Trusts | Chicago Estate PlanningThe usefulness of trusts for general estate planning purposes as well as for the specific tax advantages that may be realized cannot be overstated.  A trust is commonly defined as a fiduciary relationship in which one person holds legal title to property for the benefit of another. The division of title into legal and equitable components is the critical and necessary element for the existence of a trust.  The individual who establishes the trust is known as the settlor, trustor, or grantor. The individual who manages legal title to the property is known as the trustee. The individual who holds the equitable or beneficial title to certain assets is known as the beneficiary. The trust property in estate planning is known as the res, corpus, or principal.

The selection of assets to transfer to a trust involves not only the question of what property, tangible and intangible, can and cannot form the trust corpus, but also the question of what property should and should not be utilized in the trust. The former question commonly involves issues as to present ownership, definiteness and transferability, and the latter question often turns on tax issues arising out of the transfer.  Our Chicago estate planning attorney  provide our clients with specific, personalized legal counsel in properly employing trusts in estate planning.

Types of Trusts

Our Chicago estate planning attorneys often use revocable trusts as compliments to the will, which in the past was the primary dispositive estate planning instrument. Revocable trusts allow a person to effectuate a dispositive estate plan that, although being legally valid immediately at the creation of the revocable trust, has a practical dispositive impact only at the persons death. Therefore, revocable trusts offer two excellent benefits: 1) retention and control over property during life; and 2) an alternative to the will for effectuating the dispositive estate plan at death, which serves to avoid the probate process.

Establishing Trusts in Estate Planning

Our Chicago estate planning attorneys frequently maximize the advantages of employing trusts for our estate planning clients.  A trust generally is establishedby 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 several requirements to establish a valid trust: (1) an expression of intent that the property be held for the benefit of a person other than the grantor; (2) at least one beneficiary for whom the assets are to be administered by the trustee; and (3) an ownership interest in property that is ascertainable, present or future, and is to be held for the benefit of a beneficiary.