Gullberg & Box

WILLS - BASIC CONTROL!

A basic Will is affordable. Considering what it does for your family, there is no expenditure more important. Your Will can direct where the money and property, of all kinds which you hold in your name, will go when you die. If you don't have a will, the law of the State will direct where your assets go. The law of the State may be different from what you want or expect.

In general, if you leave both a spouse and one or more children surviving you, and you don't have a Will, your spouse would receive 1/2 of your estate and the children would receive the other 1/2 to be divided among them. Children of half-blood share equally with children of whole-blood. A complete explanation of the law of inheritance absent a valid Will is beyond this discussion; suffice it to say that a multitude of unintended consequences can and do occur in the estates of those who die without a valid Will.

Just as importantly, your Will can direct who will be in charge of your estate. If you do not have a Will, a court will have to appoint your executor. This process will cause unnecessary legal fees, other costs, and delays in distributing your estate, and if every one of your potential heirs does not agree, this process can be messy and time consuming.

If you have minor children, your Will can appoint a guardian for your children, should the need arise. This is probably the most important thing a Will can do to protect your children. If you do not appoint a guardian in your Will, your surviving family and friends will get together and make a recommendation to a judge, who will appoint a guardian the judge thinks appropriate. It may be a family member, but it could also be a stranger. If you appoint a guardian in your Will, you can avoid this unnecessary uncertainty in your child's life. If your child stands to inherit assets from your estate, you can make sure the guardian is a person who will not only nurture the child, but also handle the assets with the child's best interest in mind.

The cost of a basic Will in our office is normally $250. The basic Will appoints an executor, guardian, and makes a general distribution according to your desire between your spouse and children. More complicated Wills take more time, resulting in additional fees.

TRUSTS - BETTER CONTROL!

A Revocable Living Trust can easily avoid all of the costs, delays, and publicity of probate.

Under a Revocable Living Trust, all of your assets held in the name of the trust, are exempt from probate.

HOW THE REVOCABLE LIVING TRUST WORKS:

During your lifetime, you are the trustee of the trust, and you have the complete right to revoke or amend the trust at any time. Consequently, for all practical purposes, you control your property and the trust just like you did prior to making the trust. For this reason, the Internal Revenue Service does not require a separate tax return for the trust, and if you have a senior citizen or other real estate tax exemption on your home, you remain entitled to it. Under State law, however, the law recognizes the Revocable Living Trust as a separate and distinct person from you, individually. At the time of your death, the trust continues on in existence and a new trustee who you have appointed an advance, for instance your wife or husband, takes over, reads the trust, and distributes the assets as you directed. It is as simple as that. The only catch is that you have to spend a little bit of time making sure that all of your important assets are placed in the trust to start with. It only works for assets held in the trust. Our assistants routinely help people make sure all their assets are held by the trust.

In the event that you forget to transfer some assets into the trust, or decide it would be impractical (most people do not transferred their automobile into the trust), we routinely prepare what is called a "pour-over" Will which simply directs your executor to take what ever assets are in your name at your death and place them in the Revocable Living Trust.

Your estate plan for the distribution of your assets, which would otherwise be in your Will, is located in your Revocable Living Trust.

Our normal fee for a simple Revocable Living Trust and Pour-Over Will is $500. The basic Revocable Living Trust and Pour-Over Will appoints a Trustee and successor Trustee, Executor, guardian, makes a general distribution according to your desire between your spouse and children, and includes a provision for you to distribute personal effects to the beneficiaries you desire, and even change that from time to time yourself. More complicated estate plans take more time, resulting in additional fees. For many people, the additional cost of the Revocable Living Trust will pay for itself many times over at the time of their death and be of great benefit to their family and beneficiaries.

FARMS AND SMALL BUSINESS - ESSENTIAL CONTROL!

There is a common perception that the federal estate tax has been scheduled for repeal and that advanced estate planning is no longer necessary for most small business owners. Unfortunately, this perception will probably lead to very expensive mistakes which will seriously affect a farm and small business owner's heirs.

Actually, the only year that the estate tax is repealed to is the year 2010. In 2011, the federal estate tax will automatically be back in existence as it was prior to 2001, with a federal and state tax exclusion of $1 million. Furthermore, the current step-up in basis provision to fair market value will be limited beginning in 2010. Therefore, the heirs of a farm or a small business owner who must sell, or decide to sell the farm or business, may be hit with an additional tax - the federal capital gains tax (computed on the difference from the fair market value less the basis of the inherited property).

If all of that is not enough to make a small business owner a believer in advanced estate planning, consider also that every time Congress introduces spending legislation it also needs to provide a way of paying for it by either a spending decrease (almost never) and a tax increase (most always). This means there are many proposals for tax legislation. It seems that the ever-popular focus of tax legislation is "make the rich pay". It is also true that because of the "smoke and mirrors" way the federal estate tax temporary breaks were enacted, States are losing money they previously received from credits from the federal government for a portion of estate taxes paid by the State's residents. As a result many states have moved to modify their own estate or inheritance taxes to make up the lost revenue. The bottom line is, the estate tax breaks are going away.

Our emphasis is to use the tried and trusted provisions of advanced estate planning to minimize estate taxes. These include assuring that farming operations qualify for the 2032A valuation. In appropriate cases we have used land trusts, limited partnerships, and corporations for gifting of fractional interests to heirs while retaining control of management. These techniques can reduce the value of the estate for federal estate tax purposes by not only the amount of the gift(s) but also for the reason that the ownership is fragmented, so that the majority owner's value for estate tax purpose is somewhat less than his/her value figured by multiplying his/her percentage by the total value of the farm or business. Life insurance is a necessary estate planning tool for most farm and business owners. This need increased in 2004 with the repeal of the family-owned business exclusion - worth $650,000 per family owned business. Just buying life insurance without careful planning, however, can be akin to shooting oneself in the foot - it can easily increase the estate tax burden. The bottom line - farm and small business owner's need a dedicated team of attorneys and life insurance professionals to protect their business from burdensome estate taxes.

425 West Walnut, P.O. Box 340 Kirkwood, Illinois 61447 (309)768-2015