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ILLINOIS TRUST AGREEMENTS – WHY YOU SHOULD
CONSIDER ONE FOR YOUR ESTATE PLAN
ROBERT N. NASH ILLINOIS ESTATE PLANNING ATTORNEY
“ Only an in-depth consultation with your Illinois estate planning attorney can help you decide if a trust agreement is right for your plan but knowing a little more about trusts is a good place to start if you are considering adding one to your estate plan.”
Illinois Trust Agreements – Why You Should Consider One for Your Estate Plan www.nashbeanford.com 2
When you sit down to create your estate plan a wide variety of decisions will
have to be made, starting with deciding on your estate planning goals and
objectives. From there, you must decide what estate planning tools and
strategies are best suited to achieving those goals and objectives. The unique
nature of an estate plan means that no two plans are exactly alike; however,
there are common components found in many plans.
Trust agreements, for example, are frequently included in a comprehensive
estate plan. Only an in-depth consultation with your Illinois estate planning
attorney can help you decide if a trust agreement is right for your plan but
Illinois Trust Agreements – Why You Should Consider One for Your Estate Plan www.nashbeanford.com 3
knowing a little more about trusts is a good place to start if you are considering
adding one to your estate plan.
TRUST BASICS – THE ELEMENTS
Trusts have evolved to the point where there is a specialized trust for almost any
specific estate planning goal. All trust agreements, however, require the same
basic elements, including:
Maker –the person who creates a trust is referred to as the “maker” or
“trustor” of the trust.
Trustee – the Trustee is responsible for managing and investing trust
assets as well as administering the terms of the trust.
Beneficiary – every trust must have at least one beneficiary. A beneficiary
can be an individual, charity, organization, or even the family pet.
Terms – the terms of your trust will dictate how the trust assets are
invested, managed, and
distributed to
beneficiaries. As the trust
maker you can create
any terms you wish as
long as they are not
illegal, unconscionable,
or impractical.
Assets –almost any type
of assets can be used to
fund a trust, including cash, stocks and bonds, or real property.
Illinois Trust Agreements – Why You Should Consider One for Your Estate Plan www.nashbeanford.com 4
TESTAMENTARY VS. LIVING -- REVOCABLE VS. IRREVOCABLE
Trusts have evolved
over the years to the
point where there is now
a specialized trust for
almost any estate
planning goal or
objective. All trusts,
however, are first
categorized as either a
testamentary trust or a
living trust. A testamentary trust is one that does not activate until the death of
the Maker whereas a living trust (formally referred to as an intervivos trust)
takes effect as soon as all formalities of creation are complete and sufficient
assets are transferred into the trust.
Living trust are then further sub-divided into revocable and irrevocable trusts. As
the name implies, a revocable living trust is one that can be revoked, modified,
or terminated at any time and for any reason by the Maker. An irrevocable trust,
on the other hand, cannot be revoked or modified by the Maker once the trust
takes effect. There are situations in which a court can approve a modification, or
even termination, of an irrevocable trust; however, as the Maker of an
Illinois Trust Agreements – Why You Should Consider One for Your Estate Plan www.nashbeanford.com 5
irrevocable trust you should always assume that not changes may be made once
the trust becomes active.
HOW DOES A TRUST WORK?
Without realizing it you have likely entered into numerous simple trust
agreements over the course of your lifetime. At its most basic, a trust agreement
requires the Maker to designate assets that are to be managed and invested by
the Trustee for the benefit of a third party (usually) beneficiary. If you stop and
consider, you have likely played all three roles at some point in your life. For
example, have you ever asked a neighbor to hold onto your house key and then
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give it to your child when he/she got home? If so, you were the Maker of a
simple trust wherein the neighbor was the Trustee and your child the beneficiary.
Has your mother/father asked you to hold onto a family heirloom intended for
your child until he/she is old enough to have the heirloom? If so, you are the
Trustee of a simple trust wherein your mother is the Maker and your child the
beneficiary. As you can see, the concept of a trust agreement is really an
everyday concept that has been adapted and formalized into a legal agreement.
THE BENEFITS OF INCORPORATING A TRUST AGREEMENT
INTO YOUR ESTATE PLAN
Trusts have grown in popularity over the last several decades due, in large part,
to the numerous and varied benefits a trust agreement can offer to an estate
Illinois Trust Agreements – Why You Should Consider One for Your Estate Plan www.nashbeanford.com 7
plan. Estate planning is, of course, highly personal. One of the reasons trust
agreements fit so well into an estate plan is because trusts are very flexible and
can be personalized to fit the needs of the Maker. A trust agreement may:
Help decrease your estate’s exposure to federal gift and estate
taxes. Assets transferred into the right type of trust agreement are no
longer owned by you
at the time of death
and are, therefore,
not included in gift
and estate tax
calculations.
Remove assets
from probate.
Probate can be
lengthy and costly.
The more non-probate assets your estate has the better.
Protect assets from creditors and spendthrift beneficiaries. A
properly drafted trust agreement can remove assets from the reach of
creditors as well as keep a spendthrift beneficiary from squandering them.
Provide the cornerstone for an incapacity plan. A revocable living
trust can be used to hold all major assets of yours. Naming a
spouse/parent/adult child as the successor Trustee results in an immediate
Illinois Trust Agreements – Why You Should Consider One for Your Estate Plan www.nashbeanford.com 8
shift of control of those assets without the need for a court’s intervention in
the event of your incapacity.
Allow you to continue to support a special needs loved one. A
supplemental needs trust allows you to supplement the assistance provided
by federal and state assistance programs such as Medicaid and SSI to a
special needs loved one without jeopardizing eligibility for those programs.
Support charitable gifting now and after your death. A trust can be
used to provide for a non-charitable beneficiary now and a charitable
beneficiary in the future or vice versa.
If you believe a trust agreement could be a valuable addition to your estate plan
take the time to discuss the possibility with your Illinois estate planning attorney.
American Bar Association, Trusts
U.S. Trust, Trust Basics
Living Trust Network, Types of Trusts
Vanguard, Living Trusts:Learn the Basics
Illinois Trust Agreements – Why You Should Consider One for Your Estate Plan www.nashbeanford.com 9
About the Author
Robert N. Nash
Robert N. Nash is a partner in the law firm of Nash Nash Bean & Ford, LLP. The law firm has
offices in Geneseo and Moline, Illinois and conference facilities available throughout
Northwestern Illinois. Mr. Nash chose the estate and business planning arena because he
believes it provides a positive force in his clients’ lives. He practices preventative, rather
than remedial law. Robert Nash focuses on all aspects of estate planning, including estate,
gift and income taxes, trust and probate administration, real estate, and business.
Nash Nash Bean & Ford, LLP www.nashbeanford.com
Geneseo
445 US Highway 6 East Geneseo, IL 61254
Phone: (309) 944-2188 Fax: (309) 944-3960
Moline
5030 38th Avenue, Suite 2 Moline, IL 61265
Phone: (309) 762-9368 Fax: (309) 944-3960