Estate Planning During and After Divorce

Divorce can be a painful and difficult process for you and your family. Once the big decision to go separate ways has been made, there are more decisions and seemingly endless paperwork separating and re-titling assets, selling or refinancing the family home and/or relocating to a new one, custody issues if there are minor children, college expenses for older children... These tasks and more must be completed to be able to move on with your lives.

Often forgotten after everything is settled are changes that need to be made to your beneficiaries and estate planning documents. No matter how well your relationship is with your ex-spouse, most people would agree that their ex-spouse is the last person they want to inherit when they die or to have that person make life and death decisions for them. Unfortunately, that is exactly what can happen if your estate planning documents are not updated. Below is a list of items to review and update to ensure that the correct person/people are named.

Beneficiaries on Retirement Plans and Insurance Policies

Even if you never created an estate plan while you were married, you may likely have a retirement plan or life insurance policy.  Many times the named beneficiary on those accounts is your spouse. After a divorce, your spouse is not likely the beneficiary you would like named unless required pursuant the divorce decree.  As these plans are contracts, the named beneficiary benefits upon your passing unless you update the policy or plan documents accordingly.  

Power of Attorney for Healthcare and Property

As most people will not want their former spouse to have authority over end-of-life decisions or access to medical records it is, therefore, important for someone going through a divorce to update their power of attorney documents.  Most importantly for someone going through a divorce or soon thereafter, is to make sure their power of attorney for property is updated.  The POA for property could allow an ex to have access to bank, brokerage and retirement accounts, or possibly make financial transactions without your consent.  If a client does not have a health care or property POA, it is encouraged that they prepare one so that they can name a trusted individual.

Executor and Trustee
Similar to your health care and property POA documents, revising your will and revocable trust should be at the top of your list.  Most people probably don't want to leave everything to an ex-spouse and will want to revise their will and trust to provide for their children, parents, siblings, and/or charities.

The ex-spouse is also likely named as Executor and Trustee in these documents,  you will want to name someone else for these positions as well as naming a guardian and successor guardian for your children.

It is important to review and update your estate planning documents accordingly after a life-changing situation. If you would like to have one of our attorneys review your current estate plan or if you have any questions, please feel free to contact Glick and Trostin, LLC at 312-346-8258.

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein. No one should rely upon the information contained herein as constituting legal advice. The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.

Protect Rental Property Assets with an LLC

Real Estate has always been considered a safe investment since the supply is finite and the demand grows with the population.  Even though we have seen some swings in the real estate market over the past decade, the theory still is held true by many.  Purchasing a rental property is a common investment as individuals look to diversify their portfolio with reducing their risk in the stock market. Oftentimes individuals will buy their first home and keep it as a rental when they purchase their next home.

One downside to owning rental property is that you are at the risk for the liability arising out of any accident that might occur on your property.  If the property is in your name alone, a lawsuit could expose your other assets to this risk.  This is why it is advisable to place rental properties into a limited liability company ("LLC") to limit the liability exposure.  Having an LLC provides an owner with a legal veil that will usually protect the owner's other personal assets from legal claims and limit what could be recovered in a lawsuit.

Most states have enacted Limited Liability Statutes.  Since LLCs are governed by state law, it is important to understand the filing and annual reporting requirements within the state and how to effectively transfer title of the assets into the LLC.

An LLC has the advantage of pass-through taxation.  This means that the LLC will file either as a partnership if there are 2 or more members (owners) or report the earnings directly on your individual tax return (Schedule E) if you are the sole owner. This avoids double taxation as corporations have to file a corporate tax return and then each individual owner files his/her earnings on an individual return, resulting in double taxation.  You can avoid this by forming an LLC.

If you have any questions about business entities and tax and estate planning, please feel free to contact Glick and Trostin, LLC at 312-346-8258.

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein. No one should rely upon the information contained herein as constituting legal advice. The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.

Illinois Probate law Frequently Asked Questions

The probate process can be confusing and complicated for many who are trying to navigate issues that may come up at the end of the life of a loved one.  A good probate attorney is one who is willing to walk a client through the process, address common issues and assist with strategic planning for an estate. Below are answers to common questions that we receive from clients who are attempting to understand the probate process in Illinois.

What is Probate?

Almost everyone leaves assets behind when they pass away.  Some individuals will plan extensively for the distribution of their assets, while others leave little direction behind.  The process to determine the distribution of assets after someone's passing is called probate.  Whether there was a Will or not, legal assistance can help tremendously when going through this process.

