The Coyle Law Office
131 East 9th Street
Lockport, Illinois 60441
Phone: (815) 838-6199

Illinois Estate Planning

How to Lose a Billion Dollars Playing Powerball

powerball-basic

The Powerball lottery jackpot is advertised as $1,400,000,000 but if (when!) you win, how much will you really see deposited into your bank account? First, let’s assume that you hold the only winning ticket (you have a about a 1 in 300 million chance). The advertised amount is what you would receive if you agree to take payments spread out over 30 years. If you opt to take the lump sum (which most financial advisers would recommend), you would receive a fairly decent deposit of $868 million – that’s a loss of 38% of the advertised jackpot.

After that, Uncle Sam will be ready to tax the lump sum amount as your regular income at the highest federal rate of 39.6%, leaving you with $524 million. If you live in Illinois, you will also need to pony up another 3.75% for Illinois income tax – for a net total of around $492 million. Bam, you just lost almost a billion dollars from the advertised jackpot.

Another factor to consider is gifting. If you decide to generously spread out your winnings to friends, family, neighbors, or your local attorney, any amount gifted may be subject to a federal gift tax of 40%. If you have an agreement to share prize money before the drawing, though (like an office pool), that would not result in gift tax.

So, when you’re deciding how much of your nest egg to invest in lottery tickets, don’t be fooled by the advertised jackpot – you could lose a billion dollars.

Ernie Banks’ Estate Woes

Ernie Banks’ Estate Woes

Ernie Banks' Estate Woes

As chronicled throughout Chicago and national media, there is a fight brewing between the family of Ernie Banks and his caretaker who has filed a Will presumably signed by Banks that leaves the bulk of his estate to her. There are some fascinating wrinkles to this case, though, as Ernie was apparently in the middle of divorce proceedings with his estranged wife, who lives in California and it appears that the will was signed some time in the last three months of Ernie’s life.

I have not viewed the will (which is filed with the Cook County court and is public record) but, the news accounts I’ve read say that the will named the caretaker as executor and the main beneficiary. If this is true, and if Ernie did not have the bulk of his assets set up in trust, that is shocking to me. A trust is a useful estate planning tool for just about anyone, but especially for people who (a) have family strife; (b) want to leave assets to people who are not their ‘natural heirs’; (c) have property in multiple states; or (d) want their estate handled in a private manner.

By having such gifts flow through a will, it opens up so many issues that have to be hashed out in court and in the public eye. Most of my clients, even those with assets under $300,000, set up trusts to avoid probate and allow for a smoother transfer to their preferred beneficiaries.

Interestingly, a new Illinois law became effective on January 1 of this year which states that wills which provide more than $20,000 for a caregiver of the person signing the will are presumed to be invalid. The caregiver has to show, by clear and convincing evidence, that the gift was not the result of fraud, duress, or undue influence. That is a very large hurdle and is very different than we normally see in these cases (usually, you only have to prove that the deceased person’s signature is on the document). If the caregiver is not able to prove this, they receive nothing under the will and the caregiver is required to pay the attorney’s fees and court costs of the family that brings the challenge. So, if the filed will is truly Ernie’s wish, then let’s hope that he used a very thorough attorney who very carefully recorded all of his meetings with Ernie to present at trial. If the caretaker was improperly influencing Ernie, though, it is my guess that she will have a very hard time succeeding in court.

These squabbles and fights are never pretty and no one comes out looking good when they are over; however, I am always amazed at how many high net-worth celebrities, athletes, and entertainers have failed to do even simple estate planning that can avoid so many of these problems for their loved ones. By all accounts, Ernie Banks was the perpetual optimist and surely he never wanted to see his loved ones fighting over his legacy. Here’s hoping everyone involved is able to ask themselves “What Would Ernie Do” and have the matter settled fairly and amicably before catching a game (or two) on the North Side.

http://www.cnn.com/2015/02/17/sport/cubs-ernie-banks-estate-dispute/

http://www.chicagotribune.com/sports/baseball/cubs/chi-ernie-banks-remains-20150216-story.html

Do I Need an Estate Plan?

