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Understanding living trusts

On Behalf of | Aug 17, 2017 | Trusts |

A living trust is sometimes used as an alternative to a will to administer assets in Illinois. According to the American Bar, one of the differences between a will and a trust is that a trust is effective before the grantor’s death, because ownership of the assets is transferred to the trust. Some people name themselves as the trustee, while others appoint an alternative or successor trustee.

There are several advantages to a living trust. One such advantage is avoiding probate. Since the assets are already in the ownership of the trust rather than a person, they typically do not need to pass through probate upon the grantor’s death. The trustee may then administer the assets to the specified beneficiaries. Another advantage is flexibility. The grantor may alter the trust at any time, adding or removing assets as necessary. Since trusts are effective during the grantor’s life, they may also provide for the maintenance of assets in the case of physical or mental incapacity, which a successor trustee oversees.

The Illinois State Bar Association points out that living trusts must be funded to be effective. In other words, a trust specifies assets and beneficiaries, but official ownership of those assets must then be transferred to the trust before the trust can be honored. The grantor no longer has legal ownership of the assets, but he or she still has freedom to use them and make money from them. If the grantor does not transfer assets to the trust before death, they may still be subject to probate.