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Tuesday, December 23, 2014

Encouraging Behavior with Incentive Trusts

Courtesy of Mediaphoto.org
Virtually all parents have at some point worried about their children's future choices in life, whether they be educational, career-related, or moral.  This article will describe how some parents use "incentive trusts" to try to nudge their children toward a certain path in life, long after the parents are in the grave.

There is no question that a large inheritance can transform a young person's life, positively or negatively.  Bill Gates and some other tycoons from his generation are so concerned about the potential of a large inheritance to destroy their children's will to work, that some are severely limiting the size of their children's inheritance, giving the majority of their fortunes to charity.  But it is not just technology billionaires that have to worry about the effect of a sudden windfall of money for their children.

Saturday, December 13, 2014

Estate Planning re: Online Accounts

Courtesy of Sofiaperesoa
One of the hottest topics in estate planning right now is "digital estate planning," which involves managing your online legacy after your death.  In this post, I will focus on three topics:  1) Inventorying your online assets, 2) managing your passwords, and 3) making instructions for the handling of your social media and other online accounts.

Sunday, December 7, 2014

A Well-Drafted Living Trust does not have to create "Trust Fund Kids"; Learn from Philip Seymour Hoffman's Estate Plan

Courtesy Justin Hoch
In the months following Philip Seymour Hoffman's untimely death this year, details of his estate plan began to emerge.  Hoffman was beloved in his craft, and had noble intentions in his estate plan.  Specifically, the acclaimed actor desired that his children not become "trust fund kids," and reportedly rejected the advice of his attorney to create a living trust for their benefit.

While it is certainly understandable that people of great wealth would not want their children to become part of the "idle wealthy," ending up as reality TV caricatures, it is not correct to assume that a living trust per se will spoil them. On the contrary, a living trust typically offers far greater flexibility in planning the distribution of one's property than an ordinary will:

Tuesday, December 2, 2014

Giving to Loved Ones with Money Problems

Courtesy of Ralf Roletschek
If you have a family member who struggles with addiction, gambling, a controlling spouse, a party lifestyle, or bad financial planning, estate planning can be a dilemma.  On one hand, you may wish to provide the family member a share of your estate to show that he or she is loved just the same as other members of the family.  On the other hand, you worry that any inheritance will end up in the hands of creditors, a manipulative partner, at the casino, or fueling a drug addiction.  This post will discuss how spendthrift trusts are used to responsibly provide for family members who may not be able to manage an outright inheritance:

Monday, December 1, 2014

Estate Planning Without Borders

This week my family and I moved back to my hometown of Naperville, Illinois, after seven years in the Air Force.  During that time, I frequently drafted estate plans for military members with property in multiple states.  Today’s post will discuss what happens when people die with property outside their state of residence.  I will use my family’s story as an example:


As an Air Force officer, I lived in three US jurisdictions:  North Dakota, Ohio, and Guam (a US territory in the Western Pacific – see picture above).  In 2010, we purchased a home in Guam, while maintaining Illinois residency, an arrangement that is common in the military.  We loved owning our little slice of paradise in the tropics.  But what would have happened if we had died with some property in Illinois and a house in Guam?

Thursday, November 13, 2014

Avoid Accidentally Cutting Someone out of your Will -- Ademption and Abatement Explained

Some wills lump together all property in the estate, and simply divide it amongst the beneficiaries.  An example would be a clause in a will saying, "I give all my property, real and personal, to my two children, to be divided in equal shares, per stripes."  In contrast, other wills break out specific pieces of property, which is known as making specific devises.  For example, "I give my 2014 Ford Fusion to my son, John; I give my house at 123 Main St, Naperville, IL, to my daughter, Erica."  However, making specific devises carries risks, especially to those who do not frequently review their estate plans:

Wednesday, November 12, 2014

Controversial Estate Plans: Can you Legally Encourage Divorce? Disinherit a Spouse? Make Religious Restrictions?

"Testamentary freedom" is a terms lawyers use to describe a person's freedom to dispose of his or her own property at death.  While American law generally supports the idea of testamentary freedom, this power is not limitless.  In this article, I will discuss controversial estate planning provisions, such as provisions that disinherit spouses, encourage divorce, or make religious restrictions.

