Living Trusts and Wills and Powers of Attorney, Oh My!

The most common form of estate planning is Wills and Powers of Attorney.  A will is a very handy document that specifies how you want all your possessions and assets to be divided after you pass away.  A will can help avoid family disputes by making a clear and concise statement “from beyond” about what your intentions are.  A power of attorney (whether financial, health, or both) is very handy for folks who are unable to make decisions due to sickness, disability, travel, or other reasons.  A power of attorney transfers power to your “agent” so your agent can handle your business for you, but it loses its effect upon your death.  Your will becomes effective upon your death and upon its admission to probate.

Let’s talk about some common misperceptions that many people have about estate planning.
No. 1: If I die and I don’t have a will, all my assets will go to the state? Fortunately, this is NOT TRUE! If your assets pass according to Illinois law, your heirs will inherit your assets, not the state. Your heirs are usually your spouse, children, etc. according to the Illinois laws of intestacy.
No. 2: If I have a revocable living trust, I can avoid probate! Well, yes, this is possible – if you want to transfer ALL of your assets into a revocable living trust! You probably should have a will anyway because usually there is some asset that has not been transferred into that trust. And a revocable living trust is not always necessary or desirable.
No. 3: If I have to go to a nursing home when I get older, the state will take all my stuff! Well, this is sort of true, in a roundabout way. If you have assets, State Medicaid will require you to spend your own money for your care until your funds are gone. The state will only allow you to keep a small amount of  assets (and sometimes your home) if you accept Illinois Medicaid benefits to pay for nursing home costs.