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– 80+ years of combined experience –

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Selecting The Best Probate Lawyer Bloomington IL Will Make A Big Difference

Before hiring a Probate Lawyer Bloomington IL, it may be helpful to know some of the basics about probate and other estate administration options. If you read this page to the end, you should gain a better understanding about:

1. What Probate Entails

2. When Probate Is Necessary

3. When Hiring A Lawyer Is Essential

What Is Probate?

The legal process of probate is designed to ensure proper asset distribution and payment of the taxes and debts of the deceased person.

The first few steps of probate include the following:

1. Filing a probate case with the court

2. Establishing the executor or administrator of the estate

3. Setting up an employer identification number (EIN)

4. Notifying heirs and creditors

These first 4 steps are the simple part. Thus, as you can already tell, the problem with probate is that it is complicated and time-consuming. It is also expensive, public, and can be contentious. It is ideal to avoid probate when possible, which is why it is helpful to meet with a Probate Lawyer Bloomington IL to help you understand whether probate is necessary and the proper steps to take.

Is Probate Necessary?

There are several different strategies for avoiding the probate process.

1. Trusts

2. Estate Value Less than $100,000

3. Accounts with Named Beneficiaries

a. Traditional IRA

b. SIMPLE IRA

c. Roth IRA

d. 401(k)

e. 403(b)

f. Life Insurance

When you meet with a Probate Lawyer Bloomington IL, bring all documents you have regarding the estate, but especially evidence of any trusts, retirement accounts, and life insurance policies.

It is important to understand that just because these accounts, plans, and policies can avoid probate, that does not mean they always avoid tax consequences. Tax implications are addressed under the section entitled “Tax Consequences For Beneficiaries After Inheriting Retirement Accounts & Life Insurance”.

What Is A Trust & How Does It Avoid Probate?

There are two main types of trusts: (1) Irrevocable; and (2) Revocable.

An Irrevocable Trust is typically set up for a child during a person’s life. An irrevocable trust cannot be changed and has the benefit of shielding your descendants from tax consequences. Once assets are transferred to an irrevocable trust, they are no longer owned by or under control of the person creating the trust. Thus, these irrevocable trust assets are certainly not a part of the estate when the trust creator passes.

A Revocable Trust is very different than an Irrevocable Trust. A revocable trust is comprised of a legal document (Trust Agreement) similar to a Will, with the exception that the Trust Agreement designates a trustee who holds legal possession of the property that flows into the trust.

The person creating the trust (“grantor”) owns the property and can move money and assets freely while alive. At any time, the trust grantor can change the trustee or the beneficiaries.

Any asset that is included in a trust can avoid probate. Check the estate planning documents to see if you are dealing with a Will or a Trust. The documents should be labeled as such. The Will may be called a “Last Will & Testament” and the Trust may be called a “Living Trust” or “Revocable Trust”.

If there is a trust, there could be assets that are not included in it. Thus, more investigation is needed so your Probate Lawyer Bloomington IL can determine whether probate is necessary.

We recognize that many people are not familiar with trusts. If you don’t understand something, ask your Probate Lawyer Bloomington IL to explain it.

If you are certain that all or most of the assets are included in the trust, then click Trust Administration Lawyer Bloomington IL.

Probate Is Not Necessary If The Estate Is Worth Less Than $100,000

According to the Illinois Probate Act of 1975 (755 ILCS 5/25-1(B)(6)), probate is not necessary to administer an estate’s assets if the assets are worth less than $100,000.

However, the Probate Act does not expressly state which assets count toward that $100,000 threshold.

How To Determine Which Assets Count Towards The $100,000 Threshold

A Probate Lawyer Bloomington IL can determine which assets count towards the $100,000 threshold, but the first step is to understand what “estate” means.

Many assets are not considered part of the estate and thus do not count towards the $100,000 threshold requiring probate. For example, assets in a revocable trust, retirement accounts with named beneficiaries, and life insurance policies are not technically owned by the estate and therefore do not count towards the $100,000 threshold.

