John was a successful businessman and accumulated roughly $1.2 million after selling his company and retiring. Being an entrepreneur, he liked to do things on his own. He had heard lots of discussion about “death taxes,” and wanted to leave as much money for his family as he could. His children all had good jobs and could care for themselves, so John decided to skip their generation (thus avoiding one level of taxation), and wrote his own will leaving all of his assets to his grandchildren, the oldest of whom was only 15 years old. Six months later, John and his wife died unexpectedly in a car crash.
What will happen to the money John left to his grandchildren?
First of all, the federal estate-tax threshold is now approximately $5 million, so John’s efforts to avoid paying “death taxes” were likely unnecessary.
Secondly, unless John used language in his will leaving the money to one of his children “as custodian for [the child] under the Illinois Uniform Transfers to Minors Act,” he has probably created a significant headache for his own kids. This is because, in order to ensure that the funds are properly cared for until the grandchildren reach adulthood, John’s children may have to appear before the judge who handles the probate of John’s estate to account for all of the money and to show that it has been used for the children’s benefit.
John could have instead created a trust (either while he was alive or through his will), that would have allowed the money to be held for his grandchildren, but without court supervision.
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