A comprehensive estate plan should help you accomplish a wide range of inter-related goals. Accomplishing those goals typically requires the use of a variety of estate planning tools and strategies. Among the most common of those is a revocable living trust. Understanding the benefits of revocable living trusts will help you decide if your estate plan could benefit from the addition of one.
Trust Fundamentals
A trust is a relationship whereby property is held by one party for the benefit of another. A Settlor (also referred to as a “Grantor” or “Trustor”) transfers assets into the trust that is then administered by a Trustee, appointed by the Settlor. Trusts can be divided into two broad categories – testamentary and living trusts. A testamentary trust is a trust that only activates after the death of the Settlor. As the name implies, a living trust activates while the Settlor is still alive. Living trusts can be revocable or irrevocable.
Revocable Living Trusts
The type of trust you create will depend on the purpose of the trust and the goals you hope to achieve through the use of the trust. For example, some common benefits of a revocable living trust include:
- Modification – as the Settlor of a revocable living trust, you can modify the trust at any time and for any reason. This makes it easy to transfer assets into and out of the trust as well as to add or delete beneficiaries of the trust. You can also change the trust terms or replace the Trustee as often as you wish.
- Termination/Revocation – just as you can easily modify a revocable living trust, you can also revoke or terminate the trust at any time and without the need for a reason.
- Probate avoidance – probate is the legal process that is typically required following the death of an individual. Probate is used to identify and value the assets of the decedent as well as provide creditors of the estate with an opportunity to file claims against the estate. If you use a Last Will and Testament to distribute your estate, the Will must be probated. That means the beneficiaries of the Will must wait until the conclusion of the probate process before receiving their intended gifts. Even a relatively modest and uncomplicated estate can take months to get through the probate process which is why using a revocable living trust is often a better option. The benefit to using a trust to distribute estate assets is that trust assets bypass the probate process altogether, allowing them to be distributed as soon after your death as you dictate using the trust terms.
- Incapacity planning – although you may not have given it much thought, you could become incapacitated any time as the result of a tragic accident or debilitating illness. If incapacity does strike, someone must take over the control and management of your assets during your period of incapacity. One of the many benefits of a revocable living trust is that it works as an incapacity planning tool by first allowing you to name yourself as the Trustee. Then you name the person you wish to take over control of the trust assets in the event of your incapacity as your successor Trustee. You then transfer major assets into the trust and manage them as you always have. If you become incapacitated, however, control shifts seamlessly to your designated successor Trustee without the need for court interference.
- Minor children – a revocable living trust offers a number of benefits to the parents of minor children. As the Settlor of the trust you appoint the Trustee, and any successor Trustees, allowing you to decide who will protect and manage the inheritance you leave your children. In addition, a trust lets you stagger the inheritance you leave your children instead of giving them a lump sum and lets you decide when they receive those distributions. No matter how mature a child may be, handing an 18-year-old a large lump sum inheritance is rarely a wise idea. Instead, you may wish to direct the trust to distribute that inheritance in increasingly valuable disbursements over the course of several years to allow your child an opportunity to learn to handle his/her finances before being handed a large sum of money and/or valuable assets.
Contact Illinois Trust Lawyers
For additional information, please download our FREE estate planning worksheet. If you have questions or concerns regarding the benefits of revocable living trusts, contact the experienced Illinois trust lawyers at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.
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