Definition of a Living Trust in Oak Park, IL
Definition of a Living Trust in Oak Park, IL
My parents put everything in a trust fund for me. I won't get it until I'm 18, so I'll use it for college.
- Heather O'Rourke
The Revocable
Living Trust, sometimes known simply as a Living Trust, has been growing more popular in recent years because it offers important benefits when compared to a simple
Last Will and Testament.
A Living Trust protects your privacy, saves you money, eases the burden of estate administration on your family, and most importantly, allows you to establish a "financial parent" who will take care of your kids financially until they are ready for the responsibility.
How Does a Living Trust Work?
Proving the legality of a will can be difficult, especially when there are properties to be distributed to beneficiaries. On the other hand, a living trust will no longer undergo the probate process of proving its legality after the owner's death.
A Living Will is deemed valid after signing the document with the Declaration of Trust. This will be the only thing you need to be able to create a living trust.
A living trust has an advantage, you can modify or change its contents anytime. Unlike other trusts, a "living" trust means it is made while you are still alive. As the trustee, you have the power to manage your own trust property and have absolute control over the properties held in trust. This authority includes:
• Mortgage, sell or give away property held in trust
• Place ownership of property back to your own name
• Augment property to the trust
• Amend the beneficiaries of the trust
• Appoint a different successor trustee
• Completely revoke the trust
Filing of personal income tax can include the income held in the Living Trust as long as you are both the trustee and grantor. No additional income tax return is necessary. If you and your spouse are partners in creating the trust, changes or revoking a trust can be made, as long as both parties agree.
A "successor trustee" whom you name in the trust takes over when you die. He or she will be responsible in handing over what you've left behind to the indicated beneficiaries including relatives, families, friends and charities. After the handing over of the properties or cash indicated in the living trust, the document will no longer be in existence.
When a probate-avoidance living trust is made by a couple and one of the spouses or partners dies, the surviving trustee automatically becomes the sole trustee. The trust will be bifurcated into two trusts. Trust 1 contains the deceased grantor's share which is irrevocable. The surviving trustee will distribute the grant to the beneficiaries. The remaining second trust which is the surviving trustees' share can be amended or revoked according to specified terms.
Basic Living Trust Terms Defined
• Grantor, truster, or settler- refers to the person who set up the trust.
• Trustee refers to the person who has complete power over the trust.
• Trust Property or trust principal are the properties you transfer to the trustees.
• Successor trustee is the person who takes over as the trustee after your death
• Trust beneficiaries are the persons who inherit your trust
• Avoiding Probate. Making a living trust can avoid going to a probate before your beneficiaries can receive their inheritance indicated in the document. This is less difficult compared to a will that would need to undergo legal process to prove its validity. Probate can cost a lot of money because of the attorney's and other fees charged that could eat up much of the value of the estate being in question. Also, probate can consume a lot of time; probably a year or two, which can delay distribution to the beneficiaries. They may receive nothing until all issues are resolved.
• Conservatorship or Guardianship can be avoided. In cases where you are no longer able to take care of your financial affairs because of physical or mental problems, the person you have appointed as trustee can take over and manage the property in the trust. If you were not able to appoint anyone as your trustee after your death, the court itself will appoint another person to take over your finances. This person is called the conservator or guardian.
• Maintain the Confidentiality of your Estate. Unlike a will, a living trust is a private document and will not be held as a public record. Whatever you leave to your beneficiary will not be divulged. Only that the records of real estate transfer are considered a public matter. Living trust can be registered in the local court but this is not required. The only time your living trust will become public is when someone files a lawsuit to challenge your trust or collect court judgment you owe, which are both unlikely events.
A living trust is not a complete estate plan and can have the following limitations:
• They do not shelter assets for the purpose of Medicaid qualification. Any assets held in trust are treated like you own them. They are "countable resources" in terms of Medicaid qualifications.
• Medical Intervention wishes. Health related intervention is not covered by a living trust document.
• Protect assets from creditors. As long as you are alive and have the power to transfer the properties and/or revoke the trust, you are not protected from creditors suing you. If they win, the creditor can seize trust property that can be used to pay them.
• Change family obligations. Married couples usually leave half of their property to their spouses. If you don't, your spouse has the right to contest your decision in court and claim your property, including all that is indicated in trust, after your death.
Getting a divorce and transferring assets in and out of trust while under the divorce proceeding can cause trouble. Some states have very specific rules about what you can and cannot do during this period.
Making a Will
Making a will can act as a back-up plan for the properties that you do not want to be transferred to the living trust. If a will is not made, your properties that are not covered by the trust will be given to your closest relatives as determined by state law. This can result to distribution of your property that might not be in accordance to your wishes.
You can name a personal guardian of your minor children in your will but you cannot do this in a living trust.
If you don't want to leave anything to your spouse or a child, these wishes should be made clear in your will.
Make sure your will and living trust has no conflicting provisions that can be a cause of confusion and disputes among your heirs. You can always avoid lawsuit among family members by making distinctions in your will and living trust documents.