Category: Trusts

Sure you can. But there are troublesome concerns to watch out for.

Looking for ways to transfer property after death, without having to worry about probate court costs and delays, is a common topic. Sometimes clients ask if they can simply designate a beneficiary in connection with their home or even their investment or vacation property, the same way they do with their life insurance policy, pension, 401(k) or IRA account.

The simple answer is: It’s possible in Illinois and in most other jurisdictions to identify a beneficiary for transfer of the property without doing so in a Will or a Trust. It’s done through a Transfer On Death Instrument (TODI for short). There is a reasonably straightforward format for you to create with your lawyer.

But there are often pitfalls in the use of a TODI that are good reasons to reconsider this approach.

What is a TODI?

The concept of a TODI was created as a simple option to help avoid the costs and the time that it usually takes to go through the probate court process. If the real estate property is owned in your own name at the time of death, Illinois law requires that the property be formally transferred (or sold and the value transferred) through a formal months-long process called “probate”. Like a pay-on-death form often used by banks and financial institutions, or a beneficiary designation form used by life insurance or annuity companies, the TODI specifies the identity of the beneficiary and the transfer to them is expected to occur when the property owner dies, without the need to go to the court.

The TODI can be useful, because you can still mortgage or sell the home prior to their death, and you can make changes to the TODI if you later want to do so by simply revoking and filing a new TODI in the real estate records.

What is the need for caution?

Sometimes it’s as simple as your trying to do it yourself and not following the legal requirements for witnesses on the form, properly notarizing the form or properly describing the property and describing the beneficiaries. Recently, very smart clients didn’t realize that just including both of their daughters on the form accidentally left a potential problem waiting to happen: If one of their children passed away before them, then that child’s own children (the client’s grandchildren) would not receive a share of the home and the surviving daughter would take the whole. This was not their intention. The recording clerk doesn’t give advice or review the form for such concerns. And the change required meant that they had to pay twice by having to pay for preparation and filing of a new TODI.

In other circumstances, the property owner complicates how expenses, debts and taxes are to be paid by their children or by others who inherit the property. The TODI doesn’t usually spell out the specifics of how the beneficiaries will pay for and manage the property after they have become the owners. This often leads to fights among siblings or other beneficiaries, who argue over selling the property or keeping it (and being “partners”), or argue about who will pay for repairs, taxes and such. If one of the beneficiaries cannot afford the upkeep, taxes, etc., how will the expenses be paid?

There’s simply no faster way to create fights between children or other beneficiaries when leaving the home or investment property to all of them without expressing just how these issues will be handled. And if things cannot be worked out between them, then the only way to address this situation is by forcing a sale of the property through what is called a “partition” lawsuit in court. And the result is oodles of attorney fees and costs, with often a lower value as a result of a court-ordered sale, and more bad blood between the beneficiaries.

Is the alternative to a TODI expensive?

When reviewing all of the circumstances and the value of avoiding problems later, the answer, simply, is “No.”

By the time you pay for the creation of the TODI and for the recording fees, and you recognize the possible pitfalls using this planning tool, it is not much more expensive to either specify the gift transfer by Last Will and Testament (which you should have in any event – even if probate will not be necessary), or by using a living trust for this and other estate planning benefits.

Still not sure? Understanding the advantages and disadvantages of the TODI is deserving of a call or a Zoom video meeting with an attorney like Marc Sherman or Maureen Meersman. Contact us to schedule a discussion: https://mshermanlaw.com/contact/

In the world of Wills, Trusts and Powers Of Attorney (the central components of your basic set of Estate Planning Documents) there is no “one size fits all” approach. Our situations may look and sound similar, but when we get to the heart of things, everyone brings their own special considerations to their current and future plan.

Without a doubt, a basic Last Will & Testament and enforceable Power Of Attorney (POA) for healthcare matters and POA for financial matters are necessary for each of us. Depending upon what we own, and what activities of life and business we are embarking on, a living trust (sometimes called a revocable trust) can also be a worthwhile investment in time and expense.

As we grow and our investments and earnings increase. Our assets and our business and personal activities become diversified. And with that diversification, comes the need to plan for additional risk. Further planning and estate planning documentation is appropriate. But starting out, it is important to get the basics in place — and to do so as economically as we can.

If you are in your 30’s and 40’s, married or single, and with our without children, you should be creating the basic building blocks for your own protection and for the protection of those you care about.

Should I use an on-line document assembly program?

My answer is “no.” Do not use an on-line program that you’ve seen on in infomercials during late night television, or even if recommended by a friend.

The savings in time and cost that you think will benefit you, when compared to a simple estate planning package created with your lawyer, is simply not enough of a discount for what you give up. Artificial Intelligence or plug-and-play document assembly programs pushing out machine-generated documents lack a key component in the process. Communicating with your attorney gives you a broader perspective on how to use the tools available to protect what you have and how to use the documents created during the estate planning process when it is time to do so.

Everyone’s situation is different. So, the “off the rack” package stifles the opportunity to interact with your legal team. You should be discussing questions that you have, and addressing the personal, unique situations that you are involved with and that are deserving of attention.

Your legal team doesn’t simply plug in your name, the names of your representatives and beneficiaries, and the identification of some of your assets into a form document. Your lawyer and their staff focus on creating your unique estate documents with your special considerations and concerns in mind. Protecting those important to you, protecting the things that you have worked hard to earn or that have been passed to you by your parents and other family members, and knowing how you will be protected if something happens that keeps you from taking care of your health and your activities.

