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5 Tips For Non-Traditional Families When Creating an Estate Plan

Web Admin - Friday, June 28, 2019
Barrington estate planning lawyer same sex couplesToday’s families come in many forms. In fact, there are fewer “traditional” families than ever in which two opposite-sex parents are married for the first time and have children together. Since divorce is common, and couples often choose to live together and have children without getting married, many families include step-parents and step-children. In addition, the legalization of same-sex marriage has resulted in complex family arrangements involving biological children and adoptive children. Regardless of how a family is configured, it is important to plan for the future and ensure that all family members’ needs will be met. For non-traditional families, it is important to consider the following during the estate planning process:

1. Update your will - Your last will and testament specifies how you want your assets to be distributed to your heirs after your death and any other last wishes. You will want to be sure that your will addresses your partner, your children, your step-children, and any other family members.

2. Create a trust - In addition to your will, a trust can provide more control and flexibility for how you would like your assets to be distributed to your beneficiaries. A living trust can be changed or modified if necessary, and it can also be used to provide for your and your partner’s needs during your life.

3. Use power of attorney - While married spouses have the right to make decisions for each other, this is not always true for unmarried couples. A power of attorney agreement can be used to ensure that partners will be able to make medical or financial decisions for each other if one of them becomes incapacitated.

4. Consider a prenuptial or postnuptial agreement - When you get remarried, your new spouse will typically be entitled to receive half of your estate following your death. A prenup or postnup can ensure that certain assets will be set aside for any children you may have from a previous marriage or relationship.

5. Address plans for retirement - If you have any retirement funds saved in an account such as a 401(k) or IRA, you will want to be sure to name beneficiaries who will receive these funds following your death. You can name your spouse or partner as a beneficiary, as well as any children or step-children.

Contact a Kenilworth Estate Planning Attorney


When creating a comprehensive estate plan, you will want to be sure all of your family members will be provided for. Determining how to do so when you are in a non-traditional family can be a complex matter, and an experienced attorney can help you address issues involving same-sex partners, children from previous marriages, adoptive children, or other family members. Contact our Riverwoods estate planning lawyer today at 847-934-6000 to schedule a free consultation.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Sources:
https://digitalcommons.law.seattleu.edu/cgi/viewcontent.cgi?article=1773&context=sulr

3 Reasons Why a Living Trust Is More Beneficial Than Just a Will

Web Admin - Wednesday, January 23, 2019
Des Plaines living trust lawyerIf you wish to leave a legacy to your children or other beneficiaries after your death, it is imperative that you have an estate plan that will ensure prompt and accurate distribution of your assets. Many people think that writing a will is the best way to do this. However, while a will is important, putting your assets into a revocable living trust can provide several additional benefits.

Avoid the Illinois Probate Process 


In order to distribute assets according to the terms of a will, the will must go through the probate process. This involves filing various court documents required by law to establish the value of each asset and to re-title each asset from the deceased’s name to the recipient’s name. This can be a long, drawn-out process.

Secure Adult Heirs’ Immediate Access to the Estate


One of probate’s most serious drawbacks is the freezing of assets. Specifically, any assets that are held solely in the name of the deceased are frozen upon their death. Imagine a married couple who amassed several large investment and retirement accounts and multiple pieces of real estate during their lifetime. Upon the death of both spouses, their children cannot touch any of the assets until a probate court judge approves the will and appoints a Personal Representative to handle the estate. Leaving large investment accounts without active management can be risky.

By comparison, imagine that all of the couple’s assets had been placed in a living trust, meaning that the assets are titled in the name of the trust rather than in the name of any individual. Upon the death of the trust-maker, their designated successor has immediate access to the assets of the trust.

Secure Assets for the Long-Term Benefit of the Family


Imagine our married couple has three children and has a will. Upon the death of both spouses and probate action, the assets of the estate must be divided amongst the named heirs. Assuming the estate is to be divided equally among the three children, the inherited assets are now at risk to creditors, bankruptcy, a lawsuit, or a divorce. 

