Lifetime Trust or Outright Distribution – How to Leave Your Assets to Your Beneficiaries

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. Continue reading »

Being an advocate for your child with special needs

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). Continue reading »

Electronic Estates – Keeping a Record of Your Assets

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. Continue reading »

Frequently Asked Questions: Revocable Living Trust

What is a Revocable Living Trust?

A trust is an agreement that determines how a person’s property is to be managed and distributed during his or her lifetime and also upon death.

A revocable living trust normally involves three parties:

• The Settlor – Also called grantor or trustor, this is the person who creates the trust, and usually the only person who provides funding for the trust. More than one person can be the settlors of a trust, such as when a husband and wife join together to create a family trust.
• The Trustee – This is the person who holds title to the trust property and manages it according to the terms of the trust. The settlor often serves as trustee during his or her lifetime, and another person or a corporate trust company is named to serve as successor trustee after the settlor’s death or if the settlor is unable to continue serving for any reason.
• The Beneficiary – This is the person or an entity that will receive the income or principal from the trust. This can be the settlor (and the settlor’s spouse) during his or her lifetime and the settlor’s children (or anyone else or a charity the settlor chooses to name) after the settlor’s death.

A trust is classified as a “living” trust when it is established during the settlor’s lifetime and as a “revocable” trust when the settlor has reserved the right to amend or revoke the trust during his or her lifetime.

How is a Revocable Living Trust Created?

There are two basic steps in creating a revocable living trust. First, an attorney prepares a legal document called a “trust agreement” or a “declaration of trust” or an “indenture of trust” which is signed by the settlor and the trustee. Secondly, the settlor transfers property to the Trustee to be held for the benefit of the beneficiary named in the trust document. Continue reading »

Important Tax Options for Estates of Those Who Passed Away in 2010

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. Continue reading »

The Importance of Care Plans & Beyond

A care plan is written information about how to best care for your child’s health needs. A care plan may include specific medication your child takes and the time they take it, particular foods your child should avoid, how often your child gets physical therapy, or what to do for your child in an emergency. For families with children who have special needs, a care plan can convey vital information to caretakers. This may include doctors, nurses, therapists, emergency medics, teachers, child care providers, respite providers, grandparents, friends, and neighbors. Continue reading »

Illinois Changes Its Power of Attorney Laws

The revised Illinois Power of Attorney Act, 755 ILCS 45/2-1 et seq. provides greater protection to principals. These revisions are designed to minimize abuses of the elderly, incapacitated and disabled persons by their agents serving under powers of attorney. House Bill 6477, the new state bill containing the changes, was passed by both houses and signed into law by Governor Quinn on July 26, 2010. The effective date for the changes is July 1, 2011. All powers of attorney which were validly executed prior to this date will continue to remain effective.

A few highlights of the changes to this Act are: Continue reading »

Frequently Asked Questions: Powers of Attorney

What is a power of attorney?

• A power of attorney appoints a person to act as an agent for the person who executes the document. An agent is authorized to act for another person to the extent that the document permits. The acts of the agent (also known as the attorney-in-fact) will legally bind the person who granted him or her the power to act.
• Powers of attorney come in a variety of forms. There are two major types of powers of attorney: financial and healthcare. These powers can be combined into one document, but are frequently separate documents.
• Financial powers of attorney can be effective immediately or become effective upon the incapacitation or disability of the person who executed the power of attorney.
• Powers of attorney can also be limited to a certain period of time or last until they are revoked by the person who executed the power of attorney.

What is a durable power of attorney?

• A durable power of attorney remains effective during such periods of time that the individual who executed the document is considered incompetent.
• A durable power of attorney must be designated as such in the title.
• Specific wording must be used for a power of attorney to last during any period of time the person who signed the document is considered incompetent.

Continue reading »