WHAT IS A LIVING TRUST?
A Living Trust is otherwise named a “Revocable Living Trust”; “Family Trust” or “Declaration of Trust” among other names. A Living Trust is a legal document that describes who shall receive your inheritance and property upon your death. Unlike a Will, a Living Trust is intended to plan for an incapacity. An incapacity for older adults is similar to retirement planning. Most adults are more concerned about their own lifestyle and standard of living than who shall receive their property or inheritance upon a death. A Living Trust is titled “Living” because it is designed for life and death unlike a Last Will. A Last Will and Testament is a document for distributing property at death. A Last Will does not plan for an incapacity. Strokes and unexpected healthcare care issues are possible and increase in likelihood the older a person becomes.
Incapacity planning is important because it protects your assets and creates an emergency plan in case of unexpected healthcare issues. An unplanned incapacity can result in financial chaos. In addition to a Living Trust, a Durable Power of Attorney for Property or otherwise known as a “Financial Power of Attorney” is important.
A Durable Power of Attorney for Property is where a person appoints an agent to manage their financial needs while they lack the ability to make financial decisions. Most financial powers of attorneys have a springing provision, which means that the agent assumes responsibility only if the creator of the power of attorney is unable to make financial decisions for themselves. Most agents are spouses that can act immediately upon an incapacity or cognitive diminishment issue such as dementia or a stroke.
A Living Trust is a legal document that controls and distributes assets upon an incapacity. Generally, a Durable Power of Attorney for Property and Living Trust work in combination with one another. A Living Trust appoints a Trustee, which is typically the Maker of the Trust. Upon an incapacity, the Successor Trustee or Contingent Trustee assumes responsibility of managing one’s Living Trust. Most Durable Power of Attorneys enable the agent to transfer assets and property to the Living Trust. The Living Trust is the mechanism for protecting one’s assets upon an incapacity. In the event of an incapacity, the Successor Trustee assumes responsibility for managing the Living Trust.
A Successor Trustee is a fiduciary like an Executor of a Will because the Successor Trustee has a fiduciary duty. A Successor Trustee is a legal relationship between the Maker of the Trust or called a “Trustor” and the beneficiaries of the Trust. A Successor Trustee manages the Trust assets that are titled in the trust’s name for the maker of the trust and its’ beneficiaries under the Trust Agreement. A Trust Agreement is the details outlined by the Trustor in case of a death or incapacity. A Trustee is responsible for management, investment, and carrying out the duties as outlined in the Trust Agreement. The duties and responsibilities of the Successor Trustee changes depending on the circumstances and wishes of the Trustor or Grantor. A Successor Trustee can be personally liable to the Grantor or Trustor and the beneficiaries for failing to reasonably perform their duties. In Illinois, the duties of a trustee are outlined in the Trust Agreement and by the Trusts and Trustees Act, 760 ILCS 5.
The Powers of the Trustee is generally the same as the Successor Trustee’s powers. Most Trust Agreements’ outline the powers of the Trustee or Successor Trustee. In general, the powers of the Trustee or Successor Trustee involve the following powers:
- Make Investments;
- Purchase Investments;
- To manage and purchase stocks, bonds or other investments;
- Register securities in the name of the Trustee or Trust’s name;
- Voting, in person or by proxy, securities held by the Trust;
- Repair, improve, or lease property or real estate;
- Sell property such as real estate;
- Refinance real estate or borrow funds or mortgage or pledge any property;
- Settle and compromise lawsuits including any estate claims or litigation issues;
- Distribute income or principal in cash or in kind;
- Employ agents such as attorneys and accountants;
The Trust Agreement also should have a disability provision in case the Successor Trustee develops an incapacity. A Living Trust is able to be revoked, amended, or changed. A Revocable Living Trust is revocable unlike an Irrevocable Trust. A Trustor or Grantor may revoke or amend a Trust in whole or in parts.
A Living Trust is governed by the Trust Agreement or otherwise known as “Declaration of Trust”, which is the outline of the Maker’s wishes upon an incapacity or death. Generally, the Trust Agreement highlights how the Trustor’s property should be distributed upon death. In most cases, a Trustor or Grantor’s spouse will be the beneficiary of the Trustor’s estate. A well-drafted Living Trust should also explain how property should be distributed in case the primary beneficiary is deceased or disabled.
Sean Robertson and Robertson Legal Group’s Trust Agreement automatically give the primary beneficiary the ability to set up a Supplement Needs Trust to protect their inheritance from creditors or the government in case of a disability. Creation of a Supplemental Benefits Trust for disabled beneficiaries is important to protect and qualify for Supplemental Security Income, Medicaid or any other government program which is “needs based”. The Supplemental Needs Trust protects the beneficiary’s government benefits and the Supplemental Needs Trust supplements the expenditures of the government assistance program.
Furthermore, there are several benefits of a Living Trust in comparison to a Last Will and Testament. First, a Living Trust is a private document and does not have to be filed at the local courthouse similar to a Last Will and Testament. Second, a Living Trust avoids probate court and does not have to be administered through probate court. On the contrary, a Last Will and Testament must undergo a probate process requiring a probate attorney and a lengthy court process. Third, a Living Trust is easily administered and offers few headaches. Whereas, a Will is more likely to involve a Will Contest because court proceedings invite estate litigation. With a Will, the heirs and legatees (beneficiaries of the Will) must be notified of the court proceedings. A Living Trust does not require beneficiaries or heirs to be notified about any proceedings. Finally, a Living Trust has a spendthrift provision, which protects the beneficiary’s inheritance from creditor’s claims and divorcing spouses.
CALL YOUR LIVING TRUST LAWYER AT 630-780-1034
In conclusion, Sean Robertson and Gateville Law Firm concentrate in the areas of wills and trusts, living trusts, powers of attorneys for property and healthcare, and asset protection. Sean Robertson is an experienced estate planning attorney that is passionate about assisting people with their wealth management and estate planning legal needs. Sean Robertson is a graduate of DePaul University College of Law and University of Illinois at Urbana-Champaign. Sean Robertson offers a FREE initial consultation by calling 630-780-1034 or via online contact form.