Should I Use a Revocable Living Trust or an Irrevocable Living Trust?

IL estate planning lawyer, Illinois trust attorneyAlthough many people assume that a last will and testament is the only estate planning tool that they need, a will is not always the best way to accomplish all of your estate planning goals. Other estate tools such as living trusts are often overlooked due to confusion or misunderstandings about the purpose of these tools. A trust is a legally binding agreement involving an individual or entity called a trustee who holds property for the benefit of a beneficiary. A living trust is an advantageous tool for managing your assets during your lifetime and then passing those assets to beneficiaries upon your death. If you are interested in using a living trust to manage your assets, you may question whether you should use a revocable living trust or an irrevocable living trust.

Revocable Trusts

As the name implies, a revocable trust is one that is able to be revoked or canceled. If you place assets in a revocable trust, you remain in control of those assets. You are also considered to be the owner of those assets in the eyes of the Internal Revenue Service and other governmental agencies. Because the property is yours, you can choose to remove the property from the trust and use it for other purposes at any time. A revocable living trust covers you while you are alive, in the event that you are incapacitated by illness or injury, and after you pass away. One of the greatest benefits of a revocable living trust is that it avoids probate– the public legal process during which a will is validated in court. Because you remain the owner of the property placed in a revocable trust, transferring property to a revocable trust does not affect your federal income taxes or estate income.

Irrevocable Trusts

An irrevocable trust is not able to be withdrawn. When you transfer assets to an irrevocable trust, you no longer own the assets or have control over them. The trust itself becomes the owner of the property. This means that you cannot take the assets out of the trust. Because you are not the owner of the assets in an irrevocable trust, you cannot be taxed on them. However, you can continue to gain revenue on investments from the trust. Depending on your net worth and overall estate planning goals, there may be enormous tax benefits to placing assets in an irrevocable trust. Using an irrevocable trust may also help shield your assets from any future creditors.

Contact a Wheaton Trust Lawyer

Assets placed within a revocable trust may be withdrawn at any time while assets in an irrevocable trust are no longer considered your property. There are advantages and disadvantages to both irrevocable and revocable trusts. If you want to learn more about which type of trust will best suit your unique needs, contact Stock, Carlson & Duff LLC. Call our office today at 630-665-2500 and schedule a personalized consultation with a knowledgeable DuPage County estate planning attorney.

Sources:

https://www.isba.org/sites/default/files/publications/pamphlets/Estate%20Planning.pdf
https://www.washingtonpost.com/business/2020/06/17/purposes-revocable-vs-irrevocable-trusts/
https://www.thebalance.com/living-vs-revocable-trust-3505393

 

Rethinking Trusts and Estate Planning

DuPage County estate planning lawyers, estate planning, trusts, trusts and estate planning, transfer-on-death beneficiary, payable-on-death in orderToo often, people think that estate planning and trusts are not applicable to their lives. They may feel they are not old enough to begin to plan, and therefore mistakenly believe that only senior citizens make estate plans and set up trusts. Additionally, they may think that only people who are rich set up trust funds. Again, this is not true.

Although many wealthy individuals do set up trusts to ensure their loved ones are taken care of and their estate is not eaten up by taxes, trusts can be set up by people who have a limited means.

trust is useful in several ways. Whether the person setting it up is rich or has a limited income, it ensures that a person to whom the trust is being left, such as a young adult, will not spend all the money at once. Quite often, a trusted family member or friend is named as trustee to cut down on expenses of administrating a trust.

Another reason why people avoid creating trusts is that they feel it will take too much work to create a trust. Yet the act of moving the money that will fund a trust does not have to be difficult. One option is to name a trust as a transfer-on-death beneficiary or payable-on-death in order to fund it. Hence, immediate action does not have to be taken. This helps keep the funds out of probate.

Many also believe that issues, such as trusts and estate planning, are only necessary when a person is dead and does not realize how helpful they can be when a person is still living. Trusts can help in the event one is stricken with a debilitating illness or injury. Having plans in place for unexpected tragedies can also help ease the burden off one’s family since an estate plan will already have his or her wishes in place.

It is never too early to begin estate planning. If you need help developing an estate plan in Illinois, contact Stock, Carlson, Flynn & McGrath, LLC. Our experienced DuPage County estate planning lawyers offer solutions to protect your rights and assets and help you plan for a better retirement. We can assist clients in Downers Grove, Hinsdale, Lombard, Naperville, and throughout DuPage County. To schedule a consultation, please contact our office at 630-665-2500.

Living Wills become More Popular in Estate Planning Choices

Many people are under the misconception that estate planning is only for the rich and the elderly. In estate planning, an estate is not a large mansion, but it is actually everything a person owns when they die. Personal property, bank accounts, their home or other property, digital information, stocks, retirement plans, and business ownership all fall under the domain of a person's estate.

Whether wealthy or not, everyone should have a will or living trust to clearly spell out your wishes in the event of your death. A living trust, also referred to as a living will, is becoming a more and more popular choice in estate planning, especially as it avoids the probate process a will is required to go through to determine its validity.

In a living will, you determine who the trustee or the trustees are and who the beneficiaries will be. Check with your attorney to see if you and your spouse should also be on the list of trustees, as this will enable you to maintain complete control of your assets while you are still alive.

Like a will, a living will allows you to clearly spell out which of your assets goes to whom and how those assets should be handed out. For example, you may not want a young adult to suddenly inherit a large sum of money so your instructions could include the assets be portioned out over a period of time.

An attorney can help you decide if a will or a living will is the right choice for you based on your assets and the size of your estate. Whether a large or not so large estate, the basic questions for estate planning are the same.

  • Who are the loved ones you want to provide for?
  • What assets will you have to gift to your beneficiaries when you die?
  • What will your liabilities (i.e. debts) be?
  • When do you want your beneficiaries to receive your gifts (i.e. minor children)?

If you have questions on whether or not a will or living will is right for you, contact a qualified DuPage County estate planning attorney today to help decide which are offer the best options.