How Long Does Probate Take in Illinois?
Every case involves different sets of facts and circumstances so there is not a standard timeline for probate proceedings.  Thankfully, we do have an approximate minimal time period as Illinois law requires the executor or administrator of the estate to file notice to creditors and run an official notice in a local newspaper.  Upon such notice, creditors have six (6) months to file claims.  Once the six month period expires, if there are no other matters before the probate court, the estate may close.

When is Probate Required in Illinois?
Probate is not always required in Illinois, and when it is required it is determined by the amount of property being passed through the estate*. However, probate is not required for assets like life insurance, retirement accounts and other assets that have assigned beneficiaries.  These types of assets go directly to the named beneficiary after the decedent's death.  

*If an individual passes away with real and personal assets that are greater than $100,000 in value, the estate must go through probate with a judge overseeing the distribution of the assets.

What is a "Small Estate" in Illinois?
Under 755 ILCS 5/25-1, there is an exemption for smaller estates in Illinois to avoid probate.  If an individual passes away with assets under $100,000, the use of a Small Estate Affidavit may allow a representative of the estate to collect assets and pay creditors without the need of going through the probate process in court.  It is important to seek advice as without the probate process and notice to creditors, creditors may have up to two (2) years to file claims against the estate.

How to Avoid Probate in Illinois?
Many individuals think having a Will will help avoid the probate process.  While it may help make the probate process proceed a little faster, it does not avoid the probate requirement.  Individuals may plan to put assets in joint accounts with individuals they would like to inherit their assets or name beneficiaries on certain accounts.  Another common planning technique is titling assets in a Living Trust in combination with a Will.  Discussing a Trust with an attorney will help to understand the process of retitling assets and making sure that the objectives of the estate plan are met.

How much will the Probate Process Cost in Illinois?
There are numerous variables in the probate process so the total cost will vary case by case.  There will be certain fixed costs of the probate process such as filing fees and Notice to Creditors; however,  the planning put into place by the decedent may help reduce the time and expenses needed to administer an estate. Discussing the process with an attorney beforehand and understanding the requirements and potential issues will hopefully provide you with an approximate cost.

What does "Testate" and "Intestate" mean?
In Illinois, if someone passes away with a valid Will at the time of their death, then that person is said to have died "testate" and their assets will be distributed according to their Will.  If someone passes away without a Will, then they are deemed to have died "intestate" and their assets will be distributed according to the laws of Illinois under the intestacy statute 755 ILCS 5/2-1

What are "heirs" and "legatees"?
If a decedent leaves a valid Will in Illinois leaving assets to a specific person, then that person is referred to as a "legatee".  If an individual is inheriting under the laws of intestacy in Illinois or by relation to the decedent, then that person is considered an "heir".

How are Creditors Paid after Death?
A decedent's final expenses must be paid before their assets may be distributed to beneficiaries. The creditors are paid from the estate's assets and those assets alone. There is no liability on the executor, administrator or heirs personally.  If the estate goes through probate, creditors have up to six (6) months to make claims under 755 ILCS 5/18-3 on the estate as long as notice is properly given.  If the estate does not go through probate, creditors have up to two (2) years to make a claim.

Once claims are filed, they are paid in order of priority under 755 ILCS 5/18/-10.
1.  Funeral and burial expenses, statutory custodial claims, and expenses of the administration;
2.  Surviving spouse's award or child's award;
3.  Debts due the United States;
4. Money due employees of the decedent of not more than $800 for each claimant for services rendered within four months prior to the decedent's death and expenses attending the last illness;
5.  Money and property received or held in trust by decedent which cannot be identified or traced;
6. Debts due the State of Illinois and any county, township, city, town, village or school district located within Illinois; and
7.  All other claims.

How is Property Transferred in Illinois after Death?
Once all claims and expenses have been paid, then the estate may begin distribution to the heirs and legatees of the decedent.  The distribution may also be delayed if assets need to be sold such as a home or other property in order to allow for distribution to the heirs and legatees.

If you have any questions about probate or creating an estate plan, please feel free to contact Glick and Trostin, LLC at 312-346-8258. To read more about essential estate planning documents, please click here.

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice.  Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein.  No one should rely upon the information contained herein as constituting legal advice.  The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.

