What Are The Benefits Of A Revocable Trust Vs. A Will In Illinois?
Answered by: Devin QuackenbushQuackenbush Legal, PLLC Phone: 312-319-8445
Wills and revocable trusts are valuable estate planning tools, and each has advantages and disadvantages. But before making specific comparisons, it’s even more crucial to understand what can happen to your assets if you have neither when you pass away.
If you die in Illinois without a will or trust, called “intestacy,” it’s up to a judge to assign ownership of your assets to new owners during a court-ordered process known as probate. The judge will rely on the state legislature’s intestacy rules without clear written instructions on how you want your property distributed.
Probate can be lengthy, expensive and stressful for families, especially when disagreements arise over who gets what. Family squabbles and court challenges during what should be a time to come together and grieve can lead to long-lasting or permanent rifts. The good news is that it doesn’t have to come to that. Let’s look at two of the most common estate planning options.
Basic Outline Of A Will
A will is the most straightforward document you can create outlining how you want to distribute property after your death. In addition to naming your beneficiaries it has several other components, including:
- Naming guardians for minor children
- Naming an executor to manage your estate
- Designating how you want your taxes paid
- Providing instructions on how to pay other debts
- Outlining decisions to forgive debts from family members or others
After you die, the executor inventories your assets, pays off outstanding debts and distributes the remainder according to your wishes. All assets listed in a will must go through Illinois’ public probate process.
Also known in Illinois as a “living trust,” a revocable trust also allows you – as the grantor – to name beneficiaries for your assets. But similarities to a will mostly end there. Living trusts are managed by a trustee on behalf of your beneficiaries. Grantors can select themselves as trustee for a revocable trust, and the trust can be changed at any point during the grantor's lifetime. On the other hand, “irrevocable” trusts become permanent once they are created and must be managed by a third party.
A central feature of a living trust is that assets in the trust bypass probate, with the added benefit of maintaining your privacy. This can save your loved ones considerable time, money and anxiety. Many people create a revocable trust specifically for this purpose. It’s important to note that most people with a living trust still have a will to designate guardians for young children, executors to distribute assets not contained in the trust and offer other instructions.
What Wills And Living Trusts Don’t Do
Creating a comprehensive estate plan that fits your needs depends on many things, such as net worth, family considerations, charities close to your heart and a multitude of other factors. An experienced estate planning attorney can help you determine which tools are beneficial. Here are two critical issues for many that neither wills nor living trusts address:
- Reducing or avoiding taxes: Most estates are not subject to estate taxes. In Illinois, the exclusion is $4 million, while the threshold for federal estate taxes is $12.92 million. For tax purposes, benefactors with high-asset estates may want to consider irrevocable trusts, which avoid estate and gift taxes.
- Protecting assets from creditors: Assets in a will or living trust can be targeted by creditors for debts owed or by plaintiffs seeking compensation in lawsuits. Here again, assets placed in irrevocable trusts are typically protected from creditors and legal judgments.
Additionally, wills and living trusts do not include instructions, such as user names and passwords for an executor or trustee to access online accounts, computers, social media and other vital information. Your lawyer will help you create a separate document with this information that will be added to your estate planning portfolio.
Personalized Guidance For Estate Planning
While avoiding intestacy and probate are two crucial goals for any estate, finding an estate plan that fits your unique needs is the best course of action. A knowledgeable attorney can explain the benefits and drawbacks of wills and living trusts. Not everyone needs a trust, which is more expensive than just drafting a will. Bear in mind that all estate plans should be reviewed annually and revised when major life events occur, such as marriages, divorces, births, deaths and when serious health issues arise.
For changing a will or living trust, some attorneys charge separate fees for initial and subsequent drafts. Others may charge more upfront, but any revisions are generally included in a one-time initial fee. It’s important to ask questions beforehand to understand why, when and what you’ll be charged. Attorneys specializing in estate planning take the time to get to know you and understand your financial as well as your personal goals. That knowledge is vital so we can offer informed suggestions to provide sound solutions based on your circumstances.
The answer is intended to be for informational purposes only. It should not be relied on as legal advice, nor construed as a form of attorney-client relationship.
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