Creating a comprehensive estate plan that accomplishes all of your estate planning goals and meets all of your estate planning needs can be a complicated, and often intimidating, endeavor. While your plan may start with a Last Will and Testament, you will undoubtedly need to include additional estate planning tools and strategies for your plan to be successful. Trusts are among the most common addition to the average estate plan because of the flexibility a trust offers as well as the range of goals that can be accomplished with a trust. Family trusts are a specific type of trust that can help protect and grow assets so those assets can provide for future generations. The best way to determine if a family trust is right for your estate plan is to consult with your Illinois estate planning attorney; however, learning more about trusts in general, and family trusts in particular, may help make the whole estate planning process a little less intimidating.
Why Are Trusts So Popular?
At its most basic, a trust is a legal agreement made by one party (a “Settlor”) whereby another party (the “Trustee”) holds and protects assets for the benefit of a third party (the “Beneficiary”). A trust can activate during the lifetime of the Settlor (a “living trust”) or upon the death of the Settlor (a “testamentary” trust). In addition, living trusts may be revocable or irrevocable. A revocable trust is one in which the Settlor may modify, amend, or revoke the trust at any time and without the need to give a reason. An irrevocable trust, on the other hand, cannot be modified, amended, or revoked by the Settlor for any reason once it takes effect.
Trusts are a popular estate planning tool in large part because they offer such a wide range of benefits and can be extremely flexible. Depending on the type of trust you create, the benefits you get from the trust may include:
- Probate avoidance
- Tax benefits
- Asset protection
- Medicaid eligibility
- Inheritance protection for a beneficiary with special needs
- Help with estate planning for a blended family
- Continues control over trust assets
The flexibility of a trust comes from the fact that the Settlor creates the trust terms. Those terms may include almost anything as long as they are not illegal or unconscionable.
How Are Family Trusts Different from Other Trusts?
Family trusts, also referred to as “Family Wealth Trusts (FWT),” are trusts that are specifically created to protect the family wealth for future generations. Do not let the name scare you off – you do not really need to be “wealthy” in order to benefit from a FWT. All you need is a desire to ensure that the assets you do own are protected and passed down to future generations. The right Trustee is essential as well because it is the Trustee’s job to invest trust assets so they will grow. As the Settlor of your FWT you will create the trust terms that dictate how the trust is to administered and how and when trust assets can be distributed to the trust beneficiaries. By distributing assets out of a trust you can avoid a lump sum distribution, a mistake when beneficiaries are still young and not ready to handle a large lump sum inheritance. Those same trust terms can also be used to guide your beneficiaries and to maintain a certain level of control over the trust assets, and beneficiaries, even after you are gone. You might, for example, only allow trust assets to be used to pay for higher education or you might prohibit distributions if a beneficiary has an addiction problem. Consult with your Illinois estate planning attorney if you think a family trust might be beneficial addition to your estate plan.
For more information, please join us for one of our upcoming FREE seminars. If you have questions or concerns regarding family trusts, contact the experienced Illinois estate planning attorneys at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.