What to do about IRS Tax Debt

Having a tax debt can feel like a dark cloud is following you everywhere you go. Fear that the IRS could levy your bank accounts, attach liens or worse: Prison. Thankfully, if you are willing to work with the IRS in attempting to resolve your outstanding tax debt, you can keep the collection activity at bay.

The key to resolving a tax liability is to respond to the IRS as quickly as possible when you receive notification that you owe taxes. Today, individuals who have outstanding tax liabilities will begin to receive notices or correspondence by mail (the IRS will never contact you by phone). Unfortunately, many of the clients who contact our office have ignored those letters and do not reach out to the IRS to begin resolving their tax issues until the IRS finally starts to collect the outstanding debt by garnishing wages, levying bank accounts or filing a lien. 

A tax professional can help you through the administrative process of working with the IRS and advise on what actions should be taken to succeed in resolving your situation and halting all garnishment and levy activities.

First, the IRS requires that taxpayers are compliant and current with all tax return filings.  This means that all missing tax returns must be filed with the IRS before the IRS will even begin to discuss stopping collections for any other year. If a tax return was not filed by the taxpayer, the IRS can file a return on your behalf; this is referred to as a substitute for return. As the IRS does not have complete visibility into your deductions, the tax assessed in a substitute for return usually results in the worst case scenario.  Therefore filing your actual tax return can likely reduce the assessed tax liability. 

Secondly, the IRS will request copies of your bank statements and request a Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals. This information will report to the IRS all assets, income, debt, and expenses for your household. The purpose of this form is to determine if you have the ability to make payments on your tax liabilities and if so, how much. 

Once you are tax filing compliant and you provide your financial information, you and your tax advisor can review your options for resolving your tax debt. The four options are: pay the full tax liability, enter into an installment plan, request an Offer in Compromise, or do nothing. 

By paying off the full tax liability, you would put an end to all collection and levies would be released. This is obviously the quickest resolution although for many it is unrealistic depending on the tax liability and the ability to pay. 

Doing nothing is the simplest response: you simply allow the IRS to continue to take collection action against you until the statute of limitations period ends on the collection of tax debt (10 years from the date of filing). 

Entering into an installment plan is the most common action taken. The IRS will review your income and expenses and request a monthly payment to be made until the taxes are paid or the statute of limitations for collection has expired.

Finally, the option that many people have heard about is the Offer in Compromise. This option allows the taxpayer to offer a lump sum payment in exchange for having the total tax liability released. This is the most attractive option for many when they contact our office as they believe they can obtain a resolution with paying pennies on the dollar. Unfortunately, the IRS is very strict about accepting an Offer and it weighs numerous factors into its decision such as age, health, total assets, total debt and prior compliance.

If you have any questions about resolving a tax liability, please feel free to contact Glick and Trostin, LLC at 312-346-8258. To read more about essential estate planning documents, please click here.

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice.  Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein.  No one should rely upon the information contained herein as constituting legal advice.  The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.

Check to See if you are Entitled to a Red-Light Camera Refund

As many drivers in and around the City of Chicago know, red-light cameras have been installed on many of the intersections we navigate.  Unfortunately, many of us know all too well of how they work. You may have received a violation notice in the mail soon after seeing the flash of the camera as you went through an intersection.

In July of this year, the Chicago City Council approved a $38.75 million settlement of two class-action lawsuits that claimed the City failed to provide drivers adequate notice of a red-light camera violation before finding them guilty and imposing a late fee on the ticket.

Now the city has begun sending out notices on the settlement terms as well as instructions on how to submit a claim to the drivers who qualify for a refund or forgiveness of any unpaid tickets.  

Rather than wait for the notice in the mail, you can check the City of Chicago website to locate any tickets you may have received by searching by license plate, driver's license number, and other information. 

Then you may enter the ticket information on the Online Claim Submission to see if you qualify for a refund.

Individuals with eligible tickets have until December 11, 2017 to file a claim with the City of Chicago.  Claims will begin paying out the beginning of August 2018. 

Glick and Trostin, LLC is a tax and estate planning firm located in Chicago, Illinois and can be contacted at 312-346-8258. 

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice.  Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein.  No one should rely upon the information contained herein as constituting legal advice.  The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.

