized expression of intent regarding life-sustaining measures
- When followed, doctors and hospitals are not subject to civil or criminal liability
- May be revoked at any time by the person who made the declaration
- When properly signed and delivered to health-care providers, does not require action by family, friends or court.
Negative Features of Living Will
- Requires attending physician to comply with intent of signer
- If the doctor is unwilling to comply, a different doctor must then be found who will comply
- The term "imminent death" is not defined by statute
- Nutrition and hydration cannot be withdrawn or withheld
- Must be signed with all the formalities of a will
- Applicable only to life-sustaining measures regarding a final, terminal condition
- May not be valid outside the state in which signed.
INSTRUCTIONS FOR WILLS, TRUSTS, AND RELATED DOCUMENTS
These instructions help you know where to keep originals and copies of various documents relating to your will, trust, or other estate plan.
WILL. Each original will should be kept in a safe deposit box or other safe place. It is our practice to give you a copy of all documents. Put the copy in a place where it will be easily found and mark on the copy where you have put the original. Our office supplies an extra copy of the cover sheet to your will. The purpose of this document is to provide a simple method by which you can inform the executor and alternate executor that 1) you executed a will, 2) where to find the original and 3) that our office has an extra copy of the will. There is no reason for you to reveal the contents of your will to anyone as you may change or revoke your will in the future.
If an original will is lost, Illinois law presumes that it was your intention to revoke or destroy it. That is why it is critical for you to keep the original in a safe place. Even if the will is in a safe deposit box, there is a procedure for anyone who has an interest or a potential interest in an estate to go to the bank and open the box. If the will is there, the bank will arrange to file the original with the Court.
TRUST and RELATED DOCUMENTS. The original of your trust should be placed where you can retrieve it easily. Banks, brokerage firms, or other third parties often need to see a part or all of the trust agreement before they will allow accounts to be opened in the name of the trust. While the original should not be delivered to them, they may want to see the original and may want a copy of all or part of the trust.
You often name successor trustees in a trust. It is important that any successor be able to take physical possession of the original without having to go to Court. If you put the trust document in a safe deposit box without allowing access to the box, it may still be necessary to get a Court order just to open the box. If you want to put all successors trustees on the box with you so that they can enter separately, that would avoid the problem. Otherwise, you should keep the original trust document in a place where it will be safe but will also be available to the successors. All original documents relating to the trust, including the Exhibit of Trust Assets should also be kept with the original trust for the same reasons. It is our practice to give you copies of all documents which have been signed by you. Our suggestion is that you keep the copies in a place where they will be easily found and that the copies make reference to where the originals are located. As opposed to wills, the trust and related documents can always be re-executed by you if necessary.
DEEDS OR OTHER TRANSFERS OF REAL ESTATE. If you have transferred real estate into a living trust, the original deed for each property must be recorded with the recorder of deeds of the county where the property is located. Once the deed is recorded, it is microfilmed and becomes a matter of public record. It will never be necessary for you to produce the original deed for any purpose. You may therefore keep the deed wherever you choose.
POWERS OF ATTORNEY FOR PROPERTY and HEALTH CARE - ADDITIONAL SIGNATURES. When you signed your Powers of Attorney for Property and Health Care, they were either witnessed or notarized by us as necessary. In each Power of Attorney, you named from one to three people in succession as "attorneys." There are additional signature lines on each Power of Attorney. It is not legally necessary for any of your attorneys to sign any of those lines. The purpose of the signature lines, however, is to provide specimen signatures of those individuals for reference by any third party after each Power of Attorney takes effect. We advise that you do get those signatures on the originals as soon as possible. You should have each attorney and successor attorney sign where indicated, and you should sign to the right opposite their name immediately after they have signed. Your signature is a certification that you saw them sign on the left side, and by comparing your signature on the right with your signature above, any third party to whom the power is given can then be assured that the attorney is who they say they are. Only the original Powers of Attorney need to be signed. We furnish a copy of each for your reference only.
You will never need to deliver any original Power of Attorney to any third party. Any of them may insist upon seeing the original and receiving copies of the original, but you will never need to turn over the original to anyone.
POWER OF ATTORNEY FOR PROPERTY. If your Power of Attorney for Property names someone as attorney immediately, you should keep it available for their use whenever necessary. If the Power of Attorney will not take effect until you are mentally disabled, it should be kept in the same place as we have described above for a living trust.
POWER OF ATTORNEY FOR HEALTH CARE. Your Power of Attorney for Health Care may be needed at any time in case of emergency. You should therefore, be sure that it is in a place where it can be retrieved quickly and a copy delivered to any doctor or medical facility which may require its use. You should also leave a photocopy with your primary care physician and with the first named attorney, in case its use becomes critical. The original should also be accessible in case it needs to be exhibited to any medical provider.
LIVING WILL. If you signed a living will, it should be available on very short notice in an emergency. You should treat it as you would a Power of Attorney for Health Care.