October 27

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:

If your have items of sentimental value, ask yourself:  Would it be better to give them away while I am still alive?  You could pass on your great grandmother’s engagement ring to a relative who is getting ready to propose.  Or give a precious crystal collection to a child who is moving into a new home.  A will or living trust could of course assign these pieces of property to the same people.  However, giving them away during your life gives your loved ones a chance to hear your reasoning for passing on the gifts and allows you to enjoy the memory together.

Additionally, any property you give away during your lifetime by default will not be part of your probate estate after your death.  The benefits of this can be substantial.  For example, in Illinois, a probate estate containing under $100,000 and no real estate, and meeting certain other criteria, can be handled through “summary administration.”  Therefore, by giving away enough property during one’s life (and possibly using other probate avoidance mechanisms), it is possible to avoid probate by shrinking the estate below the threshold.  In Illinois, a family under the $100,000 threshold would use a small estate affidavit and avoid the probate court process, a major benefit. 

If you are concerned about paying estate taxes, lifetime giving can have a tax benefit as well.  In 2014, you can give up to $14,000 each to as many people as you wish, without incurring any gift tax.  This money leaves your taxable estate and will not be subject to estate tax when you die.  Of course, federal estate tax only applies to estates above $5.34 million this year ($10.68 million per couple).  And making lifetime gifts of financial assets that have appreciated in value is often a poor choice, as it wastes the tax benefit known as the automatic step-up in basis at death.

While there are significant benefits to lifetime giving, there are drawbacks as well:

Once you give away property, you can’t change your mind.  Elderly people sometimes sign over the title to their house or other property to a child, expecting that the child will continue to allow the elderly person to live there.  However, children are not always so scrupulous.  Even children who wish to allow their parents to stay might have problems with bill collectors, get sued, or face divorce proceedings.  All of these situations could cause the house or other property to be lost to creditors.  In short, never give away property that you need to survive.

Additionally, lifetime gifts can cause serious family fighting (and litigation) if you don’t make it clear (in writing) whether those gifts are meant to be counted against a person’s share of your estate when you pass away.  Imagine splitting your estate 50/50 between your two sons in your will, but then giving one son a lifetime gift worth $100,000 before you die.  The other son will likely assume that you intended that to be subtracted from the other son’s estate, while the gift recipient will not likely see it that way.  Don’t think it could happen to your family?  Talk to a probate litigation attorney and hear how many times he or she has heard a story like this.

Speak with a qualified estate planning attorney before considering major lifetime giving as a part of your estate plan.

Next Topic in the Probate Avoidance series:  Life Insurance

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. 

October 26

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:

If you have ever owned a car or house jointly with another person, then, in the eyes of the law, you entered a “joint tenancy with right of survivorship.”  The same is true if you have ever formed a joint bank account with a parent, sibling, spouse, or anyone else.  It has become such a routine to title our vehicles, houses, and accounts with our family members, that we may not even think through the legal ramifications of doing so.  As a side note, in many states, joint ownership with a spouse creates something called a “tenancy by the entirety,” which for our purposes is similar to joint tenancy with right of survivorship.

Joint tenancy with right of survivorship is different from a mere “tenancy in common,” where two or more people maintain shares of a property, but their shares remain separate and can be freely given or sold away.  To visualize a tenancy in common, imagine owning a share of a vacation house in Orlando.  You sign an agreement with your friend Bill to be tenants in common.  Though you both own a share in the house,  the agreement says you have rights to visit the house from January until June, and Bill has rights to visit July until December.  As tenants in common, there are limits to your relationship with Bill.  If Bill gets sued, he could lose his share of the property, but your share cannot be touched.  Either of you could sell your share of the property at any time, without the permission of the other.  And in your will or living trust, you could give your share away freely.  Bill does not take over your share of the property if you die.

In contrast, to visualize joint ownership, imagine an elderly widow adding her daughter on the title of her house, as a joint tenant with right of survivorship.  The mother also places her daughter’s name as a joint owner of her bank account.  By placing her daughter on the house title and bank account, the widow makes several very important legal decisions.  First, the mother and daughter as joint tenants have an undivided ownership share in the property.  Each one of them has an equal claim to use the property at any time.  Let’s discuss some benefits and drawbacks of this joint ownership arrangement:

The biggest estate planning benefit from joint ownership is that if one person (let’s say the mother) dies, her share in the ownership of the property disappears and her daughter automatically takes complete ownership of the property.  There is no need for a probate court proceeding; she is already an owner of the house and the financial account.  This benefit potentially saves the family a year or more of court proceedings.

