Your initial estate plan probably consisted of little more than a Last Will and Testament. Over the years, you have hopefully recognized the need for a more extensive and comprehensive plan to protect your growing family and estate. Among the most common additions to a growing estate plan is a trust. Deciding which type of trust you need, however, can be a complicated undertaking. The estate planning attorneys at Hedeker Law, Ltd. offer some guidelines that may help you understand how Waukegan revocable trusts fit into your overall estate plan.
Originally, trusts were used almost exclusively by wealthy families to protect that wealth and pass it down to future generations. As trusts evolved, however, they became more “user-friendly.” Today, there is a specialized trust to meet almost any estate planning goal which is why trusts are so frequently found in the average estate plan.
At its most basic, 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 beneficiaries designated by the Settlor in the trust agreement.
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.
Living trusts are further divided into revocable and irrevocable trusts. As the name implies, a revocable living 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. Testamentary trusts are all revocable because they do not go into effect until the death of the Settlor. Because a testamentary trust is triggered by a Will, and a Will can always be changed prior to the death of the Testator/Settlor, a testamentary trust is revocable.
Common Uses for a Revocable Trust
One of the primary factors used to determine which type of trust you need is the estate planning goal(s) you are trying to achieve with the trust. For example, if asset protection, Medicaid planning, or special needs planning is your goal, you need an irrevocable living trust. The reason for this is that once assets are transferred into an irrevocable living trust they are no longer accessible to you. As such, they are also not accessible to creditors nor are they counted when determining eligibility for Medicaid or other assistance programs.
Although there are numerous uses for a revocable trust, some common uses include:
- Protecting the inheritance of a minor child – because a minor child cannot inherit directly from a parent, parents often create a testamentary trust that will activate upon their death and protect the child’s inheritance until the child reaches the age of majority.
- Incapacity planning – to plan for the possibility of your own incapacity, you may wish to create a revocable living trust and name yourself as the Trustee. Then designate the person you wish to take over control of the trust assets in the event of your incapacity as your successor Trustee. Transfer major assets into the trust and manage them as usual. If you become incapacitated, however, control shifts seamlessly to your designated successor Trustee.
- Probate avoidance – probate is expensive and time-consuming. In addition, probate assets are held up and unavailable to the intended beneficiaries until the end of the process. One way to limit your estate’s exposure to probate is to create a revocable trust because assets held in a trust are considered non-probate assets, meaning they bypass the probate process altogether.
Contact Waukegan Revocable Trusts Attorneys
Please join us for a FREE upcoming seminar. If you have questions or concerns regarding Waukegan revocable trusts, contact the experienced estate planning lawyers at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.