It’s important to understand that an estate plan is made up of more than one, and sometimes many, different components that each function to accomplish your goals and tell your story, your way. Below, you’ll find some of the most basic tools that are available to you in creating your plan. Of course, no two clients are the same, so each tool should be drafted specifically to fit your individual needs. To familiarize yourself with the basics of planning your estate, click each tool name below to learn more about them.

 

Durable Power of Attorney

A “durable” power of attorney is a document by which you appoint a person to act as your agent. The “agent” is the person who has the authorization to act for another person. The agent is also called the attorney-in-fact. The person who appoints the agent is the principal. If you have appointed an agent by a power of attorney, acts of the agent within the authority spelled out in the power of attorney are legally binding on you (the principal), just as though you performed the acts yourself. The power of attorney can authorize the attorney-in-fact to perform a single act or a multitude of acts.

A “durable” power of attorney means that the power of the agent to act on the principal’s behalf continues despite the principal’s incapacity, whether or not a court decrees the principal to be incapacitated.

Through a durable power of attorney, an agent may continue to act on your behalf even after you have had a stroke or other incapacitating illness or accident. If the power of attorney so provides, the agent can use your funds to pay your bills and can contract for nursing home services for your benefit if it becomes necessary.

An aging parent may wish to give durable power of attorney to a responsible adult child so that the child can act on the parents behalf and carry on routine matters in the event the parent is disabled or incapacitated.

A durable power of attorney need not take effect immediately. A durable power of attorney can be prepared to prepare for the possibility that you may become mentally incompetent due to illness or an accident. In this case you would specify that the power of attorney would not go into effect unless your doctor certifies that you are mentally incapacitated and unable to handle your own affairs.

A properly prepared and executed durable power of attorney in most cases can avoid the need of costly court supervised guardianship. It is important to remember that the power of attorney must be done while the principal has the mental capacity to do so, once the principal no longer has the mental capacity to execute a durable power of attorney, a guardianship becomes necessary to grant the powers to act to another.

Healthcare Power of Attorney

The durable power of Attorney for Health Care is document that allows you (the “principal”) to designate a person (an “agent”) who will have the authority to make health care decisions on your behalf if you are unconscious, mentally incompetent, or otherwise unable to make such decisions.

The health care power of attorney is different from a Living Will because it allows you to appoint someone to make health care decisions for you. A Living Will only allows you to express your wishes concerning life-sustaining procedures. The Power of Attorney for Health Care allows for all health care decisions and is much broader than the Living Will.

In a Health Care Power of Attorney, the agent is empowered to make any decisions concerning medical treatment or procedure, personal care, hospitalization and health care, and to withhold or withdraw any type of medical treatment or procedure, even though death may ensue. The agent has the same full access to medical records as the principal, and provides for the right of the agent to disclose the contents of said records to others. The power can provide the agent full power to make a disposition of any part of all of the body for medical purposes, authorize an autopsy, and direct the disposition of the remains. Any of the powers listed above may, of course, be limited by the principal in the document.

The Health Care Power of Attorney only becomes effective when you no longer have the capacity to give, withdraw or withhold informed consent regarding your own health care. Even if you have executed a Health Care Power of Attorney, you still have the right to give medical directions to physicians and other health care providers as long as you are able to do so.

Land Trust

A Land Trust is a Trust established for the sole purpose of holding “real property” (real estate). Illinois is one of only a few states that allow real estate to be held in this manner.

A simple definition would be that a land trust is very similar to a “mini” Living Trust for the sole purpose of holding real estate.

The major benefit of establishing a Land Trust is to avoid probate in the event of the death of the property owner(s). In a Land Trust the property is transferred to a Trustee, and usually held for the benefit of the person transferring the property into trust. Upon the death of the beneficiary, the property passes to a successor beneficiary or beneficiaries without the need of probate. Any property placed into a Land Trust will not pass through the Will, as same was placed in Trust during the lifetime of the Grantor (person placing the property into Trust).

The Trustee may be a bank or other party. In the event the property is secured by a mortgage, the mortgage holder will require a bank to act as Trustee so as not to accelerate the mortgage. For landowners that no longer have a mortgage, a private party may be used so as to reduce the fees involved.

A Land Trust is much less expensive than a Living Trust, but can only be established for the limited purpose of holding real estate. Because the land is deeded to a trustee, the beneficiary is not disclosed to the public. For some clients, this privacy matter of not having their names disclosed is an important enough reason to establish a Land Trust.

