Different Types of Trusts in Illinois

Estate planning involves the creation of many different documents and the use of various tools for transferring property upon death or ensuring that loved ones are financially cared for upon your death. One of those tools is a “trust,” which is, according to Fidelity, “a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries.” There are many reasons that people establish trusts, including allowing beneficiaries to avoid probate, controlling financial distributions to particular individuals, planning for Medicaid and long-term care needs, and supporting a disabled loved one without putting their government benefits at risk.

While many trusts are established by adults with significant assets, there are also many reasons that middle-class Illinois residents would also want to consider establishing a trust. Our Oak Park estate planning lawyers can give you more information about some of the different types of trusts that you may want to consider.

Living Trusts Versus Testamentary Trusts

Trusts will either be living trusts or testamentary trusts. A living trust (also known as an “Inter Vivos trust) is one that is established during the lifetime of the grantor or settlor (the party establishing the trust), while a testamentary trust is one that does not become activated until the settlor dies, and usually, a provision in the settlor’s will establishes the trust (although it can also be a trust created during the settlor’s lifetime that becomes irrevocable upon the settlor’s death).

Different Types of Trusts in Illinois 

Trusts, on the whole, will either be revocable or irrevocable. A revocable trust is a trust that the settlor can modify or terminate. In general, testamentary trusts are always revocable, but some types of living trusts are also revocable. An irrevocable trust is a type of trust that the settlor cannot modify or terminate — the trust cannot be changed. Irrevocable trusts are always living trusts. With a revocable trust, as the Illinois Department of Revenue explains, the settlor “remains in control of the assets,” while the settlor no longer has any control over the assets with an irrevocable trust.

Simple Trust Versus Complex Trust

The term “simple trust” is used to refer to a trust from which the only distributions are income distributions. Simple trusts cannot distribute to charities, for example. Oppositely, a “complex trust” allows for the distribution of income, charitable contributions, and more.

Special Needs Trust

A special needs trust is set up for a disabled adult. With a special needs trust, the settlor ensures that the disabled adult can receive assets while maintaining eligibility for government benefits like Medicaid.

Medicaid Asset Protection Trust

Medicaid asset protection trusts are often important tools in Medicaid planning. They can allow adults who may require long-term care to place their assets in a trust so that they can be eligible for Medicaid long-term care benefits without being required to spend down assets.

Contact Our Oak Park Estate Planning Attorneys

If you are considering the creation of a trust, or if you want to learn more about trusts and estate planning in general, an experienced Oak Park estate planning lawyer at our firm can speak with you today. Do not hesitate to reach out to us for advice. Contact the Emerson Law Firm to learn more about the estate planning services we provide.



See Related Blog Posts:

Estate Planning: What Documents Should I Consider?

What Goes Into a Valid Will in Illinois?

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