However, there are drawbacks to joint ownership in this scenario.  First, the mother can no longer sell the house or close her accounts without the daughter also signing off on the decision (and vice versa).  Their futures are bound together, for better or for worse.  Second, both members of the joint tenancy have an absolute ownership share in the property.  One person might engage in very selfish behavior (like the daughter wasting money in the joint bank account or neglecting the upkeep of the house) and the other cannot prevent it.  Third, if one of the joint owners has problems with bill collectors, gets sued, or becomes divorced, the house and financial accounts could be taken and both could lose out.

A joint ownership arrangement is also irrevocable.  In the example above, if three years from now, the mother decides she no longer wishes to pass on property to her daughter after her death, she cannot take her daughter off the title or the account.  Contrast this to a will or living trust which can be updated any time before death.  Additionally, adding a joint owner to a property that has appreciated in value could be throwing away one of the biggest income tax benefits in the United States, the automatic step-up in basis at death.

One possible way to achieve some of the benefits of joint ownership without the drawbacks is to name death beneficiaries on your financial accounts.  If you die, the death beneficiaries become the new owners of your property without going through the probate process.  But during your life, they are not owners.  They will however be able to take advantage of benefits like the income tax step-up in basis.  And unlike naming them as joint owners, you can change the decision at any time in your life and you do not become liable for their problems during your life.  The process to set up death beneficiaries is easy:  It took me 10 minutes through my online banking portal.  If you go this route, make sure to notify your death beneficiaries of the accounts they are entitled to claim upon your death.

In conclusion, while joint tenancy is one of the most common probate avoidance strategies, it has a lot of drawbacks.  Speak with a qualified estate planning attorney if you intend to use joint ownership as an estate planning technique.

Next Topic in the Probate Avoidance series:  Lifetime Gifts

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. 

October 23

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:

A Trust where You are the Boss

A “trust” is a simple legal concept.  Someone (a trustee) holds something of value (trust propertyin trust for a beneficiary.  There are many variables to this scenario, where the beneficiary might be a child, a disabled adult, a charity, etc.  However, the revocable living trust is one of the simplest types of trusts, because while you are alive, you are typically the boss of everything!

In the typical revocable living trust, you sign a document creating a trust.  You appoint yourself as the trustee.  You make your property the “trust property.”  And the beneficiary of the trust while you are alive is…you!   The IRS treats your trust property as personal property, so there are no changes to your tax situation or extra returns to file.  While you are alive and healthy, the trust is revocable, meaning you can change it or get rid of it at any time.  Essentially, after you create the trust and title your assets to the trust, you go on living your life as you did before. 

What Happens when you get Sick or Die?

While you are alive and well, you may not even notice the living trust is there, since it is largely a legal fiction where you are a trustee, the trust property is your property, and you are free to use it as you see fit. 

Where the trust becomes useful is if you become incapacitated or die.  When you draft the living trust document, you name someone trustworthy to serve as successor trustee in the event of your incapacitation or death.  At that point, the trust shifts from being revocable (changeable) to irrevocable (set in stone). 

In the trust document, you leave clear instructions to your successor trustee about how to handle the trust property (all the property you put into the trust).  In this respect, the living trust is a lot like a will, but there can be many advantages to the trust over a will:

Advantages of a Living Trust

When you die, your successor trustee can immediately get started on closing your estate.  As the new trustee, he or she has legal authority to distribute any trust property in accordance with your trust directions. 

Most attractively, there is no need for the trustee to go to probate court and wait for a year or more to close out the estate (as would an executor if you had left only a will).  Typically, trust property can be distributed in a matter of weeks, and the distribution is handled entirely out of court. 

Another benefit is that property handled through a living trust does not count as part of your “probate estate.”  If you have a small amount of property that mistakenly didn’t get titled to the trust, there is good news on that front as well:  In many states, if your remaining probate estate (anything left over that was not put in the living trust) is below a certain dollar amount, you can go through a highly simplified process to distribute that remaining property.  In Illinois, a probate estate containing under $100,000 and no real estate, and meeting certain other criteria, can be handled through without going to court.  The family uses a small estate affidavit and avoids a lengthy  and expensive process. 

For families that have gone through traumatic multi-year probate court proceedings, and have spent tens of thousands of dollars in legal fees, it can be difficult knowing that their loved one’s estate could have been wrapped up at little or no cost and in a matter of a few weeks.  However, advanced planning is required — once you are dead (without a well-crafted estate plan), it is too late.  Your loved ones are stuck with the baggage of the decisions you make while alive.

