Illinois Trusts Lawyer

There are many benefits to choosing a Trust, including the following:

  • Avoiding Probate
  • Providing for Long-Term Needs (e.g. Minor Children, Special Needs)
  • Utilizing Special Tax Provisions (in certain cases)
  • Increasing Flexibility of Dispositions
  • Increasing Privacy for Estate Disbursements and Life-Time Needs

 

The use of a Trust for estate planning can help achieve the following goals: (1) it provides a means of avoiding probate (2) it provides long-term asset management potential to assist with the care of minors or others with special needs; (3) it can take advantage of certain tax-saving provisions; (4) it provides flexibility with regard to the terms of asset disposition; and (5) it can prove to be far more private than a Will or a general power of attorney.

1. Avoiding Probate:

A Trust provides a means of avoiding probate. Assets held in trust name are no longer “owned” by the person in control of the Trust. Therefore, to avoid probate with a Trust, you must not only create the Trust, but it must also be funded prior to the death of the Settlor. To fund a Trust, assets should be retitled into Trust name, or the Trust should be listed as the payable on death beneficiary of the asset. The procedure for accomplishing this generally is not difficult, but must be carefully done. Furthermore, retitling assets in Trust name will not affect your ability to utilize them. In a revocable Trust where the Settlor is the Trustee and Beneficiary, the Settlor may sell, transfer, deplete, etc. the assets as if they were not placed in Trust. Not all assets may be owned by a Trust. You are advised to seek specific advice of legal counsel and financial advisors as you determine which assets should be held by a Trust.

2. Long Term Asset Management:

The use of a Trust can provide significantly increased flexibility regarding the timing of the disposition of property.

First, a Trust can delay the placing of assets in the hands of a minor beneficiary. Assets that pass only by a Will (or by the intestacy statute if no Will exists) become the property of a minor recipient upon reaching their 18th birthday. This result can be avoided through the use of a Trust. For example, instead of a certain beneficiary receiving large amounts of property on his or her 18th birthday, the Trust could provide income paid in regular intervals, such as quarterly, and that the beneficiary has the right to withdraws Trust principal when the beneficiary reaches certain benchmark ages. For example, the beneficiary may be given the ability to request distributions of principal on a schedule similar to the following: 25% on his or her 25th birthday; 25% on his or her 30th birthday; and 50% on his or her 35th birthday. During the existence of the Trust, beneficiaries could have the ability to receive principal for certain other expenses such as education and medical expenses, and may request a discretionary distribution from the Trustee prior to a withdrawal right age. The flexibility of delaying and controlling payments by a Trust can represent a significant planning advantage for people with young children.

Second, in the case of certain assets, the use of a Trust can enable a beneficiary to access funds. For example, if a young couple has large life insurance policies payable in the event of both of their deaths to their minor children, the life insurance company may refuse to payout on the policy until a guardian is appointed by a court of competent jurisdiction. The company may determine to “hold” the proceeds of the policy until the child reaches age 18. By using a Trust as the Beneficiary of the life insurance policy, this result can be avoided, in that the Trustee would accept the policy proceeds and hold them for the Beneficiary pursuant to the Trust provisions.

 

3. Tax Saving Provisions:

One of the most significant advantages of a Trust is that it can include tax-savings provisions. Specifically, a Trust can be drafted to ensure that each spouse can utilize his or her federal and Illinois estate tax exemption, which can result in significant estate tax savings. Tax laws and rates are constantly changing. Each year, it becomes important to review the current tax law structure and specific exemptions and rules. By understanding and taking advantage of existing tax laws, an individual, and his or her family, can save hundreds, or even thousands, of dollars in tax. Further, to minimize the estate tax impact of generational wealth, a generation skipping transfer in favor of grandchildren may also be employed.

Even if you do not have any estate tax concerns, you must still consider the income tax consequences of the provisions in your Trust, and of your beneficiary designations on any retirement accounts (e.g., IRAs and 401(k)s), or tax-deferred annuities.  If you are utilizing a Trust as a beneficiary of these types of assets, perhaps because your children are minors, the Trust must include specific provisions to minimize income tax liability upon your death.

Other options also may exist depending on the facts and circumstances of a particular situation.

4. Flexibility of Asset Disposition:

A Trust can provide flexibility with regard to modifying asset dispositions. Unlike with a Will, which must be modified through a duly executed Codicil, a Trust may provide for dispositions of tangible personal property by letter. This letter may detail who receives certain items of tangible personal property. Further, this letter can be changed at any time by the settlor, without further legal expense, and does not have to be executed with the formalities of a Will.

Furthermore, the assets may be distributed in the body of a Trust in a more flexible arrangement than can be found in a simple Will. For instance, the Trust may provide for the assets to be distributed in a staggered payout structure, or according to beneficiaries achieving goals (e.g., college graduation, maintaining job for a period of time).

5. Increased Privacy for Asset Distribution

Unlike a Will, which must be filed with the county after death and becomes a public record, a Trust is a private document. A Trust is not required to be filed and continues to be a private document even after your death.  Only the beneficiaries identified in the Trust, and financial institutions or others involved in the administration of the Trust will receive a copy of your Trust.

 

The above list is not an exhaustive list of the benefits of a Trust.  We would be happy to discuss how a Trust could benefit you and your loved ones.

Learn more about trusts:

Should you have any questions about Complex Wills, Estate Planning or would like to schedule a free initial consultation, please contact Waltz, Palmer & Dawson, LLC at (847)253-8800 or contact us online.

Waltz, Palmer & Dawson, LLC is a full-service law firm with various areas of service to assist your business, including: Employment Law, Intellectual Property, Commercial Real Estate, Business Immigration, Litigation and general Business Law services. Individual services include Estate Planning, Wills and Trusts, Probate, Guardianship, Divorce and Family Law.

This information constitutes attorney advertising. The material is for informational purposes only and does not constitute legal advice.

 

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Rolling Meadows, Illinois 60008

Phone: (847) 253-8800
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