Giving Your Heirs “Lifetime Gifts” Can Benefit You During the Estate Planning Process

Wheaton wills and trusts lawyersIf estate plans were only about money, they would not be so difficult to create. Instead, parties must first come to terms with their own eventual death, and they must consider where and how they would like money to be distributed. Since family matters can be highly complex and sometimes volatile, and the rules for handling assets upon one’s death can vary by type and situation, such decisions regarding inheritances can be more than just difficult. One possible solution is to use “lifetime gifts” as your guide. Learn more in the following sections, including how our seasoned estate planning attorneys can help with drafting your initial estate plan. 

What is a Lifetime Gift?

Lifetime gifts are often used as an estate-planning strategy for reducing federal and state taxes, which means they are most commonly used in estate plans that exceed either the $4 million Illinois state estate tax exemption or the $5.5 million federal estate tax exemption. Each gift, which may equal up to $15,000 in value each year ($30,000 maximum for married couples giving a joint gift), reduces the value of the estate, thereby reducing the amount that heirs will be taxed when they inherit it. Lifetime gifts can do more than simply lower the tax load of one’s estate, however. They can also benefit the guarantor during the estate planning process. 

Using Lifetime Gifts to Aid You in Estate Planning

One of the biggest struggles that guarantors face is deciding how to distribute their wealth among heirs. Some are not even sure if the total value of the estate should be divided equally among children, or if personality and spending habits be considered when deciding how much to give a specific heir? Those who are considering the latter may use lifetime gifting as a part of their estate planning strategy. 

Consider this example: You have two children – one that has always been responsible with money and life decisions, and another that usually spends money frivolously and seems to struggle with making good and healthy life decisions. Perhaps the latter has made attempts to improve things, so you want to leave them an inheritance. Yet, because of their history with money, you are concerned that they will squander whatever you leave to them. A lifetime gift, given to them with conditions, can help you determine how well they might handle an inheritance. You can also give lifetime gifts to extended family members that you may not know very well to determine how they might handle any wealth that you decide to leave them. 

Contact Our Wheaton Estate Planning Attorneys 

Lifetime gifting is just one of many strategies that guarantors can use during the estate planning process. Stock, Carlson & Duff LLC can assist you in using it, as well as any others that may serve your needs. Schedule a consultation with our DuPage County wills and trusts lawyers by calling 630-665-2500 today. 



Inheritance Taxes in Estate Planning

inheritance taxes, DuPage County Estate Planning AttorneyMany people take advantage of the tax savings that estate planning options give them. Utilizing different legal options, such as trusts, will often alleviate how much a person would have to pay to the IRS in taxes for those funds. However, one of the issues to consider is whether or not the plans you are establishing will place a tax burden on your beneficiaries when you pass.

The federal tax exemption statistically affects approximately 1 percent of the country's population. The current exemption is $5.43 million for individuals and $10.86 million for couples. Yet many people fail to consider if the state they live in has required estate tax. There are 16 states, including Illinois, which levy up to a 20 percent estate tax to beneficiaries.

Funds from life insurance policies are exempt from taxes. Everything else is taxable. The only people exempt from paying these taxes are spouses. All other beneficiaries can be taxed between 10 and 26 percent for any property or funds they inherit. Domestic partners are also required to pay the same estate taxes as other beneficiaries.

There are several options people have to help alleviate the burden of inheritance tax with which their heirs could get hit. Options can include the following:

  • Life Insurance: Since funds from life insurance policies are not taxable, one option may be to set up a trust and have the trust as the beneficiary of any life insurance policies you have. By setting up life insurance this way, the person maintains control of how those funds will be doled out to heirs, since the policy funds will be place in the trust and not directly to a beneficiary. This way, the benefits of a trust are being utilized without heirs having to pay any inheritance tax;
  • Gifting: Under current tax laws, a person can gift someone up to $14,000 per year—$28,000 if they have a spouse—without any required gift tax needing to be paid. However, there is a $5.43 million lifetime cap on gifting; and
  • Transferring Real Estate: One way to limit estate taxes on property is to place the property under the ownership of a limited partnership or in a trust.

These are only some of the options available when it comes to estate planning. A qualified DuPage County estate planning attorney can help sort through what the best options for your situation would be. Contact the Law Firm of Stock, Carlson, Flynn and McGrath, LLC at 630-665-2500 today to discuss your options.

The Role of an Executor

When drawing up a will, one of the most important decisions that need to be made is who will serve as the executor of the estate. The executor is the person who will be in charge of ensuring that your last wishes are carried out.

According to an article in The Huffington Post, there are several things that an executor is responsible for. The very first thing the executor needs to do is to file the will with the court in order to begin probating the estate.

The next step is to locate and take an inventory of all the estate's assets in order to determine the value of all the assets. An executor is also responsible for paying any bills the estate owes, such as funeral costs or taxes. He or she must also make notifications to any government agencies (such as Social Security or Veterans Administration), banks, credit card companies and the post office that the person has died.

Executors are responsible for locating and notifying all the heirs of the estate. They are responsible for notifying the public that the estate is being probated, usually via legal notices in the newspaper. And if someone comes forward to file a claim to the estate, it falls to the executor to protect the estate against those challenges.

The final duties of the executor are to file final income taxes for the estate and then to disburse all assets to the rightful heirs.

Typically, people name a trusted family member or a close friend as their executor.  Other options are naming a trust company or bank to oversee your estate. Whoever is named executor is entitled to a fee for the work they do for the estate. In Illinois, that fee can range anywhere between 1 and 5 percent of the estate's value.

There are many important decisions to make when drawing up a will. It's also important to have an experienced DuPage County estate planning attorney working with you to make sure that all your final wishes will be correctly written out in your will.