A well thought out estate plan will typically include a wide variety of strategies and tools designed to accomplish all of your estate planning goals and objectives. Among those tools and strategies is often a living trust. After a Last Will and Testament a trust agreement is by far one of the most common additions to an estate plan. If you and your spouse have created a living trust and incorporated it into your estate plans you may be wondering what happens to a living trust when one spouse dies.
Trusts are broadly divided into two categories – testamentary and living trusts. A testamentary trust only activates upon the death of the trust maker. A living trust (formally referred to as an “inter vivos” trust), on the other hand, will activate as soon as all the formalities of creation are complete and the trust is funded. Living trusts are further divided into revocable and irrevocable living trusts. If you have created a living trust with your spouse the fate of that trust upon the death of your spouse will depend on what type of trust you created and the actual terms of the trust itself.
If you created a revocable living trust, for example, the trust can be modified or terminated at any time by the maker of the trust. If the trust is an irrevocable living trust, however, the trust cannot be modified or terminated by the maker once it takes effect. In the case of an irrevocable living trust, therefore, the trust terms will dictate what happens to the trust if one spouse dies. If the deceased spouse was a beneficiary of the trust, for instance, the trust terms may simply call for a successor beneficiary to take his/her place or the decedent’s share of the trust assets might be paid out to the decedent’s estate. If the deceased spouse was a Trustee of the trust the trust terms will dictate that a successor Trustee should be appointed.
If the trust you and your spouse created is a revocable living trust then the maker of the trust can make changes to the trust or terminate the trust. The terms of the trust will still dictate what happens to the trust and the trust assets, however, as long as the trust is active. The only real difference is that after the death of one spouse, the surviving spouse may have the right to terminate or modify the trust, assuming that the surviving spouse is the maker of the trust.
If you have additional questions about living trusts, or your Illinois estate plan in general, contact the experienced Illinois estate planning attorneys at Nash, Nash, Bean & Ford, LLP by calling 309-944-2188 to schedule your appointment today.
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