Aside from saving time and legal fees after death, a living trust has another benefit:  It is private.  Neighbors, curious members of the public, distant relatives, etc. are unable to access your living trust.  In contrast, any probate proceedings would be completely open to the public, even those
proceedings discussing your most sensitive family business.  Also, disgruntled relatives will have a harder time challenging a trust than a will, decreasing the chances of a protracted, expensive legal battle.

A Few Notes

Above I described the basics of a living trust.  Here are a few additional points to consider when discussing a living trust with your attorney:

Your attorney will likely spend more time drafting a living trust than he or she would spend drafting just a will, so expect to pay more up front for a trust.  However, remember that these extra fees now will often save your family far greater fees and months or years of court proceedings later on.

Living trusts can do many wonderful things, but do not expect an ordinary living trust to reduce your taxes.  The IRS generally treats revocable living trust property as your own property, for estate tax and income tax purposes. 

Additionally, contrary to popular belief, property held in a living trust can be reached by creditors (just like property held in your name).  The same is true if you are sued–trust property can be seized to satisfy a judgment against you.

Finally, even if you have a living trust, it is still important to have a will.  A will names guardians for your children.  A will also disposes of any property not covered by your trust.  You can put a provision in your will giving any non-trust property to the trust (a “pour over” provision). However, don’t go without one.

In conclusion, a living trust is a relatively straightforward yet powerful probate avoidance tool.  It is a good fit for many American families.  Talk to a qualified estate planning attorney to see if a living trust is right for you.

Next Topic in the Probate Avoidance series:  Joint Accounts and Naming Death Beneficiaries

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. 

October 20

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:

Probate in Theory

When a family member dies, probate is the public, court-supervised process of closing out the deceased’s estate.  Probate law is based on centuries of English legal tradition, and relatively little has changed over time.  In theory, a probate court’s supervision of the settling of the estate accomplishes several goals:

1) The probate judge checks the will (if there is one) to see if it appears to have been validly prepared and executed by the deceased.

2) If there is a will, the executor of the estate (named by you) handles the administrative steps to close your estate.  If there is no will, the judge appoints a personal representative to do this.

3) Creditors of the estate (people and companies to whom your family member owed money) get notified that your family member has died.  They are then able to recover their unpaid debts from the estate.

4) After creditor claims are settled, the executor/personal representative distributes property (according to the deceased’s will or state intestacy law).

5) When the executor transfers title of property to its new owners, the executor’s letters of office (granted by the court) provide evidence of transfer of title, giving the new owners clear title to the property.

What’s Wrong with Probate?

The following are a few of the many reasons Americans have come to greatly dislike probate:

1) It is long.  Even in a relatively simple estate with uncomplicated assets, no disagreement among family members, and clear directions for distribution of property, a case typically takes a year to wind its way through the court system.  In some Illinois counties, there may be a wait of months just to get on the docket to begin the process.  During this time, family members are unable to freely dispose of property, leaving them in limbo.  And if there any snags, all bets are off.  This article describes a 14-year probate case, which ran up legal bills in the mid-six figures.

2) Probate can be very expensive.  Most people find probate complex, and hire an attorney to help them through it.  There are many forms, filings, and even court appearances, all of which drive up legal bills.  The legal fees in a typical case can end up consuming a small percentage of the estate.  Again, any complications in the estate will greatly drive up fees.

3) Probate is incredibly formalistic.  Can you imagine invalidating someone’s will because a stray ink mark on page 11 of the will touches one of the words?  A judge can!  How about embarking on an incredibly expensive litigated case because the deceased’s witnesses only signed the will once, and forgot to also sign a “self proving affidavit”?   Will contests over issues like this can throw your case into turmoil for years, all at great financial expense and cost to the relationships in your family.

4) Probate is public.  Any curious member of the community, reporter, blogger, etc can freely write about the intimate details of your family’s estate.  This could include information about your net worth, financial assets, personal belongings, disputes, etc.  During and after a probate case, anyone could soon be reading intimate details about your family’s assets on the internet.

What you can do

Modern qualified estate planning attorneys are attuned to the problems with probate, and can counsel you on your individual situation.  They are also familiar with common probate avoidance strategies, which we will discuss in the upcoming posts.  Living trusts in particular are an attractive option for many families, and will be discussed in depth.  Luckily, in estate planning, a small up-front commitment in planning can prevent a nightmare for your family after your death.