Because these types of assets have named beneficiaries, these assets are immediately transferred outside of the estate. In the eyes of the law, these assets are viewed as being transferred to the named beneficiaries at the time of the deceased person’s passing.

However, these assets do not automatically avoid probate. First, certain requirements must be met for retirement accounts and life insurance policies to be transferred outside of the estate.

How Do Retirement Accounts Avoid Probate?

An IRA (individual retirement account) is a plan for retirement where money is put into an account for special tax benefits. There are three different kinds of IRAs: (1) Traditional IRA; SIMPLE IRA; and (2) Roth IRA.

A traditional IRA is a retirement account where you only pay taxes after withdrawing the money from the account, meaning it is tax free when initially added. This saves money up front by avoiding taxes now. However, taxes apply later when funds are withdrawn. Anyone with earned income can open a traditional IRA.

A SIMPLE IRA (Savings Incentive Match Plan for Employees) is similar to a traditional IRA in terms of tax consequences, but it can only be used by small businesses with 1-100 employees. The advantage to small businesses and their employees is that both can contribute to the employee’s SIMPLE IRA.

A Roth IRA allows one to pay taxes when first adding funds to the account but allows tax-free withdrawals in the future.

Which type of IRA or combination of IRAs a person should choose depends on each person’s circumstances. This is why it is essential to consult with a Probate Lawyer Bloomington IL who is also experienced with taxes and financials.

A 401(k) and 403(b) are retirement accounts that can be offered by select employers. These retirement plans are named after sections in the federal tax code. The main difference between them is 401(k) plans are offered by private, for-profit companies and 403(b) plans are offered by government employers and nonprofit organizations. Similar to traditional and SIMPLE IRAs, a 401(k) and 403(b) are tax deferred, meaning taxes apply to withdrawals.

All of the retirement accounts mentioned in this section can avoid probate in Illinois if the account names a beneficiary and is only used for retirement purposes.

Life Insurance

Life insurance is a contract between an individual and an insurance company where the insurance company agrees to pay out a certain amount of money to named beneficiaries after the death of the policy holder.

Just like with an IRA and a trust, life insurance policies have named beneficiaries. This means the money is not received by the estate of the insured and therefore avoids probate and does not count toward the $100,000 probate threshold to avoid probate. However, before benefits can be distributed, the life insurance company requires the completion of verification documents. Even after benefits are distributed the distribution can be contested within the statutory time frame, so it is imperative to follow the procedures correctly.

Avoiding Creditors

Life insurance policies are exempt from creditors when there is a named beneficiary. Retirement accounts are exempt from creditors if the accounts are truly for retirement and a beneficiary is named.

This only pertains to creditors of the estate. Life insurance policies and retirement accounts are not accessible by creditors if the debt was caused by something during the deceased person’s life or estate expenses that accrued during probate or estate administration.

However, if the beneficiary has personal creditors, those creditors could pursue the proceeds of any life insurance policy or retirement account distribution.

Tax Consequences For Beneficiaries After Inheriting Retirement Accounts & Life Insurance

The tax rules that would have applied to the original retirement account owner also apply to the beneficiaries. This means if the account is a Roth IRA, then there are no income tax consequences. However, all the other retirement accounts require beneficiaries to pay income taxes on the funds that are withdrawn.

Depending on the type of retirement account, your age, and your relationship to the decedent, when you are required to take a distribution from the retirement account varies greatly. In some situations, the beneficiary has several choices and can select whichever option provides the best tax implications. In other situations, choices are limited and there may be unfortunate tax consequences.

There is no inheritance or income tax on life insurance policies.

As of 2023, the estate itself will be subject to Illinois estate taxes if the estate’s value exceeds $4M and also subject to federal estate taxes if it exceeds $12.92M. For purposes of estate taxes, all assets including trusts, retirement accounts, and life insurance count toward the Illinois and Federal estate tax thresholds. Thus, while the beneficiaries may not have to pay inheritance or income tax on a Roth IRA or Life Insurance policy, the Illinois and Federal estate taxes must still be accounted for on these plans/policies if the threshold is exceeded.

Instances When You Need A Probate Lawyer Bloomington IL

-The estate has more than $100,000, excluding assets from a trust, retirement account, or life insurance policy.

