Estate planning, regardless of one’s income and assets can be complicated. However, we all want to maximize the value of our estate. This means, avoiding the costs of probate and reducing taxes, which brings many to the idea of creating a living trust.
What happens at death?
All of our assets that are “non-probate assets” are passed on as intended, like a joint account transferring to the co-owner. All other assets must go through a court process called probate to be distributed to one’s heirs. This can be a costly court process as it is litigation that usually, requires all heirs and whoever is administering the estate to get an attorney, which reduces the amount of value each heir receives in the end.
What is a trust?
A trust is a way for someone to designate a third party, like a person or entity, to act as a custodian or trustee over assets in the trust. They are created through a trust document, and the person that creates the trust is known as the, grantor, trustor or settlor. The person or entities that receive distributions from the trust, like those that receive distributions from a will, are known as beneficiaries.
What about a living trust?
A living trust is, which is also called a revocable trust, begins while the grantor is alive, and since it can be amended or terminated during the grantor’s life, it is revocable. Like all trusts, living trusts are created by a trust agreement, which names the trustee, but for living trusts, the grantor can be the trustee during their life or until they are incapacitated. This trust agreement sets out how one’s assets are managed, and then after death, how they are distributed to the named beneficiaries.
The key benefits are control, reduced court proceedings and reduced taxes. First, one can still maintain control over one’s assets while they are live. Second, to the extent that one transfers all of their assets into a living trust, those assets avoid probate proceedings because those assets are “owned” by the trust. And, finally, since the estate has become trust property, none of the normal death taxes would apply. Nonetheless, as this is only a trust primer, those in Will County, Illinois, should consult an estate planning attorney to make sure they create a personalized estate plan for their own needs.