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1There are numerous benefits to making lifetime transfers rather than holding onto assets and transferring them upon death. Furthermore, there are several different methods and vehicles that may be used for making lifetime transfers depending on the desired result. Some of these methods and vehicles include outright gifts of property, transfers of property into trusts, and transfers of property to and interests in family limited partnerships.
WHY YOU NEED A WILL OR LIVING TRUST
1.10 A will or living trust is the foundation of any good estate plan. As a legal document, a will or living trust is the primary way to ensure that the property in your estate will be distributed according to your wishes after your death. In addition, a will or living trust can help you accomplish the following:

provide financial security for your loved ones, allow for the special health or educational needs of a family member, or make allowances for the varying income needs of your heirs;

appoint a guardian for children under age 18;

determine who will be in charge of carrying out your wishes by naming an executor or successor trustee;

minimize taxes and administrative costs; and

support worthy charitable organizations.

What is Probate and How It May Be Avoided
1.20 Probate is the process by which a person's estate is administered. The first step is for the court to determine that the decedent's will is valid. This is often called "admitting the will to probate." Next, the court appoints a personal representative to administer the estate. This is typically the person named as executor in the will. Next, the court authorizes the personal representative to administer the estate. Estate administration involves gathering the decedent's assets, discharging the debts and liabilities, and distributing the remaining assets according to the will or intestacy statutes. The court supervises the estate administration process and discharges the personal representative from his or her responsibilities when the process is complete.

Living Trust Option
1.30 For those who wish to avoid the time, expense, and public nature of probate, the living trust is often a good supplement to a will. The living trust is a three-part document that handles the financial aspects of death and possible incapacity without taking these matters through court. The first part of the living trust typically addresses the distribution of your assets while you are of sound mind and body. Usually this involves naming yourself as trustee and granting yourself the right to distribute your assets as you see fit. The second part of the document often names a successor trustee to handle your financial affairs after your death, or if you become incapable of handling them yourself during your lifetime. The final part provides for the distribution of your assets. Like a will, the living trust is revocable, which means you can change it while you are living and competent. To be effective, the trust must own all of your assets. Since some people don't remember to transfer all of their assets to the trust, it is advisable to also have a "pour-over" will, which transfers any forgotten assets into the trust at your death.

If You Don't Have a Will or Living Trust
1.40 If you die intestate (with no legal estate plan) your property will be distributed according to state law, without regard to your personal wishes or the specific needs of your family members. Although intestacy laws vary from state to state, they frequently provide that your spouse and children receive equal amounts of your estate. Without a will or living trust, these distributions will be made regardless of age, health, or financial need and, of course, there can be no bequests to friends, more distant relatives, or charitable organizations.

Tax Planning Through Your Will or Living trust
1.50 A carefully planned will or living trust can help you avoid or reduce taxes so that you can leave as much as possible to your heirs and/or charitable organizations. Should you want to take advantage of tax planning opportunities, such as establishing a charitable remainder trust, you should consult your attorney or financial advisor to achieve the best results for yourself and your heirs.

By: Robert E. McKenzie, EA, ATTORNEY
ARNSTEIN & LEHR
SUITE 1200
120 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
(312) 876-7100

mailto:REMCKENZIE@ARNSTEIN.COM
http://www.mckenzielaw.com

PORTIONS REPRINTED WITH PERMISSION OF WEST GROUP, INC.
Original title: PLANNING FOR THE FUTURE - ESTATE AND TAX PLANNING