Trusts are an important concept to understand, with serious long-term implications when it comes to probate, estate planning, tax preparation, and asset protection. They’re used by homeowners, investors, and anyone looking to safeguard their family’s financial future.
So, what are some of the most important and frequently asked questions and considerations about trusts here in Chicagoland? Let’s dive into several FAQs about trusts that we tend to encounter here in Illinois:
What Is a Living Trust?
Put simply, a living trust is an agreement that you set up during your lifetime to have a designated trustee administer and manage certain assets on your behalf, and on behalf of your chosen beneficiaries. Regardless of your income or background, responsibly creating a living trust can allow you to streamline the management of your assets, and offer a great deal of protection in the event that you become ill or disabled, or pass away.
Broadly speaking, when you set up a living trust, you choose the assets that you want to place into the trust, as well as the trustee who will oversee them on your behalf. During your lifetime, the trustee will largely be responsible for managing the assets, as you direct. At the time of your death, the trustee will generally either distribute the property in the trust to your named beneficiaries, or to continue to hold and manage it on their behalf.
What’s the Difference Between Revocable and Irrevocable Trusts?
Broadly speaking, living trusts are set up as either revocable or irrevocable trusts. Both of these situations offer different advantages and limitations, and choosing the right style for you will ultimately come down to your needs, intentions, and long-term goals.
Put simply, a revocable trust allows you to revoke, alter, or edit the trust during your lifetime. This is a flexible option, popular because it allows the grantor (that is, the person who created the trust) to also serve in the role of trustee while they remain alive. An irrevocable trust, in contrast, cannot be changed or altered by the grantor, or revoked after their death. With this set-up, the grantor transfers the ownership of the assets over to the trust, giving up their own legal claims to ownership – which can prove advantageous when it comes to avoiding estate taxes or protecting certain assets from creditors.
Do I Need a Will If I Have a Trust (Or Vice Versa)?
Broadly speaking, estate transition and asset protection experts generally encourage utilizing both a trust and a will. For one thing, a will can help dictate your wishes when it comes to all property not included in the trust. Wills can also be set up to work in conjunction with an established trust; for instance, a pour-over will can help transfer all of your remaining overlooked or recently acquired assets into a living trust at the time of your death.
It’s also important to remember that wills also cover legal ground and considerations separate from asset management and disbursement, including naming a guardian for surviving minors. Meanwhile, unlike a will, a trust can act as a vehicle to help you manage your property during your lifetime, including if you become incapacitated.
How Much Control Can I Have Over a Living Trust?
Ultimately, the amount of control you can exert over a trust is a decision that largely rests in your hands. Generally speaking, grantors have significant ability to alter, update, or edit a revocable living trust, and virtually no ability to do the same for an irrevocable living trust (give or take in a few limited, highly specific circumstances).
In most cases, a grantor can make changes to a revocable living trust throughout their lifetime as they see fit. This may include making a loan from a trust to a beneficiary; adding new property or assets to the trust; transferring property out of the trust; and amending the details of a trust (such as beneficiary designations) in the event of marriage, divorce, childbirth/adoption, changes to financial status, and so on.
What Are Some of the Advantages of a Trust?
Why look into a living trust? Ultimately, the answers to this question will vary from person to person. No two people are exactly alike, and no two individuals or families are going to have precisely the same reason for creating and managing one or more trusts. WIth that said, there are several clear and commonly cited benefits to establishing a living trust, including:
- Probate avoidance. Generally speaking, asset placed into a trust are able to avoid the complex and costly probate process, allowing them to pass to your beneficiaries more seamlessly, more privately, and with less effort. In many cases, this can make the difference between giving your loved ones the financial and lifestyle support they need, or tying up assets for months and months.
- Asset management. In the event that you cannot or do not want to manage certain assets, a trust can offer a significant level of protection. For example, a trustee can handle the management and administration of trust assets if you fall ill or become incapacitated.
- Asset protection and tax planning. Trusts can be set up as a form of asset protection, allowing assets to become off-limits to creditors and avoid estate taxes, in certain circumstances.
Who Can I Turn to With More Questions?
Successfully setting up a trust can be complicated. There are many crucial decisions to be made, and documents to be completed correctly. Ultimately, even a slight error or oversight could derail the entire thing, and potentially invalidate the trust if it’s held up to scrutiny down the line.
An experienced legal professional can help make this process easier. An attorney can help you to understand the unique variables of your situation, ensuring that no detail or nuance gets overlooked. In addition to helping draft and file your paperwork correctly, an attorney can make sure that the trust is set up properly for the sake of your long-term goals, help you anticipate conflicts or future issues, and serve as a resource if you have any questions or need clarification at any point.
About the Gunderson Law Firm
Curious about trusts, asset protection, estate planning, or any aspect of real estate or bankruptcy law in Chicago or Illinois? Don’t hesitate to get in touch with the attorneys and staff of the Gunderson Law Firm to keep the discussion going.
Our attorneys and staff understand just how much the decisions you make now can significantly affect your long-term financial goals in the future – including tax liabilities, getting access to cash when you need it, simplifying estate transitions, and so much more. The Gunderson Law Firm possesses the expertise and insight necessary to help you find effective solutions tailored to your unique needs – all reinforced by years of experience and long-term connections throughout Chicago’s real estate, title, finance, and insurance industries. Drop us a line whenever you’d like to learn more or set up your free initial consultation.