Setting up a trust can be a wise financial decision for Illinois residents—especially for those with significant assets and complex estates. In most cases, revocable living trusts allow beneficiaries of the trust estate to bypass the time-consuming and often costly realities of probate court after a loved one passes away.
Since establishing a trust in Illinois can be a complicated process, it’s a good idea to speak with financial advisors and attorneys who provide estate planning services. With their help, you can create a trust that not only meets your specific needs but also complies with all state laws and regulations.
In this guide, we’ll walk you through the steps of setting up a trust in Illinois, from selecting a trustee to transferring assets.
Setting Up a Trust in Illinois: Step by Step
Step 1: Determine the Type of Trust You Need
There are many types of trusts designed for different situations. Many unmarried individuals establish a single living revocable trust. A married couple with children may have different needs and consider creating a joint marital trust, an A-B trust, a special needs trust, or a spendthrift trust. Meeting with a qualified estate planning attorney is invaluable and will help point you in the right direction.
Step 2: Take Inventory of Your Investments, Assets, and Property
Once your trust is established, you will need to transfer ownership of most, if not all, of your assets, including the contents of brokerage accounts, stocks, businesses, real estate, cars, boats, and other titled property, such as jewelry and artwork. As you take inventory, gather all necessary documents, such as titles, bills of sale, account statements, and other records to prove ownership. Keep in mind that some assets, such as specific deferred tax plans, may not need to be placed in your trust.
Step 3: Select a Trustee
The trustee is the person responsible for managing the trust. You can serve as your own trustee, but when you are no longer able to manage your affairs—or upon your passing—you will need to have named a successor trustee to take over. Successor trustees are typically family members, such as children, siblings, parents, or trusted friends.
Step 4: Have a Lawyer Draft Your Trust Document
Trust documents are complex and legally binding. Working with an experienced living trust attorney ensures your trust estate is adequately protected and that your assets will be distributed according to your wishes.
Step 5: Sign Your Trust with a Notary Present
While notarization is not required in every state, having your trust notarized adds an extra layer of protection. This step can help minimize disputes or challenges to your estate in the future.
Step 6: Fund Your Trust by Transferring Property to It
Once the trust is created, you may transfer ownership of your assets to the trust. Your attorney can guide you through this process and help ensure all transfers and titles are correctly executed in the name of the trust.
What Is a Trust?
A trust is a legal arrangement that allows a grantor to transfer property into a trust account managed by a trustee for the benefit of designated beneficiaries. The trustee holds and administers these assets in accordance with the terms set out in the trust document. This structure helps ensure that assets are managed and distributed as intended, often avoiding the need for probate.
Types of Trusts
- Revocable Living Trust: This type of trust allows the grantor to retain control during their lifetime and make changes as needed.
- Irrevocable Trust: Cannot be altered once created and can offer substantial protection from creditors or tax exposure.
- Special Needs Trust: Supports an individual with disabilities without affecting their eligibility for government programs.
- Testamentary Trust: Created through a will and activated upon the grantor’s death.
Each trust fund or trust account type serves distinct purposes, so it’s essential to select one aligned with your estate planning goals.
How Does a Trust Work?
A trust begins when the grantor creates a legal document detailing how their property should be managed and distributed. Once the trust is formed, ownership of the assets is transferred into the trust account or titled in the name of the trust.
The trustee—whether an individual or institution—manages the assets according to the trust’s instructions. They may handle investments, pay expenses, and ensure distributions to beneficiaries occur as outlined. During the grantor’s lifetime, a revocable trust allows them to retain control and make adjustments as circumstances change.
After the grantor’s passing, the trustee continues to follow the trust’s directives, distributing property directly to beneficiaries without the delays or costs of probate. This structure provides both flexibility and continuity in managing and transferring wealth.
Benefits of Creating Trusts in Illinois
Save Time and Money
Establishing a trust can help your loved ones avoid probate court, which often takes months—or even years—and can cost thousands in court and legal fees. With a properly prepared and funded trust, your beneficiaries can receive their inheritance without the expense and delay of probate.
Stay in Control of Your Assets
A revocable living trust allows you to maintain complete control of your estate during your lifetime. You can add or remove assets, make changes to the trust, or revoke it entirely. Regularly reviewing your estate plan ensures it reflects your current wishes and circumstances.
Protect Your Interests if You Become Incapacitated
You can include provisions in your trust that authorize a successor trustee to manage your assets if you become unable to do so yourself. This helps protect your financial well-being and ensures that your affairs continue to run smoothly without the need for court intervention.
Distribute Wealth on Your Terms
Trusts offer flexibility to tailor your estate plan to your family’s unique needs. You can create a spendthrift trust for a loved one who struggles with money management or schedule distributions over time rather than all at once—helping to preserve wealth and encourage responsible financial habits.
Important Considerations for Setting Up a Trust in Illinois
While the steps to establish a trust in Illinois may seem straightforward, there are important considerations to keep in mind throughout the process. These include:
1. Choose the Right Trust Structure
There are various types of trusts available in Illinois. Some of the most common ones include:
- Revocable Living Trust: This type of trust allows you to retain control over your assets during your lifetime but passes them directly to your beneficiaries after you pass away. It also helps avoid the probate process.
- Irrevocable Trust: As the name suggests, this type of trust cannot be changed once it is established. It can provide tax benefits and protect assets from creditors.
- Special Needs Trust: This trust is designed for individuals with disabilities and provides financial support while ensuring continued eligibility for government assistance programs.
It’s important to carefully consider which type of trust best fits your needs and consult with a legal professional for guidance.
2. Choose the Right Trustee
Choosing the right trustee is crucial, as this person will be responsible for managing and distributing your trust assets according to your wishes. While many individuals choose a family member or friend for this role, it’s important to consider their ability and willingness to handle these responsibilities. You may also want to consider appointing a professional trustee such as an attorney or financial advisor.
3. Review and Update Your Trust Regularly
It’s important to regularly review and update your trust as needed. This could include changes in your personal circumstances, tax laws, or other factors that may impact the distribution of your assets. It’s recommended to review your trust every 3-5 years or whenever a major life event occurs.
4. Consider Consulting with a Legal Professional
While it is possible to set up a trust on your own, it’s highly recommended to seek the guidance of a legal professional who focuses in estate planning and trusts. They can help ensure that your trust is properly drafted and executed according to Illinois state laws.
When to Speak with an Attorney for Estate Planning
If you have a net worth that is nearing $100,000 or exceeds that amount, consulting with an estate planning lawyer can help you protect your property and your loved ones’ inheritances. Attorneys are experts at drafting legal documents and contracts. They can also anticipate potential issues and correct them before they arise.
Our estate planning law firm, Diamond Legal, serves residents in and around McHenry, Illinois. Call us to consult with one of our skilled attorneys. We have experience in creating wills, trusts, powers of attorney, and other vital estate planning documents.