Trusts Explained by the Springfield, IL Trust Attorneys at the Noll Law Office
Are you considering your future and wondering what you could do to minimize taxes on your estate? Perhaps you are thinking about leaving money to your grandchildren, but you want to be sure they use it to pay for college. Maybe you have a disabled child who will need assistance in adulthood.
A trust could be the tool for you to ensure your legacy and facilitate your wishes. Trusts will vary in how and why they are formed, ran, and terminated. If you are considering a trust, the Springfield trust attorneys at the Noll Law Office can help you get a better idea of what they are and how they work before you make any decisions about the function of trusts.
Since 1948, the Noll Law Office has provided high-quality legal representation to Springfield and all of Central Illinois. The lawyers at the Noll Law Office offer free consultations to discuss your legal needs. They want to make sure you understand your options and feel comfortable with them guiding you through the estate planning process.
What is a Trust?
Trusts are typically created when the legal title to someone’s property is separated from the equitable title. Put another way, a person transfers property (the settlor or grantor) to another person or entity (trustee), who holds that property for the benefit of (usually) yet another person (a beneficiary). There is generally a trust agreement, which is a written document stating how the trust must be managed and distributed.
Legal Definition of a Trust
A trust, under the Internal Revenue Service code, is a relationship where one party holds the title to property or other assets and is subject to an obligation to use the property or keep the property for the benefit of another person. Trusts are formed under the state’s laws. The State of Illinois has trust laws in place to govern these types of legal entities.
Types of Trusts in Illinois
In Illinois, there are three common types of trust. These are revocable trusts, irrevocable trusts, and testamentary trusts. All of them can vary in their terms and reasons for being created, so it is helpful to speak with a Springfield, Illinois trust attorney if you are considering forming one.
Revocable Trusts (Living Trusts)
Revocable trusts, often called living trusts, are trusts that are established during the settlor’s lifetime. They are also sometimes called inter vivos trusts and are very helpful with estate planning because they can avoid the probate process while maintaining the ability of the settlor’s right to change the terms of the trust. Simply put – you can change your mind. Revocable trusts are extremely helpful for tax issues that arise for large-dollar estates. The settlor can also act as the trustee in order to retain control over the assets of the trust. So long as the trust is revocable, it can be amended by the settlor – assuming that the settlor retained his or her testamentary rights.
Once the settlor dies, the trust becomes irrevocable.
It is important to name a “successor” trustee, so that if the original trustee can no longer act as the trustee, an approved, pre-identified party can substitute as trustee. Oftentimes, family members such as children or a spouse are named as the successor trustees. Alternatively, “joint trusts” with multiple settlors can be considered, in particular with married couples. This can get pretty complicated, and it’s best to speak with some experienced Springfield trust attorneys regarding your options.
The revocable trust can generate income or loss. Regardless of the outcome, the income and loss of the trust flow through to the settlor. If the settlor is the trustee, the settlor may often use his or her social security number as its taxpayer identification number to avoid a separate tax return.
The property held by the trustee is often referred to as the trust estate. If a person has the right to income from the trust, they are called an “income beneficiary.” If a person has a future interest in the trust, they are referred to as a “remainder” beneficiary. This person’s interest vests when the current beneficiary’s interest has terminated.
Irrevocable trusts are created to make a permanent transfer of assets to the trust. Generally, settlors should not act as trustees with irrevocable trusts. These are often used for life insurance trusts, charitable trusts, gift trusts, and the like. One type of popular irrevocable trust in the State of Illinois is the QTIP trust, which helps to support a spouse while protecting your children’s inheritance. This can be a great option for blended families. In second marriages, a spouse can create the QTIP trust so that the surviving spouse can live off the income generated from the trust until he or she passes away. At that time, the beneficiary of the trust can receive the principal.
Testamentary trusts are created through the will of the decedent. They are irrevocable. However, they can have many provisions that are similar to a revocable trust and can also be used for charity. The Illinois Probate Act allows the creation of testamentary trusts. Married individuals often choose this type of trust to maximize marital deduction laws. It is often a popular choice to provide for minor children.
