Creation of Trusts in Estate Planning
Our Chicago estate planning attorneys frequently utilize the many advantages of trusts for our estate planning clients. A trust generally is created by a transfer of property, or assets, in trust during a persons lifetime, by a declaration of trust, by a testamentary transfer in trust, by a promise in trust or by the exercise of a power of appointment. Most commonly, however, trusts come into existence either through a during life (inter vivos) or at death (testamentary transfer).
A during life transfer of property or assets in trust can be accomplished by the conveyance of property during the grantor’s lifetime for the benefit of the grantor, a third person or both the grantor and another beneficiary or beneficiaries. A living trust instrument, such as a revocable trust, will contain the specific terms and conditions of the trust if proper estate planning was made by the client and his/her counsel and other professional advisors.
A testamentary trust may be created in the testator’s last will and testament. The execution of the will that embodies the trust must meet all Illinois statutory requirements for the execution of a will. There does not have to be a physical transfer of property to create a trust. A trust may be created by a declaration of the owner of property or assets, generally an estate plan, that he or she holds the property as trustee for another person, or for himself and another person or persons. The usual requirements of identity of beneficiary, property, and terms apply to testamentary trusts. In many instances, the terms of the trust are not contained in the will itself. In a “pour over” arrangement, a testamentary disposition of property is given to a living trust.
There are three requirements to create a valid trust: (1) an expression of intent that the property be held, at least in part, for the benefit of someone other than the grantor; (2) at least one beneficiary for whom the property is to be administered by the trustee; and (3) an interest in property that is ascertainable and is to be held for the benefit of the beneficiary.