Creditors. If the married couple had all of their assets in a trust, ownership of those assets can remain titled in the name of the trust indefinitely. Because the assets are not titled in the individual children’s names, the assets are protected from creditors, even if one child files for bankruptcy or gets divorced. The beneficiaries named in the trust will have access to the assets in accordance with the directions specified in the trust documents. 

Heirs with disabilities. Upon the death of the spouses, one child (or an objective third party such as a bank) could be named as the successor trustee with directions to manage the trust in a certain way. This approach can be used to ensure that the use of the assets is prioritized in some way, such as to meet the basic needs of a child or grandchild with a disability. Keeping the assets in the trust can also serve to protect the right of a disabled heir to receive needs-based government benefits.

Underage heirs. Keeping the trust open with a successor trustee can also be beneficial for heirs who have not yet reached adulthood. When a will leaves assets to a minor, the probate court must appoint a conservator to manage the minor’s assets. Once our fictional married couple has died, there is no telling who that conservator might be and what decisions they might make. In contrast, assets left in a trust can be managed according to specific directions written into the trust. Thus, the maker of the trust can dictate when and for what purposes a youthful (or even as-yet unborn) heir can access their inheritance.

Consult a Palatine Revocable Living Trust Lawyer


A well-thought-out living trust can give you greater peace of mind and benefit your heirs in the long run. To discuss options for writing or updating a living trust, call an experienced Schaumburg living trust attorney at Drost, Gilbert, Andrew & Apicella, LLC. We have prepared living trusts for many high-asset families with complex issues of inheritance. To set up a free initial consultation, call 847-934-6000.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Sources:
https://www.isba.org/public/guide/livingtrust

Modern Family Estate Planning – Why Use a Living Trust?

Web Admin - Friday, October 20, 2017

Arlington Heights wills and trusts attorneyToday’s family looks much different than those from just 50 years ago. People no longer feel obligated to stay in a marriage that is not working, divorcees sometimes remarry, partners opt for cohabitation over remarriage, and there may be children from one marriage or both. While, in many ways, blended families are a positive thing – especially for kids – it does make estate planning much more complicated than it once was. A living trust can mitigate against many of these issues. Learn how with help from the following.


Potential Blended Family Pitfalls

People can cause some serious problems by either not having an estate plan or creating an ineffective one. The chief issue is that heirs could experience unnecessary financial difficulty while trying to muddle through the expensive and arduous probate process. Several other pitfalls must be addressed as well, however, especially in blended family estate planning. Consider some of the following possible examples:

- A father intended to leave everything to his children, but he failed to check his beneficiaries and update his estate plan. His home and other assets ended up going to his former wife. 

- A step-child expected to receive an inheritance, but the estate plan was unclear and state law does not provide for step-children. They receive nothing;

- A child inherits their father’s antique rifle, but it was promised to another child from a previous marriage;

- A husband dies and leaves his assets to his wife. When she passes away, she leaves everything to her children from a previous marriage. His children inherit nothing.

A Living Trust Can Mitigate the Risks

While it may be impossible to remove all risk of heirs fighting over an inheritance, there are several strategies that guarantors can use to mitigate against the possible damage of probate, tax consequences, family squabbles, debtors, and other common issues. The most effective tool is the living trust (revocable, irrevocable, marital, etc.). Each type works a little differently, but the primary goal is to ensure that the right person receives the right assets. Set up properly, a trust can also mitigate against spendthrift issues, ensure that even extended branches of family receive assets, and can even be specifically designated for certain expenses or needs (such as with college students, special needs children, or an ex-spouse who happens to be the other parent of your minor child). 

Why Plan Now?

