When you contemplate creating an estate plan to distribute your estate assets after you are gone you likely envision using a Last Will and Testament to accomplish that distribution of assets. A Will certainly can be used to distribute your assets; however, there is another popular option. A living trust can also be used as the primary vehicle for distributing your estate. Of course you should consult with your estate planning attorney before deciding which option is better for you; however, learning the benefits of using a living trust to distribute your estate may help you make your ultimate decision.
What a Last Will and Testament Can Accomplish
At its most basic, a Last Will and Testament is a legal document that communicates a person’s final wishes pertaining to possessions and dependents. Your Will allows you to make both specific and general gifts. For example, you might make specific gifts of your vehicle and $10,000 to a beneficiary. You could also gift a percentage of your estate to a beneficiary. For example, you could gift 25 percent of your entire estate to a beneficiary. A Will also offers you the only official opportunity you will have to nominate a Guardian for your minor children in the event one is ever needed.
How a Trust Works
A trust agreement is also a legal document that serves to establish a trust. A trust is created by a “Settlor” who appoints someone to be the Trustee of the trust. The Trustee is the individual who manages and invests trust assets as well as oversees the administration of the trust according to the trust terms created by the Settlor. Assets held in the trust are distributed by the Trustee according to the terms of the trust. When used to distribute estate assets after the death of a Settlor, the trust terms will tell the Trustee when to distribute assets and which assets to distribute to which beneficiaries.
Why Might a Living Will Be a Better Choice for Your Estate Plan?
Both a Will and a trust can be used to distribute your estate assets after your death. In fact, even if you choose to use a trust as the primary vehicle for distributing your estate you should still execute a Pour Over Will to ensure any assets left out of the trust make it into the trust at the time of your death. Among the factors that often make a trust the tool of choice to distribute an estate are:
- Probate avoidance – probate is the legal process that follows the death of an individual. Probate can be time consuming and costly. Assets distributed via a Will must first go through the probate process. Trust assets, on the other hand, bypass the probate process.
- Minor child’s inheritance – a minor child cannot inherit directly from your estate. Therefore, if you are the parent of a minor child, or you plan to have children in the near future, a trust is a better option to guard your child’s inheritance until he/she reaches the age of majority.
- Asset protection – the right type of trust can also protect your estate assets from creditors, divorcing spouses, Medicaid spend-down, and various other potential threats.
- Staggered distributions – gifts made in your Will become the complete and unconditional property of the beneficiary once the transfer of ownership is complete. If you have a beneficiary to whom gifting a lump sum of money is not a good idea, a trust might be a better choice. A Trustee manages the assets held in a trust and the Settlor creates the terms of the trust, allowing you to retain a certain degree of control over gifts you make using a trust.
- Privacy – because a trust agreement is not part of the probate of your estate, the terms of your trust remain private. Therefore, gifts made using a trust agreement can remain private as well.
- Incapacity planning – the terms of a Will do not become relevant until the death of the Testator; however, the terms of a trust can apply in the event of incapacity as well as death.
Contact a Living Trust Attorney
Please feel free to download our FREE estate planning worksheet. If you have questions or concerns regarding the use of a living trust to distribute your estate, contact an experienced Illinois living trust attorney at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.