Core Estate Planning Tools Illinois Residents Should Know

When people picture estate planning, they usually just picture a will explaining where their assets will go, and that’s it. Now, that’s not false, but it’s not all there is to estate planning. Estate planning covers not just where your assets go, but also your health, protecting your family, your finances, and your privacy. Estate planning has tools to ensure that if you ever fall ill or get into an accident, your health will be handled the way you’d want it to, as well as your bills and mortgage. If you have minor children, you can ensure they’ll be protected if you ever are unable to be there for them. If you have loved ones with special needs, you can create a legal structure to ensure they receive their government benefits and money without disqualifying them.

Estate planning protects every aspect of your own life as well as your family’s. It goes beyond naming who will receive your assets. 

The Tools Involved in Estate Planning and How They Work

There are some core tools used in estate planning, each with different purposes and its own perks. 

Trusts (Revocable Living Trusts and Irrevocable Trusts)

Trusts work by transferring your legal ownership of your chosen assets over to the trust itself, where it’s then protected until you pass away, and distributed as you wish. One major thing about both a revocable and an irrevocable trust is that they bypass probate. Probate is the court-supervised process used when someone doesn’t have an estate plan (or only has a will) to validate assets and then distribute them. The problem is, probate takes from 6 to 18 months to finalize, and during that time, your family won’t be able to access a penny of what you wanted to leave them. It can also drain your savings, due to probate court costs, and leave all of your information public. So, with a trust, your family will not have to go through probate, and can instead inherit assets almost immediately after your passing. You can also stagger out when your beneficiaries will inherit assets and how so (for example, you can leave money for your son to inherit once he has finished college). 

A revocable and irrevocable trust works in different ways, despite both bypassing probate entirely. 

A revocable living trust is flexible, as it suggests in the name. You can update it (move assets in and out of it during your lifetime, change beneficiaries) or even cancel it entirely. It’s entirely in your control. If you become incapacitated (unable to act for yourself), your chosen successor trustee can immediately take over management of the trust assets and speak on your behalf, avoiding a court-supervised guardianship. 

Now, an irrevocable trust works less flexibly, but with immense power. You permanently transfer your ownership over to it, and you cannot revoke it, update it, or change anything within the trust. That rigidity means everything within the irrevocable trust will be untouchable by creditors, and you can avoid extra federal and state taxes. Everything within your trust will stay exactly as it is until it gets distributed. If you’re thinking about Medicaid planning but don’t want to spend down your assets, placing them into an irrevocable trust 5 years before you apply will ensure you stay eligible for your benefits. 

Advanced Healthcare Directive

What would happen to you if you had a stroke, got into a bad car accident, or fell into a coma? What would happen to you? What kind of medical care would you want? If you were in a vegetative state, would you want artificial nutrition and to be kept alive, or would you want the “plug pulled” if there wasn’t a guarantee you’d come back? An advanced healthcare directive is a set of legal documents that protects you if you're ever in a medical situation where you can't speak for yourself. It typically includes three tools: a living will, which tells doctors what treatments you do or don't want; a healthcare surrogate designation, which names a trusted person to make medical decisions on your behalf; and a do-not-resuscitate order (DNR), which is optional, but specifically instructs medical staff not to perform CPR if your heart or breathing stops. It ensures your voice is always respected. Without an advanced healthcare directive,  your family will be left in a situation of choosing your life and health. That’s something almost nobody wants to do.

A Last Will and Testament

This is the famous one, and it is very helpful to have, even with a trust. A Last Will and Testament is the only place where you can name a guardian for your minor children. If you have minor children and don’t designate someone you trust to be their guardian, and you happen to become incapacitated or pass away, the courts will choose who your kids end up with. A Last Will and Testament is also a good way to designate who will inherit your assets; it does go through probate, but it does help guide the courts a lot through it, and makes the entire process smoother. 

Power of Attorney 

What would happen to you if you became incapacitated and still had bills to pay, a mortgage to keep up with, or if you were in the middle of a legal crisis? Someone you trust will need to be able to pay your bills, access your bank accounts, manage your property, and make financial or legal decisions on your behalf. This is what a power of attorney does: it allows you to assign someone of your choice to speak on your behalf and make these decisions for you.

We hope this article was of use to you. If you have further questions, feel free to contact us for more information.