Like most people, your initial estate plan probably consists of nothing more than a Last Will and Testament. Over time, however, that basic estate plan should grow to accommodate the growth of your assets and your family. One of the most common estate planning tools people add when expanding their basic estate plan is a living trust. To find out if a living trust would make a beneficial addition to your specific estate plan you should consult with your Illinois estate planning attorney. It may also help, however, to learn as much as possible about living trusts and how they can help you reach your estate planning goals and objectives. Toward that end, the Lincolnshire living trust attorneys at Hedeker Law, Ltd. discuss living trusts and why you might need one in your estate plan.
What Is a Trust?
A trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a Settlor, who transfers property to a Trustee. The Trustee is appointed by the Settlor and may be an individual or an entity (such as a bank or law firm). The Trustee holds that property for the trust’s beneficiaries. The trust must have at least one beneficiary, but may have numerous and they may be current and/or future beneficiaries. A beneficiary may be a person, an entity (such as a charity), or even the family dog. The terms, which are used to dictate how the trust is administered and the trust assets managed, are created by the Settlor. Finally, a trust requires funding. Almost anything of value can be used to fund a trust, including cash, securities, real and personal property, and/or the proceeds of a life insurance policy.
Testamentary vs. Living Trusts
All trusts fall into one of two broad categories – testamentary or living trusts. A testamentary trust is a trust that does not activate until the death of the Settlor and is typically activated by a provision in the Settlor’s Will. A living trust (the formal name for which is an “inter vivos” trust) activates as soon as all formalities of creation are in place. Living trusts are then further sub-divided into revocable and irrevocable living trusts. Because a testamentary trust is activated by a provision in the Settlor’s Will, which can always be revoked up to the time of death, a testamentary trust is always revocable.
Common Reasons to Establish a Living Trust
A living trust is a very flexible estate planning tool that can be used to accomplish a wide variety of diverse estate planning goals and objectives. Some of the most common reasons to include a living trust in your estate plan include:
- Incapacity planning — as the Settlor of the trust, you appoint yourself as the Trustee and the individual you wish to take over control of your estate in the event of your incapacity as the successor Trustee. Major assets are then transferred into the trust and you continue to control them as the Trustee unless you become incapacitated. If that happens, control of your assets automatically shifts to your designated successor Trustee.
- Medicaid planning – a Medicaid trust can protect hard earned assets while ensuring that you qualify for Medicaid benefits if you need them to help cover the high cost of long-term care when you are older.
- Special needs planning – A special needs trust provides supplemental funds to a beneficiary with special needs without jeopardizing the beneficiary’s eligibility for state and/or federal assistance program such as Medicaid or food stamps.
- Charitable gifting – a properly drafted charitable trust allows you to gift throughout your lifetime using tools such as the annual exemption, thereby reducing your taxable estate and allowing you to gift to a cause that is important to you.
Contact Lincolnshire Living Trust Attorneys
For more information, please download out FREE estate planning worksheet. If you have additional questions or concerns regarding living trusts, contact the experienced Lincolnshire living trust attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.