The Payne Law Office, Chartered The Payne Law Office, Chartered 2025-09-29T15:09:06Z https://www.paynelawchicago.com/feed/atom/ WordPress /wp-content/uploads/sites/1302022/2021/01/cropped-payne-favicon-32x32.jpg On Behalf of The Payne Law Office, Chartered <![CDATA[What does testamentary capacity mean when creating a will?]]> https://www.paynelawchicago.com/?p=47252 2022-12-19T22:48:32Z 2022-12-19T22:48:32Z Understanding testamentary capacity When a person creates their last will and testament, they are considered the testator. Testamentary capacity refers to the individual’s mental state and ability to create a valid will. By law, the person must have their full mental faculties in order to ensure that their will is legal. They must have a full understanding of what's included and why they are creating the will in the first place. If the person’s testamentary capacity is questionable, it could result in someone else contesting the will.

How testamentary capacity is determined

After a person passes away, their will must go through the probate court to determine whether it’s valid. If any members of the decedent’s family believe it’s not, they can contest it. Lack of testamentary capacity and undue influence are two of the most common reasons to do that. In the former situation, the document could be found invalid if there’s evidence that the testator was mentally incapacitated in some way. For example, they suffered from dementia, Alzheimer’s disease or a brain injury that affected their ability to think and reason rationally. If someone contests a will, there must be evidence to back it up. This can be in the form of paperwork from a medical professional or even testimony from a doctor who treated the testator during the time the will was created. However, if the individual’s mental state declined after the will was written, it would not suffice or invalidate the document. When ample evidence exists that the decedent did not have the capacity to create a legal will, the court could declare the document invalid.]]> On Behalf of The Payne Law Office, Chartered <![CDATA[What are the different types of trusts?]]> https://www.paynelawchicago.com/?p=47250 2022-12-05T23:47:18Z 2022-12-05T23:47:18Z common types of trusts are revocable, which is a type of trust that can be revoked or modified by the grantor at any time. Then there is the irrevocable trust, where the terms cannot be changed after the creation of the trust. This trust is often used in estate planning to protect assets from being taxed or seized.

Tax exemption trusts

A charitable trust, upon its creation, has the purpose of providing financial support to a charitable organization. Charitable trusts can be created during a person's lifetime or after their death. A charitable trust can be funded with cash, stocks, bonds, real estate, or other assets. Charitable trusts are exempt from federal income taxes. Distributions from a charitable trust are also tax-exempt if their use is for qualified charitable purposes. GRATs transfer property to children or other beneficiaries while minimizing gift and estate taxes. With a GRAT, the grantor retains an annuity for several years. At the end, the trust property passes to the beneficiaries free of gift and estate taxes.

Strict distribution trusts

A spendthrift trust protects the assets of the trust from being used up by the beneficiaries. The terms of these trusts can specify how and when the assets can be used and can also include provisions for protecting the assets from creditors.

Trusts to protect disabled persons

Creating a special needs trust provides financial support for someone with a disability. The funds in the trust cover medical and living expenses but do not pay for things that would disqualify the person from government benefits like food stamps or Medicaid.

Finding the right trust

Selecting the right trust matches your needs to the types of trusts available. This is not an exhaustive detailing of all trusts, but those found here can help you get started searching for the right trust.]]> On Behalf of The Payne Law Office, Chartered <![CDATA[Reasons why estate planning early is better for everyone]]> https://www.paynelawchicago.com/?p=47247 2022-11-18T04:20:54Z 2022-11-18T04:20:54Z Gives you control When you begin estate planning while you’re still young, it gives you control over your future. You can make sure that your financial and health care arrangements occur the way you want by creating financial and health care powers of attorney. These legal documents allow you to name agents you trust to handle your money or medical-related affairs in the event that you’re ever struck incapacitated in the future.

Protects your children

If you have minor children, it’s crucial to think about their future and name guardians for them. You can designate those guardians in your last will and testament. You might wonder why you need to worry if you’re still young, but life is full of uncertainties and anything could happen. Protecting your children while you’re very young is responsible and lets you decide who should raise them if you unexpectedly pass away.

Choose your beneficiaries

Planning your estate early allows you to choose beneficiaries who will eventually receive an inheritance. For most people, that includes spouses, children, other family members and friends. You can also go a step further and leave some of your assets to your favorite charities, which allows you to simultaneously do something good for others and save money on estate taxes.

