Family Disputes over Personal Property Northbrook IL

Let's Talk about Avoiding Family Disputes over Personal Property.
By Alan Orlowsky

It is quite often the personal property that causes the most heartache and disruption in families after a death. Money doesn't  usually have any sentimental attachment, but personal property can have a perceived  value far beyond its actual monetary worth. For example, there may be souvenirs from family vacations, various collectibles  or other items of sentimental value that are impossible e to divide or duplicate. It's helpful to discuss these things ahead of time, so you have a clear understanding of who wants what, and can anticipate and avoid problems after you're gone.

Generally speaking personal property is distributed under the laws of the state in which the decedent was a resident on their date of death. Real property (real estate), on the other hand, is subject to the laws of the state in which it is located. If you have significant personal property located outside of your official state of residence, distribution can be confusing. For example, if you own a Steinway piano that is located in your vacation home, the vacation home and Steinway piano will be treated differently.


Personal Property such as jewelry, antiques, artwork, family heirlooms and household effects can be passed on to your beneficiaries through a specific bequest: "I leave my Ming Vase to my sister Betty." But for most people, it would be overwhelming to try to inventory and choose a beneficiary for every last item you own. Instead, it is common to use a separate "Personal Property Memorandum" that is attached to, and incorporated by reference into your trust.


The Memo is generally a handwritten or typed list of your bequests to family or charities, which is signed and dated by you. They could cover each personal item that you own, but typically include only those items of financial value or of strong sentimental value - the types of things that could lead to disagreements among the heirs.

The benefit of a memo is that it can be easily changed if you sell something, give it away during life, or change your mind about who should receive it after you're gone. You simply throw the old memo away or destroy it,  and replace it with a new one. Each Personal Property memorandum should be dated, and the trust should contain instructions that if more than one memo is discovered after your death, the one with the most recent date is binding.

Of course, you should also provide for Personal Property that is not specifically listed on the Personal Property memorandum. Over the years, parents have come up with interesting ways to distribute Personal Property items that aren't the subject of specific bequests. They might instruct the executor or trustee to divide Monopoly money among the children, and let them "Bid" on remaining items. Or they might say that each child can choose one object, starting with the oldest and moving to the youngest (or vise versa), until all items are accounted for. Anything that is not selected can be given to Goodwill or the Salvation Army, or be included in an estate sale.

Most trusts will state that the trustee can dispose of Personal Property equitably to the beneficiaries, and if they can't agree on the disposition, the trustee can sell the items and split the proceeds of the sale according to the trust distribution plan.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559 or email alan.orlowsky@gmail.com

Schedule A Deductions Disappearing Northbrook IL

Lets Talk About......Schedule A Deductions Disappearing
By Alan Orlowsky

According to the Huffington Post, former White House press secretary Ari Fleischer said he would likely give less to charity in 2013 because of new limits on Schedule A itemized deductions.

In talking with a number of Tax professionals, there seems to be a lack of consensus about how much the new law will actually reduce charitable deductions and other itemized deductions like those for state income tax, real estate and mortgage interest.

This article outlines what the new law really means in this area.

If you want to see how the new law affects you, follow the link to use an interactive calculator. http://inknowvision.com/agi_limits/agi_limits.htm

What does the new law do?

The New law brings back the Pease Amendment which was canceled during the Bush Tax Cuts. The Pease Amendment reduced itemized deductions for high income earning taxpayers. The effect was to make tax rates higher for those taxpayers without actually changing or increasing the rates.

What itemized deductions are subject to being reduced?

Deductions for mortgage interest, state income tax, real estate tax, sales tax, personal property tax, points paid for a loan, mortgage insurance premiums, charitable gifts, job expenses, and tax preparation fees.

What deductions are not subject to being reduced?

The reduction does not apply to deductions for medical expenses, investment interest, casualty and theft losses, and gambling losses (which can only offset gambling winnings included in income).

Who does it affect?

1. Married Taxpayers filling jointly earning over $300,000 per year.
2. Married Taxpayers filling separately earning over $150,000 per year.
3. Single Taxpayers earning over $250,000 per year.
4. Single head of household Taxpayers earning over $275,000 per year.

How much is the reduction?

The reduction is equal to 3% of the amount over the threshold.

Can you provide an example?

Let's say you are a married filling jointly taxpayer earning combined adjusted gross income of $500,000. In addition, you have mortgage interest, charitable deductions and state income tax totaling $80,000. You would lose $6,000 of your itemized deductions and you would be able to deduct $74,000.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559 or visit our website at http://www.orlowskywilson.com

This video is from the Radio Show "Left Right & You"
Tax Discussion - part 2 of 2
With Tim Elanz & Paul Edwards

Guest Speaker Alan Orlowsky

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559.

This video is is from the radio show "Left, Right & You"
Tax Discussion
With Tim Elanz & Paul Edwards

Guest Speaker Alan Orlowsky

This is a Tax Discussion. Part 1 of 2

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559.

When to Use Life Insurance in Estate Planning - Lincolnshire IL

When to use Life Insurance in Estate Planning

Many of our clients have been watching the recent estate changes and wondering if they should continue to hold on to their life insurance. Others are asking if they should be purchasing life insurance. This article is not so much about different types of life insurance or an analysis of life insurance companies, but rather is a look at situations where life insurance can provide value to you and your family.

1. Estate Tax

The recent change in federal tax law raising the estate tax exemption to $5.24M means that fewer people will be subject to federal estate tax. However, for those who will be subject to this tax, life insurance remains one of the best ways to provide for payment of the tax.

