Tag: Andrew Szocka

What Is a Spendthrift Trust in Illinois?

Posted May 23, 2022 by Law Office of Andrew Szocka

If you have a relative who is bad with money but needs support, you may want to form a spendthrift trust. Many people have someone close to them who cannot manage their own money. A relative may have a gambling problem, have a mental impairment, have a lot of debt, or just need help handling finances. You might be surprised to learn that estate planning could allow you to provide for and protect a family member who is like this.

The Perils of Supporting a Family Member Who Is Bad with Money

You may think that giving money outright to a relative is the best option, even if he or she is bad with money. Or you might want to put money in an ordinary trust for the relative’s benefit. Neither of these methods are usually your best option for a few reasons:

  • Your relative may spend all the money right away
  • Creditors could access the money (even if in a trust) to satisfy debts
  • You may owe gift taxes depending on the size of your gift
  • You lose any control over how the relative spends the money

Instead, consider starting a spendthrift trust to both provide for and protect your relative.

What Is a Spendthrift Trust?

A spendthrift trust is a special type of trust that give the trustee full authority to decide how to spend trust distributions for the beneficiary’s benefit. The trust’s language explains how often the trustee needs to make distributions and may specify the amount to be spent. In addition, the trust language must include a special “spendthrift clause” explaining the settlor’s intent that the trust be a spendthrift one.

Because the beneficiary of a spendthrift trust has no authority to spend or receive trust distributions as he wishes, most creditors cannot access those distributions to satisfy debts. The typical exceptions are debts like child support, alimony, and payment for “necessaries” like food and shelter.

It is very important that your spendthrift trust include the necessary language and have an appropriate trustee. If the trust is not set up right, creditors could go after the distributions and your trust would not have the effect you expected. Talk to a lawyer about how to set up a spendthrift trust to benefit a relative.

Want to create a spendthrift trust or another type of trust? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.

What Are Discretionary and Mandatory Trust Distributions?

Posted May 23, 2022 by Law Office of Andrew Szocka

If you are a trustee or trust beneficiary, you may want to know more about discretionary and mandatory trust distributions. You might have questions about how often the trustee needs to make distributions and in what amounts. It is important to get answers to these questions so that the trust functions properly, as the settlor intended.

What Are Trust Distributions?

To help the trust beneficiary, the trust’s settlor permits the trustee to make periodic distributions from the trust. The settlor decides on which language to include in the trust document regarding distributions. For example, the settlor could choose to allow distributions on a regular schedule, distributions if certain events happen, or discretionary distributions at the trustee’s option. Read the trust document to determine which kinds of distributions apply for a particular trust.

What Are Mandatory Trust Distributions?

Some trusts require trustees to make mandatory distributions. These distributions might take place every month or every year. Often, a trust requires distribution of a percentage of the interest earned on trust assets during the year. Or the trust might list a specific amount of money or property to be distributed. Sometimes, mandatory distributions must happen after certain triggering events. These could include a significant birthday (turning 18 or 21, for example) or marriage.

Trustees must make mandatory distributions described in the trust document. If they do not, they could face legal liability for breaching their fiduciary duties to the beneficiaries.

What Are Discretionary Trust Distributions?

In contrast, trustees do not have to make discretionary trust distributions. They get to decide when it is appropriate to distribute money from the trust (interest or principal) to the beneficiaries. Maybe the trust assets do not earn much interest in a particular year, so the trustee decides not to make a distribution. Or a beneficiary runs into hard times and the trustee decides that a distribution would help him out. Trustees need to be careful, however, not to favor any one beneficiary over the others. They also need to carefully track distributions over time. Finally, trustees or beneficiaries with questions about distributions should seek legal advice.

Need help with a trust or will? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.

Estate Planning for Joint Tenants and Tenants in Common

Posted May 23, 2022 by Law Office of Andrew Szocka

Different methods of owning property, such as being joint tenants or tenants in common, could affect your estate planning. You may not realize how the ownership method changes your options for passing on real estate to your heirs.

What Is a Joint Tenancy?

A joint tenancy is one method of owning real estate in Illinois that gives multiple owners equal shares in the property. The key feature of a joint tenancy is that each owner (called a joint tenant) has a right of survivorship. This means that if there are two owners and one owner dies, the second owner automatically owns the entire property outright. If there are three owners and one dies, the other two owners now hold the property.

Importantly, property owned by joint tenancy does not go through probate. A deceased joint tenant’s estate executor does not distribute the property to heirs because the other joint tenants simply take over ownership via their right of survivorship. The surviving joint tenants simply need to update the property deed.

What Are Tenants in Common?

