Parish & Castleman LLP

If you die without a will, Illinois law has an estate plan for you. If you leave a spouse and children, the spouse takes half of your estate and all of your children share the other half. If you leave only a spouse and no children, the spouse takes the whole estate. If you leave only children and no spouse, the children share the whole estate equally. Other provisions of the "intestate succession" law are too detailed for a full explanation here.

If you die without a will, the distribution provided by state law may not be what you want, especially if you leave a spouse and children. The court appoints an administrator, who may not be the person you would nominate as executor. Your administrator may be required to pay a bonding company or ask financially responsible individuals to guarantee his or her bond. (In a will, you can excuse the need for a surety on the bond.) A legal guardianship may be required to manage the portion of the estate that passes to minor children, and all of their property must be turned over to them at age eighteen. The surviving spouse will likely be appointed guardian of the children's estates, but will have to post a bond as guardian, follow strict rules of investment, and file detailed accounts with the court.

Probate administration of an estate involves the collection of assets, payment of any debts and applicable estate taxes, and distribution of the property to the heirs or other beneficiaries. The executor or administrator carries out these duties under some degree of court authority and supervision. Two different procedures are available — "independent" or "supervised" administration.

Your executor is the person you nominate, and who the court appoints to administer your estate. You can nominate anyone you choose in your will. He or she is responsible for collecting all of the assets of the estate, paying the proper claims and taxes and distributing the estate to the beneficiaries.

Where the personal property in the estate (not including real estate or joint tenancy property) is less than $100,000 in value, under Illinois law it is usually not necessary to open an estate in probate court. A "small estate affidavit" may be used in such cases to transfer property to the beneficiaries of the estate where there are no disputed claims or other issues that require court determination. Joint tenancy and P.O.D. or T.O.D. beneficiary designations can be used to transfer assets at death outside of probate.

A living trust may help avoid probate. However, these trusts do not save any estate tax that cannot be saved by other methods. Trusts require periodic maintenance to make sure they are funded and that newly acquired property is put into the trust properly. A will is usually made, as a backup, to make sure that any property not in the trust at the time of death is added to the trust.

Modern probate laws have made probate procedures more convenient and less costly. The independent administration procedure operates without court supervision and affords more privacy. We use it wherever possible and appropriate. This can be simpler and time consuming, and therefore is less expensive.

The federal tax law applies only to estates in excess of $2,000,000 in value, in 2007. That amount increases in future years. Where the net estate is less than that amount, there is no estate tax. The tax is based on the fair market value of your "taxable estate". That includes, generally, the value of all the property in which you own an interest at the time of your death, including property in revocable trusts, life insurance proceeds on policies you own, joint tenancy property, certain gifts made during your lifetime, and other property over which you have retained or received certain rights or powers, less debts and bequests to your spouse and to charity.

The estate and gift tax laws provide a "marital deduction" which allows unlimited transfers to a spouse, before or after death, to pass free of estate tax. The property must be transferred in a way that meets the technical requirements of the law, in order to qualify for the unlimited marital deduction. Proper use of the marital deduction can eliminate tax for estates larger than the applicable credit amount. While this result is usually beneficial, in some cases there may be overall tax savings from incurring some tax on the death of the first spouse. Careful planning is required to make sure each spouse can take maximum advantage of the "unified" tax credit.

The old Illinois Inheritance Tax law was repealed, but it was replaced with the Illinois Estate Tax. In 2006, the Illinois tax was "de-coupled" from the federal tax and the Illinois estate tax rates frozen .

If you die leaving children under age 18, the other parent ordinarily will raise and support them. If the other parent is not living, however, your minor children may require a "guardian of the person" to take care of and arrange for their education and medical care. The "guardian of the estate" controls the minor's property. You can nominate a guardian for the person and a guardian for the estates for your children in your will, and they need not be the same person. If you do not nominate anyone, the court will select the guardian. A person who is fourteen or more years of age may nominate his or her own guardian. A guardianship of the estate can be cumbersome and expensive, and it may be avoided by proper planning for the use of trusts or custodianships for minors.

A trust is a private arrangement, created by a trust agreement or will, by which property is transferred to a trustee for the benefit of someone else — the beneficiary.

A trust can be designed to produce almost any result desired by the client if the client gives the trustee sufficient funds to work with. Trusts are especially useful where minor children, an elderly spouse or estate tax issues are involved. We usually recommend that trustees be given very broad and adaptable powers to provide flexibility for future events. The trustee should be empowered to do what is best for the beneficiary. If a trust appears suitable for your estate plan, you will need to exercise care in the selection of a trustee. You may even serve as trustee of your own trust.

A handwritten will is valid if it meets all other legal requirements. Illinois law makes no special exceptions for handwritten, "holographic" wills.

Wills are usually prepared in two steps. At our first meeting, we gather the information needed to prepare your will. Then, we prepare a draft and mail it to you for review. If the first draft meets with your approval, you would come to our office a second time to sign the will in the manner provided by law. Wills can be prepared in one visit, if the circumstances require, or we can meet at another location convenient to you.

We recommend keeping your will in a place where it will be safe and where someone would expect to find it. A safe deposit box in a bank is an excellent place. On request, we keep wills for our clients in one of our safe deposit boxes at no charge.

We suggest that you contact us at least every five years for a conference to review your will and estate plan. Your plan should be reviewed at other times, such as the birth or death of a family member, a divorce, a large inheritance, a change in tax laws, a disability or when children become adults or marry. These occasions may create opportunities for tax savings, as well as necessitate further family financial planning.