Do you own any Bank Accounts? Automobiles? Real Estate? Financial Accounts?
These and any possession in your name are all part of your estate. The ownership of these items must be passed on after you die. Do you want to make sure your loved ones are taken care of after you pass away? Some folks pass on their property at death according to his or her wishes through an estate plan. And others who die without a will have a plan set in place by state law to distribute his or her property.
Mistakes in an estate plan cannot be undone once a person dies. Mistakes tear up families and often undo the wishes of the deceased person.
The attorneys of the Estate and Probate Legal Group see many common mistakes in estate plans that become the source of expensive litigation. Our video series will help you avoid the top 3 mistakes in estate planning.
In our 4-part video series, estate and probate attorneys Mario Godoy and Steven Novak will explain how to avoid mistakes during the estate planning process. While navigating the estate planning process in Illinois, many individuals encounter complications. These include issues regarding outdated plans, unnecessary taxation, or a lack of coordination between parties.
Welcome to this video. These is the 3 Common Mistakes in Estate Planning. This is Mario Godoy and Steven Novak with the Estate & Probate Legal Group. Steve, you just want to say a quick hello.
And so today we’re going to be talking about what we see in probate courts. So for those of you who are unfamiliar with the process, we represent folks in both estate planning. We also represent folks that need guardianships and we represent folks that are in probate court. And so probate is where we are all destined to go to if we don’t do a good job of transferring title of all our property at our death or before our deaths.
So these are all things that we can help you with, but even when you do make a plan, there are some common mistakes that we see. And so we’re going to cover that today and help you protect your family. And so with that said, let’s discuss, do you have an estate? So this is a common question that we get often from folks, because it sounds like a very fancy word and it is, it is a formal term. It’s a formal word that describes all the property that is in your name only. Things that you solely own that are not transferred to someone else at your death. And so anything that comprises in that becomes your estate and that’s what you open up in probate court.
And so one other thing is that folks often make a mistake and think that everyone thinks that an estate plan only deals with death, but what we see in guardianship, what we’ve seen happen in instances where family members become disabled, is that at a great estate plan contemplates both issues that you will deal with in your lifetime and also with after-death planning. So it should really comprise of two different things. And this is why you need to revisit your estate plan every couple of years, because as your life changes, as your needs change, your estate plan needs to be updated. So let’s talk about the components as far as lifetime planning. So I mentioned disability a little bit earlier and the things disability includes not just the physical incapacity, but it also includes the legal capacity to sign documents. Having the mental capacity to execute decisions on your behalf.
It’s not always just physical. And so, the US Census in the last one that we did, identified that one out of five people lives with a disability. And so what they also found was that people over the age of 80 are 71%, a higher chance of becoming disabled. And so what that means for you is that we need to look at the lifetime planning in place here. And so you want to provide for your care during any period of disability or incapacity, you want to try and minimize any family conflict that might arise, especially if you haven’t talked about what you would want to be done. And so you could have different members of the family looking to step into that role to help you in arguing over what your wishes may have been. Coordinating with tax and other legal planning strategies is another part of lifetime planning.
That’s where we look at gifting and how that comes into play with your estate plan. You want to provide for smooth transitions to decision-makers in your life. The courts will follow what the legislature has put in place, but that might be different for you. You may want someone else as a key decision-maker who may not get to become one if you haven’t laid this out. And I think the other big key thing is that you want to try and avoid court-imposed guardianship. You want to try and pick who you would want to make decisions for you. Now, Steve deals with the big context of guardianships. I don’t know, Steve, is there anything that you might be able to add to that topic?
Absolutely. One of the things that I wanted to bring up is we do certainly have extensive experience in guardianship court and the cases vary, and generally speaking, it’s not a place that you want to be. As Mario said, an estate plan even during your life can give you the opportunity to make certain choices. And more than one of those important choices is who would you want to have making decisions on your behalf? Who would you want to have paying your bills? Who would you want to have deciding where you could live, if for whatever reason you weren’t able to make those decisions for yourself? And if you’ve got an estate plan in place that takes care of those issues, then you can make those choices.
And the people that you’ve chosen that can go ahead and carry out those decisions for you. The problem is, is if you haven’t made those decisions, you haven’t formally, whether it’s a power of attorney or a trust or whatever the case may be, you haven’t gone ahead and made those choices while you still had the capacity to do so then if there’s some sort of disability, some sort of event, something bad happens to you, and now you no longer have that voice that unfortunately, whether your loved ones, your family members, your friends, you’re going to wind up in guardianship court. Just as a brief example is even in the context of spouses, whether say a husband and wife is that if something happens to the husband, then the wife might still be able to make medical decisions and things like that by virtue of being a wife.
But if the husband needs to sign contracts, if you’re in the middle of selling a house and the husband is on the deed or something like that, you need a husband to do legal things to make decisions for him with finances or assets. Now, wife, even though she’s his spouse, she has to go to guardianship court, she has to pay an attorney. She has to pay a bond. She has to take all this time and all these expenses, when a relatively simple estate plan that provided for lifetime planning would have taken care of that for her.
And Steve, that’s a yearly accounting as well, that you may have to go back year over year.
