Although your initial estate plan will likely be fairly simple, at some point in time you will likely update that plan to account for your growing estate and/or family. That will likely mean the addition of estate planning tools and strategies that will help you manage your estate assets and protect both your assets and the people you love. One of the tools you may consider adding to your plan is a living trust. Understanding the relationship between living trusts and probate may help you decide if a living trust is right for your estate plan.
Why You Might Need More Than Just a Last Will and Testament
The Last Will and Testament you executed when you initially created an estate plan may continue to serve as the foundation of your estate plan today. While a Will can effectively distribute your entire estate after your death, most people eventually require more than just a Will to achieve all of their estate planning goals. One of the most common reasons people consider switching to a living trust to distribute the majority of their estate is the relationship between living trusts and probate.
What Is a Living Trust?
A living trust is one of two types of trusts, with the other being a testamentary trust. A trust is a fiduciary legal arrangement that allows a third party, referred to as a Trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries. All trusts can be broadly divided into two categories – testamentary or living (inter vivos) trusts. Testamentary trusts are typically activated by a provision in the Settlor’s (trust creator) Last Will and Testament and, therefore, do not become active during the lifetime of the Settlor. Conversely, a living trust activates during the Settlor’s lifetime. Living trusts can be further sub-divided into revocable and irrevocable living trusts. If the trust is a revocable living trust, as the name implies, the Settlor may modify or terminate the trust at any time. An irrevocable living trust, however, cannot be modified or revoked by the Settlor at any time nor for any reason unless a court grants the right to revoke or modify the trust.
Living Trusts and Probate Avoidance
Among the numerous benefits a living trust can provide, one of the most popular is probate avoidance. Typically, an estate must go through the legal process known as probate after the death of the estate owner. The probate process can be both lengthy and expensive. In the State of Illinois, creditors of the estate have six months after notice of probate is published to file a claim against the estate. That means that probating even a relatively modest and uncomplicated estate will usually take at least eight months. If the estate involves complex assets and/or becomes involved in litigation, it can take years to reach the end of the probate process. Assets that are part of the decedent’s probate estate remain out of reach of the intended beneficiaries until the conclusion of probate, providing one strong incentive for avoiding probate. In addition, probating an estate can diminish the value of the estate that is ultimately handed down to loved ones because everyone involved in the probate process is entitled to a few for their services. This may include the Executor, estate planning attorney, accountants, appraisers, and real estate professionals. Once all of the expenses of probate are paid out of the estate assets, the assets left can be considerably less than the decedent intended to leave behind.
A living trust can resolve this problem, to a great extent, because assets held in a trust are non-probate assets. As such, those assets bypass the probate process altogether, meaning they can be distributed to the beneficiaries as soon as the trust terms direct, making a living trust an excellent probate avoidance tool.
Contact Illinois Estate Planning Attorneys
For additional information, please download our free estate planning worksheet. If you have additional questions or concerns about living trusts and probate, contact the experienced Illinois estate planning attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.