Not too long ago trusts were used primarily by wealthy families as a mechanism by which the family wealth could be transferred to future generations without losing complete control over how the assets were used. In the 21st century, however, trusts are almost a routine addition to any estate plan. Despite this, trusts remain a mystery to many people. The manner in which assets are handled in a trust, for example, causes a significant amount of confusion for many people, causing clients to ask “ What assets are left outside of my trust? ”
A trust is a legal arrangement that allows you to shelter and/or leave behind assets for a beneficiary by entrusting those assets to the care of a trustee. While there are a seemingly infinite number of specialized trusts that can be created to achieve very narrow objectives, all trusts require the same basic elements:
Trustor – the person who creates the trust and whose assets are used to fund the trust
Trustee – the person or company that manages the trust assets and administers the trust terms
Beneficiary – the person(s), entity, or even pet that benefits from the trust
Assets – real or personal property, tangible or intangible property –almost anything of value can be used to fund a trust.
Trust terms – created by the grantor to guide the management of trust assets and distribution of those assets to beneficiaries
Trusts are divided into four categories – irrevocable, revocable, living, and testamentary. A living trust becomes effective once all the elements of creation are satisfied and funded appropriately. A testamentary trust, on the other hand, does not take effect until your death. A revocable trust can be modified, changed, or revoked by the grantor at any time and for any reason while an irrevocable trust cannot be changed or revoked once it takes effect.
As the trustor of any trust you decide which assets will be used to fund the trust. Therefore, you also decide which assets will be left out of the trust. Though it is not common to transfer all of your assets into a living trust it could be done. Likewise, you could direct all of your assets to be transferred into a testamentary trust upon your death. Assets acquired after the creation of a living trust can even be transferred into the trust by you if the trust is a revocable trust or automatically by virtue of the terms of an irrevocable trust.
In short, as the creator of a trust you decide which assets will become trust property and which assets will remain outside the trust. If you have specific questions about a trust or trust administration consult with your Illinois estate planning attorney.
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