Not every state has an estate Tax, but several do. If you own property in a state that has such a tax or if you are thinking about moving to such a state you will want to calculate the approximate tax due. Once done, you may want to consider life insurance for purposes of paying the state estate taxes.

Life insurance can create liquidation of valuable family assets such as business, art, and real estate and investment holdings.

2. Liquidity - Inheritance Balancing

Many clients own assets that are not readily susceptible to equal division among children or grandchildren. Examples include businesses, real estate  art, and collections where it might be better if not divided among family members. In such cases, life insurance can be used to equalize an inheritance allowing a business owner or collector to pass the business or collection to the child that is running the business or interested in collection and using the life insurance proceeds to equalize the family inheritance to other children.

3. College Education

Life Insurance can be helpful in the case of a breadwinner who dies while his or he children are still young. Proceeds can be made available for college, private school or trade schools. Of course, insurance can also be employed to provide education for grandchildren in the case of the death of a family patriarch or matriarch. People have also used a life insurance funded trust to provide a pool of education money for many generations to come.

4. Vacation Home Maintenance

Many Clients own second homes and want to pass those homes on to their children to enjoy. Unfortunately, home ownership has expenses associated with it and not all children have the wherewithal to fund those expenses. Here is another case where life insurance on the senior family members can be used to provide a fund that can perpetually maintain the family vacation home.

5.Special Needs Children

One area where life insurance can be extremely powerful is with regard to trusts funded with life insurance for special needs children. Such a fund may be set up to allow life insurance proceeds to be a supplemental benefit in addition to any state or federally provided benefits. This type of funding can make the difference between subsistence living and a better quality lifestyle. Keep in mind that this area of law is currently in flux and so be sure to check with us prior to establishing such a trust to make sure it will work as anticipated.

Life insurance is certainly not the answer to all estate planning issues, but should be considered if it can be used to help you accomplish your planning goals.


If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559 or visit our website: www.orlowskywilson.com  

2013 Estate Tax Changes Lincolnshire IL

by: Alan Orlowsky

The New Year brought with it some very Significant changes to the estate tax law. Without these changes, families with estate of $1 Million or more would have been subjected to estate and gift taxes.

The Good news is that for most families the primary goal for estate planning will be to make sure that your plan is comprehensive and remains up to date and relevant for you and your family. We suggest that you add this to your annual list of New Years Resolutions.

Some areas Orlowsky & Wilson often see opportunities:

1. Asset Preservation

This type of estate planning helps to protect your assets you leave for your children and grandchildren, thus preserving the assets for many years into the future and making sure they are used for good purposes. Failure to take advantage of available protections could mean that your hard earned assets end up being lost or wasted. Asset Preservation is a key part of estate planning that should not be ignored.

     2. Disability Planning

This type of planning makes sure that you and your loved ones are taken care of in the event that you become disabled. An Annual review can ensure that your disability planning documents are up to date.

     3. Planning to make a difference

Our colleagues report that many clients are asking about ways they can use their wealth to make a difference in their community or in the world. Often, this type of planning can be tied to helping children (and grandchildren  learn how to be responsible with significant sums of money. They opportunities for philanthropic giving are limitless and can be personally rewarding in addition to helping to reduce income tax.

Of course, these are just three ideas out of many that could provide benefits to you and your family.

Summary of 2013 estate tax changes:

The biggest impact for the new tax law is that the estate and gift tax exemption will not fall back to $1 Million as many experts had predicted.

The new estate and gift exemption is set at $5.12 Million per person ($10.24 Million for most married couples.) The exemption amount is indexed for inflation and is will rise automatically over time. The tax rate for taxable gifts and estates is set at 40%.

If you have questions, click here to contact us and set up a time to discuss your situation and how we can help.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559.

Who Do You Trust? Lincolnshire Power of Attorney

Who do You Trust? Let's Talk about it.

An Article by Alan Orlowsky. For more information please visit our website.

What is Power of Attorney? A power of attorney is the grant of authority to act for another person in legal financial matters.

A Colleague recently related the following story, illustrating how powers of attorney can be abused. Her Client, Gloria had started thinking about going into an Adult Living Community because taking care of the house was getting to be more and more of a chore. Several of her clients Friends had already made the move and loved it.

Gloria called a Realtor who did research on the value of the home and came back with some disturbing news. The Realtor told Gloria the house was not worth as much as the mortgage.

This really caught Gloria by surprise. To her knowledge, the house mortgage had been paid off whether husband dies eight years earlier. She called the attorney who had been involved and asked for help. He told her that indeed the old mortgage had been paid off, but a new one had been put on the property by Gloria's son less than a year later for $300,000. All without her knowledge and permission.

Gloria had no idea how this had happened. The attorney told her that her son Mike had used the power of attorney she had given him to take out the mortgage.

When confronted, Mike admitted that he had borrowed money against the house. It turned out that he had a gambling problem and needed the money to pay outstanding debts. He had been paying the mortgage on the property from his cash flow but was just about out of money and it looked like the house might go into foreclosure.

Her lawyer contacted the police. The police said that it was a money matter between family members and that they were not going to get involved. Even if they had been willing to get involved, it is unlikely that Gloria would have pressed charges or that it would have solved Gloria's real financial issue, which was how to save her house from foreclosure.

With an aging population, this type of incident is starting to happen with more frequency. Enough so that lawmakers throughout the US are starting to pass laws to increase oversight, limit powers and make this behavior criminal.

While this is good, it may not be enough. What Gloria needed in her case was a greater level of oversight.

Orlowsky & Wilson have different methods for helping our clients work through these types of issues. But each family situation is different. If this is something you need to discuss, contact us today.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559.