Revocable TrustsThe name of the revocable trust is fairly descriptive of its legal character.  As opposed to a testamentary trust, or a trust created by will, the revocable living trust is, first, an inter vivos trust, meaning a trust that a person creates during his or her lifetime.  The typical Illinois estate planning living trust is testamentary in nature, meaning that it is the instrument by which the creator of the trust disposes of property at death.  At death, the living trust (still in existence for a deceased client) acts, looks, and feels like a last will and testament.

An estate planning trust is generally revocable, meaning that the creator of the trust, typically called the “settlor,” “trustor” or “grantor,” reserves to himself or herself the right to amend or revoke the trust at any time during his or her lifetime. The term “revocable trust” will refer to a trust created while the grantor is alive in which the right to revoke is retained by the grantor alone or can be exercised in conjunction with the grantor or solely by another with the authorization of the grantor.  It is clear that without an express retained power to revoke the trust, a trust created during the lifetime of a person will be irrevocable.  The transfer of property or assets to a revocable trust is not a gift because the right to revoke makes the transfer incomplete for transfer tax purposes. At death, the revocable trust becomes irrevocable (just as a will is irrevocable at death), and assets contained in the revocable trust will be included in the taxable estate of the grantor at death. Note that even though assets in the trust will not be included in the grantor’s probate estate, the assets will be included in the grantor’s taxable estate.

The revocable trust is one of the most flexible planning tools available and its nontax advantages are numerous. Problems associated with probate can largely be avoided through the use of a revocable trust. A person whom engages in estate planning and has established a revocable trust may provide for management of the trust assets in the event of his or her incapacity or that of a family member. A revocable trust facilitates the continuous and centralized management of an individual, professional estate planning or family estate planning assets. In Illinois, our Chicago estate planning attorneys may counsel a family, individual or professional to establish a revocable trust in order to place assets beyond the reach of creditors.

Revocable Trust Benefits

Our Chicago estate planning attorneys often use revocable trusts as a compliment to the will. Revocable trusts allow one to effectuate a dispositive estate plan that, while being legally valid immediately at the trusts creation, has a practical dispositive impact only at a persons death. Therefore, revocable trusts offer two important benefits: 1) retention and control over a persons property during his or her lifetime, with the right to revoke or amend; and 2) an alternative to the will for effectuating the dispositive estate plan at death, which serves to avoid the probate process.  A person may fund the revocable trust during his or her lifetime, retaining the right revoke the property and the status of sole beneficiary until death.  Consequently, a person using the revocable trust estate planning vehicle will maintain the most important qualities of property ownership: the right to the benefits of the property as the beneficiary and the right to control the property as the trustee.  Upon death, the revocable trust operates to manage the property in accordance with the person’s directions, much as as a last will and testament would direct the disposition of assets in probate.

Continuity of ownership also may be desired where problems with the clearance of debts, claims or Illinois estate administration expenses are anticipated. Finally, continuous ownership afforded by the revocable living trust is advantageous where liquidity is needed to pay taxes and assorted probate costs.

Revocable Trust For Single or Unmarried and Nontraditional Relationships

As for unmarried or single persons as well as individuals in nontraditional relationships, revocable trusts may be the best alternative of the estate planning options.  Generally speaking, a trust may be more difficult to contest than a last will and testament (see Will Contests).  Additionally, a revocable trust is private, and its contents and provisions may not be known for quite some time after death.