Revocable Living Trusts Lawyer in Naperville and Schaumburg

TRUSTS
LIVING TRUSTS
A trust, generally, is an agreement in which one person (the trustee) holds and manages property for another (the beneficiary). If you create a trust under your Will, it’s called a testamentary trust. If you create a trust while you’re alive, it’s called a “living” or “intervivos” trust.
The living trust is a vehicle for managing your property during your lifetime and passing it on to your beneficiaries at death without probate.
The usual living trust works in this way. First you have your lawyer prepare a trust agreement that names the trustee and the beneficiaries and defines everyone’s rights and duties. The agreement usually says that you retain power to amend or revoke it whenever you want. The trustee (or trustees) may be one or more responsible individuals (including yourself) or a bank or trust company. You transfer property (real estate, securities, cash, etc.) into the trust by placing it in the trustee’s name. The trustee has management responsibility for the trust property.
The trust agreement usually provides that you are to receive all of the income of the trust and as much of the principal as you request, but if you are disabled, the trustee may use the income and principal to pay your bills. Upon your death the trust property is transferred to your beneficiaries without probate. A trustee might also continue to manage the trust property for the beneficiaries if they are minors, disabled, or have other special needs.
The main advantages of a living trust are these:
• If you want or need to have someone else manage your property and pay your bills in case of illness, the living trust may be the best arrangement. One alternative is a probate court guardianship proceeding, which is public, costly and inconvenient.
• Trust assets avoid probate. Avoiding probate at death may save time and money. However, Illinois probate procedures are very simple especially when Independent

Administration is used, and the importance of avoiding probate can be exaggerated. Virtually all of the steps outlined in the Probate Administration section above under “Duties as to Property” and “Financial Duties” need to be satisfied by the trustee.
• Because a trust is not filed in court, its provisions are private, unlike a Will, which must be filed in court at death. However, copies of the trust may be required by persons dealing with the trustee such as banks, stock brokers, etc.
The main disadvantages are these:
• If you use a bank or professional trustee, there are fees to pay during your lifetime that will probably be much more than the potential probate cost savings.
• Even if there are no trustee’s fees to pay, there will be costs and inconveniences during your life – the initial cost of setting up the trust and transferring your property into trust, inconvenience of maintaining a separate bank account and books and records for the trust, annual filing of tax returns may be required under certain circumstances.
• A trust only disposes of assets transferred to the trust.
The living trust is usually the best way to provide for someone to manage a person’s property and the payment of his bills during disability.
TAXES
The living trust has essentially no tax significance. While you live, the trust income is reported on your 1040 just as if the trust did not exist. (Unless you are trustee, the trustee must file an annual fiduciary return on form 1041, but this is only an information return.) At death, the trust property is included in your estate for tax purposes as if you owned it outright. Any tax plan that is built into the trust agreement (e.g., the marital deduction gift) also could be achieved through a Will.
LIFE INSURANCE TRUSTS
A life insurance trust is a living trust that can be either revocable or irrevocable. A revocable life insurance trust can be created to receive and distribute life insurance proceeds after the death of the trust maker. Typically, the trustee is named as a beneficiary of life insurance policies and then after the trust maker dies, the trustee collects the insurance proceeds and distributes the proceeds pursuant to the terms of the trust. A revocable life insurance trust can unify the disposition of your life insurance without subjecting the insurance proceeds to probate or to the claims of your creditors. An irrevocable life insurance trust owns the insurance policy and collects the proceeds at death which, if properly structured and managed, will exclude those proceeds from estate tax.