No one wants to think about their death or the death of their spouse, and many dream of the death of their ex-spouse - which is why it can be easy to put off planning for it until you start to age. Sadly, not planning now can have severe consequences if an accident or incapacitation occurs to you, your spouse, or your ex-spouse. Avoid the consequences of ineffective and non-existent estate plans by contacting an experienced wills and trusts lawyer today.

At Drost, Gilbert, Andrew & Apicella, LLC, we work in your family’s best interests. Dedicated and experienced, our Arlington Heights wills and trusts attorneys wills and trusts attorneys can handle even the most complex of situations with skill. Call 847-934-6000 and schedule your personalized consultation today.


About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.



Sources:
https://www.fidelity.com/viewpoints/retirement/blended-familieshttps://www.nytimes.com/2017/01/13/your-money/estate-planning-early.html

Transferring a Home to an Adult Child – Why Putting Them on the Deed is Not an Option

Web Admin - Friday, October 06, 2017
Illinois wills and trusts attorneysAs parents age and their children grow up, they begin to face their own mortality. They realize they will not always be around, and that everything they own must be given to a loved one, a charity, or an adult child. Homes are one of the most commonly transferred items after death, but how you do it matters. Learn more about transferring your home to a child, including why simply “putting them on the deed” should never be an option. 

Dangers of Deed Transfers 

There are three basic ways to transfer the deed of your home: an ownership transfer deed, a will or living trust, or a transfer on death instrument. Of all the options, the first is your least desirable. Mostly, this is due to the tax implications that an heir may face, should you simply transfer the title over to their name. However, this is not the only concern when transferring a deed over to an adult child – nor is it the most concerning. 

Parents typically trust their children, but there have been instances in which children have sold the home, right out from underneath their parent, to gain a profit. Alternatively, if the child ends up in a lawsuit or falls behind on their income taxes, the house could have a lien placed on it. Because the deed is now in the child’s name, the parent (who may still be living in the home) is powerless. They cannot stop the seizure, remove the lien, or save their home. 

A Better Way to Transfer the Ownership of a Home 

Besides deed transfers, parents can use either a living trust or a transfer upon death instrument. How do you decide which is most appropriate for your needs or situation? The first step is to consider your situation. Is your adult child responsible? Can they maintain the deed on their own? Might they have a way to move the mortgage over to their name, or is their credit rating simply too low? All these questions – and more – can be answered by an experienced estate planning lawyer.   

Contact Our Arlington Heights Wills and Trusts Lawyers 

No one likes to think about passing away, which is why Drost, Gilbert, Andrew & Apicella, LLC work so hard to provide compassionate and experienced assistance. Committed to ensuring we exceed your expectations, our Arlington Heights wills and trusts lawyers can examine your situation, advise you of your options, and then assist you in developing creative estate planning solutions to fit your needs. Schedule a personalized consultation to learn more.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Source:

http://homeguides.sfgate.com/can-transfer-deed-house-kids-before-die-50431.html



IRAs and a Living Trust – What Every Grantor Should Know

Web Admin - Thursday, July 13, 2017

Mount Prospect wills and trusts lawyersAfter years, perhaps even decades of pouring money into your individual retirement account (IRA), it only makes sense to ensure it goes to the appropriate party if you do not live long enough to receive all the payments. Unfortunately, transferring an IRA to a living trust can be far more complex than most people realize. The following information can help you better understand how to avoid such consequences. You shall also learn where to find assistance with the process.

The Complicated Nature of IRA Accounts

Created under the Employment Retirement Income Security Act (ERISA) in 1974, IRAs were originally meant to provide employers with a way to offer affordable retirement benefits to their employees (at that time, most did not have the funds to cover a traditional pension plan). Now they are one of the most common types of retirement plans, and they can even be purchased by individuals with qualifying income and credentials.

Unfortunately, there are many rules, exclusions, limitations, and legalities involved with an IRA account – especially when it comes to the transfer or disbursement of the account. For example, IRAs can only be “owned” by the individual that started it. It cannot be transferred to a trust nor can it be owned by a business or other entity. Still, there are ways to transfer an IRA upon death. It just requires some thoughtful planning.

