Like most people, when you think about the concept of estate planning you probably think about executing a Last Will and Testament that provides for the distribution of your estate assets when you are gone. While creating a Will that distributes your assets is certainly part of the estate planning process, it is not the entire process for most people. Because a comprehensive estate plan is intended to achieve a wide range of interrelated goals and objectives, most people find the need to include additional tools and strategies in their plan. By far, one of the most popular additions to any well thought out estate plan is a trust agreement. Living trusts, in particular, are commonly found in the average estate plan. The Vernon Hills living trust attorneys at Hedeker Law, Ltd. explain some trust basics for those who are unfamiliar with how trusts operate and how one might fit into an 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 (also referred to as a Maker or Grantor), who transfers property to a Trustee. The Trustee holds that property for the trust’s beneficiaries. Most people enter into trust agreements on a daily basis without realizing it. For example, imagine that you ask your brother Steve to hold onto some family heirlooms you have and to then give them to his daughter (your niece) when she reaches age 35. You have created a trust wherein you are the Settlor, Steve is the Trustee, and your niece is the beneficiaries of the trust. In addition, the family heirlooms are the trust assets and your direction to hold onto them until the beneficiary reaches age 25 would be considered a trust term.
Testamentary vs. Living Trusts
All trusts are first divided into one of two categories – testamentary or inter vivos – the latter of which is more commonly referred to as a living trust. A testamentary trust is a trust that arises upon the death of the Settlor and which is typically activated by a provision in the Settlor’s Will. A living trust is a trust that takes effect as soon as all the legalities of creation are in place.
Revocable vs. Irrevocable Trusts
Trust are further divided into revocable and irrevocable trusts. As the name implies, a revocable trust is one that can be modified or revoked by the Settlor at any time and without the need to provide a reason. An irrevocable living trust, once it takes effect, cannot be modified or revoked by the Settlor for any reason. Typically, an irrevocable trust can only be changed or revoked by court order. Testamentary trusts are all revocable because they do not even go into effect until the death of the Settlor at which point they are triggered by a Will that can always be changed prior to the death of the Settlor.
When Is a Trust a Beneficial Addition to an Estate Plan?
The only way to know, with certainty, that you need a trust in your estate plan is to consult with your estate planning attorney. Some common reasons, however, why a living trust might make a valuable contribution to your estate plan include:
- Incapacity planning
- Medicaid planning
- Protecting assets for a non-citizen spouse
- Business succession planning
Because of the flexible nature of a living trust, there are a seemingly infinite number of ways in which one might fit into your estate plan.
Contact Vernon Hills Living Trust Attorneys
For more information, please download out FREE estate planning worksheet. If you have additional questions or concerns regarding living trusts, or you wish to discuss how a living trust might fit into your estate plan and help achieve your estate planning goals, contact the experienced Vernon Hills living trust attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.