Eases stress

It’s never too early to start estate planning for another major reason: it eases stress for you and everyone close to you. Your family members won’t have to worry about debating on how things should be handled if you’re suddenly incapacitated or you suddenly die. Early estate planning can bring you peace of mind in knowing that you’re protecting your family, your estate and yourself.]]> On Behalf of The Payne Law Office, Chartered <![CDATA[Basics of intentionally defective grantor trusts]]> https://www.paynelawchicago.com/?p=47243 2022-11-04T03:46:13Z 2022-11-04T03:46:13Z Grantor trusts and the IRS The Internal Revenue Service has promulgated rules that dictate how grantor trusts are handled for tax purposes. In some circumstances, an irrevocable grantor trust may be treated the same as a revocable grantor trust. The play between the rules and the legal instruments has given rise to the Intentionally Defective Grantor Trust. With an IDGT, the grantor remains responsible for payment of income taxes on the growth of trust assets. Thus, the beneficiaries are not responsible for these taxes later.

IDGTs and estate taxes

For purposes of estate tax, the value of the grantor's estate is lessened by the value of the assets transferred into the trust. Typically, as part of their estate planning, the grantor sells the assets to the trust by taking a promissory note in exchange for the assets. Thus the trust holds the assets and pays for them by the terms of the promissory note.

IDGT beneficiaries

Typically, the beneficiaries of an IDGT are children or grandchildren of the grantor. During the life of the grantor, the grantor pays income taxes on the growth of the assets. When the grantor dies, the beneficiaries receive the trust assets without having to worry about paying these income taxes on the asset growth. If properly structured, an IDGT can reduce the taxable value of their estate while locking in the value of the assets for the beneficiaries. These trusts can be an effective part of a comprehensive Illinois estate plan.]]> On Behalf of The Payne Law Office, Chartered <![CDATA[Understanding the role of TOD accounts in avoiding probate]]> https://www.paynelawchicago.com/?p=47239 2022-10-20T02:02:31Z 2022-10-20T02:02:31Z Fundamentals of TOD accounts There are several types of financial instruments and accounts on which owners can place a TOD designation as part of their estate plan strategy, including:
  • Mutual funds
  • Stocks and bonds within brokerage accounts
  • Deeds to real property
Once such a decision is made, named beneficiaries need only provide the relevant investment firm or brokerage with proof of the account owner's death in order to receive the assets, steering clear of a potentially lengthy and cumbersome probate process entirely.

Potential pitfalls to avoid

It is worth noting, however, that those who have established TOD accounts for some or all of their investments need to remain vigilant in terms of adjusting beneficiaries if and when circumstances change and ensuring that family members -- particularly in the case of blended families -- are not disinherited contrary to the account holder's overall estate plan priorities. While a TOD account can be a valuable tool for achieving estate disposition goals and objectives, that is not to say that the use of such vehicles eliminates the need for a will, trust, or other mechanisms. Because TOD accounts cannot be used to address who will receive assets such as checking or savings accounts, certificates of deposit, vehicles, personal belongings, or other items upon death, the development of a comprehensive estate plan is the best way to guarantee that resources go to the intended recipients, ideally without the need for expensive, time-consuming probate proceedings.]]> On Behalf of The Payne Law Office, Chartered <![CDATA[Memorial trusts in Illinois explained]]> https://www.paynelawchicago.com/?p=47235 2022-10-06T01:21:31Z 2022-10-06T01:21:31Z Understanding memorial trust By definition, a memorial trust is a fund set up in someone’s name, usually by their family or friends, which is used to support a cause or charity that was important to them. The funds for a memorial trust can come from many different sources, such as life insurance policies, retirement accounts, investments or even donations from loved ones. The named trustee will manage the money and make sure that it is used according to the wishes of the person who created it. This can include making sure that the money is donated to a certain charity regularly, educating the deceased children, paying for funeral expenses or anything else specified in the trust agreement.

Creating a memorial trust

As with all other types of trusts, the first thing you will need to do if interested in creating a memorial trust is to choose a trustee who will be responsible for managing the fund. It is important to choose someone you have every confidence in and have experience with financial matters. You will also need to create a document called a “trust agreement,” which outlines how the money in the trust is to be used. Next, you will need to fund the trust by transferring money or assets into it. You can do this by writing a check, transferring stocks or mutual funds, or even designating the trust as the beneficiary of a life insurance policy. Before creating a memorial trust, it is important to understand the legalities and tax requirements involved. For instance, for the trust to be valid, it must be registered with the state of Illinois. Additionally, there are certain tax implications to consider when setting up this type of trust. Like you will need to complete an information return, otherwise known as 990-PF, annually.]]> On Behalf of The Payne Law Office, Chartered <![CDATA[Real estate and trusts]]> https://www.paynelawchicago.com/?p=47231 2022-09-22T01:32:24Z 2022-09-22T01:32:24Z Putting real estate into a trust The process of putting real estate into a trust is simple, assuming that the trust has already been created. First, the original owner, or grantor, has to transfer the title to the trust. The next step is creating a new deed for the real estate that will override the old one. The new deed can be exactly like the old one. It simply has to name the new owner and will need to describe a transaction that transfers ownership. The simplest way is to specify a sale for $1. After that, sign the new deed and get the signature notarized. Then, the new deed can be filed with the land court.

