When you think of estate planning you undoubtedly think of executing a Last Will and Testament. While a Will is typically the foundation of a well thought out estate plan, most estate plans include additional tools, documents and strategies as well. Trust agreements, for example, have become a common addition to a comprehensive estate plan over the last several decades. The decision to add a trust to your estate plan is a decision that should only be made after consultation with your Illinois estate planning attorney; however, a basic understanding of what a living trust is can only help you make that decision when the time comes to do so.
Trusts are separated into two types – testamentary and living trusts. You may decide to have one (or more) of each in your estate plan as they can serve different purposes. A testamentary trust is one that only takes effect after the death of the trust creator, or Trustor. A living trust, formally known as an “inter vivos” trust, will take effect as soon as all formalities of creation have taken place and sufficient assets have been transferred in to fund the trust.
Living trusts are further divided into revocable and irrevocable trusts. As the names imply, a revocable living trust is one that the Trustor may modify or even revoke at any time after creation of the trust while an irrevocable trust cannot be changed or revoked by the Trustor once the trust takes effect.
Living trusts can be used to achieve a wide variety of estate planning goals and objectives. The type of trust you use will depend on the objective. A revocable living trust, for example, is commonly used for incapacity planning purposes because it allows you to transfer assets into the trust and manage those assets while able to do so. Upon your incapacity, however, your successor trustee (usually a spouse, parent or adult child) will automatically take over the control and management of the assets, providing a quick and simple shift of control without the need for court interference.
If asset protection or Medicaid planning is your goal, an irrevocable trust must be used. By transferring assets into an irrevocable trust they are no longer considered part of your estate, and therefore protected from creditors or from consideration when applying for Medicaid benefits.
If you have additional questions or concerns 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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