Next Topic in the Probate Avoidance series:  Living Trusts

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. 


October 17

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:

Imagine if a Facebook employee freezes her eggs or embryos under the new company policy.  One legal question is whether her stored genetic materials are property, people (who cannot be owned), or something else in the eyes of the law.  Attorney Steven H. Snyder explains that courts have tried to define the legal nature of stored genetic materials with mixed results.  Frozen sperm has generally been treated by courts as pure property (like a book or a table).  Like frozen sperm, unfertilized eggs are likely to be treated as pure property. Frozen embryos, on the other hand, have not been treated by some courts as pure property.  However, they have also not been treated by the law as full persons.

Of importance to estate planning, stored genetic materials may generally be owned and disposed of by the people that provided the materials to the cryogenic bank.  So, the Facebook employee in our hypothetical situation would likely be the legal owner of her frozen eggs and could give them away in her will or living trust.  An employee in her situation should closely research the company benefit and see how long her eggs (her property) would be preserved in the event of her death.  If Facebook would stop paying for storage after a certain number of years, she might wish to pay to continue freezing her eggs in her estate plan, perhaps through a living trust.

Imagine that the Facebook employee above froze her eggs, gave them away to her husband in her will, and then died.  If her husband later had a child using her eggs through a surrogate mother, the child would be “posthumously conceived,” a previously unforeseen concept in estate planning law.  Recently, the Supreme Court struggled with the question of whether posthumously conceived children could receive their deceased parents’ social security benefits.   The Court said such children could only receive benefits if they would have inherited under state intestacy laws, meaning the result could vary depending on the state in which the child is born. 

States have a wide variety of approaches to the growing number of posthumous conception probate cases.  Some states say that for these children to inherit, the parents must have consented in writing to inheritance by posthumously conceived children–otherwise they get nothing.  For parents that do consent to inheritance by posthumously conceived children, how long do we wait to divide their property between the children after their death?  The number of children in the family could continue to grow indefinitely, due to the miracles of modern science.  Some states put a time limit on how long after the parents’ death a posthumously conceived child may inherit. 

In short, the justice system, never known for its speed, is trying to keep pace with rapidly changing reproductive science.  Consult an estate planning attorney in your state if you are considering assisted reproduction.

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. 

October 16

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. 

October 14

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:

Laura explains that wine stores frequently encounter an estate planning-related situation:  The family of a recently-deceased wine collector will ask if the store is interested in buying the deceased’s wine collection.  Intuitively, this would make sense.  When a family member dies, the executor, trustee, or administrator of the estate often conducts a sale of property, the proceeds of which are to be divided according to the deceased’s wishes (or according to state intestacy laws).  The sale often includes tangible investment property, which might include rare baseball cards, antique cars, or any other collectible items.  The estate sale can be a relatively straightforward process, particularly if the deceased was foresighted enough to enact a well-drafted estate plan

However, the rules for selling a deceased’s wine collection are far more complex than the rules for selling baseball cards or antique cars.  The legal difficulty is rooted in the unpopular three-tier system for distribution of alcohol in the United States, a relic of the post-prohibition era.  In most states, retailers can only buy alcohol from distributors, and distributors can only buy from manufacturers or importers.  Although these laws were conceived in the wake of the era of Al Capone, they continue to shape modern liquor industry trends well into the 21st Century.  In my state of Illinois (also Al Capone’s state!), the three-tier system remains solidly entrenched.  And the personal representative of an estate does not easily fit into this legal framework.

Fortunately, in Laura’s state of North Carolina, the legislature passed a law allowing for a special one-time permit to sell alcohol received through inheritance or similar circumstances.  The law does require the alcohol be sold by the estate to an end user (which would still prevent the sale of a wine collection directly to a wine store).  However, auction houses can help facilitate sales by an estate to other wine collectors.  Other states have different ways of dealing with this unique situation.  Before attempting to pursue an alcohol auction or any other means of disposing of your estate’s alcohol, contact a local attorney that specializes in this unique area.

One final consideration for anyone considering leaving behind a valuable wine collection:  Protect your assets from physical deterioration due to temperature, light exposure, breakage, flooding, etc.  Also review your insurance policy coverage and limits. It would be a shame to lose a portion of your family’s valuable assets to a physical threat.

Thanks again to Laura Collier, The Spirited Lawyer, for her help with this post!

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. 

