DO I HAVE AN ESTATE?
The term “estate” may conjure images of an elderly, wealthy matriarch executing a Last Will and Testament declaring which of her children and grandchildren shall inherit the family wealth at her death. Maybe she is disinheriting one or more of her natural heirs because they have mistreated her. There may even be a “reading of the Will” following her death in which family members gasp and glare at one another when the secret estate plan is finally revealed to all. In reality, Estate Planning and Estate Administration is not like you see on television and in the movies, and you definitely do not have to be rich to have an estate.
In answer to the question “Do I have an estate?” – If you own a car, have a checking account, own a home, have any life insurance or retirement accounts, then, yes, you have an estate. It may be modest and you may have no interest in disinheriting anyone, but you still need to understand what you have and then take steps now so that your wishes can be carried out upon your death.
Your “probate estate” includes all assets that are titled in your individual name, with no joint owner and no named death beneficiary.
If you are an Illinois resident and the total value of your probate estate exceeds $100,000, or you own any real estate in your name alone, then opening an estate in the probate court of the county in which you resided will be required following your death. Additionally, if you own real estate in your own name in more than one state, then ancillary probate administration in such other state or states will also be required.
Your “taxable estate” includes all assets in which you own an interest, whether it is an outright interest, a beneficial interest in a trust, or a partial interest (such as a joint owner), less any liabilities or allowable deductions at your death. This includes real estate, bank accounts, CDs, stocks and bonds, brokerage accounts, mutual funds, and interests in a small business (e.g., S corporation, limited liability company or partnership), whether these assets are held in your name, in joint tenancy, or in a trust under which you are a beneficiary (e.g., a revocable living trust). Also included in your taxable estate are your IRAs, 401Ks, annuities, the death benefit of any life insurance policies owned by you, and beneficial interests in a land trust.
If your taxable estate exceeds the federal, or state, estate tax exclusion amounts in the year of your death, then the executor of your estate shall be required to pay the estate tax before distributions from your estate can be made to your beneficiaries. For 2018, the Federal Gift and Estate Tax Exclusion is $11,180,000 and the Illinois Estate Tax Exclusion is $4,000,000. Note that these exclusion amounts are reduced by the value of any taxable gifts that you made during your lifetime. Also note that, while many taxable estates will be below the exclusion amounts, it may still be beneficial to file federal, or state, estate tax returns.
As you can see, it is possible to have a probate estate without a taxable estate, or a taxable estate without a probate estate. For example, your “estate” may consist of a joint interest in your home (with a mortgage), a car titled in your name, some personal effects (e.g., jewelry, coin collection, etc.), a joint checking account, a life insurance policy, and an IRA account, for a total “taxable estate” of $950,000. Your “probate estate” consists of only your car and personal effects. Accordingly, no estate tax returns or probate court proceeding would be required at your death. However, this does not mean you do not need to do any planning.
At a minimum, you should execute a valid Will. Beyond that, you should also consider creating a Revocable Living Trust in order to better provide for your family, especially for those family members who may be minors or disabled, or have other special circumstances, at the time of your death.
Don’t leave it to chance. Estate planning is not just for the elderly and the wealthy. You need to plan for what you have – whatever that may be. We can help you sort through the types of assets that you have, find out what is important to you, and then help you create an estate plan that will address your priorities and accomplish your goals to best take care of yourself during your life and your family after your death.
Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Business Immigration, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law.
This article constitutes attorney advertising. The material is for informational purposes only and does not constitute legal advice.