Establishing a Trust
Estate planning is an important step in protecting your family should you be incapacitated or die, and a key option for that plan may be a trust. Unlike a will, your trust actively survives your death, guided by the successor trustee so that all trust property is delivered as laid out. Most importantly, property held in living trust avoids the probate process, which is both time consuming and very public. Relying on a will alone may also put your wishes at risk of being contested.
It is true that trusts are not the right fit for everyone. This may not be dependent on your level of wealth — after all, the less you have, the more it may need to be protected, especially since probate costs can come as a higher percentage from smaller estates. However, the process can cost more up front and is often best suited for being drafted by an estate attorney. Our team at Schottler & Associates serve residents throughout Riverside, IL and the Western Suburbs (Chicago) by helping them understand and draft trusts.
What a Living Trust Does
A living trust is, quite simply, an arrangement made while you are alive that holds ownership of property and other assets on behalf of someone else. This kind of property may be real estate, stock, bonds, brokerage accounts not held in TOD, precious metals, antiques, heirlooms, special collections, works of art, and small business interests and shares. It can even control less tangible assets, including patents, copyrights, and digital property. Property can be added or removed from the trust at any time, presuming the correct paperwork is filed. However, the biggest benefit of a living trust is the fact that it allows you to avoid probate, which, as mentioned above, is lengthy and public. It can also result in a hefty set of fees, which can eat up about 5% of the property being processed by the court. Other benefits offered by a living trust include:
- Maintaining control of trust property and assets while you’re alive.
- Avoiding interference on incapacity.
- Improving privacy, since a trust is not made public.
- Protection from court challenges.
- Set up long-term care for beneficiaries with special needs (may require specialty trust).
- Ensure firearms are passed down without violating federal and state regulations (may require specialty trust).
What a Living Trust Doesn’t Do
If a trust sounds like a perfect solution, then you need to remember that there are a few significant limitations. First, a living trust does not protect your assets (especially real estate) from creditors collecting on lawful debts, even after your death. (It is worth noting that while creditors have to be notified of your death for probate proceedings, they do not necessarily get notified without probate proceedings, and so it may be more difficult for them to track the assets for collection.) What’s more, it does not help you qualify for Medicaid, and can even incur transfer penalties. Assuming they’re suited to your needs, you will need to set up one of three different special needs trusts to avoid these penalties. Living trusts also have no bearing on how your income tax or estate tax is determined, and should not be confused for a living will, because it does not define power of attorney.
Professional Assistance for a Future You Can Trust
Ensure that all of your assets are listed and protected from probate so that they’re distributed properly among your inheritors and beneficiaries. Schottler & Associates serves Chicagoland and Riverside, IL residents and has the skills and expertise to develop a declaration of trust for revocable living trusts, irrevocable living trusts, special needs trusts including Medicaid special treatment trusts, gun trusts, and more. Contact us today for a consultation about whether trusts are the right choice for your Chicagoland estate planning needs.
Will vs. a Trust:
What’s Best for You?
Estate planning is full of choices. This guide will help you decide whether a will or trust is right for you.
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