A trust could be an essential component of a comprehensive estate plan. Trusts allow creators to transfer property, provide for a child or disabled person, or protect assets from creditors.
While drafting trusts on your own may seem like a reasonable idea, contacting an experienced trusts attorney could help ensure your beneficiaries receive as much of what is put aside in a trust for them as possible. If you are considering creating an estate plan, learn more about the types of trusts in Lombard from an accomplished attorney.
A trust is a document that creates a separate legal entity that could own property. In principle, there are three components to every trust: a grantor, trustees, and beneficiaries.
The person who creates a trust, known as the grantor, determines the trust’s terms and which property to transfer to the trust. The grantor may retain ownership of the trust and manage the property in it, or may give this responsibility to another person.
The grantor of a trust may also serve as the trustee or the beneficiary, depending on the trust’s terms. The grantor may create a trust and manage it during his or her lifetime or may set up a trust that he or she cannot change.
A trustee is the person responsible for managing a trust. This person serves as the owner of the trust’s assets and manages the trust’s property by paying taxes and distributing assets upon the grantor’s death. The trustee has a fiduciary duty to manage the trust’s assets for its beneficiaries.
The beneficiaries of a trust are the people for whom the trust is created. The grantor decides who should receive the trust’s assets and how the trust’s property should be distributed. The beneficiaries usually have the right to monitor the trustee’s actions and ensure that their assets are not squandered.
Trusts serve many purposes, and a trust may be tailored to each grantor’s needs and desires. Among other reasons, a grantor may create a trust to transfer assets outside of probate, to care for a minor child, or to support a charitable purpose.
No matter the purpose, there are two basic categories of trusts in Illinois: revocable trusts and irrevocable living trusts. Both have certain advantages and disadvantages that may be noteworthy to a grantor.
A revocable trust, also known as a living trust, is similar to a will in that it distributes assets to beneficiaries after a grantor dies. During the grantor’s lifetime, the grantor could retain control over the assets in the trust, add or remove property, or change the trustee or the beneficiaries.
After the grantor’s death, the property in the trust transfers automatically to the designated beneficiaries. These assets avoid probate and allow the beneficiaries to access the trust’s assets without incurring the costs of administering the grantor’s estate.
Unlike a revocable trust, a grantor cannot alter an irrevocable trust once it is executed. Additionally, the grantor generally cannot change the trust’s terms or its beneficiaries, and may lose his or her ownership rights over the trust corpus. However, because the grantor loses the right to control his or her property in an irrevocable trust, these estate planning documents help minimize the estate tax the grantor pays and could protect certain assets from the beneficiaries’ creditors.
Creating a trust may allow you to retain control over your property while planning to pass your assets on after you move on. Trusts could help in all kinds of situations, and the terms of your trust are up to you to decide.
Deciding how to manage your estate is an essential step in protecting your family’s future. Learn more about the types of trusts in Lombard with the help of an experienced trusts and estates attorney. Call now to set up an initial consultation.
