By Derek M. Johnson

        With all the modern technological advances in society, many people are now going “digital.”  That is, many people now: communicate through e-mail, have online financial accounts, receive electronic financial account statements (via e-mail), pay bills electronically, make online purchases, store files, photographs or videos electronically, have social media accounts (e.g. Facebook, Instagram, Pinterest and Snapchat), own electronic assets (e.g., website domain names, virtual currency such as bitcoin, and electronic designs that are subject to copyright, trademark, or patent laws), etc. (collectively, “digital assets”).  While digital assets certainly make life more convenient for users, questions have arisen as to whether and how someone else can access a user’s digital assets when the user is incapacitated or deceased.  These questions are important because the universe of digital assets is growing immensely, and some digital assets can be very valuable (e.g., a website domain name or electronic copyrighted or patented designs). 

        To help address these issues, a Power of Attorney for Property, Will and Trust can provide your loved ones with access to all of your digital assets in the event you become incapacitated or after you pass away.  However, this does not guarantee access.  For example, even if you grant a loved one access to your e-mails in your Power of Attorney for Property, Will and Trust, a loved one may still have to start probate court proceedings to gain access and, even then, there is no guarantee that your loved one will obtain full or partial access.  

        To overcome these hurdles, we recommend using “online tools” - to the extent they are available.  An online tool is an electronic service provided by custodians of e-mails and digital assets that allows users like you to provide directions for the disclosure or nondisclosure of your e-mails and digital assets to your loved ones if you are incapacitated or after you pass away.  Unfortunately, most custodians currently do not offer online tools.  However, there are two notable exceptions: Google and Facebook.  

              • Google’s Inactive Account Manager.  The Inactive Account Manager allows users with Google accounts (including Gmail) to designate specified persons to have access to the user’s e-mails and other digital assets held by Google if the user’s Google-related accounts have been inactive for a specified period of time (e.g., 3, 6, 12 or 18 months).  For more information about Google’s Inactive Account Manager, please visit https://support.google.com/accounts/answer/3036546?hl=en.    

            • Facebook’s Legacy Contact.  The Legacy Contact allows Facebook users to have their accounts “memorialized” (as opposed to deleted) after he or she passes away and to designate another person to manage the user’s memorialized account.  However, the Legacy Contact does not allow the designated person to log into your account, remove or change past posts, photos or other things shared by you, remove your friends, or read any of your messages.  For more information about Facebook’s Legacy Contact, please visit https://www.facebook.com/help/1568013990080948 and https://www.facebook.com/help/103897939701143?helpref=faq_content.
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If providing access to your e-mail and other digital assets when you become incapacitated or after pass away is important to you, then we recommend that you use all available online tools.

Another New Year is underway, and it’s time once again to share with our clients some information about changes in the estate tax law, and some other ideas and recommendations that may be of interest to you. See below for information and our recommendations regarding:
 

•           Current Gift and Estate Tax Exclusions;
•           Avoiding potential Illinois estate tax if you’ve established residency in another state;
•           Updates to documents, including:
  •           Avoiding Illinois estate tax on first of married couples’ deaths;
  •           Simplifying estate plans for married clients with total estate value of $4,000,000 or less;
  •           For all clients, “digital asset” access by your POA agent, Executor and Trustee; and
•           Gifting opportunities prior to 2026 for clients with larger estates.

 
Current Gift, Estate and GST Tax Exclusions.  The annual gift tax exclusion remains at $15,000 for 2019; the index for inflation resulted in an increase in the lifetime gift and estate tax exclusion and the GST tax exclusion to $11,400,000 in 2019.
 
Primary Residence Established in Another State.  Some of our clients are reading this while sitting poolside, enjoying the sunshine, in a warm state, far from Illinois. More and more of our clients are establishing residency elsewhere, but still maintaining a residence or ownership of other real estate here in Illinois.  We are thinking of ways for our “non-resident” clients to alleviate the potential Illinois estate tax that may be due on death.  If your total estate is worth $4,000,000 or more, even if your Illinois real estate is worth less than the Illinois $4,000,000 estate tax exclusion, there may still be an Illinois estate tax due.  The Illinois estate tax calculation takes into account the value of your entire taxable estate wherever located; the Illinois estate tax is then calculated on that entire value; and the resulting tax amount is pro rated based on the ratio that the value of your Illinois real estate is to the value of your entire estate.  This can be remedied by changing the ownership of your Illinois real estate.  Please contact our office to discuss your particular situation, and we will recommend one of several options to move your Illinois real estate out of the reach of the Illinois estate tax.
 
Updates to Documents.  It’s always recommended to have your estate plan reviewed periodically.  If you haven’t reviewed your documents with us in five (5) years or more, it’s time.  Here are some of the updates that have been most commonly needed by clients in the past several years:
 

• Since 2009, it has become important to include in married clients’ documents language regarding the Illinois “QTIP” election, to ensure that there will not be a potentially large Illinois estate tax due upon the first of the spouses’ deaths, due to the inclusion of outdated formulas in documents prepared prior to 2005 or so.

