When it comes to estate planning, people in Illinois should know the various options available to provide for their loved ones. One way to pass an inheritance onto selected beneficiaries is to establish a trust. The Internal Revenue Service defines a trust as placing the care or ownership of property into someone's hands on behalf of someone else. In other words, this document establishes who will assume control of a person's assets and disburse them accordingly when the owner passes away. Some trusts take effect while the benefactor is living, while others only go into effect after death.
According to CNN, there are two broad categories of living trusts. A trust which relinquishes ownership of the assets and which cannot be changed easily is called irrevocable. While this type of trust shifts ownership of the assets from the benefactor to the trust, it allows them to avoid certain taxes. In many cases, the original beneficiaries must grant permission before an irrevocable trust may be altered. Revocable trusts, on the other hand, are generally more flexible. The benefactor may change the beneficiaries or specific terms of the trust when he or she chooses to do so.
There are several different types of trusts to accommodate varying family dynamics. For example, a qualified terminable interest property trust may work well for blended families. In this case, children from a relationship prior to the current spouse may receive compensation after the benefactor's spouse dies. Generation-skipping trusts allow assets to be directed toward grandchildren. Life insurance and residence trusts may help to avoid excessive taxes on the estate, leaving more money to loved ones.