Monthly Archives: February 2011

Cook senior exemption now requires annual application

The exemptions for Cook Co. real estate taxes are like some sort of Byzantine maze.

There are seven different exemptions and here is a breakdown of them.

The collar counties (Kane, DuPage, Lake, McHenry) make tax exemptions simple. Getting and keeping exemptions is easy there. In Cook County, the exemption applications and renewals have become  an unnecessary,  bureaucratic tangle.

Now, Cook requires an annual application for the senior exemption. The new 2010 form is here. Be sure to apply for this one right away. Previously, this was automatic from year to year, but that was too simple so the assessor mailed out 300,000 applications. What are the chances that half of those will be signed and  returned?

The 2010 senior freeze exemption, that freezes the assessment of seniors earning under $55,000.00 per year, is now online too. This one has always required an annual application because it includes last year’s income tax figures.

Don’t let the Cook Co. tax maze stop you from getting the exemptions you deserve.

Do I still need a trust with the new estate tax law?

There were big changes in the inheritance tax laws recently. For the most part, the changes affect only the super-rich (estates of over $5 million).
But, a number of clients have come in for living trust review appointments lately wanting to know if they should get rid of their trust because of the changes in the estate tax laws. My policy always has been to meet with existing clients annually for  a free review of their trust. This encourages clients to come in (since they know they won’t get a $300 bill) and it helps keep trusts up to date and properly funded.

Several clients have asked if they should just ditch their trust due to the fact that the estate tax doesn’t start until $5 million in assets. The short answer: Keep the trust.

Here’s why:

1. Avoiding Probate. Revocable living trusts avoid probate. The filing fees and other costs for a Cook County probate are now around $700.00 and attorney’s fees will be about $2000.00. Clients don’t like this and can sidestep these costs by using a trust.

2. Estate tax limits change every five minutes and will soon go back to $1 million. For 2011 and 2012, the estate tax exemption amount is $5 million. But, this will change again in 2013 back to $1 million. Living trusts for married couples often use a formula that sets up  A/B  or family/marital trusts upon the first spouse’s death. The purpose of this is to avoid estate tax on the amount in the family trust of the first spouse to die. I think it’s best to keep your A/B trust intact if you are a married couple since you will need it when the amount clicks back to $1 million in 2013. The A/B trust protects the surviving spouse’s assets from creditors and insulates the assets in the event of remarriage.

3. Portability won’t last. Under the new law, married couples won’t even need A/B trusts because of the new concept called “portability.” This means if one spouse dies without a trust, the surviving spouse can file an inheritance tax return for the deceased spouse and claim the funds in the deceased spouse’s name as exempt from inheritance tax, even if the deceased spouse did not have an A/B trust. Wow, confusing, huh? The problem with this: It forces the survivor to pay to file an inheritance tax return (not cheap) on the first death and both spouses must die by the end of 2012 for it to “work.” And the clients still has to find a way to avoid probate on all of their assets. So it’s crazy for a married couple to get rid of their trusts because of portability.

For a nice summary of the many changes brought by the estate tax law, please read a series of  posts by a Chicago lawyer that cover in detail and with clarity the many changes to the estate tax laws.

Here are a few that you should be aware of :

1. Illinois tax kicks in at $2 million. The Illinois inheritance tax used to run parallel with the federal tax. Not any more. If you have a large estate, the best solution to this problem is to buy a  foreclosed condo in Florida and become a Florida resident since it has no state inheritance tax or state income tax.

2. Gifting can go up to $5 million lifetime. It used to be that the lifetime limit for gifting was $1 million. Now it’s $5 million, which is sweet, especially if you are the progeny of a rich dude.

So don’t ditch your living trust, just be sure that it says what you want it to say and that it’s properly funded with life insurance, real estate and the other fruits of your labor.