Family Memberships as Tax Deductions

As the days get shorter and cooler, taking your kids outdoors might not always be an option. You may be in need of something to keep your kids active and entertained. Did you know that some or all of the costs of memberships to organizations that qualify as nonprofit 501(c)3 organizations such as the Chicago Botanic Gardens, Children's Museum, Shedd Aquarium, and Brookfield Zoo can be tax deductible.  Often times, the cost of a family membership can pay for itself in as few as two visits for a family of four.  

If you are looking for possible holiday gifts for loved ones, a membership can be a great present and provide yourself with an additional charitable deduction at the end of the year.  Further, grandparents can utilize their RMDs from IRA's with a Qualified Charitable Distribution. 

Just remember to keep your receipts for these expenses in a safe place so that you can reap the tax benefits when you file in the next calendar year.

            

If you have any questions regarding your personal taxes and other exemptions you may qualify for, please feel free to contact Glick and Trostin, LLC at 312-346-8258.

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice.  Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein.  No one should rely upon the information contained herein as constituting legal advice.  The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.

Qualified Charitable Distribution ("QCD") From your IRA RMDs

As individuals invest in their retirement funds, over the years these accounts can become one of the largest assets at the time of retirement.  At age 70 1/2, you must begin to take Required Minimum Distributions ("RMD") from these accounts based on your life expectancy.  These income distributions are taxable and can cause an individual to move into a higher tax bracket or increase their Medicare premium expenses.

A great way to offset some of this taxable income is to use a portion of your IRA RMD to donate to qualified charitable 501(c)(3) organizations ("Qualified Charities"). These donations are called Qualified Charitable Distributions ("QCD").

How To Make A QCD: To make a QCD, the funds must go directly from your IRA to a Qualified Charity.  At your request, your IRA administrator will make a distribution directly to the Qualified Charity to satisfy your RMD. At tax time you will receive a 1099-R from your IRA showing the full amount of your distribution.  Your tax preparer will then enter the amount of the RMD that went to Qualified Charities through a QCD. The QCD will reduce the taxable portion of the 1099-R.

Example:  Lisa is 72 years old, lives on a combination of $25,000/year of Social Security and another $25,000/year of interest income from her portfolio, and has a $3,400 RMD this year. In addition, Lisa donates each week to her church and takes the deduction on her Schedule A to offset the tax consequences of her RMD. She would like to assess the tax savings benefit if she simply did a Qualified Charitable Distribution directly from her IRA to the church to satisfy her RMD obligation.

By allocating Lisa's RMD to a QCD, her AGI would result in $25,000 (ordinary income) + $7,475 (the taxable portion of her Social Security) = $32,475. Since Lisa has only $6,000 of itemized deductions, she instead claims the $7,850 standard deduction (including the additional amount for being over age 65), and also receives a $4,050 personal exemption, which brings her taxable income down to $20,575. Based on the 2016 individual tax tables, this puts Lisa in the 15% tax bracket, with a total tax liability of $2,622.50.

In contrast, if Lisa were to take the $3,400 RMD directly, her income would increase by $3,400. In addition, the higher income would also increase the taxability of her Social Security from $7,475 to $10,365. The subsequent $3,400 donation to her church would produce a $3,400 tax deduction, bringing her total tax deductions to $9,400 (although she already had a $7,850 standard deduction, only the last $1,550 produces any tax savings). Thus, Lisa’s final taxable income is $38,765 – $9,400 – $4,050 = $25,315, which produces a tax liability of $3,333.50.

Benefits: The bottom line for Lisa is the saving in taxes of $711 by simply allocating the deduction straight from the RMD instead of receiving the RMD herself.  Depending on your income, you may also avoid the Medicare high-income surcharge, which increases your Part B and Part D premiums based on your AGI.

Tips for QCDs: To make a QCD, we recommend contacting the charitable organizations first to obtain the correct address and mailing information to make your gift. You will then need to obtain an application from your financial planner or IRA Administrator to make an RMD distribution by checking the QCD box (with no taxes withheld) and provide the information for the charitable organization. The application should have your name and address on it so the charity knows who to send the acknowledgment letter to and state that no goods or services were received for the donation.  Any donations over $250 require a written receipt from the charity. Come tax time, provide the 1099-R along with the QCD information to your tax preparer.

If you have any questions about Qualified Charitable Distributions and other tax planning, please feel free to contact Glick and Trostin, LLC at 312-346-8258. 

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein. No one should rely upon the information contained herein as constituting legal advice. The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.