Estate planning can be a challenge for Illinois residents. People want to share their assets without burdening their loved ones with heavy estate taxes. Establishing a trust may offer benefits that will help meet your long-term goals.
Comparing trusts and wills
Most individuals think about wills when considering how to pass on their assets. After your death, this document goes through probate court where it must be verified. This process can delay and complicate the distribution of your wealth.
Trusts are private legal contracts that involve the transfer of wealth. In this arrangement, the trust becomes the owner of the money or property, and a designated trustee manages the assets.
The person who creates the trust gives instructions about the distribution of assets. You can make provisions for what happens to property while living, dead or incapacitated. An important difference between trusts and wills is that the trust goes into effect immediately after signing.
Revocable versus irrevocable trusts
In establishing a trust, it is necessary to choose a revocable or irrevocable model. Revocable trusts provide more control over the assets included in them. You can change the instructions or remove assets at any time while you are living.
Irrevocable trusts are arrangements that exist so long as they hold assets. Once you place an asset in an irrevocable trust, it is no longer part of your taxable estate. Using this model can lower your taxable wealth while you are alive and reduce taxes for your loved ones after you die.
Planning for change
Relationships within families can be complicated. A revocable trust offers the option of redistributing your assets when family situations change. This design allows you to adapt the fund to events like the birth of new children or a couple’s divorce.
Placing assets into a trust also allows you to maintain care for a loved one after you are gone. The trust can provide a regular allowance rather than distributing assets in a lump sum.
Developing a plan for your estate is always a prudent action. A trust may be the best solution to manage your assets in the present and distribute them after you are gone.