Why transfer to a trust?

There are multiple types of trusts that can hold real estate. The primary benefit is usually to make sure that the real estate can quickly transfer from the original owner to their heir or heirs after the owner dies. Setting up the trust properly allows this transfer to happen right away instead of having to go through an extended estate administration and probate process. A trust can also provide tax benefits in the context of the rest of the estate. Moving real estate to a trust can have tangible estate planning benefits and is fairly simple to execute, depending on the type of trust involved.]]> On Behalf of The Payne Law Office, Chartered <![CDATA[How do you transfer real estate titles to a trust?]]> https://www.paynelawchicago.com/?p=47227 2022-09-08T04:10:47Z 2022-09-08T04:10:47Z Getting a hold of the original real estate deed If you own a property, you'll need to track down the deed to the building. A deed is a legally binding document that proves ownership of a property. If you have this document handy, you can move to the next step. If not, you'll need to track down your deed. It's also a good idea to use this time to make sure there are no liens or defects on your title.

Creating a new deed

To transfer real estate, you'll need to prepare a new deed. Learning that you have to create a new deed might make you feel overwhelmed. Don't worry. You shouldn't have to rewrite your deed from top to bottom. Instead, the main thing to focus on adding to the new deed is that your property has a new owner. You'll also need to include your name in this document as the property's previous owner.

Signing the deed in the presence of a notary

The last step of this estate planning process is a simple one. As the property owner, you'll need to sign your newly-created deed in the presence of a notary public. After signing, the notary seals or stamps the document. After signing over your property, the final thing to do is to register this new deed. Then, the trust becomes the new owner.]]> On Behalf of The Payne Law Office, Chartered <![CDATA[Powers of attorney]]> https://www.paynelawchicago.com/?p=47224 2022-08-23T22:04:11Z 2022-08-23T22:04:11Z The importance of having a power of attorney A power of attorney is a legal document that lets you name someone who serves as an agent to act on your behalf if you become incapacitated. This person can handle your financial affairs or medical and health-related affairs. There are durable and non-durable powers of attorney. Each can be tailored to allow your agent only one action to perform or grant them the authority to perform many actions.

Traits to look for when choosing your agent

The person you choose should always be someone who is trustworthy to handle your affairs. They should be fair-minded, take important life decisions seriously and have the maturity necessary to handle making major decisions on your behalf. Usually, a person selects a family member or close friend as their agent. The person you choose should fully understand and respect your wishes and values and demonstrate fierce loyalty to you. It should also be someone who lives near you to ensure that your needs can be handled close to your home. Anyone dealing with estate planning documents should have a strong, assertive character as well. They should be able to tackle any situation while remaining strong and clearly but firmly communicate. Even when choosing a close family member such as a child to serve, you might want to ensure that you ask someone who shares the same values as you. Medical and end-of-life matters can be difficult for some loved ones. When you choose the right person, it gives much-needed peace of mind.]]> On Behalf of The Payne Law Office, Chartered <![CDATA[How revocable and irrevocable trusts affect estate plans]]> https://www.paynelawchicago.com/?p=47222 2022-08-10T01:32:35Z 2022-08-10T01:32:35Z Pros and cons of a revocable trust The first major type of estate planning arrangement is a revocable trust. This type will allow you to retain full control of your assets. It also offers you protection in case you should become incapacitated. Perhaps the biggest advantage is that it allows you a high measure of privacy. Finally, it's a good way to help you avoid going to probate. However, there are also a number of drawbacks that do need to be mulled over. The first is that this type of trust doesn't offer a great deal of protection against your potential creditors. A revocable trust is also not known for providing a high measure of useful benefits when it comes to tax matters.

Pros and cons of an irrevocable trust

An irrevocable trust can also offer a unique set of advantages. You can benefit from several built-in tax reduction plans while also enjoying a higher level of protection from your creditors. You also have the ability to gain protection in case you become incapacitated. This type of trust can also help you avoid probate. The main problem with an irrevocable trust is that it requires you to relinquish control of assets. Your flexibility within this type of arrangement is also much lower. This type of arrangement can also prove to be very complex and difficult to maintain control of.]]>