By Matthew A. Quick
Introduction to Estate Planning
Welcome to the first issue of The Estate—the quarterly note intended to give access to easy-to-understand information and news involving real estate and estate planning. The object of this publication is simple: to empower our community with knowledge and awareness of issues relating to real estate and estate planning. A well-informed community contributes to better judgment, not only for those who are actively seeking to do what is in their best interest, but also for those who would like to protect themselves from fraudulent practices.
To best inform readers, The Estate promises to be very clear, concise and easy to read. Each issue will contain a “Preface” section that will introduce the issue’s contents and an “Update” section that will monitor news and current trends in the legal field. Various articles, critiques and reports relevant to real estate and estate planning will complete each issue, in addition to guest contributions that will offer insight on a variety of topics from health to wealth management.
The article in this issue of The Estate introduces estate planning and the tools commonly used to prepare one’s estate. For the purposes of this article, note the various estate planning mechanisms discussed and the practicality of each. The instruments mentioned, as well as many others, will be discussed in greater detail in issues to come.
Thank you for your attention. In the event you have any questions or concerns regarding any legal matter, please contact me at your earliest convenience; I am always happy to help. Also, please note that all legal matters are unique, thus the information contained in The Estate may only be used for informational purposes and cannot be considered legal advice.
The next issue, due in April, will address Powers of Attorney. These mechanisms are an extremely important estate planning utility, but are often not properly prepared or are overlooked all together. In addition, Clint Edgington, principal and founder of Beacon Hill Investment Advisory, will focus on the pragmatics of life insurance.
Estate planning is a process that involves the construction of a strategy to direct one’s health care and property when he or she is not able to do so. The goal of an estate plan is to provide clear and detailed instructions to those who are appointed to help. These instructions are simply the wishes of the person whose estate is being planned (referred to as the “principal”). Some wishes are assumed, such as minimizing federal and state taxes and maximizing flexibility, but all directions of the estate plan are at the discretion of the principal.
Because the process of estate planning has fallen victim to the ill-fame of complexity, many people try to avoid an estate plan. However, complexity is not the burden of the principal. To the principal, the process of estate planning is as straightforward as creating a manual for the care of his or her health and property.
There are several mechanisms available to accomplish the wishes of the principal. Those that will be introduced in this article are Powers of Attorney, Living Wills, Medical Orders, Wills and Trusts.
For many principals, Powers of Attorney are the most important estate planning instrument available. Powers of Attorney come in two basic forms: Powers of Attorney for Health Care and Powers of Attorney for Property. A Power of Attorney for Health Care nominates a person, an attorney-in-fact (referred to as a “Patient Advocate” in Michigan and an “Agent” in Illinois), to make health care decisions for the principal. It also gives the attorney-in-fact directions as to what should be done in the event the principal cannot direct his or her own medical treatment. The ability of the attorney-in-fact to act under a Power of Attorney for Health Care usually commences upon the disability or incapacity of the principal. Generally speaking, a principal is deemed disabled or incapacitated if he or she is incapable of making informed decisions regarding his or her health care.
If the attorney-in-fact needs to act for the principal, he or she must act pursuant to the directions of the Power of Attorney. These directions (referred to as “directives”) should be very detailed and thorough, and may give instructions on everything from religious requests to comfort care.
Alternatively, a Power of Attorney for Property appoints a person, an attorney-in-fact (referred to as an “Agent”), to direct the principal’s affairs concerning property and finances. Unlike a Power of Attorney for Health Care, an attorney-in-fact under a Power of Attorney for Property could be given the ability to act for the principal even if the principal is not disabled or incapacitated. Much like a Power of Attorney for Health Care, however, if the attorney-in-fact needs to act for the principal, he or she must act pursuant to the principal’s directives. Again, these directives should be very detailed and thorough, and may give limited or general power to the attorney-in-fact to conduct the principal’s property and finances.
A Living Will is another means by which a principal can direct his or her health care. A Living Will does not grant decision making power to an attorney-in-fact, instead it is a list of directions for the attending medical practitioners. A Living Will allows the principal to specify the kind of treatment he or she would want in specific situations.
Medical Orders are reserved for patients that are terminally ill. Although there are several variations of Medical Orders, the most widely used is a Do Not Resuscitate Order (referred to as a “DNR”), which specifies that if the principal’s heart stops, or if the principal stops breathing, he or she is not to be given CPR. It is standard procedure for medical care facilities to attempt to resuscitate all patients if they experience heart failure or stop breathing; a DNR would relieve the medical care facility from this duty.
A Will is a legally-binding instrument that directs the principal’s property in the event of his or her death and appoints a legal representative to perform the principal’s wishes (referred to as a “Personal Representative” or “Executor”). A Will applies only to property that passes through the probate process. There are many interests in property that pass outside of the probate process, thus are not directed by a Will. Some examples of this type of property include, but are not limited to, jointly-owned property, property that is held in a trust and property with a named beneficiary, such as life insurance proceeds, individual retirement accounts or 401(k) plans. Regardless of how complex or simple the estate, a Will should always be included in an estate plan.
Finally, a Trust is a legal arrangement in which the principal gives legal title of property to a person or entity (referred to as the “trustee”) to hold for the benefit of another person (referred to as a “beneficiary”). A Trust contains instructions that the trustee is bound to follow in safekeeping the trust property. There are three main reasons to employ the use of a trust arrangement: first, a trust, for the most part, keeps the principal’s estate from having to endure the probate process; second, a trust can be used to shelter property from people or entities such as creditors, children who are too young to handle large amounts of money, and even the government; last, a trust can have significant tax-saving advantages by reducing the taxable portion of the principal’s estate.
Each of the estate planning mechanisms noted possesses great benefits to assist all of us in the estate planning process. The combined use of some, or all, of these tools provides for a dignified means to carry out the principal’s wishes.
Beware of a recent real estate deed copying scheme. Companies such as National Deed Service, Inc., Illinois Deed Provider, Need A Deed, LLC., and California Record Retrieval are sending unsolicited letters that are alarming people and compelling them to order a copy of the deed to their home for up to $89.95 per copy. The letter does not tell people that the same copy of their deed costs no more than $5.00 if purchased from the county clerk’s office. Be apprehensive if you receive one of these letters; and instruct others to do the same. Save some money and, if you need a copy of your deed, consult your county clerk’s office.
The Illinois Appellate Court held that a living trust (referred to as a “revocable trust”) that is amended by a non-lawyer is invalid. Practically speaking, regardless of the wishes of the principal, a court will not accept as valid a trust tailored by a non-lawyer. In the wake of this decision, please contact an estate planning professional if your estate plan needs to be changed.
I hope this issue of The Estate has given you some insight into real estate and estate planning. In the event you have any questions or concerns, or would like to schedule a complimentary consultation, I am available by phone at 773.790.8058 or by e-mail at email@example.com. As a service to all current and prospective clients, I travel at no charge to all meetings and consultations throughout Michigan and Illinois. In addition, estate planning seminars are provided free to groups of any size. Please let me know if there is any way I can help.