Trusts are a powerful part of many estate plans, as they can bypass probate, reduce tax burdens, and protect assets while maintaining eligibility for means-tested government assistance. As you begin to plan for the future, you should consider what trusts you might like to incorporate into your plan, and seek help from an experienced estate planning attorney who can help you implement them.

What Is a Trust?

A trust is a legal relationship in which a trustee holds and manages assets placed into the trust by its creator for the benefit of one or more beneficiaries designated by the creator. The trust’s creator, also called the grantor, can establish a trust by executing a trust document that appoints a trustee to manage the trust and includes provisions outlining how the trustee must manage it. The trust document will also designate the trust’s beneficiaries and may consist of other terms, such as appointing successor trustees or setting an expiration date for the trust.

Trusts often play a key role in many people’s estate plans due to the advantages they offer over wills, including flexibility in how the trustee manages the trust, privacy, and lower time and financial costs by avoiding probate.

Common Types of Trusts

Examples of the types of trusts that people incorporate into their estate plans include:

  • Revocable (living) trusts: A revocable trust allows a grantor to amend or terminate the trust during their lifetime while also facilitating the distribution of inheritances outside of probate.
  • Irrevocable trusts: A grantor cannot amend or revoke an irrevocable trust. What these trusts lack in flexibility, they make up for in tax benefits and asset protection.
  • Testamentary trusts: A grantor can create a testamentary trust in their will, with the will funding the trust by distributing estate assets.
  • Medicaid trusts: Individuals or couples who anticipate the need for long-term care may create a Medicaid trust to ensure they remain eligible for government assistance that helps cover the cost of home health services or nursing home care.
  • Special needs trusts: These trusts are established to preserve a special-needs individual’s eligibility for means-tested government benefits, protect assets, or obtain an income stream to improve their quality of life.
  • Spendthrift trusts: A spendthrift trust can protect a beneficiary’s inheritance from creditors or poor financial or life decisions by giving the trustee control over distributions to the beneficiary.
  • Charitable trusts: A charitable trust allows an individual to take advantage of the tax benefits of charitable giving while obtaining an income stream or preserving family wealth to pass on to loved ones.

Benefits of Using Trusts in Estate Planning

Trusts can have a number of powerful benefits, including:

  • Avoiding probate: You can structure a trust to pass your wealth to loved ones and other beneficiaries without the need to go through the time and expense of probate.
  • Maintaining privacy: Unlike probate, which involves a public court proceeding, trusts can manage assets in a private setting.
  • Protecting assets: Irrevocable trusts can shield assets from creditors, legal liability, or irresponsible financial decisions
  • Tax planning: Certain types of trusts can provide tax benefits that may decrease income, gift, or estate taxes.
  • Maintaining control: Grantors can include terms in trust documents that specify how or when trustees may distribute assets. Revocable trusts also allow grantors to amend trust documents to change beneficiaries or update the trustee’s authority.

Contact an Estate Planning Attorney Today

Trusts can play a critical role in achieving your estate planning objectives. Find out if they’re right for you when you contact the Law Office of Vogel & Mourelatos, LLC for a consultation with an experienced estate planning lawyer in Illinois.