The loss of a family member is a deeply personal and challenging experience. And the probate process can create further emotional turmoil, not to mention additional financial costs. Understanding how probate works in Illinois and the potential challenges that could arise is crucial for individuals who want to create a straightforward estate plan for their families. Fortunately, Illinois residents can use various tools and legal instruments to ensure a streamlined, private transfer of assets. Here’s what to know and how to avoid probate in Illinois.
A financial advisor can help you create an estate plan to avoid probate in Illinois.
What Is Probate?
Probate is the legal procedure that finalizes a deceased individual’s financial obligations and allocates their possessions. Local courts oversee this process by examining the deceased’s will or following state inheritance laws if the person dies without a will.
In cases where a will exists, the designated executor commences the process by submitting a request to the local probate court. A judge then reviews the petition for approval and issues either “letters testamentary” (in the presence of a will) or “letters of administration” (in the absence of a will). This document grants the person the will names as executor the ability to carry out the will’s terms.
Following this, the executor notifies all known heirs and other interested parties of the individual’s passing. In addition, the executor publishes a statement to inform potential creditors that they have a specific timeframe (typically a few months) within which to submit claims against the estate.
The executor then takes inventory of the deceased individual’s assets, which may encompass real estate, bank accounts, investments and personal belongings. The estate’s assets first go toward settling outstanding debts and taxes. The amount left after goes to the heirs the will identifies.
Remember, estates in Illinois can be exempt from probate if they are beneath the value threshold of the state’s small estate affidavit clause. Specifically, estates worth $100,000 or less aren’t subject to probate. In addition, these small estates must not include any real estate (or transfer the property upon the deceased’s death through a transfer on death document).
Why Should You Avoid Probate?
Avoiding probate is advantageous for heirs and beneficiaries because doing so leads to a smoother and more efficient transfer of assets. Here are seven common reasons to create an estate plan that bypasses probate:
Save Time
Probate can be a lengthy process. While straightforward cases can take less than a month, complex estates with parties contesting sections of the will can take years. On the other hand, privately distributing assets can help beneficiaries access their inheritances more quickly.
Save Money
Probate involves various fees, such as court costs, attorney fees, and executor commissions. Specifically, probate in Illinois can cost as much as 10% of the estate’s value. Avoiding probate can help reduce or eliminate these expenses, leaving more of the estate’s value intact for the heirs. Instead of various costs chipping away at the estate’s wealth, the one-time cost of arranging a trust can prevent surprise expenses in the future.
Preserve Privacy
Probate proceedings become part of the public record. As a result, anyone can access information about the estate, including its assets, debts, and beneficiaries. Transferring assets through a trust or with beneficiary designations (through a life insurance policy, for instance) keeps these details private.
Minimize Stress
Probate can be emotionally taxing for the family of the deceased, as it involves legal complexities and administrative tasks during a time of mourning and loss. Avoiding probate can alleviate some of the emotional difficulty by streamlining the process of distributing assets.
Quick Asset Transfer
Probate can delay the distribution of assets to beneficiaries. This situation can exacerbate challenges for beneficiaries in financial duress. Sidestepping probate expedites the transfer of resources and ensures the deceased’s family’s well-being.
Prevent Disputes
Beneficiaries and interested parties have the legal right to contest the deceased’s will if they find it unsatisfactory. These scenarios drag out the probate process, leading to increased stress, financial erosion of the estate, and extended periods without asset distribution. Fortunately, trusts and other financial tools eliminate the public aspect of asset transferal, discouraging disputes.
Control Asset Distribution
While people usually have specific preferences for the distribution of assets, they may not explicitly mention or explain these preferences in their will. This circumstance is more common for those who don’t update their will to adjust for new life circumstances (such as a divorce or the birth of a new grandchild). Additionally, in cases of unforeseen deaths, they may not have a will at all. If a person passes away without a will (referred to as dying “intestate”), the probate court will follow the default state laws to determine asset distribution. However, if a person has a well-structured estate plan, these distribution decisions are not left up to the discretion of a probate judge. Instead, the estate plan outlines the individual’s wishes clearly, ensuring they are carried out as intended.
How to Avoid Probate in Illinois
Fortunately, your estate plan can help you bypass probate in Illinois with these four common tools:
Living Trusts
A living trust is a legal document that allows you to transfer your assets into a trust during your lifetime. With a revocable living trust, you can act as the trustee and maintain control over the assets during your lifetime. On the other hand, an irrevocable trust places control of your assets into a trustee’s hands while you’re alive, and you can’t change the terms once you create it. In either case, assets held in a trust aren’t subject to probate. Instead, when you pass away, the successor trustee you designate for the trust takes over and distributes your assets.
Beneficiary Designations
Certain assets, such as life insurance policies, retirement accounts (like IRAs and 401(k)s), and some bank accounts, allow you to designate beneficiaries. These beneficiaries receive the wealth from your accounts directly upon your death. This process bypasses probate, as the assets are distributed according to the beneficiary designations you have specified.
Joint Tenancy
Illinois allows for joint tenancy with right of survivorship for two parties who equally own property. This feature is accessible to married couples and two cohabitating individuals. When one person dies, the other takes complete ownership without probate interference. As with revocable living trusts, joint tenancy documents can be updated over time to account for changing circumstances.
Transfer-on-Death (TOD) Deeds
A TOD deed is a legal document stating how the ownership of a piece of real estate will change when the current owner dies. This way, you can ensure the intended beneficiary receives the property after you’re gone.
Bottom Line
Probate in Illinois can be time-consuming, expensive and emotionally taxing for the family of the deceased. By employing various tools and strategies, such as living trusts, beneficiary designations, joint tenancy and transfer-on-death deeds, Illinois residents can ensure their beneficiaries receive the wealth due to them with minimal costs and stress. Creating a well-structured estate plan empowers you to maintain control over asset distribution, even in unforeseen circumstances.
Tips for Avoiding Probate in Illinois
- Probate in Illinois is expensive and time-consuming. A financial advisor can guide you in setting up a estate plan that could help you avoid probate. If you don’t have a financial advisor yet, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Every state has different stipulations for how beneficiaries receive assets. In Illinois, it helps to familiarize yourself with the inheritance laws that could prevent you from taking ownership of your portion of the state or penalize you if you accidentally don’t comply with state tax code.
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