When the subject of estate planning comes up, creating a trust almost inevitably becomes part of the discussion. The reason for this is simple – trusts are flexible enough that numerous estate planning goals can be furthered using one of the various types of trusts. If you are unfamiliar with trusts, it will help to get a better idea why you might want to create a Waukegan revocable trust.
What Is a Revocable 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. Because they are activated by the Settlor’s Will, which can always be revoked, a testamentary trust is always revocable. 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.
Why Create a Revocable Trust?
The problem most people face when contemplating the addition of a trust to their estate plan is knowing which type of trust to use. Given the highly personal nature of estate planning, it is always best to consult with your estate planning attorney when making any decisions relating to your plan. You may find it beneficial, however, to learn some of the most common reasons why a revocable trust is included in an estate plan, such as:
- Incapacity planning – a comprehensive estate plan should plan for the possibility of your incapacity as well as the eventuality of your death. If you do become incapacitated at any point in time, someone will have to take over control of your assets and finances. A revocable living trust serves as an excellent incapacity planning tool by allowing you to appoint yourself as the Trustee and appoint the person you want to take over control of your estate as your Successor Trustee. Assets are transferred into the trust and you continue to manage them as long as you are able. If you become incapacitated, the Successor Trustee takes over control of the trust assets without the need for any additional steps.
- Protecting the inheritance of a minor child – for a parent — particularly the parent of a minor child – one of the primary goals of an estate plan is usually to ensure that the child is financially provided for if something happens to the parent. If you are the parent of a minor child, however, your minor child cannot inherit directly from your estate. To resolve this dilemma, many parents choose to create a testamentary trust. Using a testamentary trust makes sense because the trust won’t be needed unless the parent dies. If it is needed, the Trustee can manage the trust assets until the child reaches the age at which the assets can be distributed directly to the child.
- Avoiding probate – at the time of your death, the assets you own will make up the estate that you leave behind. Probate is the legal process that is usually required before those assets can be distributed to beneficiaries. Probate can be a time consuming and expensive process which is why people often include probate avoidance as one of their estate planning goals. One way to significantly decrease your estate’s exposure to the probate process is to use a revocable living trust. Assets held in a trust bypass the probate process and can, therefore, be distributed to the intended beneficiaries shortly after your death.
Contact a Waukegan Revocable Trust Attorney
For additional information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about creating a revocable trust, contact an experienced Waukegan revocable trust attorney at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.