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Let us handle the hard stuff.
ELDER LAW • ESTATE PLANNING • WILLS & TRUSTS • GUARDIANSHIP & PROBATE LITIGATION
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Dear Barbara,
It's Time for an Estate Plan Check-Up!
It’s been a while since you came into my office regarding your estate plan.
Over the last several years there have been some changes to the federal tax and Illinois trust law that have affected some estate plans, I thought I’d send out this letter to make sure that your legal documents are still accurate, and reflect your continuing wishes for agents, successors and beneficiaries.
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I enclose a simple checklist you can use to ensure nothing important has changed as it relates to your estate plan. If it has, be sure to let us know. Changes can be simple or more complex, but up-to-date information is critical for documents like yours. If someone in your estate plan has moved or married since we created your documents, we rarely need to change the addresses or surnames in your documents. | |
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Besides making sure your documents reflect your wishes, there have been a lot of changes in the law relating to estate planning in Illinois and how the Federal government taxes retirement benefit distributions, in the last several years.
Here are some brief highlights. After the highlights, there is a link to a private area on our website with more detailed information (we didn’t want to kill lots of trees bringing this information to you).
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Remote Witnesses and Notaries. During the COVID Public Health Emergency, just about everything went online and could be handled remotely by video. This includes the law permitting notaries and witnesses to do their thing based on a live video of someone signing a document. During the Pandemic, the Governor signed various executive orders permitting the remoteness we had to become used to. In mid-2021, Illinois enacted new laws codifying portions of the executive orders related to witnessing documents remotely and notarizing documents effective as of January 1, 2022. Some of the detailed laws on remote notarization will not take effect until the Illinois Secretary of State creates additional rules. Those are still in process.
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Minor Changes to the Healthcare Power of Attorney Law. Effective, January 1, 2023, a health care agent can present an electronic device displaying an electronic copy of a healthcare power of attorney as proof of a valid POA. This means you can store a PDF of your health care POA on your phone. If you don’t have an electronic copy of this, contact us and we will look to see if we have an electronic copy we can e-mail you (we store images of 99% of the documents our clients have signed).
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New Federal Estate Tax Exemption for 2023. The “estate tax exemption” is the amount allowed at one’s death that is not subject to the estate tax. For 2022, in addition to the Illinois state estate tax (which applies to estates with a value of $4 million or more), the federal estate tax applied to estates with a value over the 2022 federal estate tax exemption of $12.06 million. Because this amount is currently indexed for inflation through 2025, the 2023 federal estate tax exemption has been increased to $12.92 million. However, this amount is scheduled to be reduced by 50% in 2026 and could be reduced earlier by Congress.
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New Gift Tax Exclusion for 2023. Given that the federal estate tax exemption for 2023 is $12.92 million and one can give an unlimited amount to his or her spouse while both spouses are alive, the chance of incurring gift tax liability is highly unlikely. Further decreasing the odds of gift tax liability is the fact that each taxpayer may gift up to an “annual gift tax exclusion” each year without those gifts counting towards the lifetime gift tax exemption described above. The annual gift tax exclusion applies to each gift recipient. This annual gift tax exclusion is adjusted annually for inflation, and will be increased to $17,000 per recipient. While the federal estate tax exemption (and therefore the lifetime gift tax exemption) is scheduled to be reduced by 50% in 2026, the annual gift tax exclusion is not. This means that we can expect the annual gift tax exclusion to continue to increase in coming years.
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SECURE Act 2.0. On January 1, 2020, the Setting Every Community Up for Retirement Act (the “SECURE Act”) took effect. The SECURE Act brought many legal changes. For the trust and estates field, the most notable change was to the tax treatment of retirement interests held in trust and otherwise. After that law passed, if you are not a spouse, minor child, or disabled, you need to take out (and pay taxes on) all the retirement monies you inherit within 10 years of death. Previously, you could elect to receive the money over your actuarial life expectancy. If you have not updated your estate plan since 2020 and you have a revocable trust in your estate plan, we encourage you to contact us to see if any changes are desirable. On December 29, 2022 Congress passed the “SECURE Act 2.0” expanding the provisions in the original Act. These include (this is a brief list):
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- Increase in age for beginning required minimum distributions to age 73 and, later, age 75.
- Decreased penalty for failing to take required retirement plan contributions.
- Permitting more “catch-up” 401(k) contributions when you are ages 60–63.
- Indexed IRA catch-up limits.
- Increased age limit for ABLE Programs (disabled individuals can qualify if they became disabled under age 46 instead of the previous age 26).
- Tax-free rollovers from 529 accounts to Roth IRAs.
- Penalty-free IRA emergency withdrawals.
- Penalty-free early distributions for those with terminal illnesses.
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Also, keep in mind that the agents, successors and beneficiaries appointed in your estate plan will need access to your critical information if a death or disability occurs. We recommend that you gather your critical information and keep it in one place that the appropriate people can access when the time comes. You can download a spreadsheet containing a sample list below.
In addition, know that one of the most frustrating aspects of administering the estate of a person who dies or becomes disabled is their digital estate. Without someone you trust having access to your online passwords, it is very difficult to find out or have access to anything you deal with over the internet. Please record all of your online passwords either in a list or electronically and make that accessible so that those you trust can manage your online world if you cannot.
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On a private area on our website, we posted downloadable files for you to review. These files include:
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After you’ve gone through all of this and have questions or changes, please email any attorney in the firm, and let us know if you want to make any changes or discuss things. We can then review your file to determine how much work it requires bringing your legal documents up-to-date, and what it might cost to do so. We will perform no work without your prior approval.
If you're satisfied with Generation Law’s service, we'd like to encourage you to pass along our information to your family and friends. If you would like further information about updating your estate plan, call us at 630-782-1766, or email us at info@GenerationLaw.com.
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Thank you for working with us to ensure your affairs are in order.
Warm regards,
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Ben A. Neiburger, JD, CPA
Founder,
Generation Law
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