Monday, November 10, 2014

Estate Planning Advice for Military Members and Veterans

If you are currently serving in the Armed Forces or are a dependent or retiree, you are entitled to free legal assistance services at an installation legal office.  In my seven years as a JAG, I saw hundreds of legal assistance clients from all over the country.  By far my most most common legal assistance service was estate planning, especially for airmen deploying to a combat zone.

JAGs must be licensed to practice law in at least one US jurisdiction (Illinois in my case).  In the civilian world, only an attorney licensed in your state can give you legal advice.  However, a special law, 10 USC 1044, allows JAGs to provide worldwide legal assistance, and mandates that states give full effect to the wills, healthcare directives, powers of attorney, and notary services we provide.

Most of my military estate plans were for couples, and I would commonly provide eight to ten documents at the end of an appointment -- everything from wills to trusts to community property arrangements, durable powers of attorney, living wills, and advance funeral directives.  JAGs are happy to provide these services at no charge, saving our fellow military members thousands of dollars in legal fees.

Additionally, note that JAGs may be intimately familiar with common military estate planning issues, like owning property in multiple states, having domicile outside one's state of residence, and having one's family spread in jurisdictions across the country or the world.  JAGs also commonly insert clauses in estate planning documents designed to express military members' wishes regarding burial in VA cemeteries, burial with full military honors, etc.

One note of caution:  I have observed over the years that deploying military members may be quick to request a general power of attorney from the legal office.  A general power of attorney grants the appointee the legal power to make transactions on behalf of the grantor.  If the document is drafted to be "durable," it continues to remain in effect even if the grantor becomes incapacitated due to a combat injury or other medical condition.  I understand people's reasoning for wanting these documents:  Once a military member deploys half way across the world, the last thing he or she wants to be worrying about is taking care of day-to-day financial issues back home.

However, be aware that a general power of attorney can be used to empty a bank account, sign up for new accounts, sell a car, etc.  Giving this kind of power to the wrong person can destroy your finances, your career, and worse.  A JAG may be able to direct you to more appropriate tools to accomplish your objectives, like a narrowly-tailored special power of attorney (or no power of attorney at all).

Finally, note that you are not limited to legal assistance services from just your branch.  During my years of service, I helped Airmen, Soldiers, Sailors, Marines, dependents, and veterans alike.  A JAG from your nearest legal office can assist you with your estate plan.

Some useful links are below:
Air Force Legal Assistance
Army Legal Assistance
Navy-Marine Corps Legal Services
Coast Guard Legal Assistance
American Bar Association Pro Bono Resources for Veterans


Published by Ian Holzhauer, Esq. of Nagle Obarski PC in Naperville, IL.  


Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 




Thursday, November 6, 2014

Prepare for your Attorney Meeting

My wife and I will be seeing an attorney tomorrow to update our estate plan.  In theory we could prepare the plan ourselves, but there is an old adage that, "an attorney who represents him/herself has a fool for a client."  Knowing this, we value the outside perspective of a different estate planner taking a fresh look at our situation.

I thought this would be a good time to cover my next blog topic:  How to prepare for your first meeting with your estate planning attorney.  Some basic tips follow:

Monday, November 3, 2014

Probate Avoidance Topic #5: Life Insurance

Courtesy of NARA
This is topic #5 in this series on strategies to avoid the court-supervised probate process.  Previously in this series, I have provided an overview of the probate process, discussed how to avoid probate by using a living trust, explained how to use joint ownership and death beneficiaries, and most recently discussed lifetime giving as a probate-avoidance strategy.

