Illinois families who are trying to settle their assets for after they die may want to learn more about a trust. Investopedia defines a living trust as the same thing as a revocable trust, but an irrevocable trust is also an option. Before you make choices with a lifetime of assets and wealth, it is important that you understand the difference.
A trust is set up during your lifetime and can be set up in any way you feel is appropriate. It is used to manage your assets as a separate legal entity. You place your assets in a trust, and they are then managed by a trustee, who is a third party you have chosen. Investments are managed by the trustee and once you die, all distributions are handled by the trustee. They do have to distribute your assets in the way that you specified.
A revocable trust, or living trust, is one that you can change the terms to at any time. They are more flexible, and you can designate new beneficiaries, remove old ones and change the guidelines of the trust at any time. The downside of a revocable trust is that it is not shielded from creditors. If you are sued by someone during your lifetime, you may be forced to liquidate your assets. In a revocable trust, the assets are also subject to federal and state estate taxes.
The minute an irrevocable trust is signed, the terms cannot be changed. You relinquish all control to your assets and there are only rare circumstances where they can be modified. The benefit of an irrevocable trust is that the trust is removed from your taxable estate, which may limit the tax liability on your estate.
It may seem that a revocable trust is the best way to go because you can always change it. The reality is that an irrevocable trust has its own benefits, and you may benefit from discussing each option with an estate planning attorney.
This information is for educational purposes and should not be interpreted as legal advice.