Transferring an IRA to a Living Trust

While one could simply name a beneficiary for their IRA account, some plan owners prefer the increased accountability of a trust. For example, if the grantor has a special needs child with their ex-wife, they may want to ensure that the funds are used to benefit the child directly. Just keep in mind that disbursement to a trust before the age of 59.5 is considered an early disbursement, which may result in an early payout penalty. As such, it is recommended that you speak with an experienced wills and trusts lawyer before naming a trust or changing the beneficiary on your IRA account. An attorney can also help ensure the right verbiage is used in your estate plan (i.e. “pass through,” “designated beneficiary,” etc.) to reduce the risk of any transfer issues.

Contact Our Mount Prospect Wills and Trusts Lawyers

Known for our creative solutions and personalized touch, the experienced Mount Prospect wills and trusts lawyers at Drost, Gilbert, Andrew & Apicella, LLC can assist you with your estate planning needs. Get started by scheduling a consultation. Call our offices at 847-934-6000 today.


About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.



Sources: https://www.forbes.com/sites/deborahljacobs/2014/09/04/iras-and-trusts-what-you-need-to-know/#4fe760a2172b
https://www.wellsfargo.com/help/faqs/investing-ira/http://www.bankrate.com/investing/ira/naming-a-trust-as-your-ira-beneficiary/



Illinois Wills and Trusts – The Use and Limitations of No Contest Clauses

Web Admin - Wednesday, May 24, 2017
Grief from losing a loved one can cause irrational behavior in even the most level-headed of people. When an inheritance is factored into the equation, arguments between family members can become downright volatile. In some cases, things can become so explosive that it irreparably damages relationships. This risk is why many people choose to create wills and trusts; they want to reduce the possibility of family strife. Unfortunately, it does not always work. Miffed family members can still contest a will or trust. An in terrorem provision may help. 

In Terrorem Provisions

An in terrorem provision, or a no contest clause, is sometimes used to discourage the contesting of a will or trust. It specifies that an heir may either lose their inheritance or receive only a nominal amount of money if they contest the validity of their loved one’s will or trust. Unfortunately, it is not always enough of a deterrent, and contests are still possible. 

Contests Can Still Occur

You can take all the right steps and put all the protective provisions in place, but you still cannot completely control what family members do once you are gone. Some may still contest the will, fully knowing they are at risk of losing their inheritance. Granted, individuals with smaller inheritances are far more likely to do so, but even those with a substantial amount to lose may consider the risk worth their potential gain. In some cases, that gain may not even relate to the inheritance; it could, instead, relate to getting “even” with a family member. 

Enforcement of No Contest Clauses in Illinois

An in terrorem provision is not much of a deterrent if it is not enforceable. Unfortunately, the law in Illinois is rather vague when it comes to the enforceability of no contest clauses. At least one court has overruled a no contest provision, stating that the contest was filed in good faith. However, that does not mean that all no contest provisions will be thrown out. Assistance from an experienced attorney can decrease the risk of language issues in your will or trust. As a result, your wishes are more likely to be honored by both your loved ones and the courts. 

Contact Our Arlington Heights Wills and Trusts Attorneys

If you fear family members may try to contest your will or trust and want to reduce the risk with an in terrorem provision, contact Drost, Gilbert, Andrew & Apicella, LLC for assistance. Experienced and dedicated to preserving your estate, our Arlington Heights wills and trusts lawyers will carefully examine your situation to help you develop a creative and comprehensive solution. Schedule your consultation by calling 847-934-6000 today.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.



