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The Benefits of a Living Trust

The Benefits of a Living Trust

A smiling elder couple, probate living trust

Estate planning is a careful mixture of planning for present and future needs. People who put too much of their assets away in a trust may lose the ability to support their lifestyle. People who don’t plan sufficiently may end up paying significant sums in taxes. Living trusts are an estate planning tool that is critical to ensuring that future planning does not detract from present needs.

Estate Planning Generally

There are two tools that people use to plan their estate the will and the trust. The will is a document that gives specific instructions regarding the disposition of the decedent’s (the deceased person) estate. The will is enforced in probate court.

A living trust is a separate legal entity that holds legal title to property for the benefit of another person, the beneficiary. Simply put, the trust owns the property but the beneficiary has the right to receive the benefits of the property.

The trust accomplishes this duty through a trustee or manager of the trust. The trustee owes fiduciary duties to the trust and beneficiary to do her job diligently and competently.

For most trusts, the trustee and beneficiary are separate. However, a living trust allows the trustee and beneficiary to be the same person.

Risks with Probate Court

Illinois has not adopted the Uniform Probate Code which simplifies the probate process. The result being that probate court can take years to resolve disputes and cost thousands of dollars. The average duration of a case through probate is 9 to 18 months. Trusts avoid probate entirely because there is nothing left of the decedent’s estate to dispense.

Probate court is generally reserved for deciding estates with more than $100,000 in assets therefore, many people may assume that their estate will not qualify for probate court. Unfortunately, many people would be wrong. Real estate, especially family homes, are almost always valued in excess of $100,000. That means, even if a will specifies a direct transfer of a home to a child or loved one, the probate court must still resolve the matter.

While the will is being probated, the assets of the estate are frozen. This means no money for expense including the funeral, outstanding medical bills or other costs associated with winding down the estate. The assets may be frozen however bills must still be covered, that means utility bills and mortgages must continue to be serviced through the duration of probate.

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