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Estate Planning: The ABC's of Estate Planning

March 2000

Introduction

Estate planning is important to you and your family.  A person who fails to do any estate planning may leave their family with the heavy responsibility of sorting out his or her property and debts, and to make arrangements for the future care of his or her minor children.  Further, at death there are certain problems, which, if not planned for, can create a burden on those who are left behind.  An experienced estate planning attorney will help you frame the estate-planning issues you need to address and can create a comprehensive estate plan that will address both your financial and personal goals.  Estate planning should be considered a challenging business process and should not be dreaded. 

Your Estate

Your estate includes all the property that you own at the time of your death.  Estates that exceed certain amounts may be subject to both state and federal death taxes.  A federal estate tax is imposed on the right to transfer assets.  At death, a person's estate will be valued to include all property she owns and the property she has the right to control or access.  Retirement benefits, personal residence and life insurance are all potential assets that could contribute to an estate tax problem.  Federal estate taxes can be as high as 55% on estates larger than $3,000,000.  By proper planning during your lifetime, you may be able to reduce or eliminate this tax.

If you are unable to reduce or eliminate estate taxes through lifetime planning, estate liquidity should be a consideration when one asset compromises a considerable portion of your estate.  For example, a piece of property or a business may disrupt the ability of your estate's executor to pay estate taxes, which generally are due nine months after the date of death.  Your estate plan should address any estate liquidity concerns to reduce the potential for a fire sale of your business or property to pay taxes, which can result in a depletion of the amount passing to your heirs.

Care Of Children

If you were to die tomorrow, who would be best suited to raise your children?  Think of potential candidates, including siblings, parents, aunts, uncles and friends.  Consider the candidates' ages, health, financial position and the stability of their current situation.  Parents can nominate a guardian for their minor children in a will or revocable trust.  Without a will or trust setting forth who you would like to care for your children, you risk that a court will appoint someone who would not be your first choice to raise your kids or even a battle among your surviving relatives over the custody of your children.

You should also consider establishing a trust for your children, so that the assets will not be distributed to them outright upon your death.  The trustee can care for the assets until some specified point in the future, at which time your children will be mature enough to handle the assets themselves.  Moreover, establishing a trust allows you to give the trustee direction over how the money is to be used for your children's care.

Wills and Trusts

If you died tomorrow, who would you like to receive your home, personal property and your business?  Without a will, your property will pass to your heirs according to state statute.  You probably have items of sentimental value that you would like someone in particular to receive, such as jewelry or heirlooms and, without a will or trust, your instructions may not be followed.  People who memorialize their intentions in a will or trust document ensure that their property and wealth is distributed according to their wishes. 

Why would anyone pay additional taxes if they were not due?  A will can also incorporate provisions to help you save taxes.  Further, the proper use of trusts may reduce your estate taxes.  Transfers during your lifetime and at death are subject to a unified estate and gift tax.  Certain transfers are excluded from the transfer tax.  For example, lifetime gifts can be excluded from gift taxation up to $10,000 per year per donee (indexed for inflation).  You may also pass an unlimited amount to your spouse without tax consequence if he or she is a United States citizen.  The unified credit allows you to pass property up to the equivalent of $675,000 (gradually indexed up to $1,000,000 in 2006 and thereafter).  The unified credit is an effective way to transfer property during life or at death.

Giffin Winning Cohen & Bodewes’ Estate Planning Procedures

Our law firm attempts to make estate planning a positive experience, not a dreadful one.  We will work with you to create and implement an estate plan that meets your needs, minimizes estate taxes, provides flexibility and achieves your goals.  At the same time, we attempt to make the estate plan simple, understandable and efficient.

Conclusion

Take affirmative action today toward relieving family members of the burden of sorting through your estate tomorrow.  Procrastination may cost you the opportunity to save taxes and the opportunity to determine who will receive your property upon your death.  Whether your estate requires complex planning with trusts or a simple will, it is advisable to have an experienced lawyer prepare your estate plan.  You will gain the peace of mind that comes from knowing that your family will be cared for and that your property will be distributed according to your wishes.

Giffin Winning Cohen & Bodewes’ Experience with Estate Planning

Because of the diversity of our attorneys, we at Giffin Winning Cohen & Bodewes bring a wide range of experience to bear on your legal questions.  Ronald W. Periard, a 1968 graduate of the University of Michigan Law School (J.D.), has over thirty years experience in estate planning matters and serves as the Trust & Estates Section Counsel for the Illinois State Bar Association.  David O. Edwards, a 1995 graduate of the University of Illinois Law School (J.D. and Order of the Coif), has developed will & trust plans and provided estate planning advice to many clients over the past five years.

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