-The estate includes real estate (home, farmland, rental property, etc.).

-The estate has debts.

-Disagreements over inheritances. Probate lawyers help resolve conflicts between heirs.

-The estate includes a business. In the event a family-owned business sells to another party or divides among heirs, a probate lawyer Bloomington IL can ensure that the property transfers appropriately.

-Time is an issue. If the estate must be administered quickly because family members need to be cared for a probate lawyer Bloomington IL can help.

-Small estate less than $100,000. If the estate assets are less than $100,000, probate is not necessary. However, the administrator still must accurately develop, sign, and send a notarized small estate affidavit to all interested parties.

Heirs and creditors are both considered interested parties. A small estate affidavit is typically much less complicated than probate, but it is wise to have a Probate Lawyer Bloomington IL handle the affidavit to avoid problems.

Attempting to administer an estate’s assets and pay debts can confuse even the most sophisticated people. The last thing you want is the court or IRS demanding an accounting of how the assets/liabilities were handled.

If not done properly, you could face civil penalties and even criminal charges. To be safe, it is best to hire a probate lawyer Bloomington IL so that they handle everything appropriately and you avoid risk. Click here to meet with an experienced Probate Lawyer Bloomington IL who can handle these tasks for you and guide you through every step of the process.

The Probate Process

At the beginning, we mentioned the first few steps of probate. However, there are many other steps involved.

1. To establish the executor or administrator, a probate lawyer Bloomington IL must file the (a) will and/or affidavit of heirship, (b) surety bond, (c) oath of office, and (d) acceptance of office.

2. Once these orders are signed by the judge, then notice to creditors is needed. The probate lawyer Bloomington IL must send known creditors notice of the decedent’s death. The probate lawyer Bloomington IL must also publicize it in a local newspaper and file proof of that publication with the court.

3. Once all assets are known, the probate lawyer Bloomington IL should file an inventory of assets with the court. Administering assets requires good communication between the executor or administrator and the probate lawyer Bloomington IL.

4. If creditors files a valid estate claim within the statutory timeframe, then those debts should be paid from the estate.

5. The final accounting is a report to heirs, beneficiaries, and creditors identifying how all the debts and assets were paid and distributed.

6. Then the probate lawyer Bloomington IL can file a petition to close the estate. The court will likely grant it if there are no contested issues with the final accounting report.

This summary of necessary actions is not comprehensive. As every experienced probate lawyer Bloomington IL knows, it is difficult to explain each possible issue that could arise and each step to take when it does.

Probate laws are complex for anyone who is not familiar with the Illinois statutes and courts. Most lawyers cannot competently handle a probate case. It is important to hire a trustworthy and experienced probate lawyer Bloomington IL to ensure it goes smoothly.

Why Choose Koth Gregory & Nieminski As Your Probate Lawyer Bloomington IL

1. Experience. Koth Gregory & Nieminski (KGN) has been located in Bloomington IL since 1990. We have handled over 15,000 cases and we have never moved locations. We are involved in the community and our reputation with our clients speaks for itself. This is the type of experience and accountability you want from a lawyer.

2. Empathic. When you have recently lost a loved one, the last thing you need is a cold-hearted attorney who doesn’t really care about your circumstances. The people who work at KGN have lived in Bloomington-Normal or near the McLean County area their entire lives. We care about the people in our community. When we see someone hurting, we want to help. That is why we got into a service industry. We feel called to serve those in need.

3. Efficient. KGN is a modern law firm. We have invested significant resources into custom software and employee training programs to make the legal process easier and less expensive for our clients.

Meeting with a Probate Lawyer Bloomington IL has never been easier. You can schedule an appointment directly through our website and choose whether you want to meet in-person, via video call, or over the phone. Convenient scheduling is just one of the many efficiencies available at KGN.

We know nothing changes the fact that you lost someone you love, but our goal is to make the process convenient, so it is a little easier for you to find peace with their passing.

Click here to meet with a caring and knowledgeable Probate Lawyer Bloomington IL at Koth Gregory & Nieminski.