When you sit down to work on your comprehensive estate plan you may consider including a trust in your plan. Trusts have increased in popularity over the last several decades because of the numerous benefits a trust offers and the multitude of estate planning goals that can be achieved with by incorporating a trust into your plan. If you are new to trusts, you may wonder if you will retain control over property you transfer into a living trust. The answer depends on whether you create a revocable or an irrevocable trust.
Trusts fall into two camps – testamentary and living. A testamentary trust is one that only becomes active after your death while a living trust, as the name implies, becomes active while you are alive. Within the living trust camp you then have the choice of creating a revocable or irrevocable living trust. Which type you create will depend on the purpose of the trust. Irrevocable living trusts provide tax and asset protection benefits, for example, while a revocable living trust is an excellent incapacity planning tool.
If you create an irrevocable living trust you will not retain control over the assets transferred into the trust. The reason for this is that once an irrevocable living trust becomes effective the maker of the trust cannot change, modify or terminate the trust from that point onward. Therefore, the terms of the trust will dictate how trust assets are handled once they are transferred in to the trust. The trustee of the trust will be responsible for managing those assets and overseeing the day to day administration of the trust. To get the benefits intended out of an irrevocable living trust you cannot name yourself as the trustee. Therefore, you cannot retain control, in any way, over the assets held by the trust except via the trust terms you created when you established the trust.
A revocable trust is very different. A revocable trust can be changed, modified and terminated by you after it becomes effective. Moreover, you may name yourself as the trustee of a revocable living trust. In fact, one of the most common uses of a revocable living trust is incapacity planning. When used as an incapacity planning tool, it is essential that you name yourself as the trustee of the trust, meaning you will retain complete control over the trust assets after they have been transferred into the trust.
If you have additional questions about living trusts, or any other estate planning matters, be sure to consult with an experienced Illinois estate planning attorney.
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