October 10

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:

Had the President omitted the “not unmindful of my son” phrase, his son might have argued that his father had grown senile and forgotten that he had a son, meaning that he lacked testamentary capacity to sign a valid will.  The “not unmindful” language was likely meant to show that the disinheritance was intentional.  In US states (except Louisiana), parents are generally free to disinherit children.  However, doing so often invites legal challenges from children.  Judges and juries are often sympathetic to disinherited children arguing that their parents lacked mental capacity or were under undue influence when signing their wills.

Courtesy Daily Illini Archives at http://idnc.library.illinois.edu/

Whether or not you wish your children to take any part of your estate, do not attempt to follow President Coolidge’s example by drafting a 23-word will.  First, a handwritten note like Mr. Coolidge’s may be invalid in some states (handwritten wills can be deemed “holographic,” and face a highly uncertain road in probate court).  Second, the President’s will fails to name an executor (and successor executors) to probate the will, a serious oversight.  Third, the will leaves many basic questions unanswered, like where the President wishes his property to go if his wife predeceases him.  Additionally, if one of the goals of an estate plan is disinheritance of a wayward child, it would be worth strongly considering a living trust as a will substitute, as the terms of the trust are not public and are generally more difficult to challenge in court.

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. 

October 9

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:

Using a Joint Living Trust

Both spouses may wish to enter a living trust, which remains revocable (can be changed or cancelled) while both spouses are alive.  The trust may specify that after one spouse dies, some amount of property be held in trust, with an amount going to provide for the remaining spouse every year until his or her death.  The amount could be set at a defined percentage, or keyed to certain criteria, including health costs of the remaining spouse.  The trust might require that the remainder in the trust be distributed to the children of both spouses (including children from prior marriages).  On the other hand, the trust could also provide for some immediate payment to the children.  There are numerous possible combinations.  The key is that once one spouse dies, the revocable trust must become irrevocable, so that the other spouse may not change it to the detriment of the other spouse’s children.

Leaving a Portion of Property Outright to the Children

Another option is for each spouse to leave a portion of the spouse’s estate outright to his or her own children by will or living trust.  However, estimating the right amount can be tricky, as it is hard to predict a spouse’s future needs.  Few people would want their spouse to risk running out of money during his or her life due to unforeseen health expenses, possibly making a trust (like the one described above) a more flexible option.  Additionally, a spouse must leave enough property to the surviving spouse to satisfy state spousal elective share laws.

Lifetime Gifts

Sometimes one of the simplest estate planning strategies is also one of the easiest to overlook.  If you are concerned that your children receive certain pieces of property, family heirlooms, or financial assets, consider giving them away during your life.  This may avoid future uncertainty over what you would have wanted to happen, particularly for items carrying high sentimental value.  If you are giving away substantial assets, this strategy may also decrease your need to provide for your children in your will and/or trusts.  By giving away less than the annual gift tax exclusion amount (not the focus of this article), you may also reduce future estate taxes.  However, as with the option of leaving property outright to children in a will or trust, there can be drawbacks to the lifetime gifts approach as well.

Life Insurance

Particularly if a family’s assets are illiquid (difficult to split up or sell), life insurance can be a good option for ensuring an equitable distribution of wealth in a blended family. Guaranteeing that each child receives a set life insurance payout may be preferable to granting them a share of the estate in a will, which might require a rushed sale of family cars, land, personal property, etc.  While we are on the subject of life insurance in blended families, it is imperative that people who have been divorced ensure their life insurance policies (and all death beneficiary elections on IRAs, pensions, etc) are up to date.  It is hard to think of a worse “estate plan” than having an ex-spouse as the primary recipient of one’s money!

Wealthy Spouses and Spouses with Substantial Age Differences

The techniques above are commonly used in blended family estate planning for people of modest to comfortable means, and for spouses of a similar age.  The higher the net value of the estate, the more complex the estate planning can be.  Many wealthy spouses rely on more complex devices, such as Qualified Terminable Interest Property (QTIP) trusts, Family Limited Partnerships (FLPs), Marital Deduction Power of Appointment Trusts, and Charitable Trusts.  These are commonly used by people whose individual estates top the $5.34 million estate tax exemption ($10.68 million per married couple).  Additionally, in marriages where one spouse is much older and expects the other to remarry after the older spouse’s death, there may be further estate planning considerations requiring specialized estate planning tools.


Blended families are very common, but the estate planning process for these families is surprisingly complicated.  Talk to an experienced estate planning attorney to tailor an estate plan to fit your family’s individual needs.

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. 

October 8

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.