Creating a comprehensive estate plan often requires you to utilize additional estate planning tools and strategies beyond a Last Will and Testament. One of the most common of those additional tools is a trust agreement. Though once used almost exclusively by the wealthy to shelter and pass down assets, trusts have evolved to the point where a trust is commonly found in the average estate plan. If you are considering the addition of a trust to your estate plan, you may be wondering if you need a lawyer to create a trust agreement. Learning more about trusts may help answer that question.
Trust Basics – The Elements
A trust is a relationship whereby property is held by one party for the benefit of another. Although trusts have evolved to the point where there is a specialized trust to fit almost any estate planning goal or objective, all trusts require the same five elements for formation, including:
- Trustor – also known as the “Grantor,” “Maker,” or “Settlor,” this is the person who creates the trust and makes all decisions relating to the trust.
- Trustee – the Trustee is appointed by the Settlor to manage and invest the trust assets and administer the terms of the trust. The Trustee can be an individual or an entity (such as a bank). As the Trustor, you can also appoint yourself as the Trustee in some types of trusts.
- Beneficiary – the beneficiary receives the benefits of the trust. A beneficiary can be an individual, an organization (such as a church or charity), or even your family pet. A trust may have several beneficiaries and may include both current and future classes of beneficiaries.
- Terms – the terms of a trust are created by the Trustor and may include anything the Trustor wishes to include as long as a term is not illegal or “unconscionable.” When the Trustee administers the trust, he/she is obligated to follow the trust terms exactly.
- Funding – assets must be transferred into the trust by the Trustor to fund the trust. Just about any type of assets can be used, including cash and securities, real property, and proceeds of a life insurance policy.
The Dangers of Using a DIY Trust Agreement
In the 21st century, you can find almost anything on the internet, including “Do-It-Yourself” legal forms. Because trusts are so popular, there is no shortage of DIY trust forms to be found. If you are working on a budget and/or you are short on time, it may be tempting to use one of these DIY trust agreement forms in lieu of consulting with an experienced estate planning attorney. Unfortunately, what often happens is that the trust beneficiaries end up paying the price for your decision not to consult with an attorney first. The problems you may find in a DIY trust can run the gamut; however, some common issues include:
- Out of date language or provisions because the laws have changed since the document was produced.
- Absence of contingency plans, such as successor Trustee and a method by which an alternate Trustee can be identified if necessary.
- Vague terms regarding investment and/or distribution of assets
- Failure to provide the Trustee with sufficient discretionary authority – or providing too much discretion.
Although there is no legal requirement that you work with a lawyer when creating your trust agreement, doing so will prevent problems such as these as well as others. It will also assure you that the trust actually does what you want it to do and that it will work as intended. Given the important role a trust is likely to play in your estate plan, therefore, it only makes sense to work closely with an Illinois or Iowa estate planning attorney
If you have questions or concerns when you sit down to create a trust agreement in Illinois, contact the experienced Illinois estate planning attorneys at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.