What is a will?
A will is a legal document created to assist the Probate Court in the payment of your debts including taxes and in the distribution of your assets to your heirs and legatees after your death.
What is a living trust?
A living trust (sometimes called an "inter vivos" trust) is a document covering the administration of your affairs while:
- You are living and able to act or while, or
- You are living and unable to act or disabled and incapable of acting and/or
- Upon your death.
The trustee administers the trust, pays your bills, invests your surplus funds and liquidates assets when necessary to cover your expenses and upon your demise, distributes your assets to your designated beneficiaries after paying your debts including federal state taxes if any.
What is a living will?
A living will is a document in which a person can express his or her desire to have death delaying procedures withheld or withdrawn in the event you are suffering from a medical condition which the attending physician has determined to be terminal.
What is a durable Power of Attorney for Health Care?
A Durable Power of Attorney for Health Care is a document in which a person called the principal, namely you, can delegate to another person, including a trusted friend or family member, the power to become your agent, who will act for you for any health care decisions you are unable to make. It may be used instead of or together with a living will. Your agent, who does not have to be an attorney, will speak for you and make health decisions according to your specific wishes when you are physically or mentally incapacitated.
What is a Durable Power of Attorney for Property?
A Durable Power of Attorney for Property is a document in which you as principal can delegate to another person, including a trusted friend or family member, the power to become your agent who will act for your for any type of property decisions where you are unable to make them. The agent, who does not need to be an attorney, will speak for you and make decisions according to your prescribed wishes even when you would be physically or mentally incapacitated.
Are there any rules for Gift Giving?
There are numerous rules governing gifts and their taxable consequences. Here are just a few of the more common ones:
- There is no federal gift tax on gifts of a present interest of $10,000 or less. There is no gift tax on gifts made between spouses as long as they are both citizens of the United States. (We will discuss this particular issue in more detail below.) The important point of the $10,000 gift exclusion is that it applies to as many gift recipients as your choose. Also, the joint gifts by spouses can be up to $20,000 without paying any gift tax. If the gifts are $10,000 or less per recipient, there is no need to file a gift tax return. If the gifts exceed $10,000 per recipient, a gift tax return must be filed so that a married couple may split the gifts in order to get the two $10,000 exclusions.
- In addition to the $10,000 annual exclusion, there is a federal gift (and estate) tax credit available to each individual for property which may pass without the payment of tax during life and on death. The amount of property protected by this minimum tax level is $675,000. The important point to remember is that the $675,000 is a number which combines taxable gifts made during life and taxable bequests made at death. Thus, if gifts in a year exceed $10,000 per recipient, the amount of excess will be charged against the credit shelter amount of $675,000. It is the reduced balance of the $675,000 credit shelter amount that is left to protect against taxes in the estate tax return. This exemption amount will increase gradually to $1,000.000.00 in 2006.
- The marital deduction has been expanded on gifts between spouses where both are citizens of the United States. Under the present law, one spouse can give to the other an unlimited amount of property without a gift tax being charged on it. This unlimited marital deduction is designed to provide the greatest security for the surviving spouse in the belief that the tax on the death of the surviving spouse will be much larger and make up for the lost estate tax on the first death.
- If one of the spouses is not a citizen of the Untied States, special rules apply. Basically, there is no unlimited marital deduction on gifts or bequests made by a spouse to a non-citizen spouse. There are two situations that are exceptions to this exception. They are as follows:
- A spouse can give his or her non-citizen spouse up to $100,000 in gifts each year without having to pay a federal gift tax and without reducing his or her $675,000 credit shelter amount. In making this gift, however, a federal gift tax return would have to be filed.
- A bequest to a non-citizen spouse may be protected by the deferral of the federal estate tax (on amounts in excess of $675,000) if the gifted property is transferred into a "Qualified Domestic Trust." Under a Qualified Domestic Trust, the bequest into trust on the first death is taxed at the time of the second death. The rules on Qualified Domestic Trusts are quite complicated, but they can save estate taxes.
What happens if I do not have a Will?
The State of Illinois dictates your Last Will and Testament for you. Generally speaking, if you have a spouse and children, you spouse will receive one-half of the estate and your children will receive the remainder. If you don't have a spouse and/or children your estate will be divided among your heirs at law, as that term is defined by the State. If your spouse predeceases you the Probate Court Judge will determine who will be the guardian of any children of yours that are minors. The executor and any guardian will be subject to certain bonding requirements and will be required to report to the Probate Court Judge each year until the estate is closed.
Do you have a form for information needed to prepare an estate plan?
Yes, we do and thank you for asking. You can download the form by clicking on the word "Form".