Living Trusts

A Living Trust is an arrangement in which a person transfers ownership of their assets from themselves to another entity, the trust. The person creating the Trust is the Settlor. The person who manages the trust is the Trustee. The person for whose benefit the trust is being managed is called the beneficiary. The same person can be the settler, trustee and beneficiary.

The trust is called a “Living Trust” because it is created during the settlor’s lifetime. Most living trusts are “revocable,” which means the Settlor can cancel or change the document at any time.

Trusts can be set up with your own assets so that you can retain complete management and control of the assets by acting as your own Trustee, or you can designate someone else to manage the assets for you. The document provides for a successor Trustee to act in the event of your death or incapacity to act.

Unlike a Will, any assets placed in trust, upon the death of the Settlor, will be distributed by the Trustee to the designated beneficiaries without automatic Court supervision or probate. This process is usually much faster and less costly than the distribution of assets pursuant to a Will.

Trust distributions can be prepared so that in the event of a situation where both parents die leaving minor children, the children’s shares may be retained until they reach a responsible age, as determined by the Settlors, with earlier distributions being allowed for education, medical bills, or at the discretion of the successor Trustee as determined by guidelines set up in the Trust. In the event restrictive provisions are not set up for distribution, the minor children would be entitled to their full share upon their attaining majority, regardless of their ability to manage the assets.

Living Trusts may be irrevocable, meaning they cannot be changed or cancelled. Irrevocable Trusts are set up many times so as to provide tax savings in large estates. Irrevocable Trusts are also used to insure that minor children will be taken care of in the event of a remarriage of the surviving spouse.

Living Will

A Living Will is a signed, witnessed and notarized document wherein a person has the means to control decisions relating to their medical care, including the decision to have death delaying procedures withdrawn in instances of a terminal condition. “Terminal condition” under Illinois law is defined as “an incurable and irreversible condition which is such that death is imminent and the application of death delaying procedures serve only to prolong the dying process.

The document is derived from the Living Will Act that states that persons have the fundamental right to control decisions relating to the rendering of their own medical care, including decisions to have life-sustaining procedures withheld or withdrawn in instances of a terminal condition.

Although this document was used for many years as it was the only document available, it is very restrictive and procedural problems exist in having one’s wishes carried out. The Legislature in an attempt to have the maker’s wishes honored, and be more inclusive to meet the desires of the people, passed legislation that created the Health Care Power of Attorney which is now used almost exclusively.

Probate
Under Illinois law the filing of an estate for Probate results in the estate being placed under the jurisdiction of the probate court. The court has evidence presented to enter an order determining heirship. Where a Will is filed, the court examines the document for compliance with state law and if same is in compliance admits same to probate. The property will pass to the devisees and legatees under a Will even if there are heirs who are excluded in the Will. The Court then appoints the representative of the estate. If there is a Will, the estate is called a “testate” estate. If there is no Will, the estate is called an “intestate” estate. The daily administration of the assets of the estate is left to be done by the representative under the broad powers provided under the Will or the Probate act, usually without the need of court supervision. Claims may be made on the estate within 6 months of the filing of the estate. Proper planning of your estate can result in the avoidance of Probate, resulting in less fines and costs and less delay.
Wills

A Will is a legal document that provides for the disposition of one’s assets after their death. Unlike a Power of Attorney that provides for an agent to have powers to act while the principal is living, a Will does not take effect until the person making the Will had died. The will allows you to name your executor, identify your heirs and beneficiaries, give specific personal or real property, appoint guardians for your children, discuss your funeral arrangements, and make any appropriate statement you may wish to make. A Will also allows you to disinherit any heir or other party who might inherit your estate had you not prepared a Will, provided you have not already listed said party as a joint tenant or beneficiary on another document.

In a Will, the person making the Will sets forth how they wish their assets to be distributed and names a party (the “Executor”) to have the duty and responsibility of carrying out the wishes set forth in the Will. The Executor is often a relative and may receive property under the Will.

If you die without a valid Will, your money and other property will be distributed according to the state’s “intestate succession” laws, meaning that the property will pass to the person’s descendants and ancestors (“heirs”) as defined by State law, and not necessarily to those parties you would have otherwise elected.

Wills allow parents to name guardians to care for their child or children in the event of their death. Intestate succession laws do not deal with the question of who will take care of the children if both parents die or if the surviving parent is unavailable or unfit, leaving courts and social service agencies to appoint a guardian. Wills and Trusts can provide for later distribution of assets to younger or less responsible parties so that the assets have a better chance of being preserved for the parties. Clauses allowing for earlier distributions for education and medical expenses are common.

 

NAELA

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