Looking back at 2011: all the rest

In Part 2 of our year-end review, we discussed the new Power of Attorney statute.  Next up are some changes affecting couples.

Tenancy by the Entirety

The first major change of 2011 provided new options to married couples in how they own their home.  Tenancy by the entirety was a special protection available for the marital residence.

Normally, a person’s house is completely exposed to their creditors apart from a $15,000 homestead exemption.  But married couples can own their primary residence (and only their primary residence) in tenancy by the entirety.

Tenancy by the entirety works the same as joint tenancy, meaning that when one spouse dies the other spouse inherits the entire property.  But it also adds some major creditor protection.  A home held in tenancy by the entirety can’t be lost to creditors of only one spouse.

Of course, creditors try to find a reason (any reason!) to drag the other spouse into the picture.  Even so, it’s a very strong protection.

Prior to 2011, tenancy by the entirety was only available to married couples who owned their homes directly or via a land trust.  Owning a home directly exposes the home to probate.  Land trusts were a common solution to the probate problem, but that usually meant paying annual fees to a bank to maintain the land trust.

Starting January 1, 2011, tenancy by the entirety protection became available to couples who want to own their home in a traditional revocable living trust.  It’s not automatic and it does not apply to people who transferred their home into their trust prior to January 1, 2011.  The trust and the deed need to be drafted with tenancy by the entirety in mind.

The new statute provides a useful alternative for married couples who want to: (1) hold their home in tenancy by the entirety; (2) keep their estates out of probate; and (3) avoid paying a bank for an expensive land trust.

Civil Union Act

On June 1, 2011, the Illinois Religious Freedom Protection and Civil Union Act went into effect.  That law made Illinois just the sixth state in the nation to recognize civil unions for same-sex couples. Civil union partners have the right to be treated as a spouse under the Probate Act.  They can also hold their primary residence in tenancy by the entirety (previously granted only to married couples—singles and same-sex couples were out of luck!).

While the Civil Union Act provides certain safeguards, its benefits don’t extend to every aspect of estate planning.  And at best, it means that same-sex couples get the same bad “default” Illinois estate plan as traditional married couples.  So it is important for same-sex couples to have a comprehensive estate plan that addresses their property and health care.

To 2012…and Beyond!

Those are the major stories from 2011.  There’s more to come for 2012, and we’ll be sharing it with you as it happens.  We look forward to a great year of serving you!

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Looking back at 2011: new powers of attorney

In Part 1 of our year-end review, we discussed the reemergence of the Illinois estate tax.  Next up are the changes to powers of attorney.

A new version of the Illinois Power of Attorney Act went into effect July 1, 2011.  The law changed the rules and statutory form for the Power of Attorney for Property and the Power of Attorney for Health Care.

No doubt, you are probably thinking, “what happens to the powers of attorney I signed 1 (or 2, 5, 10) years ago?”  Don’t worry.  If you have existing powers of attorney, you are not required to rush out tomorrow and sign new ones.

Of course, if they’re more than a few years old, you may still want to get them updated.  Banks sometimes question outdated powers of attorney (those more than 3 years old).  And if you’re over the age of 55, you’ll definitely want to consider a power of attorney with long-term care and elder law provisions (the statutory form which most people have does not address these issues).

While there are many technical changes to the Power of Attorney for Property, the most noticeable change is the ability to name multiple people to act as your agents simultaneously under a Power of Attorney for Property.  Your panel of agents can then act on your behalf by majority vote if you become incapacitated.

The new Power of Attorney for Health Care also provides broader access by your agents to your health care information if they need to act under the power of attorney.  These changes were made necessary by the HIPAA privacy rules that were published in August, 2002.  If you have a separate HIPAA authorization as part of your estate plan (and you do if we drafted your plan), you may not need to update your Power of Attorney for Health Care.

From a legal standpoint, I would describe the changes as a “solid upgrade”.  Something to be aware of, but not likely creating any need for action on your part—unless you were sorely lacking in the power of attorney department to begin with!

In Part 2, we’ll fill you in on the rest of the changes from 2011 and look ahead at what to expect in 2012.

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Looking back at 2011: the Illinois estate tax resurfaces

The past year ushered in many changes to the Illinois estate planning landscape.  There’s a lot to cover, so I’m breaking it into three posts.  First up is the Illinois estate tax.

The Illinois estate tax rules have caught many people by surprise.  So much attention has been paid to the federal estate tax (which currently has a $5 million exemption) that many have forgotten that Illinois has an estate tax too.

