A trust is a component of a comprehensive estate plan that dictates how you want your assets distributed when you die. Your named beneficiaries will receive what you wish them to get in a trust. Unlike a will, a trust cannot be challenged or overturned in an Illinois probate court. A trust is either revocable or irrevocable.
When you create a revocable trust, you can name yourself as the trustee and change beneficiaries and assets as often as you like. You should also name a trusted personal representative who will serve as trustee when you die.
The primary purpose of revocable trusts is to avoid probate court for any of the trust’s assets. This includes items like artwork, currency, vehicles, jewelry and real estate. Any assets of value not included in the trust account will go through probate court. When the grantor of a revocable trust dies, the trust transitions into an irrevocable entity.
Irrevocable trusts offer more benefits than revocable trusts but also have significant drawbacks. The primary disadvantage is that once assets transfer to an irrevocable trust they are owned by that trust and managed by a designated third-party trustee. You can continue adding assets and beneficiaries but cannot modify existing directives.
An irrevocable trust allows an estate to avoid probate, and it protects the assets from creditors because the trust owns the assets and not the grantor. In Illinois, there is no state estate tax if your estate is worth less than $4 million in 2023. There is no federal estate tax if the estate is worth less than $12.9 million in 2023. So, it’s easy to see why wealthy individuals transfer as many valuables as necessary for the estate to avoid paying these death taxes.
When you make your estate plans, consider creating a trust. It can make the estate settlement a much smoother process for your beneficiaries.