Misconceptions Affecting Assets After Death

By Mildred V. Palmer, Attorney at Law

Waltz, Palmer & Dawson, LLC

In the past 20 years as a practicing lawyer, I have seen many people surprised by the reality of how assets are handled after death. Many misconceptions exist about the best way to transfer hard-earned money to a family member. The following are some of my favorites.

Estate taxes won’t affect me — I don’t have a lot of money.
Estate taxes can sneak up on you. When calculating the value of your estate, include the value of life insurance proceeds, retirement plans and IRAs. Don’t forget the government changes the rules routinely.

Joint ownership with my spouse or child is an effective estate plan.
Joint ownership only works if you know who will die first. Furthermore, without planning, estate taxes on you and your spouse’s combined estate may exceed the tax exemption resulting in tax. If your crystal ball is broken, think about estate planning.

A Will is all I need.
Not really. A Will plus probate is what you need. A Will alone is more like a suggestion; it is used to get the probate case going, which involves publishing for claims and heirs. A Will can nominate an executor to be appointed in probate, eliminate a bond fee in probate, appoint a guardian for your minor children in probate, and can determine who will receive your assets upon your death through probate. Having a Will is a good first step.

It’s no one’s business who I leave money to.
Wills are public records. After a death, the original must be filed Will with the County where the death occurred. A willful failure to file is a crime. If you want privacy, avoid probate. Create a trust to hold assets.

Life insurance is not subject to taxes.
Although it is true that life insurance proceeds are not subject to income tax, they are included in your estate and can be taxed under the estate tax. Effectively, you may have bought life insurance to pay the government.This is very patriotic, but not good planning.One specific type of trust, an Irrevocable Life Insurance Trust, can keep ownership of life insurance policies out of your name, and out of your taxable estate.

Minor children who are life insurance policy beneficiaries will have access to money.
Nope. The life insurance company will hold the money until they reach 18; otherwise, they will need a court order to get the life insurance money into a court-regulated guardianship account. The judge and the guardian will decide jointly what to pay for.

My spouse will never remarry.
Maybe, maybe not. Even if they do not remarry, they may form a connection that results in future estate planning.Consider the “what if” questions. Should you leave everything to your spouse and he or she remarries, what if he or she dies, leaving everything to the new spouse? What do your children inherit?

My will leaves money to my favorite charity— I am all set.
If a charity is a remainder beneficiary, you should consider giving assets to your favorite charity now,while you are alive and can receive income from your donation through a Charitable Remainder trust.

I had a trust done 10 years ago. It’s still good.
Your trust can become outdated by changes to the tax law or by changes in your personal circumstances. Get a check up at least every other year.

Should you have any questions about your assets after your death, estate planning, or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.

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.