Many people in Chicago, Illinois, may think creating a will is enough to set their affairs in order. Although a will represents an essential starting point, people with significant assets or complicated circumstances should also consider setting up a trust.
A trust is an arrangement that allows one party to hold assets on behalf of beneficiaries. A person who places his or her assets in a trust can protect the value of those assets and control precisely how they are distributed.
Legal benefits of trusts
One advantage of setting up a trust is that assets placed in the trust will not go into probate. This allows beneficiaries to receive their inheritance sooner, since probate can take longer than a year. Setting up a trust helps protect the privacy of the estate, since probate is a matter of public record. A trust can also prevent unnecessary depletion of estate assets, since probate involves court fees and, frequently, attorney fees.
There are also other ways a trust helps protect the value of an estate. A trust can ensure beneficiaries do not waste assets or use them for unapproved purposes. A trust can stipulate when assets are distributed or even require beneficiaries to meet certain conditions before receiving their share. A carefully set up trust can also prevent estate assets from being claimed by the creditors of beneficiaries.
Setting up the trust
An individual who wishes to set up a trust can start by choosing beneficiaries and a trustee who will oversee and manage the trust. Choosing the right trustee is especially important. Under the Illinois Trust and Trustees Act, trustees have a legal obligation to manage the trust with due care, so beneficiaries can take civil action against a trustee who fails in this duty. However, this is obviously an undesirable outcome, since one aim of a trust is avoiding legal action and unnecessary expenses.
There are various types of trusts an individual may set up, depending on the nature of the assets and the desired disbursement. Most types of trusts may be set up as revocable or irrevocable. A revocable trust, or a living trust, allows the individual passing on the assets to maintain control of them. Revocable trusts can be altered or dissolved as long as the individual is alive. An irrevocable trust, meanwhile, cannot be changed after it has been established. Choosing the option that will best protect an individual’s assets and wishes is often difficult, which is why most people can benefit from meeting with an estate planning attorney to discuss every option.
