One of the biggest misconceptions about estate planning is that creating a revocable living trust automatically protects all of your assets from probate. It doesn’t.
A trust is only effective if it is properly funded. That means transferring the right assets into the trust and ensuring other assets have the correct beneficiary designations. Unfortunately, many Illinois families spend time and money creating a trust but never finish the funding process, leaving loved ones facing probate anyway.
If you’ve created a trust – or you’re thinking about one – here’s what you should know about what belongs inside your trust, what should stay outside, and why it matters.
A revocable living trust can help your family:
However, assets that are never transferred into the trust generally do not receive these benefits.
Think of your trust as a secure container. Creating the trust is like buying the safe. Funding the trust is actually putting your valuables inside.
While every estate plan is unique, these assets are commonly transferred into a revocable living trust.
1. Real Estate
Your home, vacation home, rental properties, and vacant land can often be titled in the name of your trust.
For Illinois homeowners, placing real estate into a trust may help your beneficiaries avoid probate for those properties after your death.
Depending on your goals, another probate-avoidance option for Illinois residents may be a Transfer on Death Instrument (TODI). A TODI allows certain residential real estate to transfer directly to a named beneficiary without probate while you retain ownership during your lifetime. Whether a TODI or a trust is the better choice depends on your overall estate plan.
2. Business Interests
If you own:
These assets may be appropriate for your trust, subject to any operating agreements, shareholder agreements, or business succession plans.
Business owners should coordinate their trust with their succession planning strategy.
3. Personal Property
Many trusts include ownership of valuable personal property, including:
Some household items may instead be transferred using a personal property memorandum referenced in your estate plan.
4. Non-Retirement Investment Accounts
Brokerage accounts and taxable investment accounts can often be retitled into your trust, allowing them to pass according to your trust’s terms without probate.
Not every asset should be titled in your trust.
In fact, transferring certain assets could create unnecessary complications or adverse tax consequences.
1. Retirement Accounts
Generally, these accounts should not be retitled into your trust:
Instead, review your beneficiary designations to ensure they coordinate with your estate plan.
2. Health Savings Accounts (HSAs)
HSAs generally remain in your individual name. Your beneficiary designation will determine what happens after your death.
3. Everyday Vehicles
Many Illinois families choose not to title their primary vehicle in a living trust.
Vehicles often have simplified transfer procedures, and adding them to a trust is not always necessary. However, collector vehicles or specialty vehicles may warrant additional planning.
4. Social Security Benefits
Social Security benefits cannot be transferred into a trust.
5. Health Insurance
Health insurance policies remain in your individual name and are not trust assets.
6. Credit Cards and Personal Debt
Credit accounts should never be transferred into a trust.
Instead, your executor or trustee will handle outstanding obligations according to Illinois law.
Rather than transferring ownership, some assets are often coordinated through beneficiary designations.
Depending on your circumstances, your attorney may recommend naming your trust as beneficiary for:
However, naming a trust as beneficiary is not appropriate in every situation. For example, retirement accounts often require careful planning because beneficiary choices can affect taxes and required distributions. Your estate planning attorney should review these decisions with you.
Many probate cases begin because someone created a trust but never properly funded it.
Common mistakes include:
A “pour-over will” can help transfer certain assets into the trust after death, but those assets may still need to go through probate first.
Estate planning is not a one-time event.
Your trust should be reviewed whenever you experience a major life change, including:
Even if nothing major has changed, reviewing your estate plan every three to five years helps ensure it still reflects your wishes.
A properly funded trust can provide:
Most importantly, it helps ensure your estate plan actually works the way you intended.
Does putting my house in a trust avoid probate in Illinois?
In many cases, yes. Real estate properly titled in a revocable living trust generally avoids probate. Illinois homeowners may also consider a Transfer on Death Instrument (TODI) in certain situations.
Do I still need a will if I have a trust?
Yes. Most people with a living trust should also have a pour-over will, which can address assets not transferred into the trust and nominate guardians for minor children.
Should my retirement accounts be owned by my trust?
Usually not. Retirement accounts generally remain in your name, and beneficiary designations should be carefully coordinated with your overall estate plan.
What happens if I forget to fund my trust?
Assets left outside your trust may still have to go through probate, defeating one of the primary reasons for creating the trust.
How often should I review my trust?
Most attorneys recommend reviewing your estate plan every three to five years or after any significant life event.
Creating a trust is only the first step. Making sure it is properly funded is what allows it to work when your family needs it most.
At Estate & Probate Legal Group, we help Illinois families create comprehensive estate plans, properly fund their trusts, coordinate beneficiary designations, and develop strategies to minimize probate whenever possible.
Whether you’re creating a new trust or wondering if your current one is fully funded, our experienced estate planning attorneys can help you protect your assets and provide peace of mind for the people you love.
630-864-5835
Schedule your consultation today and make sure your trust is doing the job it was designed to do.