Correct, correct. And depending on where you’re located, what County you’re in, that accounting could basically be, you have to present every single penny of what you’ve done with respect to your spouse’s assets, which I mean, when most spouses hear that, they find themselves in guardianship court, they’re just bewildered. And as we’ll kind of, we’ll talk about later on in the webinar today, but there’s something called a bond, which is basically an insurance policy that courts require guardians to post. And you see situations where people are, they’re basically just completely flabbergasted that, “Why would I need to post a bond? Why would I need to… This is my husband we’re talking about.” And it’s just, that’s what the law requires.
And so one of the other things that I also wanted to add is that there are situations where that you may find yourself in where even when a person has powers of attorney or has a trust, if you feel that there are issues regarding someone who’s vulnerable, a disabled person, an elderly person, then guardianship court may, is still a forum to kind of address those issues and that’s something that we do here at the firm too.
I think one of the key things that I’ve learned in coming to see these cases is that if you can’t have someone, if you don’t pick someone, then there’s a possibility that the court might pick a public entity to represent you financially. And so, it’s not just about going to a judge and now you might have a government employee decision-maker involved in the financial decisions.
That’s a great point. No, every County has what’s called a public guardians office. And if they feel that there may be someone out there who needs help, they feel they need help and if there isn’t anyone in place, like you were saying, Mario, to make those decisions, then the public guardian is empowered to go ahead and try and step in and become that decision-maker. And now obviously, they’re doing it for the persons, for their wellbeing, they’re still supposed to act in their best interests, but I hardly think that’s a position that anyone really wants to find themselves in. It’s essentially when people say ward of the state, that’s what they mean.
And so these are all issues that we can help you with here at the firm as you’re going through. And I think the next component that you really want to start looking at is what, how about after death planning? And so this is what everyone thinks about when they think about estate planning. And so everyone looks to avoid the need for probate court. What I’ll tell you is that, from what I’ve learned, looking through and looking at different cases, sometimes probate court can be a good thing to have a judge overviewing that process. But for privacy purposes, for the ability to be able to get assets to a family member, family members that survive you quickly, that’s why he might want to avoid probate. You want to find a way to efficiently handle those after death, the administration of your assets, you want to try and preserve your family harmony.
You don’t want them fighting over your assets after you’ve left this world. And so you can leave a written plan that can then help heal your family during that time period, as opposed to tearing them apart. The other aspect is maximizing the tax strategy, and we will kind of cover that a little bit, because if you’re married, you may want to look at where the exemptions are and what you might do as far as making any gifts and how you would set up multiple trusts, if that’s what’s the best strategy. You want to protect your beneficiaries for as long as possible, you can’t protect them forever, but with a great estate plan, you can ride that out and provide for them in the longterm.
And I think, one of the other benefits of after-death plannings if there are minor children or even a young adult that needs to grow into managing that asset, that’s being given to them. If I was 18 and I was getting a multimillion-dollar state, I think I’d probably, in one weekend, eat that up in Vegas. So this is a great component to make sure that someone who needs to grow into managing that asset can also be given that opportunity. Steve, I don’t know if there’s anything you want to kind of add about the after-death planning.
I just wanted to touch on one of the more recent kinds of examples of what may be advantageous to avoid probate is, I know we had a lot of frustrated clients this year when courts were closed due to the pandemic, just because it extended kind of the time that everything took to get an estate open, to get letters of office issued. And courts handled now via Zoom and it will be for the foreseeable future. And they’ve worked hard to get procedures in place, but who’s to say that something else might happen in the future where courts are closed or access to the courts are somehow restricted, which again, kind of tax on who knows how much time to basically getting the assets where they’re supposed to go. So if you had a trust or something like that, and something, another plan that you could handle outside of probate court, then that wasn’t a concern for you.
And that’s a great point. I think what folks don’t realize is that when you open an estate, it’s not as quickly as a Law & Order episode. You’re not in and out in 60 minutes, you got six months just for the creditors to come up and say that, “Hey, I have a claim against the estate.” And so in the midst of COVID, when things are going to be continued for the public safety and you can’t get the court proceedings, then that’s even longer that your family can’t get into those assets and use them. And so Steve brings up a great point on that, but I think that existed even pre COVID.
You throw in anyone who wants to line up and make a claim or something to argue about. And now you’re looking at more than six months before you can close out that estate of yours. And so that kind of brings us to the point of today is that we see so much in probate courts, not just in our own client list, but also watching cases and watching other attorneys and seeing the different issues that arise. But there are three mistakes that we see over and over and over again. And so we want to make sure you do not make those mistakes. And so we’re going to cover that today. So with that said, let’s talk about mistake number one.
One of the most common estate planning mistakes is the failure to include a residuary clause. Creating and updating your estate plan to make sure your assets are distributed according to your wishes is an essential part of your estate plans. By working with an attorney, you could draft a will or trust that fits your goals now and in the future. To find out the best solution for your personal situation, contact one of our lawyers today and schedule an appointment at 630-864-5835.
AREAS WE SERVE: Cook, Dupage, Kane, Lake, and Will counties