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Park Ridge Estate Planning Law Blog

What you can learn from Michael Jackson's estate planning mistake

The larger an estate is, the more prone it will be to errors and mistakes due to its complexity. Nevertheless, you'd think that a man like Michael Jackson would create the most rock-solid estate possible, but the King of Pop made a big mistake in his estate planning that everyone can learn something from.

Let's see what we can learn from Michael Jackson's estate planning mistakes.

How much will I pay in federal estate taxes?

Not too long ago, there existed the risk that much of your loved one's estate would get eaten up by the federal "death tax." However, large exemptions currently exist that protect the vast majority of estates from paying federal estate taxes. Let's take a closer look at this exemption to determine how much -- if anything -- your estate may need to pay after you die.

The current federal estate tax, or "death tax," exemption is set at $5.49 million. That means, if your estate is less than $5.49 million, the entirety of your estate will be exempt from federal estate taxes. Most estates will therefore be exempt from the federal estate tax.

What's a family limited partnership?

Large estates run the risk of getting hit with serious tax liabilities related to federal estate taxes. Even if the estate planner wants to give his or her wealth away before death, it could trigger gift tax liabilities. However, creating a family limited partnership (FLP) could be one way to bypass many common estate-related tax liabilities.

An FLP allows the estate planner to protect his or her wealth while staying in control of his or her assets. This estate planning strategy will treat your estate almost as if it were a business, with general partners and limited partners. Often, both parents will be general partners and the children will be limited partners. The general partners will manage the assets and make decisions about investments while the limited partners will maintain an ownership interest and share in income but may not have any control.

Holographic wills: One of the easiest wills to challenge in court

When a will is "holographic," it means that the will was handwritten and/or unwitnessed. This means that the testator may have written the will by hand in his or her own handwriting, and then signed the will without proper witnesses. Alternatively, the will may have been typed up and signed, but not in front of proper witnesses.

Holographic wills are some of the easiest estate planning documents for disgruntled heirs to challenge. For example, an heir might challenge the will and say that the testator in question didn't write the will by showing evidence that the handwriting doesn't belong to the testator. Alternatively, the holographic will could be discredited as a result of not having the appropriate witnesses.

Know the purpose and protections trusts can give your estate plan

When you are creating an estate plan, you might realize that you have to create trusts to get the assets disbursed in the way you want. Once you come to this realization, you will have to determine what type of trust you need to establish. This is a big decision that you need to make, because different trusts have different purposes and offer different protections.

Some people are concerned about creditors being able to come after their assets. An asset protection trust can help to prevent this from occurring. These trusts are irrevocable, so make sure that you understand how placing assets in this type of trust will impact you and the beneficiaries.

3 common estate planning mistakes

You know that quote that starts with, "The best-laid plans of mice and men..."? This quote can be used to describe a lot of Illinois residents' estate plans. Many estate plans are well-intentioned but, at the end of the day, they lay in waste and ruin and never serve to carry out the original goals of the person who created the plan.

This is often because estate planners who don't hire lawyers, or who leave their estate plans unattended and unreviewed for long periods of time, are not informed enough to avoid common mistakes. Here are few of these mistakes that have in many cases rendered an estate plan completely unworkable:

Should my fiance and I sign a prenuptial agreement?

A prenuptial agreement comes with numerous benefits. In fact, you might argue that -- given the high chance of divorce these days -- a prenuptial agreement is just as important as an estate plan.

No one wants to admit that there's a chance they could ever get a divorce, and signing a prenuptial agreement seems to imply a lack of faith in one's marital union. However, if you ask the average Illinois resident who has signed a prenuptial agreement about their experience, they will usually say the opposite -- that the process of creating a prenup actually strengthened their marriage.

What is testamentary capacity?

The legal term "testamentary capacity" refers to the capacity of an individual to draft a will for him or herself. When someone lacks testamentary capacity, a court will render any will that he or she drafted and signed is not valid. A minor, for example, who is under the age of 18, does not have testamentary capacity to draft a will. Nevertheless, in some circumstances, if the minor is married or in the military, he or she might be able to legally formulate a will.

Adults in Illinois and the rest of the United States benefit from the presumption of testamentary capacity. That said, a lawsuit could be filed by someone who believes that a will that was drafted and signed by a loved one without testamentary capacity. These challenges usually get filed by a family member who was poorly treated by a will that was potentially drafted by someone suffering from a lack of mental capacity -- perhaps due to dementia, senility, influence by a substance or another reason.

Should you create a trust for your favorite pet?

She cuddles up to you every single night providing a level of companionship that's deeper than anything you've experienced with a human being. She knows when you need her support and you know when she needs yours. It just works: Your pet is the best friend you've ever had.

Unfortunately, one of the saddest parts of owning a pet is the day you'll say goodbye because of the end of her life, or the end of yours. Unlike many pet owners, if you're getting older, you might be worried that your pet will live longer than you -- and you might be wondering who will take care of her when you're no longer there to comb her hair and cook her favorite snacks.

What should I know about real estate appraisal?

One of the most important steps following the death of a loved one is the organization of his or her estate. Through probate proceedings, potential heirs -- as well as creditors -- will have the chance to step forward and assert their rights to receive payment for debts, and ultimately to receive their inheritances after the debts have been paid. During this probate process, the estate will need to be valued and this could involve determining the value of real estate property owned by the estate.

What follows are some vital points that every estate executor should know about real estate appraisal:

  • Only use an appraiser who has been licensed by the state of Illinois, or has been licensed by the state in which the specific piece of property is found.
  • Never use an appraiser who is a family friend or known to any heir of the estate. The appraiser must be a neutral third party, and he or she cannot have any financial or friendship connection to the estate or its beneficiaries.
  • The property that you're having appraised will be referred to as the "subject property."
  • Once the appraisal is complete, you will receive a detailed report that shows information regarding a thorough on-site evaluation and an evaluation of local markets and sales data that affect the current price of the property.
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