Today's post will describe life insurance, one of the oldest, most flexible, and widely-used estate planning tools.  Unfortunately, many internet resources discussing life insurance and estate planning have a laser-like focus on one topic:  Using an irrevocable life insurance trust to avoid federal estate tax.  However, federal estate tax only applies to estates above $5.34 million this year ($10.68 million per couple).  For many families  below this threshold, these internet resources may be confusing and irrelevant.  This post explains some of the more fundamental aspects of life insurance as an estate planning tool:

Monday, October 27, 2014

Probate Avoidance Topic #4: Lifetime Gifts

This is topic #4 in this series on how to avoid tying up your estate in probate court after your death.  The previous posts in this series have provided an overview of the much-disliked probate process, explained how to avoid probate by using a living trust, and also discussed how joint ownership and naming death beneficiaries can be part of a probate-avoidance plan.   Today I will discuss the topic of lifetime giving.

Lifetime giving seems so simple that people sometimes overlook it when making an estate plan.  All the term means is giving some of your property away to your family (or anyone else) while you are still alive.  Lifetime giving has some potential benefits and drawbacks:

Sunday, October 26, 2014

Probate Avoidance Series, Topic #3: Joint Ownership and Naming Death Beneficiaries

Picture by Kance
In my last two posts, I discussed the lengthy and much-disliked probate court process for distributing property after death.  The next post covered the popular and very flexible tool known as the living trust, which helps many American families distribute their property quickly while avoiding probate court.  Today I'll discuss a probate avoidance method that is so common, most American adults have probably used it, though they may not have realized they were making an estate planning decision.   In this post, read how this method, known as joint ownership, can sometimes be a good way to pass on property and avoid probate after your death:

Thursday, October 23, 2014

Probate Avoidace Series, Topic #2: Living Trusts

As described in Topic #1 of this series, probate is the traditional court-supervised method of distributing property after the death of a family member.  People dislike probate because the judicial process often drags on for a year or much longer.  It is also frequently expensive, requires trips to the courthouse, and is also highly public.

In this post, I'll briefly discuss a very popular and flexible probate avoidance tool, known as the revocable living trust.  When many people hear the word "trust," they automatically think of other words like "billionaire," "complicated," or "trust fund baby."  However, rest assured that living trusts are relatively simple to understand.  They are widely used by middle class families across the country, and are becoming the most popular estate planning option for American families and their attorneys.  Here are the basic features of living trusts:

Monday, October 20, 2014

Probate Avoidance Series, Topic #1: What is Probate?

Today marks the beginning of National Estate Planning Awareness Week.  A survey earlier this year showed that avoidance of probate is the #1 reason Americans engage in estate planning.  Don't know much about probate?  This article will be the first in a series of posts covering the basics of probate, why people dislike it, and how you can avoid it:

Friday, October 17, 2014

Apple, Facebook Egg-Freezing Employee Benefits Raise Estate Planning Issues

Photo by:
Jeffrey M. Vinocour
As reported in the Los Angeles Times, Apple and Facebook are beginning to cover egg freezing and cryopreservation for female employees as part of their benefits plans.  Given that these procedures can run from $5,000 to $15,000 out-of-pocket, the new corporate policies open up the world of cryopreservation to a much broader potential market.  The growth of assisted reproduction raises novel estate planning questions:

Thursday, October 16, 2014

Your Birthday - an Annual Reminder to Review your Estate Plan

Photo by Ed g2s
Review your estate plan after every major life change, such as a birth, death, or disability in the family, purchase of a home, out-of-state move, or changes to investment accounts.  Unfortunately, many busy parents put their estate plan in the family safe, intending to update it periodically, but never do.  The thought process goes, "Even if our estate plan isn't up to date, at least we have one."  However, imagine dying with a 10 year-old will, and having your children turned over to guardians who seemed like a good choice 10 years ago, but are no longer in good health.  Or, imagine having a special needs child who is not appropriately cared for after your death because you did not update your living trust.  Having an estate plan in your safe that is not up to date is like having meat in your refrigerator past its expiration date--it isn't going to be pleasant when it has to be used. 

Lawyers frequently advise clients to review their estate plans at least annually, to make sure their documents are up to date.  Some will send a reminder post card each anniversary after your last will appointment.  But what if the attorney stops sending post cards?  What if you move?  How can you ensure you periodically review your documents?  Coincidentally, today is my birthday and that helped me come up with a solution to this problem.

