When most people think about the term “estate planning”, they are thinking about going to see an attorney about drafting a will and powers of attorney. However, the drafting of a will is just one step in the estate planning process.
A well-crafted estate plan utilizes multiple tools to achieve the client’s goals.
Most estate planning clients have two primary goals: to make administration of their estate after death as simple as possible for the persons who will be left behind, and to avoid any unnecessary expenses in the estate administration process. This is especially important to consider when dealing with small estates.
Unless specific circumstances warrant otherwise, the cheapest and simplest way for the average person with a small estate to plan for distribution of property after death is to try and avoid judicial probate. Judicial probate is when the court must supervise the administration of the estate of a person who has passed away because there is no plan in place. Court administration is a long and expensive process. If people plan ahead and spend a comparatively small amount of time and money crafting a plan to avoid judicial probate, they can potentially save their loved ones thousands of dollars and many headaches after their death.
Even when new clients have what they consider to be a small estate (for example, $2,000 in a bank account and a house worth $20,000), they are often surprised to find out that they do not have a “small estate” that will avoid judicial probate under Illinois law. The term “small estate” is defined in the Illinois Probate Act as an estate that has less than $100,000 in assets, and any interest in real property of the deceased cannot exceed $2,500. If there are any assets held individually by the deceased at death in excess of these thresholds, judicial probate will be necessary.
One of the most powerful estate planning tools for small estates to avoid judicial probate is to divert as many assets away from the estate as possible.
Only assets owned individually by a person at death will pass into that person’s estate after death. With the assistance and advice of a competent, thoughtful and thorough estate planning attorney, it is possible to transfer before death most of the assets of the average client into joint ownership, designate payable-on-death beneficiaries on accounts, and simply transfer other assets out of the estate (referred to by attorneys as inter vivos transfers). Illinois has even recently enacted the Illinois Residential Real Estate Transfer on Death Instrument Act which allows a client to keep property in the client’s name during the client’s lifetime, while designating beneficiaries who will receive the real estate after the death of the client.
While there is no one-size-fits-all solution to estate planning and asset protection, even people with small estates would benefit from a plan.
People who pass away without any plan in place sometimes leave their loved ones with an expensive mess to clean up.
They key to avoiding such a mess is to consult with an attorney, craft a plan, and then take the steps necessary to transfer assets into the right places to enact the plan. To schedule your estate planning appointment or a free consultation, contact Tapella & Eberspacher today at 855-522-5291.