Special Needs Trust
A special needs trust can be created for disabled relatives. Generally, a third-party supplemental needs trust or supplemental needs payback trust. The potential benefits for this are significant for disabled family members. The third-party supplemental needs trust allows a disabled person to receive benefits at the discretion of the trustee, and the beneficiary does not have to repay state or federal governmental agencies. It’s extremely helpful for medical expenses.
You should almost always speak with an Illinois estates attorney prior to creating a trust. The area is highly technical – and can become quite complex – but is invaluable under the right circumstances.
What are the Benefits of a Trust?
Trusts provide several benefits to people who have an estate. It is often one core component of a much larger estate plan. The benefit of a trust itself is to enable a way to pass assets to loved ones once they reach a certain age or once you pass away. These trusts can help with asset distribution later. Still, they can also be important tools for protecting families and their assets and businesses during your lifetime. At other times, marital deduction laws can be maximized through trust. Taxes can be avoided with the proper use of a trust. The options are numerous, ranging from simple to complex.
The key benefit of working with Springfield trust attorneys is that you are working with a highly skilled professional with ample experience in estate planning and trusts. Because this is a complicated area of the law, it is important to ensure you have an attorney with working knowledge of trust laws in the state. That’s especially essential if you have a complicated need or goal.
How Do I Get a Trust?
If you wish to get a trust, the first thing you need to do is compile a lot of specific information. You will probably want to speak with Springfield trust attorneys and accountants.
Put together a list of assets:
- Checking and banking accounts
- Real estate
- Marketable securities
- Retirement accounts
- Life insurance policies
- Valuable personal property such as jewelry or antiques, and
- Other property that you have with monetary value.
Define the Goals of Your Trust
You will need to create a list of your relatives and have a frank conversation with your attorney about your relationship with each of them. Create a list of anyone or anything that you specifically wish to help with the trust, be it yourself, family members, or even companies or nonprofit organizations. Essentially, you want to take into consideration all non-tax related concerns that you have forming a trust. Are you trying to take care of a disabled child or minor child? Are you concerned with asset protection planning during a divorce or remarriage? Do you want to include or exclude your heirs from the trust?
Create and Fund the Trust
Once you decide on your goals in creating the trust, you need to speak with an attorney to draft your estate documents. For irrevocable trusts, the trust will usually be immediately “funded” with a transfer of personal assets into that trust. However, it is important not to forget to fund revocable trusts as well. It is a fundamental aspect of trusts, insofar that the property placed in trust will be used to support the beneficiary of it.
If you are seeking a testamentary trust, you also will need to have a will drafted. An experienced attorney will draft both the will and trust documents with an eye toward your stated goals.
If you are interested in a trust, call the Noll Law Office today. Their experienced attorneys will listen to your goals and help you create a tailored plan to create a trust that will help you and your future generations to come.
What Do Springfield Trust Attorneys Do?
Trust attorneys create trusts for their clients to fund. Trust attorneys are tasked with determining the best plan to achieve the goals of the individual, which can range from ensuring a loved one’s needs are met after your death or supporting an important charity with your estate.
At the time of death, the trust attorney can help with applicable probate processes, or depending on the situation, attempt to avoid probate altogether. Because the types of trusts are so varied, and the goals are so different, the actions that a trust attorney will take almost always vary.
Applicable Illinois Laws Regarding Trusts
The Illinois Trust Code governs Illinois trusts created after January 1, 2020. Some of its provisions are discretionary but others are mandatory. It contains various notice requirements to trust beneficiaries and often allows beneficiaries to also act as trustees. It contains fairly strict accounting rules but has carved out “silent trust” provisions that allow a beneficiary to go, unnotified of the trust until they reach the age of 30.
There are various tax laws, Medicaid laws, Medicare considerations, and other inheritance laws that will impact trust considerations even if they are not part of the Illinois Trust Code. For example, the Illinois Probate Act provisions relate to minor or disabled heirs.
Speaking with an experienced attorney who can help you with this process will help you make informed decisions about your estate and any trusts that you need. The attorneys at the Noll Law Office are happy to meet with you in Springfield, Illinois, and review your estate needs. They can be contacted at (217) 414-8889.