The topic of estate planning is important, but it can seem daunting to think about. When a person dies, an estate tax is imposed on the value of the estate left behind, before any beneficiaries (family members or close friends) inherit anything.

An inheritance tax is imposed on an individual who receives any type of inheritance. Although some states do have inheritance taxes, there is no federal or state tax imposed on inheritances in Illinois. It is important to distinguish between these two kinds of taxes in order to protect the rights of those on the receiving end.

Understanding the Illinois Estate Tax

There is both a federal estate tax and an Illinois estate tax, however, the size of the estate must be significant for either one of these types of estate tax to apply. The Illinois estate tax rate is graduated and can go up to 16 percent, but it is only applied on estates worth more than $4 million. This means that if a decedent’s total estate is worth less than $4 million, the estate does not have to pay anything to the state. If an estate is worth more than $4 million, there is a progressive estate tax rate, and the estate will have to pay before money can be distributed to any heirs.

Even though it is the season for giving, this year has been difficult for many people due to the COVID-19 pandemic. Coronavirus has resulted in not only a global health crisis but an economic downturn as well. Numerous individuals across the country may have felt the impact, whether it is a pay cut or a job loss. Many people may be contemplating their financial future, regardless of their job status. Tax issues can be complex, but there are various ways to reduce estate and inheritance taxes. For instance, Illinois tax laws provide tax benefits if retirement funds are left to designated individuals, and certain kinds of trusts can reduce estate and inheritance taxes that an individual has to pay. There are valuable tools that can be utilized in the estate planning process, and an experienced attorney can assist you in creating a comprehensive estate plan.

Monetary Gifts at the End of the Year

These days, many individuals are now doing their Christmas shopping online as a result of COVID-19. Stores all over the country are temporarily closed in an effort to stop the spread of the contagious virus. For those who have a difficult time picking out the perfect gift, a good alternative is to give money. That way, the recipient can buy whatever he or she likes. Giving money to family members or friends this Christmas can also be a smart tax planning move. Gifting cash now can help you reduce or even avoid estate taxes after you die.

A special needs trust is typically established by parents for a disabled child, or for disabled adults who are eligible for aid that will be lost if there are assets in their parent or guardian’s names only. It is a legal and fiduciary arrangement that allows a physically or mentally disabled person to receive income without interrupting or interfering with his or her eligibility for the public assistance disability benefits provided by Social Security, Supplemental Security Income, Medicare, or Medicaid. For disabled beneficiaries, this financial support can make their lives more enjoyable and fulfilling. Also known as a supplemental needs trust, this kind of trust may be a necessary part of your Illinois estate plan. An experienced estate planning attorney can help you draft this essential legal document to protect your family member.

Protecting Your Loved One

According to Illinois law, two types of supplemental needs trusts can be established: third party supplemental needs trusts and supplemental needs payback trusts. Both trusts provide the disabled beneficiary with the ability to improve his or her quality of life through services or assistive equipment that he or she would not receive with government assistance programs.

The time after a loved one’s passing is hard for all grieving family members, and it can be even more difficult when disputes arise over the decedent’s wishes or the validity of the will. As you prepare your estate plan, you should consider what you can do to prevent these disputes from happening after your death so that your family remains intact and well-provided for. The following tips will help prevent a contested estate.

Creating an Illinois Estate Plan to Minimize Disputes

Many contested estate disputes happen because family members are dissatisfied with how the terms of the will affect them, while others may be based more firmly on legal grounds. You should, of course, make sure that the terms of your estate plan reflect what you truly want, but there are also steps that you can take to help your family and beneficiaries understand your reasoning and show that you were of sound mind when making your decisions. These include:

In the instance that you become unable to handle your own affairs, either financially or medically, it is important that you have a power of attorney (POA) set in place. This allows you to designate who will be in charge of your affairs if you are unable to do so on your own. The person designated to handle the affairs is known as the “agent” and the person who the POA concerns is known as the “principal.” If you are intending on getting your affairs in order, it is important to work with a reputable estate planning attorney to ensure that the POA is valid and the proper terms are included.

General POA Requirements

There are a number of requirements that must be met when creating a POA in the state of Illinois. In order for the legal document to be valid, the agent must be designated by name and their powers must be outlined. POAs are unique to your circumstances so you should include, in detail, what your agent is legally responsible for. This person must be at least 18 years of age. The POA must be signed by the principal and at least one witness must be present. The principal must also acknowledge their signature, and thus their consent to the POA, in front of a notary public, or attorney.