Under the 2009 and 2011 Illinois estate tax rules (there was no Illinois estate tax in 2010), a person dying with an estate of $2.5 million would owe no federal taxes.  But their estate would have to write a $128,518 check to the Illinois Department of Revenue.  That big number often shocks people who think of their estates as “just a little bit over the $2.0 million limit.”

Good news arrived last week, though, for Illinois families.  On December 20, Governor Quinn signed a law raising the estate tax exclusion (the minimum estate size before Illinois estate taxes are due) from $2.0 million (currently) to $3.5 million for 2012 and $4.0 million for 2013 and beyond.

Too many times this year I’ve had clients ask whether they should consider moving to another state to avoid Illinois estate taxes.  By narrowing the gap between the Illinois and federal estate tax rules, fewer families will need to consider advanced planning techniques.

But…the good news from Illinois is tempered by the uncertainty behind the federal estate tax rules that is still hanging over everyone’s heads.  The federal estate tax exemption for 2012 is currently $5.0 million, but it drops back down to $1.0 million for 2013 and beyond.  Several proposals have been made in Congress for a permanent solution.  So stay tuned!

In Part 2, we’ll fill you in on the changes to powers of attorney.

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Remembering Steve Jobs

It was with great sadness this week that we learned of the passing of Steve Jobs.  We have been using Mac computers in our firm since day one.  In some senses, using Macs has been more difficult than if we had chosen Microsoft Windows.  It’s always easiest to go with the flow.

Our choice to use Macs was about more than just what software our computers were using.  It impacts how we do everything that we do.

In an interview with Business Week in May, 1998, Steve explained his philosophy:

“That’s been one of my mantras – focus and simplicity. Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.”

And during an interview with Fortune magazine in 2000, Steve said:

“We don’t have good language to talk about this kind of thing,” Mr. Jobs replied. “In most people’s vocabularies, design means veneer. It’s interior decorating. It’s the fabric of the curtains and the sofa. But to me, nothing could be further from the meaning of design. Design is the fundamental soul of a man-made creation that ends up expressing itself in successive outer layers of the product or service. The iMac is not just the color or translucence or the shape of the shell. The essence of the iMac is to be the finest possible consumer computer in which each element plays together. … That is the furthest thing from veneer. It was at the core of the product the day we started. This is what customers pay us for — to sweat all these details so it’s easy and pleasant for them to use our computers. We’re supposed to be really good at this. That doesn’t mean we don’t listen to customers, but it’s hard for them to tell you what they want when they’ve never seen anything remotely like it.”

We have tried to bring that same sense of design to our practice.  Real design that makes things simpler and more understandable—not just decoration.  To “Think Different”.

The feedback we have received from our clients suggests we have been quite successful in that.

But we know that we have only scratched the surface.  And we say thanks to Steve Jobs for showing us just how deep that hole goes.

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Help for those BIG long-term care bills is about to get harder

Three weeks ago (on Friday the 13th no less), the Illinois Department of Healthcare and Family Services (HFS) unleashed new Medicaid rules.  The rules came about because of the federal Deficit Reduction Act of 2006 (called “the DRA”).  The name should clue you in to the fact that the proposed rules aren’t designed to improve care, just to reduce spending.

With the increase in life expectancies and rise in disabling conditions like Alzheimer’s disease, extended stays in long-term care facilities are more and more common.  And the result is thousands of seniors and their families facing what are often crippling long-term care bills.  What is so sad is that many families don’t know that help is available from Medicaid.

The Medicaid eligibility rules are tough, but it is not something you should think of as “only for the poor.”  Seniors frequently qualify for Medicaid while protecting thousands of dollars in assets for themselves, their spouses, or their families.  Smart planning makes all the difference because it helps pay for many “extras” that Medicaid and Medicare do not cover.  I am passionate about helping families escape from that feeling of hopelessness every time the long-term care bill comes.

The rules HFS announced are not the final rules.  There is still a period for public comment and changes.  But they do give us an inside look into the direction Illinois is heading with its implementation of the DRA guidelines.

There are a few important things to take away from the proposed rules:

  • Crisis planning to protect assets and qualify for Medicaid will still be possible
  • Advance Medicaid planning will become even more valuable to protect your hard-earned assets (best for people who are completely healthy but looking forward 6-10 years)
  • Medicaid will be giving additional asset protection advantages to people who have long-term care insurance in place, making the insurance doubly useful (but it has to be the right kind of policy, not just any old policy will do!)

As the rules move through the process, I will keep you updated about any developments.  But consider this your “heads up” that changes are on the way!

The good news is that there’s still time to get an application in under the current Medicaid rules.  So if you know anyone who is in a long-term care facility or think may need assistance soon, tell them to call my office.  We may be able to help.

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