 

• Since the federal estate tax exclusion increased at the end of 2010 to $5,000,000*, and increased again at the end of 2017 to $10,000,000*, we have been able to simplify many of our married clients’ estate plans by eliminating unnecessary splits of the assets into separate “Family” and “Marital” Trusts, making it easier and more flexible for the surviving spouse to manage and use the assets after the first death.

 

• In 2016, Illinois passed the Fiduciary Access to Digital Assets Act, which adopted law regarding the authority of an agent under a Power of Attorney, a Trustee, or an Executor to access your “digital assets” (your on-line accounts, e-mail accounts, social media accounts, etc.).  If your documents do not include that authorization, contact us to update them.

 
Gifting Extra Exemption Amount Through 2025.  The increased gift and estate tax exclusion amount of $10,000,000* is in effect through 2025.  It is scheduled to revert to $5,000,000* on January 1, 2026. The IRS issued Proposed Regulations providing that any gifts made in excess of the current exclusion amount will not be “clawed back” if the exclusion amount does in fact drop back down to the lower amount.  For clients with larger estates, you have an opportunity to make gifts  to reduce the potential estate tax on your estate, utilizing the extra $5,000,000 of gift tax exemption prior to the end of 2025.  Contact us to discuss your options.
 
*The federal estate and GST tax exclusion amounts are indexed for inflation annually.
 
Please contact our office any time, to discuss these or other questions or concerns.  We look forward to hearing from you!

By Derek M. Johnson

It’s a good idea to have your estate planning documents reviewed every 5 to 10 years or if there is a significant change to your family situation or finances, or the law. The importance of having an estate planning attorney review your current estate planning documents can the mean the difference between the smooth administration of your estate and trust when you pass away and unintended consequences such as property being left to someone you no longer intended to receive property, property being tied up in a needlessly complex estate plan or, even worse, the imposition of estate taxes. Case in point, a married couple had estate planning documents (including revocable trusts) prepared for them back in 1985 (for those of you that can’t remember back that far, that was the year the Bears went 15-1 and won the Super Bowl in 1986). Unfortunately, the husband passed away in 2016 and never had his documents changed during those 30+ years. When the family came to us to help administer his estate and trust, the husband’s estate owed $300,000 in Illinois estate taxes! To make matters worse, if the husband had his estate planning documents reviewed prior to his passing, his documents (in particular, his trust) could have been amended to avoid Illinois estate taxes entirely!
 
Fortunately, we were still able to help the family avoid all Illinois estates taxes through a process known as decanting. Briefly, decanting allows the trustee of a trust under limited circumstances to transfer trust assets to a new trust. In this case, the husband’s trust qualified for decanting and we drafted a new trust to which assets from the husband’s trust were transferred to avoid the Illinois estate taxes. I know. I’m just as surprised as you are, but the State of Illinois allows trusts to use the decanting process – if the trust qualifies – to avoid Illinois estate taxes.
 
Bear in mind, though, that decanting is allowed only under limited circumstances and should not be relied upon as a cure for outdated estate planning documents. Rather, the better and more cost-efficient option is to have your estate planning documents reviewed every 5 to 10 years or if your family situation, finances or the laws change; and, if necessary, amend your estate planning documents. No one has a crystal ball and can predict what will happen as life goes on. People go through significant changes throughout their lives and estate plans should likewise be amended to reflect those changes. An estate plan should not be viewed as something that is static and never needs to change. Rather, estate plans should be viewed as fluid and flexible – something that can and should be changed if your unique family and financial situation, or changes in the law, call for it.

by Kim Coogan

The latest from Hinsdale Hospital Foundation's series on gift and estate planning topics.

Top Ten Ways to Simplify Your Estate Plan

Things change. Your circumstances and those of your family may have changed over the past several years. And estate tax laws have certainly changed. Our Planned Giving Council's Kimberly Coogan, Esq., offers the following suggestions to help you keep up with these changes and, most importantly, make things easier for your surviving spouse or family members. Here's her "Top Ten List" of opportunities to simplify your estate plan:

Quick and Easy

10. Update your Executor and Trustee appointments. Things do change. Avoid unnecessary cost and wasted time later by making sure these parties are you're the parties you'd choose today.

9. Review your Powers of Attorney. Perhaps your children are now old enough to be named to make financial and health care decisions for you if you become unable to act for yourself.

8. Confirm your IRA beneficiaries. If your children were younger the last time you signed IRA beneficiary designation forms, or if you named your trust as the beneficiary of your IRA, you may need to change the wording so your beneficiaries can take advantage of the inherited IRA rules with the fewest number of "hoops" to jump through to achieve the most income tax advantage.

