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TRUST

What is a Trust

A Trust is an entity which owns assets for the benefit of a third person (beneficiary).   It is created by a trust agreement or declaration wherein the Trustor or Grantor – maker of the trust,  gives assets to the trust to be administered by the Trustee – person or entity (i.e. bank), to be held for the Beneficiary – person on whose behalf the assets are being administered.  The trust agreement or declaration also provides the  rights and duties of the trustor, trustee, and beneficiary and provides direction for the administration of the trust assets.

Types of Trust

  1. Testamentary Trust – A testamentary trust is created in a Will and takes effect when the trustor dies and is subject to court supervision during the probate process. A testamentary trust is usually used to distribute after-acquired assets not identified in a Will.
  2. Living Trust – A living trust is a trust established during the trustor’s lifetime in which the trustor’s assets are placed within the trust, usually for the purpose of estate planning.  The trust then owns and manages the assets held by the trust through a trustee for the benefit of named beneficiary, usually the creator of the trust (trustor).  The trustor, trustee and beneficiary may all be the same person and maintain complete control and management of the trust assets (otherwise known as “grantor’s trust”).   Upon the death of the trustor, the trust assets do not go through probate proceedings, but rather passes according to the trust provisions.

Living trust – forms fall under two general categories – revocable trust and irrevocable trust. These categories can then be broken into further types, depending on their purpose, such as a charitable trust, special needs trust, Medicaid income trust, family trust, asset protection trust, etc. It’s possible for the same person to be named as trustor, trustee, and beneficiary.

  • Irrevocable Trust – A trust created during the grantor’s lifetime which the trustor, cannot terminate or change. Since the grantor does not control the trust, the trustor will no longer be subject to taxes on it and it will not be included as part of trustor’s taxable estate upon death. It also provides protection from attachment of trust assets by creditors of the trustor.
  • Revocable Living Trust – A trust created during the trustor’s lifetime in which the trustor retains a degree of control over the trust assets and which the trustor can amend or revoke . Since the trustor still retains a degree of control over trust assets, it provides less protection from attachment of trust assets by creditors of the trustor. A revocable trust may become irrevocable and cannot be amended when the trustor dies or becomes incompetent.

Why a Trust

  • Privacy – Trust declarations or agreements are private documents, not  filed in court and are not public record.
  • Asset protection – A trust asset is owned by the trust and may be protected from creditors of the Trustor.
  • Avoids probate – Assets owned by a trust has predetermined distributions at the time of Beneficiary’s death and are distributed outside of probate and avoids the costs, efforts, and delay of probate proceedings.
  • Estate Tax savings – May minimize estate tax liability for large estates.
  • Separation of assets – For a couple contemplating marriage, will prevent assets from becoming marital property if transferred to a trust before marriage.
  • Preserve eligibility for benefits – In cases of senior citizens, a Medicaid income trust can protect eligibility for Medicaid when entering a nursing home. In cases of beneficiaries with disabilities, a special needs trust can protect beneficiary from disqualification for disability benefits by receiving gifts, inheritances, or settlements in lawsuits, etc.
  • Dealing with incapacity – The trustee continues to administer the assets of the trust even after the death or incapacity of the trustor, unless the trust provision says otherwise.

FIRM SERVICES FOR TRUST PREPARATION, OR REVIEW, OR AMENDMENT

At Noorani & Villar, we provide legal services for the preparation of your Trust.  We also provide an option for a Revocable Living Trust package to include pour- over Will, health care power of attorney, power of attorney for property, and healthcare directive.   We also provide legal services for the review and explanation of your existing Trust and/or amend your existing Trust.

Please contact Noorani & Villar, P.C., where our attorneys will assist you in your Trust requirements.

DISCLAIMER: The information provided on this website is a basic overview of Noorani & Villar, P.C.’s areas of practice. It is intended for advertising purposes only and may or may not be correct, complete or current at the time of reading. The contents of this website do not constitute as legal advice and must not be used as a substitute for attorney legal advice or opinion. No Attorney-Client Relationship is created by anything on this site unless an Engagement Agreement is fully executed by both Attorney and Client. Please seek detailed legal advice regarding your specific facts and circumstances before acting on any legal matter.

NOORANI & VILLAR, P.C. located at 1900 East Golf Road, Suite 950 , Schaumburg, IL . Reviewed by JA rated: 5 / 5