Source:http://www.actec.org/assets/1/6/State_Laws_No_Contest_Clauses_-_Chart.pdf


A Will and Trusts Lesson from Some of the Greatest Music Legends

Web Admin - Wednesday, April 26, 2017
Illinois wills and trusts attorneysIf there is any one group of people who should have an estate plan in place, it is celebrities. Of course, like most people, celebrities become distracted with life or refuse to face the possibility of their own mortality. Should they continue to do so and pass away, their estate becomes at risk. Take, for example, the issues faced by the families of Bob Marley and Jimi Hendrix. Both were major music icons, both died without a will in place, and both left behind a frustrating mess.

Jimi Hendrix’s Estate

When Jimi Hendrix died in 1970, the entirety of his estate went to his father, Al Hendrix. When Al died in 2002, the estate then went to Al’s step-daughter, Janie Hendrix. Jimi’s brother, Leon, received nothing from the estate. Since then, the family has been in a long, grueling, and contentious family feud.

Some of the beneficiaries had asserted that Janie and Jimi had never had a close relationship and that she had no rights to the estate. There were also concerns over how she had managed the estate. At the end (2004), a judge determined that Janie had mismanaged the estate and breached her duty as a trustee. Even still, Leon received nothing more than the gold record that had been gifted to him by his father years before his death.

Bob Marley’s Estate

Bob Marley never saw himself as a “rich” man. In fact, he claimed not to have much in the way of assets during a 1979 interview with “60 Minutes.” What he failed to understand was that his legend would live on. Without rights to his image, trademark, and personality, the market would become a free-for-all. In some cases, the issue of selling merchandise would go beyond the capital money; it would be a matter of disgrace for those that loved and knew the legend best.

To stop the unabashed and insensitive manufacturing and sale of their loved one’s image, the family had to purchase rights to his image and trademark. Had Marley had the insight to understand the implications of passing away without a will, he might have better protected his family and his legacy.

Using a Will to Protect Your Legacy and Estate

Whether you have a sprawling estate worth millions, a legacy that needs to be preserved or only loved ones that you want to take care of once you are gone, draft a will. Schedule a consultation with the Long Grove wills and trusts lawyers at Drost, Gilbert, Andrew & Apicella, LLC and get started today. Call 847-934-6000.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.



Sources:http://www.billboard.com/articles/news/473231/the-business-of-bob-marley-billboard-cover-story
http://www.cnn.com/2004/LAW/07/13/hendrix/index.html?iref=newssearch
http://www.seattletimes.com/entertainment/music/latest-jimi-hendrix-family-feud-resolved-in-settlement/



VA Benefits and the Transfer of Assets to an Irrevocable Trust

Web Admin - Friday, November 27, 2015

VA benefits and irrevocable trust, Illinois employment lawThe Department of Veterans Affairs (VA) provides our nation’s veterans with important benefits after they have been discharged from service. In order to qualify for those benefits, veterans must meet certain requirements. For some veterans, it may be necessary to transfer assets into an irrevocable trust to lower his or her net worth. 

Qualifying for Pension 

The Veterans Pension benefit is a tax-free, monetary benefit for low-income veterans. In order to qualify, the following requirements must be met: 

1. Veteran must be 65 years of age or older or permanently and totally disabled;

2. He or he must have been discharged under conditions other than dishonorable;

3. He or she must have served, which generally involves a minimum period of active duty service, one day of which was during wartime;

4. Net worth must not be considered too substantial; and

5. Countable family income must be below the yearly limit as set by law. 

Veterans who are concerned about their level of net worth may consider forming an irrevocable trust. By creating an irrevocable trust, net worth can be reduced in order to qualify for the Veterans Pension. The VA does not assess a penalty for transferring assets as long as that transfer occurs prior to filing a claim or notifying the VA of an intent to file a claim. The determination of net worth is subjective—the VA has discretion in determining whether a veteran’s assets are too large to qualify for the Veterans Pension. 

An irrevocable trust can be used to hold assets that are provided by a veteran in order to reduce net worth. Importantly, a veteran claiming benefits (as well as his or her spouse) cannot be an income or principal beneficiary of the trust established in order to obtain VA benefits. This is because the VA requires that the rights to property and income from that property be actually relinquished to be considered a reduction of net worth. 