7. Revisit your asset titling to ensure your assets pass as simply as possible to your beneficiaries. If you have a trust, make sure your after-tax accounts and real estate are titled in the trust. If you don't have a trust, you might consider ways to keep your estate out of probate. This will save time and money for your beneficiaries.

A Little More Detailed

6. Learn about the new estate tax laws, and how they affect your estate plan. If your estate is $4.0M or less, the tax formulas used in your old documents may result in unnecessary complication after your death. (Look at these changes over past 14 years: The federal estate tax exclusion amount was $675,000 in 2001; it is $5.34 million in 2014. Illinois passed its own estate tax in 2003; currently it applies to estates over $4.0 million.)

5. Would a TODI work for you? A "Transfer on Death Instrument" is a document that names a beneficiary to whom your primary residence will pass upon your death. This is a new Illinois law, providing an alternative for keeping your residence out of probate.

4. Consider using disclaimers to keep it simple. Providing for everything to pass to your surviving spouse unless he or she signs a "disclaimer" after your death, is one way to build flexibility into your estate plan and yet keep things simple for the surviving spouse. Your Will or trust agreement would provide that the disclaimed portion be held for the surviving spouse's benefit, but the disclaimed portion will not be subject to estate tax on the second death.

3. Does portability help in your situation? Portability, a provision of the 2010 federal tax act, allows the surviving spouse to file an election to retain any unused estate tax exclusion amount from the predeceased spouse's estate. Consult an attorney before relying on portability, since it does not apply to the Illinois estate tax, and presents certain other potential pitfalls.

2. Does generation-skipping transfer tax ("GST" tax) planning still make sense for you? If your old plan includes GST exemption planning, you may want to revisit it. The GST exclusion was much lower years ago, so avoiding estate tax in your children's estates may not be a priority now.

Easiest of All: Doing Good

1. Consider lifetime gifts to charity if your estate is potentially subject to estate tax. You'll make a difference for the charity of your choice and might be able to get the value of your estate below the estate tax exclusion amount. That means not only avoiding the tax, but saving your beneficiaries from having to file your estate tax return. If your age is over 70 ½ , you may roll your annual IRA required minimum distribution over to a charity, thereby avoiding paying any income tax on your IRA RMD.

These are just a few suggestions for ways in which the new estate tax laws, and other new developments in the law, afford you the opportunity to simplify your estate plan. Please contact your attorney for more detailed information as it applies to your personal situation.

by Carrie Buddingh

Crisis averted!  Well, for the time being at least.  As you probably know, on January 1, 2013, Congress passed the American Taxpayer Relief Act of 2012 (“ATRA-2012"), which prevented our nation from going over the “fiscal cliff.”  You may now be thinking, “What does this new law mean to me and my estate?”  “Has anything changed at the state level?”  Or even, “I thought the gift and estate tax law just changed in 2010.  What changed this time?”  You are in luck! Below please find a concise description of the current changes in the law that took effect January 1, 2013:

• The estate, gift, and generation-skipping transfer (“GST”) tax exemptions have been permanently increased to $5 million (adjusted for inflation).  That means that the exemption amount for 2013 is now $5.25 million.  However, the top estate, gift and GST tax rates have also been increased to 40%.
  
• For decedents who pass away in 2013 or later, the Illinois estate tax exemption has been increased to $4 million.  Please note that Illinois does not currently tax any gifts (regardless of their size) made by an individual during his or her lifetime.
  
• The "portability" provisions introduced under the 2010 Tax Relief Act have become permanent as well.  Portability allows a surviving spouse under certain conditions to elect to use the unused portion of the predeceased spouse’s federal exclusion amount for estate or gift tax purposes.  Please note, however, that no such provisions apply under Illinois law.
  
• ATRA-2012 extends the provisions that allow individuals age 70 ½ and older to make tax-free IRA distributions directly to a charity up to $100,000 in lieu of taking a required minimum distribution (“RMD”) in such amount and paying the resulting income tax.  This is often called qualified charitable rollover (“QCR”).
  
•  In addition, for a limited time, Congress is allowing individuals to reclassify gifts made to a qualifying charity as a 2012 QCR if such gift is made prior to February 1, 2013.  Thus, for example, if an individual took an IRA distribution after November 30, 2012 and then paid it to a qualified charity before February 2013, then the individual can claim such payment to the charity as a QCR for 2012.
  
• Not part of ATRA- 2012, but effective January 1, 2013 under the pre-existing gift tax law, the gift tax annual exclusion is $14,000 per donor per donee. The GST tax annual exclusion is also $14,000 for “direct skip” outright gifts to grandchildren or others more than one generation removed from the donor.
  
• The “step-up” upon death of the cost basis of a decedent’s assets continues to apply.