Today I scheduled an appointment with an attorney to review our family estate plan.  By making a habit of using my birthday to reflect on the past year's events, and take a look at my estate planning documents, I have an easy-to-remember annual reminder in place.  In our case, we recently sold a house and have a new relative in our family, so it is time to get new documents.

One caution:  Do not attempt to update your documents by making pen and ink changes, inserting pages, or anything like that.  Typically, marking the pages of a will invalidates the entire document.  Seek legal counsel to properly execute new, legally binding documents.


Published by Ian Holzhauer, Esq. of Nagle Obarski PC in Naperville, IL.  


Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 



Tuesday, October 14, 2014

Wine Collectors Face Unique Estate Planning Challenges

Laura Collier, known as "The Spirited Lawyer," runs a boutique law practice in Raleigh, NC, focused on the food and beverage industry, including wine and beer retail and distribution.   She is part of the legal movement toward highly specialized client-centered solo practice.  In her case, it is an appetizing practice area as well! 


Image: mickstephenson.photoshelter.com
I should disclose that I have a personal tie to Laura:  As a first-year law school classmate, I often relied on her excellent memory if I missed something in Constitutional Law class.  And today, she is again helping me!  I asked "The Spirited Lawyer" if there are any unusual estate planning concerns specific to fine wine collectors, and she helped me with the content for this article:

Friday, October 10, 2014

The 23-Word Coolidge Will -- A Blunt Disinheritance

President Calvin Coolidge, a man known for brevity, wrote a total of 23 words of dispositive instructions in his will, which was handwritten on White House Stationary:  "Not unmindful of my son, I give all of my estate, both real and personal, to my wife, Grace Coolidge, in fee simple."  Mr. Coolidge could have shortened the instructions to 18 words by cutting out the phrase, "not unmindful of my son."  However, he might have feared that his son would challenge his disinheritance in court:

Thursday, October 9, 2014

Blended Family Estate Planning

Imagine two separate trees growing feet apart from each other for many years.  These trees have grown numerous intertwined branches, but they still maintain separate trunks.  Like the trees in this image, many blended families today have functioned together for decades, sharing close family bonds and lots of common history, but still maintain separate family trees.
Traditional estate planning assumptions come from a time when blended families were far less common than they are today.  A common estate plan for a non-blended family (where all children have the same parents) is for the spouses to have reciprocal wills, with each spouse leaving all property to the other spouse, and if the other spouse is not alive, then all property to the children.  However, indiscriminately applying this estate plan to a blended family can lead to many difficulties down the road, as the children of the first spouse to die may not inherit if the other spouse changes his or her will.  To avoid future hardship, it is essential that parents in second marriages and/or parents with stepchildren hire a qualified attorney to craft an estate plan appropriate to their family situation.  Blended family estate planning is a very complex subject; this article will briefly touch some of the most common strategies:

Wednesday, October 8, 2014

Casey Kasem's Burial Still on Hold as Legal Battle Continues -- Don't Let this Happen to Your Family

Legendary radio personality Casey Kasem passed away this June at the age of 82.  Upon his death, media outlets across the country paid tribute to his illustrious career, including 40 years of hosting "American Top 40."

Photo by Alan Light
Unfortunately, four months after Mr. Kasem's death, his burial is still on hold as relatives argue in court over the proper disposition of his remains.  Sadly, Mr. Kasem's family could not agree on his health care or burial wishes, as he did not express these in writing.  While the level and length of disagreement in his case is unusual, family strife over end-of-life decisions is certainly not unusual.  However, this type of uncertainty about end-of-life wishes is entirely preventable.

As the last two posts on this blog discussed, you can easily clarify your end-of-life wishes in writing.  Work with an attorney to accomplish advance health care directives and documents regarding disposition of remains.  Doing so can allow your family to focus on properly grieving, and moving on after your death, instead of being mired in uncertainty.


Published by the Law Office of Ian Holzhauer in Naperville, IL.  


Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 





Tuesday, October 7, 2014

"Green" Burials, Scattering Ashes in a Special Place, and Other Advance Funeral Planning

An article in today's Washington Post describes the increasing trend toward "green" burials, which decrease the impact of the burial process on the environment.  This reflects a growing consciousness that we can plan for the handling of our remains even during our lifetimes, in a manner tailored to our personal values and beliefs.  Many of my previous clients have expressed a desire in their estate plans to have their ashes spread over a particular body of water or special place from their past.  In a creative approach, some people are now opting to have their ashes buried in a biodegradable urn, with a seed inside, so that a tree may grow out of their final resting place, as described in the article.

Whatever your wishes for the handling of your remains, an estate planning attorney can help you ensure they are conveyed in the appropriate manner.  In some states, giving a family member a durable power of attorney for the handling of your remains will help smooth the process.  Many estate planners include funeral instructions in a will, but that can be problematic if the will is not read immediately upon your death.  As an Air Force JAG, it was important that my clients' families be instructed to promptly contact the VA National Cemetery Administration for potentially free burial in a national cemetery and/or an official headstone,  flag, and full military honors.  Whatever your plan, it is important that you tell your family about your funeral wishes and where to find the documentation of your wishes.

More information is available at the nonprofit Funeral Consumers Alliance.


Published by the Law Office of Ian Holzhauer in Naperville, IL.  


Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 



Monday, October 6, 2014

Document your Wishes for End-of-Life Care

When a family member becomes permanently incapacitated, it can be one of the most emotional and difficult decision-making periods for a grieving family.  If family members disagree about what a terminally ill and permanently unconscious patient would have wanted, the result can be years of gut-wrenching intra-family fighting.

Terri Schiavo entered a persistent vegetative state in 1990, when she was age 26.  Her family could not agree on whether she would have wanted to be kept alive artificially by machines.  It took 15 years and many public legal battles before she passed away.  Fortunately, some basic advanced planning can remove uncertainty about your end-of-life wishes and prevent this type of family strife. 

Thursday, October 2, 2014

A Royal Estate Plan

Diana, Princess of Wales was known for her kindness, decency, substantial charitable work, and her devotion to her children.  Her untimely death was a reminder to us all that life can be fragile, but her legacy of good works lives on.

Even royals have to worry about estate planning issues.  Fortunately, Princess Diana established a very well-tailored estate plan to care for her children in the event of her death.  This article shows how, through the use of basic testamentary trusts, she provided income for her children until their 30th birthdays, and then turned over full control of the property to them. 

Testamentary trusts for children are a standard part of many American estate plans as well, and are typically not overly difficult to administer.  If you read the article about Princess Diana's estate plan, you may notice the reference to owing Capital Gains Tax, which can be avoided in the United States under the IRS loophole known as the automatic step-up in basis, covered by a prior blog post.

Consider how Princess Diana's careful estate planning provided for her children after her death, and ensure your family is also protected in the event of a tragedy.


Published by the Law Office of Ian Holzhauer in Naperville, IL.  


Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 



Wednesday, October 1, 2014

Storing Your Estate Planning Documents

As a society, we have grown accustomed to electronically filing and accessing important documents, including bank statements, health records, and tax returns.  In my years of litigation as an Air Force JAG (a worldwide practice), we relied almost exclusively on digitally-submitted court documents.  Indeed, in most areas of the law, a digital (or paper) copy will now be a sufficient substitute for an original document.  However, when it comes to your estate plan, it is crucial that you preserve your original, signed will in order to ensure a smooth probate process.  The following are some basic tips:

Tuesday, September 30, 2014

How Joan Rivers Provided for her Pets

Check out this DailyFinance.com article about how animal lover Joan Rivers used a pet trust to take care of her dogs after her passing this month.  In doing this, she made sure her four dogs (including rescues) will be cared for the way she would have wanted.  Think a trust is too complicated for someone of modest means?  Think again; almost all states now have straightforward laws about forming pet trusts, and you don't have to be wealthy to benefit from one.  A qualified attorney can advise you on these trusts and prepare one for you if appropriate.  The Illinois State Bar Association provides some useful guidance for attorneys on pet trusts here.


Published by the Law Office of Ian Holzhauer in Naperville, IL.  


Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 



Evolving Law for Blended Families and Adopted Children

Many blended families and families with adopted children face unfortunate (even shocking) consequences when a family member dies without an estate plan.  This article discusses unique issues applicable to these families:

Monday, September 29, 2014

Will I be Subject to the Estate Tax? What About Other Taxes?

Much attention has been devoted to the Federal Estate Tax (a/k/a "Death Tax") over the past 15 years.  After much uncertainty, a December 2012 political compromise made permanent the current version of the tax.  This brief post does not delve into the complexities of the estate tax, but deals with two common questions:

1)  Am I likely to have to pay the federal estate tax?

2)  If I don't have to worry about the federal estate tax, are there still other death-related tax rules that might apply to me?

Friday, September 26, 2014

The Basics of the "Stepped-up Basis" -- a Big Loophole to Avoid Tax on Investment Gains

Even if you are not a close follower of estate planning issues, it is worth learning the basics of the most famous tax loophole in the Internal Revenue Code, known as the automatic step-up in basis at death.

After you learn the basics of the rule, remember this:  Before deciding to sell any stocks, bonds, real estate, or other investment property, always consider the consequences the sale could have on your family's ability to use this loophole.  You don't need to know all the ins and outs of the rule; simply seeking legal advice if you identify a potential "step-up" issue could save your family tens or hundreds of thousands of dollars.

Example


Paula, a widow, has one adult daughter. 

In 2011, Paula bought 2,000 shares of Apple stock for $100,000. 

Today, Paula's 2,000 shares of Apple stock are worth $200,000. 

Paula has lived a long and happy life, but she has a serious medical condition and her doctors say she now has less than a year left to live.  She wants to give $200,000 from the Apple stock to her daughter.   Our goal is to get as much of that money to her daughter as possible.

Let's look at the tax implications of two options:

1) Paula sells the stock now and gives the proceeds to her daughter, or

2) Paula holds on to the stock and passes it to her daughter at death.

Wednesday, September 24, 2014

The Basics: Hiring an Estate Planning Attorney

The Importance a Well-Drafted Estate Plan


The benefits of a complete estate plan (and the consequences of failing to make one) are immeasurable.  For parents of minor children, a properly-drafted will ensures your children will be cared for by people you know and trust in the event of your death, not someone chosen by a judge you've never met.   This reason alone makes life without an estate plan unacceptable for most families with small children, mine included.

Aside from wills, other useful estate planning tools can be tailored to your needs.  If appropriate for you, a living trust can ensure your property is not tied up in probate after your death.  Failure to plan ahead will often leave your loved ones unable to quickly distribute property, instead forcing them to spend a year and considerable sums of money muddling through the court system, unable to move on after a death in the family.  A living trust and other documents can help avoid all of this.  There are numerous other well-documented benefits to a solid estate plan.

Competent legal advice for your estate plan is of enormous value.  The law governing wills draws back on centuries of English legal tradition before the existence of the United States.  Many of the rules about witnessing, signatures, and other formalities are both archaic and draconian.  However, failure to comply with these formalities often invalidates an entire will--an experienced estate planning attorney can help you avoid errors that could cost your family tens or hundreds of thousands of dollars in the future.   The following are some practical considerations about hiring an attorney:

Introduction and Blog Layout

This blog is intended for a wide audience, from parents of young children researching the basics of wills and living trusts, to fellow attorneys and financial professionals wishing to discuss the latest developments in trust-related case law.  As indicated in the title, my goal is to advocate for a more client-focused, personalized and less fill-in-the-blank estate planning experience.  I feel the best way to achieve this is to invite a broad spectrum of people to read and to comment.

To facilitate navigation of the blog, I will tag each post either Basic, Intermediate, or Advanced Estate Planning.  You can navigate to posts in the applicable category by clicking the tags on the right side of the screen.

Although I am licensed to practice in Illinois, and may sometimes reference my state's law, I welcome comments from practitioners in other states.  The intent is to keep the content broad enough that it is relevant to people across the country.

I invite you to learn more about my background on the About the Author link.  You can also visit the website for my firm, the Law Office of Ian Holzhauer in Naperville, IL. 

Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs.