Probating an estate, i.e. having a court case opened to deal with distribution of your assets, can be very expensive. Court costs and attorney’s fees can eat up a significant portion of the estate and prevent those funds from passing to your designated heirs and beneficiaries. In Illinois, an estate can be resolved fairly easily via use of small estate affidavits but only if the total value of the deceased person’s assets is less than $100,000. If an estate exceeds that amount, transfer of significant assets such as real estate, bank accounts and securities accounts will require court intervention if a proper estate plan is not in place.
Putting assets in a living trust during your lifetime can eliminate probate. Your designated trustee will transfer all assets held in trust to the beneficiaries you designate. This can include children, other family members, friends and charitable organizations. The trust document controls and a court will not have to intervene except in extreme cases where the validity of a trust document is challenged. A living trust will save time and aggravation for your beneficiaries.
The cost of setting up a living trust and funding it will be significantly lower than the cost of probate. Many attorneys will charge a flat fee for preparing a trust document and for assisting you with transferring title of your assets to the trust. Even if an attorney charges an hourly fee, the number of hours to complete an estate plan is significantly lower than the hours that will be expended on a probated estate.
Asset Management During a Period of Disability
A will takes effect only upon your death. A living trust, on the other hand, can be crafted to deal with your assets in the event of an extended period of disability. You can appoint a trustee in whom you have great faith to protect your assets. A living trust can also help avoid the expense and emotion that can be associated with legal proceedings seeking to have a court overseen guardian appointed for you.
Upon your death, a will must be filed with the court. It becomes a matter of public record, available for anyone to see. The terms of a trust document, however, remain private. Its contents will be known only to your designated trustee and beneficiaries.
Most living trusts are revocable. This means that it can be modified by you at any time before your death. Changes in your family, issues with your heirs or a desire to assist charitable organizations are all reasons that you may wish to modify your estate plan. The legal process for modifying a trust is simpler than the process for modifying a will.
Estate tax laws, both on the federal and state level, have been changing regularly in recent years. Having many, if not all, of your assets held in a living trust gives you the opportunity to change your estate plan easily to conform with new tax requirements.
Seeing Your Estate Plan at Work
Subject to certain gift tax law limitations, a living trust can be used to begin making distributions of your assets during your lifetime. You can use this process to make sure that you chose the right person to be your executor or trustee. You can also use it to see whether your beneficiaries will use your assets as you intended. Finally, you can begin making charitable donations of your assets now rather than waiting until you pass away.
As with all estate planning, you should consult with your qualified financial adviser, tax professional and legal advisor on the best options for you.