If you’re starting to think about your legacy and creating a plan for your estate, a living trust is one way to protect your assets and make life easier for your heirs. If you’re living in Illinois and thinking about creating a living trust, this guide will take you through the process and give you the information you need to know about the pros and cons of living trusts. Whether you’re thinking about forming a living trust or you simply have some financial planning questions, you may benefit from working with a financial advisor.
How to Create a Living Trust in Illinois
Here are the steps you’ll need to take to create a living trust in the Land of Lincoln:
- Figure out which type of trust you need: Single people only have the option of a single trust. If you’re married you have the choice of each spouse getting a single trust or getting a joint trust together. A joint trust probably makes sense if you co-own property like homes or vehicles.
- Take stock of your property: It’s important to know exactly what you own and what you want to place into your trust. You can place anything from bonds and bank accounts to artwork and antiques into a living trust. You should also gather all relevant paperwork for your property, including proof of home ownership and car titles.
- Pick a trustee: You might want to name yourself trustee, but you can also pick someone else. People typically choose their children or a trusted relative. If you choose yourself, you’ll also want to select a successor trustee who will take over management of your estate when you die. The trustee is also responsible for ensuring your property is doled out to your beneficiaries as your trust specifies, which is another matter you’ll have to decide.
- Create the trust document: You can either do this using an online service or with the help of an attorney.
- Get the document notarized: Sign the trust document in the presence of a notary.
- Fund your trust by moving your property into it: You can do this yourself, but it might be beneficial to get the help of an attorney, as it does require some paperwork and can be complicated.
What Is a Living Trust?
A living trust is a legal framework that you can place assets and property in. The trust is established by a document. A trust has a trustee who is in charge of managing the trust and distributing the property to the trust’s beneficiaries according to its instructions. You can name yourself as trustee or you can give that job to someone else.
There are two types of living trusts. An irrevocable trust is permanent, and a grantor cannot remove property placed in it unless he or she gets permission from every person named in the trust. The trust assumes control of all property and taxes are paid via the trust itself.
There are also revocable trusts, which have some flexibility and are modifiable. With this type of living trust, the grantor maintains ownership of the assets placed in the trust and pays taxes as usual.
How Much Does It Cost to Create a Living Trust in Illinois?
The cost of creating a living trust in Illinois is dependent on its structure. You can choose to use a program on the internet, which will likely run a few hundred dollars or less. If you choose to use an attorney, the attorney’s fees will determine the price you’ll pay. You could end up paying more than $1,000 to create a living trust with the help of an attorney.
Though DIY estate planning is obviously less expensive, there are risks to DIY trusts. Trusts can be tricky to set up, so you’ll need to invest plenty of time in researching and making sure you do things properly. If you choose to work with an attorney, make sure to ask about his or her fees and ensure you understand how much it will cost. Another important factor to consider if you decide to hire an attorney is whether the attorney is a trust specialist, not merely an estate planner.
Why Get a Living Trust in Illinois?
The most common reason for getting a living trust in the state of Illinois is to make matters easier for your family when you die. Any property that’s inside the trust will not be subject to probate court, a process that estates must go through when a person dies to ensure the person’s property goes to the appropriate places. This process can be very time-consuming and costly, as well as a potential invasion of privacy. The probate process can be especially lengthy in Illinois, as the state does not use the Uniform Probate Code. In other states, this code streamlines the probate system.
Using a living trust can also be helpful if you’re leaving property or assets to a minor child. With a living trust, a trustee can take ownership of the assets until the child comes of legal age. Additionally, a living trust can be useful in the event you become incapacitated. If this were to happen but you had a living trust, you’d avoid conservatorship because you’d already have designated a trustee.
Who Should Get a Living Trust in Illinois?
Living trusts are not just for the wealthy. Especially in Illinois, which does not use the Uniform Probate Code, a living trust can be helpful even for smaller estates, as it allows your heirs to circumvent the probate process. Note that in the state of Illinois, estates that have a total value under $100,000 and don’t include real estate don’t necessarily have to go through the probate process. In those instances, a living trust may not be especially useful.
There are downsides to using a living trust. For instance, trusts are more complex to arrange, and they tend to be costly than wills. Also, they can cause issues after you’ve died, as living trusts offer families a larger window of time to contest the estate than a will does. Regardless of whether you choose to create a living trust, remember that everyone needs an estate plan.
Living Trusts vs. Wills
Even if you get a living trust, make sure to also make a will. A will can direct the fate of any property that does not end up in the trust. Moreover, a will has some capabilities that a living trust does not, including:
- Establishing guardianship for children who are minors
- Selecting managers for children’s property
- Providing instructions on how to pay taxes and debts
- Naming an executor
Here’s a deeper dive into the the legal abilities of both documents:
|Living Trusts vs. Wills|
|Names a property beneficiary||Yes||Yes|
|Allows revisions to be made||Depends on type||Yes|
|Avoids probate court||Yes||No|
|Requires a notary||Yes||No|
|Names guardians for children||No||Yes|
|Names an executor||No||Yes|
Living Trusts and Taxes in Illinois
A living trust probably will not have much of a tax impact. Still, you should look into the Illinois estate tax and Illinois inheritance tax when you are thinking about your estate plan.
The estate tax in Illinois applies to estates that are worth more than $4 million. The tax is progressive, and rates range from 0.80% to 16%. The federal estate tax could also be relevant. This tax applies to estates that are worth more than $12.06 million, or $24.12 million for couples.
There is no inheritance tax in Illinois.
It isn’t difficult to make a living trust in Illinois, but it does require some level of time and planning. A living trust might be especially useful in Illinois because the state does not use the Uniform Probate Code. This means that a living trust has the potential to save time and money for your family.
When it comes to creating a living trust, you can do it yourself or work with an attorney. The first option might be less costly. However, a lawyer may be helpful as you navigate the complexities of living trusts.
Estate Planning Tips
- If you’re planning your estate or are just trying to create a financial plan, it might be a good move to find a financial advisor. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Make sure to update your will and other aspects of your estate plan. Things change, and your estate plan should change along with them.
- You can’t transfer ownership of your retirement account to your trust. However, you can name your trust as a beneficiary. If you do this, your 401(k) or life insurance benefits will automatically go to your trust.
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