You might think that "Estate Planning" means substantial assets. Nope. Anyone can have an estate plan - it simply means there is some direction regarding disposition of your assets after your death. Your "estate" consists of all of your assets that would be part of a probate proceeding.
Some assets are not part of your estate because the third party holding them on your behalf has allowed you to designate a person to receive them if you pass away. Examples include: retirement plans, life insurance, real estate held in a land trust.
Any asset that is part of your estate must be transferred by a person with authority to do so under Illinois law. Currently, the law allows transfer of assets by affidavit if the estate of a decedent totals less than an amount set forth in the statute.
So, what documents are needed for a complete estate plan? That depends on the person and what assets they own. The primary documents are set forth below with a brief description.
Power of Attorney
A power of attorney (or POA) is a document in which you give permission and authority to another person to act on your behalf. If a POA is "durable" it will continue to be in effect if you become disabled.
An estate plan should contain a Durable Power of Attorney for Property and a Durable Power of Attorney for Health Care. These two documents will allow someone to make important decisions for you should you become disabled.
A will is the document that sets out your instructions for dealing with your assets after your death. It also typically contains provisions regarding who you would like to be appointed guardian of any minor children.
A will does not avoid probate. However, if you do not have a will, the probate of your estate will be more complicated and more costly. Also, the court will follow Illinois law regarding disposition of your assets.
There are several statutory requirements to create a valid will under Illinois law. A poorly or incorrectly prepared will can be equivalent to having no will.
A decedent with no will is considered "intestate".
A trust is a contract between the Grantor (creator) and the Trustee (person in control) for the benefit of the Beneficiaries (people who receive assets). The Trustee holds title to assets and follows the instructions in the Trust Agreement. Because the Trustee has authority to deal with the assets, there is no need for a probate proceeding.
The Revocable Living Trust (also referred to as Revocable Trust or Living Trust) can be amended (changed) or revoked (eliminated completely) at any time during the Grantor's life.
There are many different types of trusts that are created to deal with tax consequences, disability, and other special situations. The primary reason to use a trust is to avoid probate.
In order for a trust to work properly, it must be funded with the Grantor's assets. If assets are not transferred to the trust during the Grantor's life, a probate will be necessary.
When you have minor children, you as a parent are the only person who has authority to make decisions for them outside of a court guardianship proceeding.
If you leave your children in the care of another person, a doctor may or may not treat an injury or illness without proper authority.
Guardianship documents set forth short term and temporary guardians and give third parties who care for your children permission to follow the instruction of the person you designate.