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The Basics of Trusts in Estate Planning

Posted on in Estate Planning

Lombard estate planning lawyerWhile you may not know the specific requirements that make one valid in the eyes of the law, you are probably familiar the concept of a will. You most likely realize that most people use a will to specify how their assets will be handled after their death. Many individuals also utilize trusts in the process of estate planning. But, what exactly is a trust and how can they help with your estate planning needs?

What Is a Trust?

A trust, at its most basic, is a fiduciary relationship that allows a person—a trustor—to give the right to hold property or assets to another person—a trustee—for the benefit of a third party or parties. There are several types of trusts that are commonly used in estate planning, but each of them has a similar structure. Assets and property are typically placed in a trust to be distributed at a later date—or over time—to the trustor’s named beneficiaries.

Revocable and Irrevocable Trusts

One of the biggest distinctions between various types of trust is whether they revocable or irrevocable. A revocable trust—sometimes called a living trust—a can be used to transfer assets but the assets remain under the control of the trustor while he or she is alive. A revocable trust can be amended or dissolved at any time, though it will usually become irrevocable when the trustor dies. A person who creates a revocable trust will typically name him- or herself as trustee so that he or she can retain ownership of the property in the trust.

An irrevocable trust, by comparison, is a trust that cannot be amended or dissolved once it is executed. The assets transferred to an irrevocable trust are no longer under the trustor’s control. This, however, may be advantageous in certain situations because property in an irrevocable trust is usually exempt from estate taxes, as the property has effectively removed from the estate.

Avoiding Probate

In most cases, assets in both types of trusts may be transferred without waiting for the probate process to conclude. When a person dies with only a will, probate ensures that everything is legally in order before allowing the assets to be distributed. A trust can go into effect immediately when properly executed, thereby eliminating much of the wait time for the trustor’s beneficiaries.

Guidance for Estate Planning Trusts

If you have additional questions about trusts or any other aspect of estate planning, contact an experienced Lombard wills and trusts attorney for help. Call 630-426-0196 for a confidential consultation today. A member of our team will meet with you to discuss your needs and assist you in finding the right estate planning tools to protect your family’s long-term financial security.

 

Sources:

https://www.fidelity.com/estate-planning-inheritance/estate-planning/trusts

http://www.investopedia.com/terms/t/trust.asp


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