In contrast to joint tenants, tenants in common own fractional interests in real estate. For example, John might own 25% of a property, Bob owns 25%, and Joe owns 50%. Despite their different interests, each still has the same right to use the property as the others.

In addition, tenants in common have the ability to sell, transfer, or convey their interest (or a portion of their interest) to other people. The other tenants do not have to agree or give permission for a sale. This means that tenants in common can leave their interests in the property to their heirs in a will. They also can place their interest in a trust.

Estate Planning Options Depend on Your Ownership Method

Owning a property by joint tenancy as opposed to tenants in common changes how you can estate plan. Joint tenants cannot give property to their heirs in their will or place the property in trust. Instead, the other joint tenant will receive the entire property by right of survivorship. If, however, you survive the other joint tenants, you will own the property outright and can give it away in your will.

Tenants in common have more opportunities to pass on their ownership interests to others. They can place their percentage interest in a property in trust, give it to an heir in a will, or transfer it directly to another person.

Want to start planning your estate? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.

Is It a Good Idea to Sign a Joint Will with Your Spouse?

Posted May 23, 2022 by Law Office of Andrew Szocka

When planning your estate, you may wonder if it is a good idea to sign a joint will with your spouse. You love your spouse and want to share everything with him or her – why not make your wills together? Though joint wills once were widely used and popular, the major problems they create should deter you from making one.

What Is a Joint Will?

A joint will is a creature of convenience that many people used before modern technology became available. It saved a lot of time (and handwriting or typewriting) to list a married couple’s wishes in one document instead of two. Both of the spouses would sign the will, and it would dispose of all their property.

What Are the Disadvantages of a Joint Will?

Joint wills have many disadvantages, including:

  • Both spouses must agree to any changes to the will;
  • Both spouses must execute the will if it they modify it; and
  • If the will is worded improperly, the surviving spouse may not benefit from the other spouse’s property.

Importantly, the surviving spouse cannot change the will after the other spouse dies. Once one spouse dies, both spouses are not able to agree to any modifications. This could seriously hinder the surviving spouse from carrying out his or her wishes. For example, the surviving spouse may remarry and want to leave money to his or her new spouse or stepchildren. This would be impossible with a joint will. So would disinheriting someone listed in the joint will.

Alternatives to a Joint Will

Couples today often have separate property. Many people have children from a previous relationship. Others have individual ties to charities or organizations not shared with their spouse. All this means that spouses often have different wishes incompatible with a joint will.

One option instead of a joint will is each spouse forming a trust that benefits the other spouse. You also might consider beneficiary designations on life insurance or retirement accounts leaving the payouts to each other. Of course, each spouse should make a separate will too.

Want to start planning your estate? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.

What Happens If One of Your Heirs Dies Before You?

Posted May 23, 2022 by Law Office of Andrew Szocka

If one of your heirs listed in your will happens to die before you, your estate gets distributed differently. It is a good idea – for your own peace of mind – to figure out who would receive the inheritance instead. Also, you should be aware of the effect that the language in your will could have on estate distribution.

Figuring Out Who Inherits When an Heir Dies Before the Testator

If an heir listed in your will dies before you, ideally you would change your will to take that person out. But not everyone has the chance to make that change. Sometimes, the testator does not even know that the heir died. When the will leaves a gift to a deceased person, there are a few options for what happens to the gift.

Often, the will’s language explains that the gift will go to someone else (a successor). The will may use language like “to the survivor” or “if John does not survive me, then to Jane”. It is important to be very clear about the language you use to describe who inherits if an heir predeceases you. In one recent case, family members got into a dispute over the meaning of the phrase “to share and share alike in equal shares or to the survivor or survivors of them.”

What If the Will Doesn’t Mention a Successor?

If the will is silent about who inherits a gift if the heir dies, it matters whether the gift is to a descendant or to a group of people. If the gift is to a single descendant (child, grandchild, etc.) of the testator, then the descendants of the heir who are alive at the time will receive the gift “per stirpes” (each branch of the family receives an equal share of the gift). In other words, if the deceased heir was the testator’s sister and she had one living child and two living grandchildren from another deceased child, then the child gets 50% of the gift and each grandchild gets 25%.

If the gift is to a group of people, and one of the people dies, then the rest of the group receives the portion of the gift that the deceased heir would have received. However, if the deceased heir is the testator’s descendant, then the rule described above for a single descendant applies.

Finally, if neither of the two situations described above apply, then the gift becomes part of the residue of the estate (anything left over after making specific gifts). Whoever inherits the residue will inherit the gift.

As you can see, determining who inherits if an heir predeceases the testator is extremely complicated. It is best to include language in your will specifying what happens if an heir dies.

Want to start planning your estate? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.