Wills, Trusts, Estate Planning, and Powers of Attorney-Naperville

What is Estate and Asset Protection Law?

Estate Planning
Estate planning is a legal specialty, which employs strategies such as wills, trusts, powers of attorney, and living wills. In today’s economy, estate planning is increasing in its’ importance because seniors and baby boomers are facing retirement. Nursing home care is also increasing and families are struggling with parents and loved ones that are ill-prepared legally. For example, you likely know at least one person that is facing nursing home care or incapacity such as Alzheimer’s disease or dementia. Guardianship court is a court that determines when an adult has lost the ability to govern their own financial and healthcare affairs. In my experience, guardianship court is one of the toughest courts because families often conflict with one another.

Why Wills are not good? A will is better than having no written estate plan. However, a will has several drawbacks. Here are some of the drawbacks to a will:
• A will does not avoid the pain and conflict of probate court;
• A beneficiary’s inheritance can be seized by a divorcing spouse or a unpaid creditor (including foreclosure and credit card bills);
• Wills invite family conflict because lawyers’ mail heirs certified letters, which heighten an heir’s suspicions and result in hiring lawyers that create conflict;
• Wills increase creditor claims because lawyers are required to mail notices to unpaid creditors including credit and foreclosure matters;
• Wills are expensive to file because of attorney’s fees, court costs, and will contests;
• Wills fail to reduce estate tax liability even when a properly structured estate of the deceased could have saved thousands to millions of dollars.

What are alternatives to Wills? A Revocable Living Trust (hereinafter referred to as “Living Trust”) is a legal entity similar to a corporation, which is separate and distinct from it’s’ owners. A Revocable Living Trust or otherwise known as “Living Trust” or “Declaration of Trust” are amendable and an excellent way of transferring your real estate to your beneficiaries. Here are advantages of a Revocable Living Trust:
• Properly structured Living Trust avoids probate and guardianship court;
• A beneficiary’s inheritance is not seized by a divorcing spouse or unpaid creditor;
• Living trust decrease family conflict because of privacy offered by living trust;
• Avoid the expense of probate court by reducing attorney’s fees, surety bond fees, and court costs;
• Living trusts are private and not public documents like wills. Thus, public documents increase the risks your loved ones will be victimized by identify theft or your neighbors knowing your family’s business;
• When one receives an inheritance through a will, a beneficiary’s creditors including their divorcing spouse is entitled to their fair share;
• Unlike probate court, which can take a minimum of twelve (12) months to years, a Living Trust takes less than thirty (30) days to administer upon your death or incapacity.
What is Asset Protection?

Asset Protection Planning
Asset protection is a legal concentration, which is concerned about eliminating and minimizing legal risks. Asset protection also is concerned about setting up legal structures in a manner that reduces your liability risks. For example, most co-owners of real estate are legally vulnerable because a creditor of one co-owner could cause a lien to be placed against the home or investment property. Additionally, a creditor can levy or foreclose the home of a creditor that failed to satisfy its’ judgment.

Co-owners of real estate typically have one of two methods of joint ownership. The first method is joint tenancy by right of survivorship or otherwise called joint tenancy (either referred to as “joint tenancy”). This form of ownership shall appear on the Warranty or Quit Claim Deed, which should have been received at the closing. Essentially, the advantage of this form of ownership is simplicity. If one spouse or co-owner dies, the other owner automatically inherits the entire house.

In most cases, co-owners of real estate are titled as joint tenants with right of survivorship. Thus, there is no need for any probate proceedings until after both co-owners of real estate die. The disadvantage of joint tenancy is one spouse or owner’s credit problems can jeopardize the other co-owner’s property interest. For instance, John and Sue are married and own a home together and John has credit card bills in his name, which has or will place judgments against John for the unpaid balances. John’s creditors will place a lien against the home for John’s unpaid credit card bills. If John and Sue have a lot of equity in their home, John’s creditors may decide to foreclose the house to pay John’s debts. As joint tenants, John’s liability issues affect the co-ownership of John and Sue’s home.

The second method of co-ownership is tenancy by entirety. Tenancy by entirety means that the property is owned by a married couple jointly. Unlike joint tenancy, one spouse’s creditor problems cannot force the sale of John and Sue’s house. However, John’s creditors may file a lien against the house, which must be paid prior to selling the house. The disadvantage of tenancy by entirety is John and Sue’s house will go into probate court if John and Sue do not have a trust to avoid probate court. Thus, John and Sue’s interest in the house does not automatically pass to the surviving spouse.

The smartest strategy is to use a land trust and place co-ownership as tenancy by entirety. In Illinois, a land trust is a method of titling real estate. A land trust has several features. The first benefit is a land trust is a private document. Thus, there is a contract with a company like Chicago Title Land Trust Company where they will hold your legal title while the co-owners remain the beneficiaries. As beneficiaries, co-owners have the ability to instruct Chicago Title Land Trust Company what to do in case of re-finance or selling of the property. The second feature is a land trust has basic estate planning role. In the trust agreement with Chicago Title, the beneficiaries give Chicago Title beneficiary instructions if the co-owners should decease.

Sean Robertson with the Robertson Law Group, LLC is a wealth preservation law firm with locations in Naperville and downtown Chicago. Sean Robertson concentrates in wills, trusts, powers of attorney, elder law, and asset protection. Sean has experience representing individuals, families, physicians, and a wide variety of clients. Sean Robertson can be reached at 630-364-2318 or 312-498-6080 or via email RobertsonLawGroup@gmail.com. Check out our website at www.RobertsonLawGroup.com.