Should I Use a Revocable Living Trust or an Irrevocable Living Trust?

IL estate planning lawyer, Illinois trust attorneyAlthough many people assume that a last will and testament is the only estate planning tool that they need, a will is not always the best way to accomplish all of your estate planning goals. Other estate tools such as living trusts are often overlooked due to confusion or misunderstandings about the purpose of these tools. A trust is a legally binding agreement involving an individual or entity called a trustee who holds property for the benefit of a beneficiary. A living trust is an advantageous tool for managing your assets during your lifetime and then passing those assets to beneficiaries upon your death. If you are interested in using a living trust to manage your assets, you may question whether you should use a revocable living trust or an irrevocable living trust.

Revocable Trusts

As the name implies, a revocable trust is one that is able to be revoked or canceled. If you place assets in a revocable trust, you remain in control of those assets. You are also considered to be the owner of those assets in the eyes of the Internal Revenue Service and other governmental agencies. Because the property is yours, you can choose to remove the property from the trust and use it for other purposes at any time. A revocable living trust covers you while you are alive, in the event that you are incapacitated by illness or injury, and after you pass away. One of the greatest benefits of a revocable living trust is that it avoids probate– the public legal process during which a will is validated in court. Because you remain the owner of the property placed in a revocable trust, transferring property to a revocable trust does not affect your federal income taxes or estate income.

Irrevocable Trusts

An irrevocable trust is not able to be withdrawn. When you transfer assets to an irrevocable trust, you no longer own the assets or have control over them. The trust itself becomes the owner of the property. This means that you cannot take the assets out of the trust. Because you are not the owner of the assets in an irrevocable trust, you cannot be taxed on them. However, you can continue to gain revenue on investments from the trust. Depending on your net worth and overall estate planning goals, there may be enormous tax benefits to placing assets in an irrevocable trust. Using an irrevocable trust may also help shield your assets from any future creditors.

Contact a Wheaton Trust Lawyer

Assets placed within a revocable trust may be withdrawn at any time while assets in an irrevocable trust are no longer considered your property. There are advantages and disadvantages to both irrevocable and revocable trusts. If you want to learn more about which type of trust will best suit your unique needs, contact Stock, Carlson & Duff LLC. Call our office today at 630-665-2500 and schedule a personalized consultation with a knowledgeable DuPage County estate planning attorney.

Sources:

https://www.isba.org/sites/default/files/publications/pamphlets/Estate%20Planning.pdf
https://www.washingtonpost.com/business/2020/06/17/purposes-revocable-vs-irrevocable-trusts/
https://www.thebalance.com/living-vs-revocable-trust-3505393

 

Transfer on Death Instrument or Living Trust – Which One Should You Use?

Wheaton wills and trusts lawyersHistorically, estate planning has been overlooked by the non-wealthy. Times are changing, however. Retirees and even younger adults are starting to recognize the benefits of an effective estate plan – especially when there is a smaller estate. You see, probate can quickly eat away at the value of a moderate estate, which may lead to significant losses for beneficiaries. In situations where the only transferable item is real estate, the loss may even prevent the procurement of the asset.

Thankfully, there are some preventative strategies that you can use, including Transfer on Death Instruments (TODI) and living trusts. How do you decide which is most appropriate for your situation? The following explores these two solutions and explains where to find assistance with your Illinois estate planning needs.

Living Trusts

Revocable trusts (otherwise known as living trusts) are legal documents that authorize a trustee (beneficiary) to hold and manage the grantor's assets before death. This authorization can be extremely beneficial for those suffering from a degenerative brain disease, or someone that is at risk for incapacitation. However, it can be used by anyone to avoid probate upon their death. It should also be noted that grantors still own their funds until death, and they can alter or revoke a living trust at any time (provided they are of sound mind).

Unfortunately, there are some limitations and concerns with living trusts. They must be funded, so they can be expensive to set up. It should also be noted that a single mistake – even a minor one – can invalidate the trust and cause the estate to go to probate. Living trusts do not replace a will either, and there may be confusion about what should go in a will and what should be designated to the trust.

Transfer on Death Instrument

A TODI deals only with the transfer of real estate, so it is not a comprehensive estate plan. However, they are less complex (and often less expensive) than a living trust, and they can still be altered or revoked (with a few exclusions). Still, there are some limitations and exclusions that one must be aware of before setting up a Transfer on Death Instrument. For example, a TODI can only be signed by someone of sound mind who is not under duress. A TODI must also comply with all deed requirements, and it must be registered in the county or counties where the property is located.

Contact Our DuPage County Estate Planning Lawyers

Because each situation is unique, it is crucial that estate planners seek experienced legal assistance before moving forward. The skilled DuPage County estate planning lawyers at Stock, Carlson & Duff LLC can help. Knowledgeable and dedicated to protecting your best interests and the interests of your heirs, we will examine your situation and then strive to develop a creative solution that works for you. Schedule a personalized consultation to learn more. Call 630-665-2500 today.

Sources:

http://www.bankrate.com/finance/estate-planning/living-revocable-trust-facts-1.aspx

http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=3382&ChapterID=60

Is a Revocable Living Trust Right for You?

DuPage County estate planning attorney, estate planning, living will, revocable living trust, executor fees, living trusWhen it comes to estate planning, an increasing number of people are having revocable living trusts prepared by their attorneys.

revocable living trust goes into effect while the person is still alive, as opposed to a will, which does not go into effect until the person dies. It is referred to as revocable because a person can change or cancel the trust any time they want and for any reason they want, as long as they are mentally competent. The trust only becomes irrevocable when the person dies.

The individuals who are involved in a living trust include the person who created it, the person or people who the creator appointed as trustees, and the beneficiaries of the trust.

With both living trusts and wills, the individual who creates these documents gets to decide how their estate is divided. However, there are several differences between the two documents. When there is a will, then it must be probated in the court system. The probate process usually takes up to a year, which means distribution of the estate is also held up for one year. There are also fees that are deducted from the estate, including attorney and executor fees. Also, the probating of the will and all the details become public record.

There is no probate period with a living trust. This means there is no waiting period. It also means that the person's instructions remain private. A trust also gives a person the option of having their estate pass to their heirs upon their death. Or, her or she may set it up so that part of the estate is passed onto the heirs in increments while still alive.

The attorney who prepares the living will can also help set it up to help alleviate any federal and/or state inheritance taxes. If you are considering setting up a revocable living trust, contact an experienced DuPage County estate planning attorney today.