A second issue relates to whether to form the trust as a grantor trust or a non-grantor trust. The VA compares income reported to it with Supplemental Security Income (SSI) and Internal Revenue Service (IRS) income records through a process called Income Verification Match (IVM). Due to the nature of a grantor trust, there may be a discrepancy between income reported to the VA and income that appears with IRS filings. 

Under a grantor trust, all items within the trust are taxed to the grantor on his or her personal income tax return. Ordinarily, the grantor is the person who funds the trust, which, in this case, is the veteran claiming benefits. The VA may assume that the tax reported on the veteran’s tax return is based on income of the veteran, which may lead to lower (or complete denial of) benefits. Therefore, a non-grantor trust, in which the trust is responsible for any tax, is likely more desirable, in an attempt to avoid this potential issue. 

Forming a Trust 

If you would like more information on the formation of a trust, reach out to a skilled Illinois estate planning attorney today. Our firm proudly helps individuals in the communities of Inverness, Schaumburg, Palatine, Arlington Heights, Kenilworth, Long Grove, Riverwoods, Barrington, South Barrington, and Mount Prospect. We look forward to hearing from you. 

About the Author:

Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.



Source:
http://www.benefits.va.gov/pension/







Capital Gains Tax and Trusts

Web Admin - Thursday, June 25, 2015

capital gains tax, Illinois estate planning lawyerToday, increasing numbers of individuals are turning to trusts as opposed to wills for their estate planning. Trusts are often advantageous over wills because they allow for greater flexibility and control over assets. It is important to know the impact of capital gains tax on the assets that fund a trust.

Step-up in Basis

Capital assets include items like a house, stocks or bonds, and machinery. When one of these items is sold, the difference in the sale price and the original purchase price is considered a capital gain or loss. If an item is sold and a profit is realized, the capital gain is taxed.

If an individual forms a grantor-type trust, all appreciated assets that are transferred into the trust (items like real estate or a stock portfolio) are eligible to receive a step-up in basis upon the death of the grantor. Basis is the cost of the property or asset. A step-up in basis is a readjustment of the value of an asset to its current value for tax purposes upon inheritance of the asset. This is important because it minimizes the beneficiary’s capital gains taxes going forward.

For example, let’s say a grantor purchased an asset for $50 and transferred it to a trust. The grantor’s basis is $50, meaning if the asset were to be sold, the difference between $50 and the sale price would be the amount subject to the capital gains tax. Now, let’s say that at the time of the grantor’s death, the value of the asset is $100. The beneficiary receives a step-up in basis, meaning his or her basis is $100, not the $50 that the grantor originally paid. This is important because if the beneficiary decides to immediately sell the asset for $100, she will not be subject to any tax. Further, any sale in the future after the asset increases in value will be subject to tax on the difference between the sale price and $100, as opposed to $50 if a step-up in basis was not available.

An important consideration is when the step-up in basis is applied. For example, how is the step-up in basis determined if a married couple each owns half of an asset through the use of separate trusts and they die at different points in time? If the deceased spouse’s share is transferred to the surviving spouse, the surviving spouse will receive a step-up in basis. When the surviving spouse dies and the trust is inherited by the beneficiaries, they will also receive a step-up in basis.

Finally, it is important to be aware of the Medicare tax on “unearned” net investment income. This imposes a 3.8 percent tax on the net investment income, which includes capital gains, of joint filers who have a modified adjusted gross income of greater than $250,000 or single filers with an adjusted gross income of greater than $200,000.

Help Forming Your Trust

If you would like more information about forming a trust, you should reach out to an experienced Illinois estate planning attorney today. Our firm proudly represents individuals throughout the northwest suburbs, including areas such as Crystal Lake, Inverness, Schaumburg, Kenilworth, Long Grove, Palatine, and Barrington.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


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