Your lawyer will have good, positive suggestions for dealing with your individual concerns and plans.

Many people are unaware that “custom tailoring” of Wills, POAs and Trust documents allows for greater planning now without significant additional current fees for the legal team, and often reduced future legal fees when the time comes to modify or expand your estate plan.

If you would like to discuss a customized set of estate documents to meet your needs, with creative cost and payment opportunities, reach out to Marc Sherman and the team at Marc D. Sherman & Colleagues, P.C. Contact us here: https://mshermanlaw.com/contact/

It’s time to finish up the dorm room arrangements, book deposits, and all other steps necessary to send your child to college. Don’t forget one of the most important preparations: simple, but effective Powers of attorney.

Yes, your college-bound child should now prepare and sign a power of attorney for healthcare purposes and a power of attorney for financial and other matters.

The Law: The Family Educational Rights and Privacy Act (or FERPA) is the federal law that provides certain rights for parents concerning their children’s education records. Your child who is over 18 or who attends a postsecondary institution at any age, becomes an “eligible student,” and that means all rights under FERPA transfer from the parent to the student.

State law considerations are also important. Once your child turns 18 years of age the law generally no longer allows you to act for them in every instance.

In plain language, when your child becomes a college student you no longer have a right to access there education-related matters. When the child is over 18, you also have only limited legal right to handle other financial and “property” related matters, or health-care related matters on their behalf. 

Why is this important?

Without the permission from your son or daughter, that is memorialized by a properly executed Power of Attorney for healthcare, you are unable to access medical records, speak with and help to guide treating medical professionals, deal with medical privacy issues and, in extreme circumstances, deal with major medical and end of life issues. For many parents, this comes as a surprise during the first time they call to the student health services at their child’s school to try to facilitate review or transfer of medical records or medical treatment for their child.

For “property” related matters, the list of items and steps that may have to come into play is long and is in fact different for everyone. Filing a tax return, hiring an attorney to bring an action or defend an action involving your child, contacting the child’s employer, dealing with leasing and other housing related matters, assisting with management of bank and other accounts, and many other activities are all the subject of a properly created Power of Attorney for your child.

The practical importance of having these tools available for you to assist your child is clear. Another important benefit of creating Powers of Attorney is that your child can begin to understand the importance of planning for their lifetime activities. If you have further questions about planning as your child embarks on this important stage in their lifetime adventures, please reach out to Marc Sherman or Maureen Meersman of Marc D. Sherman & Colleagues, P.C.

Contact us here: https://mshermanlaw.com/contact/

The simple answer is “NO”.

Waiting To Review Your Estate Plan And Estate Needs Creates Unnecessary Risks

Forbes® magazine reports that the Trump administration’s estate tax proposals and executive orders introduce potential changes and uncertainty into estate planning. The shift in the administration’s priorities, they believe, could change how Americans approach wealth transfer and asset management.

Among the items under consideration, for example, are a proposed Estate Tax Repeal, changing the death tax structure by making the current high federal estate tax exemptions permanent or by eliminating federal estate tax altogether. But this would not change the state-level Estate taxes which have almost always been significantly lower than the federal tax rate.

Another possible change may be to adjust the capital gains tax treatment. For Estate Planning purposes this could significantly affect the way that inherited assets are taxed.

Could the “step-up” basis rule for inherited assets to the date of death value be eliminated? Could there be a capital gains tax assessed on inherited assets as if they had been sold at the date of the family member’s death, resulting in immediate tax liabilities for heirs even if the asset was held by them? Of course. The types of changes to the legal and tax structure are without limit. 

Could there be a significant shift in Estate Planning approaches in the years to come, as Forbes® suggests? Yes.

Without doubt, the trust or other planning tools currently used to plan for property transfers and estate taxes may have to be changed, and new and different approaches may have to be devised.

The fact is, Americans at all income levels have had to consider the potential for change, and revise their plans as changes have been made, during the past 50 years or more. Change is usually not scary (unpleasant maybe, but not terrifying), but it affects us all because it engenders anxiety and creates indecision. 

The Steps To Take Now?

Plan And Review.

Continue to make good decisions about reviewing your current Will, Living Trust and other planning tools.

Continue to focus on your needs, now and as expected in the future. And discuss with your Attorney the need to protect your children and grandchildren.

Focus On Flexibility.

No matter what tools you use, be sure that there is the opportunity to plan for and implement change. Whether modifications need to be quickly accomplished or adapted over time as your financial and personal picture changes, your Attorney can help you to be ready.

For example, your Trust needs to have provisions capable of being tweaked without significant time or expense. Your planning needs to include thoughtful creation of Powers of Attorney, not only to address important health care issues and end of life directions, but also to plan for the possibility that your Agent under the financial POA can make adjustments in order to address substantial changes in estate and other tax and transfer strategies.

What’s The Point?

The point is: Don’t just do nothing.

Review. Plan. Implement. And stay flexible. 2025 and subsequent years will be a challenging and concerning period for everyone. No income level or family situation will likely be left unaffected in some way.

How To Start A Conversation?

Your Estate Planning Attorney is an important partner in this process. Reach out to Attorney Marc Sherman and Attorney Maureen Meersman to set up an appointment: Click Here For Sherman & Meersman Contact Info