Many people think of a Last Will and Testament as the main tool for “normal” estates, with trusts only being for large estates. However, revocable living trusts are one of the most underutilized estate planning tools.
Living trusts are documents that give a set of instructions for the use of one’s assets during their lifetime and for the distribution of those assets after their death. Although they aren’t necessary for everyone, living trusts can be useful even for small estates, depending on the type of property and the needs of everyone involved.
Living trusts are a user-friendly trust option and provide these four major benefits:
First, living trusts are flexible. A living trust is created by the grantor – the individual who puts their money and property into the name of the trust. This trust is then managed by a trustee. The grantor usually serves as the trustee as long as this person has the mental capacity to manage it.
The grantor can amend this trust during their lifetime, so beneficiaries or specific methods of distribution can be changed if they wish. Upon the grantor’s death, the instructions for this trust become irrevocable.
Second, living trusts are powerful. They provide instructions for distribution to beneficiaries and can include a variety of contingency plans to prepare for the unexpected. For example, a grantor may include instructions to give all property outright in equal shares to children, but “trigger” provisions can be provided for if a beneficiary is disabled at the time of the grantor’s death.
The grantor may also provide special provisions for the division of marital property. Trust property may be used for the benefit of a surviving spouse without that spouse having the ability to change the beneficiaries on the decedent’s share. This is an excellent way to protect children when a surviving spouse remarries.
Third, living trusts are private. The trust document itself is not filed publicly, and institutions are only allowed to require an affidavit that outlines the basic terms of the trust and cannot require the full document itself. Because of this privacy, the grantor can feel more comfortable including more specific provisions for trust distribution and management. For instance, grantors may want to include specific instructions for beneficiaries with addictions or mental illness, which should not be shared as public information.
Finally, living trusts are efficient as they do not require probate. When someone dies with property in their name, the property is frozen until a court can determine who should inherit it. However, trusts are entities that cannot die. The trustee doesn’t need to wait for an executor to be appointed by a court before being able to act, but like a manager simply continues to manage the property according to instructions.
Every person’s estate plan should be tailor made to ensure the best outcome possible for beneficiaries, and living trusts are an excellent tool to consider in this planning.
For help creating or updating your estate plan, contact us at Wilson and Wilson Estate Planning and Elder Law, LLC at 708 482 7090 for our main office in LaGrange, Illinois or at 847 656 8958 for our Northbrook, Illinois office.