Quite Simply: Estate Planning is Not One Size Fits All

January 17, 2014

It is not uncommon for me to meet with a new client who tells me that her neighbor has told her exactly what type of estate plan is best for her.   As the meeting continues, I learn that the neighbor’s advice is not based upon any particular estate planning expertise.  Rather, it is based upon the neighbor’s own situation and that of her cousin’s mother-in-law’s best friend’s sister, which is just like my client’s situation.  My response is always the same, and it goes something like this: “Estate planning is not one size fits all.  Each person’s estate plan should be tailored to meet their own specific needs, wishes, and circumstances.”

That being said, when you are ready to create an estate plan, it is helpful to have a general understanding as to what estate planning is, and as to commonly utilized estate planning options.  So let us begin with the basics, “estate planning”  is making a plan for the disposition of your property after your death.  Your property includes everything that you own, including but not limited to cash, bank accounts, stocks, bonds, personal property (jewelry, household furnishings, cars, etc.), your house (and other real estate that you may own), etc.   While some assets may pass automatically to another person after your death, most people will have assets that do not pass automatically, and for which having an estate plan in place is recommended.

One popular estate planning option is to create a “Revocable Living Trust,” which is a legal document that holds the legal title, or in other words ownership of your assets, during your lifetime.  When you create this document, you include specific directions regarding the disposition of the trust property to take effect after your death.  After obtaining specific legal advice regarding your situation, you may decide that creating a “Revocable Living Trust” is the best estate planning option for you.  If you opt for a Revocable Living Trust, with a goal of avoiding probate at your death, it is critical that you fund your trust.  Funding your trust means that you take the necessary legal steps, while you are alive, to transfer your assets into your trust.  Failure to do so may result in probate being required after  your death.   It is, also, important to note that even if you opt to create a Revocable Living Trust, most people will still make a Will, which is commonly referred to as a “Pourover Will.”  Basically, the “Pourover Will” provides for all probate assets, not previously transferred into the trust,  to be transferred into the trust after one’s death.

On the other hand, after obtaining specific legal advice for your particular situation, you may decide that a “Will” is the best option for you.  A “Will” is legal document in which you provide directions as to whom and how your property should be distributed at your death. Each state has different rules regarding how a Will may be created, and  when a Will must be probated.  Probate is the formal legal process for a court to recognize a Will (if one exists) and to oversee the administration and transfer of property (not passing via another method) regardless of whether a Will exists, after a person’s death. Some states allow for an affidavit to be utilized in lieu of opening a probate estate, when the total value of the assets subject to probate do not exceed a certain dollar amount.  For example, in Illinois, the Small Estate Act, allows for a Small Estate Affidavit to be utilized for estates in which the probate assets are:  $100,000 or less; do not include real property; and there are no outstanding creditors/claims against the estate (other than the funeral expenses).     In addition, the laws regarding the probate process, including but not limited to when a probate estate must be opened, will vary from state to state.

Quite simply, the bottom line is that do not assume that because your friend has opted for a particular estate planning approach that a similar approach is the best option for you.  Instead, consult with an estate planning attorney in your state, who will review your particular situation and provide you with viable estate planning options for you to consider.  Once you have been educated as to these options, you will then be able to make an informed decision, as to which option is best for you, and to proceed to move forward.

©Copyright 2014 by Constance Burnett Renzi.  All rights reserved.

To discuss estate planning and/or elder law issues with an attorney, please call the Elder Law Center at 630-844-0065 or contact us via email. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

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At-a-Glance: New Dollar Amounts for 2014

January 3, 2014

 Medicare

(The following is a brief review of the applicable deductibles and co-pays for 2014, and is NOT an in-depth review of costs and coverage.  For an in-depth review of the details regarding Medicare coverage and costs under Part A and Part B, visit the Medicare website @ www.medicare.gov .)

Part A—Deductibles and Co-pays

 ·  Inpatient deductible per benefit period:  $1216

 ·  Inpatient coinsurance (per benefit period) for days 1-60:  $0

 ·  Inpatient coinsurance (per benefit period) for days 61-91:  $304.00 per day

 ·  Inpatient coinsurance (per benefit period)for days 91-150 (lifetime reserve days): $608.00 per day

·   Inpatient beyond lifetime reserve days: all costs

·  Coinsurance for days in a skilled nursing facility (per benefit period):

      Days 1-20:  $0 per day

      Days 21-100: $152.00 per day

      Days 101 and after: individual fully responsible

(Note:  In early 2013, a court approved settlement agreement was reached in the case of Jimmo v. Sebelius, which resolved the matter of when Medicare coverage is available for a stay in a skilled nursing facility.  The standard (assuming all other necessary criteria for Medicare coverage is met), as articulated in the Jimmo case is whether the skilled services of a health care professional are needed to maintain the individual’s condition, or to prevent or slow the individual’s decline and NOT whether the Medicare beneficiary will “improve.”)

Part B—Premiums and Deductibles

· Part B monthly premium:  $104.90 per month (for most people)

 · Part B yearly deductible:  $147.00 per year (after meeting the deductible, the insured pays 20% of the Medicare approved amount for services)

 Medicaid

 · Community Spouse Resource Allowance (CSRA): 

            –$109,560.00 (Per the SMART Act, the 2014 CSRA in Illinois remains unchanged and remains below the maximum federal allowance for 2014.)

 · Community Spouse Monthly Maintenance Needs Allowance (CSMMNA):

            –$2739.00 (Per the SMART Act, the 2014 CSMMNA in Illinois remains unchanged and remains below the maximum federal allowance for 2014.)

  Deductibility of Long-term Care Insurance Premiums

 · For the 2014 tax year, the IRS has increased the amount that one can deduct on their taxes for premiums paid on long term care insurance policies.  The deductions, which are based on age, are as follows:

Age on 12/31/14

Maximum Amount Considered Health Ins. Premiums

            40 or under                         $370
            41 to 50                         $700
            51 to 60                         $1400
            61 to 70                         $3720
            Over 70                         $4660

 Estate and Gift Tax Adjustments

· Federal estate tax exclusions: $5.34 million

· Federal gift tax exclusions: $5.34 million

· Federal generation-skipping transfer tax exclusion: $5.34 million

· Federal annual gift tax exclusion remains unchanged at: $14,000

· Illinois estate tax exclusion remains unchanged at:  $4 million


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January 1, 2014

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