Many people think that they are too old, too young, or don’t have enough assets to warrant an estate plan. In almost all situations, however, planning your estate can save you and your loved ones headaches, time, and money.

You may not know it, but everyone has an estate plan. If you die with no will, your property will be distributed according to Illinois statute. Very rarely, however, does the statute conform with how you would desire your property to be distributed. It is important that you sit with a professional estate planner who can ensure that your property is given to who you want to have it and that the IRS gets as little as possible.

What can my estate plan do?
An estate plan is a customized set of documents that provide for the distribution of your property at your death. With a well-done estate plan, you can decide who is in charge of your property before it is distributed and to whom it will be given (which may include family, friends, charities, or even to provide for your pet). You can delay distributions or have distributions held in a trust for your heirs. Also, you can ensure that a minimum amount of tax (or, often, no tax) is to be paid from your estate.
How old should I be when I create an estate plan? How much money do I need to have?
There are many factors besides wealth and age that affect the need for an estate plan. If you have minor children, any property you own might not be transferred directly to them. Instead, a court-appointed guardian may be required to look after the child’s interests which requires time, court costs, and the guardian’s expenses. If you care for a dependent adult, the same result could occur. Further, any business you may own will likely be stuck in a lurch while the court decides who will retain your interest – and the business may be ‘adrift’ with no leader during this time.Any size estate can benefit from proper planning. For modest estates, keeping court costs and administrative fees to a minimum means that your heirs will get to enjoy more of the fruits of your labor. Further, many people greatly underestimate their net worth. Retirement accounts, home values, future inheritances, and appreciation of investment property are often overlooked by individuals as they resign themselves to thinking of themselves as poorer than they actually are.Other situations which would lead to a need for an estate plan include:
  • Children from a previous relationship
  • A desire to give charitable gifts
  • Ownership of retirement accounts (401(k)s, 403(b)s, IRAs, etc.)
  • Children (or their spouses) who have a substance problem; are not good with money; or who receive government assistance

 

Do I need a Power of Attorney?
A Power of Attorney is a legal instrument which allows you (the Principal) to give someone else (the Agent) the authority to act in your place should you be unable.There are two separate types of Powers of Attorney (POA). First, the POA for Health Care is an instrument whereby you appoint someone to make decisions regarding your medical care should you be unable to make those decisions. In the document, you can leave guidelines stating what choices you would like the agent to make in different situations.The second POA is the Property POA. This document gives someone else the power to manage your finances if you become unable to do so. A Property POA can give your agent the power to buy or sell personal property as well as real property on your behalf; pay your bills and taxes; operate your business; borrow money on your behalf; and perform other financial and personal functions if you are incapacitated.Many individuals are (rightfully so) afraid to give someone else so much power over their property or health care. While this is a valid concern, it is important to remember that the state legislature has already determined who will make such decisions if you do not appoint someone yourself. Further, by preparing your POA, you can choose to limit some or all of these powers or have them be shared by multiple agents.
What is a trust and do I need one?
A trust is an entity that can hold property for the benefit of a named person (e.g. your spouse), multiple people (e.g. your children), a class of people (e.g. your nieces and nephews), or any other entity that you may want to benefit. Basically, you (the Grantor) place property in the trust and that property is controlled by someone else (the Trustee) who agrees to ensure the property is used for the benefit of those named in the trust (the Beneficiaries).One common trust is a revocable living trust. With this type of trust, the grantor, trustee, and beneficiary are typically the same person. So, you can place property in trust for your future heirs while still retaining complete control over that property. Once you die, the property remaining in the trust is controlled by the successor Trustee who will use or distribute the property for the benefit of the successor Beneficiaries.This type of trust is popular for individuals who want to avoid probate (because the property is owned by the trust, and not the deceased) as well as individuals who may have a taxable estate.

Still have questions?

Please contact us anytime! We look forward to hearing from you.