ILLINOIS TRUST AGREEMENTS – WHY YOU SHOULD

CONSIDER ONE FOR YOUR ESTATE PLAN

ROBERT N. NASH ILLINOIS ESTATE PLANNING ATTORNEY

“ Only an in-depth consultation with your Illinois estate planning attorney can help you decide if a trust agreement is right for your plan but knowing a little more about trusts is a good place to start if you are considering adding one to your estate plan.”

Illinois Trust Agreements – Why You Should Consider One for Your Estate Plan www.nashbeanford.com 2

When you sit down to create your estate plan a wide variety of decisions will

have to be made, starting with deciding on your estate planning goals and

objectives. From there, you must decide what estate planning tools and

strategies are best suited to achieving those goals and objectives. The unique

nature of an estate plan means that no two plans are exactly alike; however,

there are common components found in many plans.

Trust agreements, for example, are frequently included in a comprehensive

estate plan. Only an in-depth consultation with your Illinois estate planning

attorney can help you decide if a trust agreement is right for your plan but

Illinois Trust Agreements – Why You Should Consider One for Your Estate Plan www.nashbeanford.com 3

knowing a little more about trusts is a good place to start if you are considering

adding one to your estate plan.

TRUST BASICS – THE ELEMENTS

Trusts have evolved to the point where there is a specialized trust for almost any

specific estate planning goal. All trust agreements, however, require the same

basic elements, including:

Maker –the person who creates a trust is referred to as the “maker” or

“trustor” of the trust.

Trustee – the Trustee is responsible for managing and investing trust

assets as well as administering the terms of the trust.

Beneficiary – every trust must have at least one beneficiary. A beneficiary

can be an individual, charity, organization, or even the family pet.

Terms – the terms of your trust will dictate how the trust assets are

invested, managed, and

distributed to

beneficiaries. As the trust

maker you can create

any terms you wish as

long as they are not

illegal, unconscionable,

or impractical.

Assets –almost any type

of assets can be used to

fund a trust, including cash, stocks and bonds, or real property.

Illinois Trust Agreements – Why You Should Consider One for Your Estate Plan www.nashbeanford.com 4

TESTAMENTARY VS. LIVING -- REVOCABLE VS. IRREVOCABLE

Trusts have evolved

over the years to the

point where there is now

a specialized trust for

almost any estate

planning goal or

objective. All trusts,

however, are first

categorized as either a

testamentary trust or a

living trust. A testamentary trust is one that does not activate until the death of

the Maker whereas a living trust (formally referred to as an intervivos trust)

takes effect as soon as all formalities of creation are complete and sufficient

assets are transferred into the trust.

Living trust are then further sub-divided into revocable and irrevocable trusts. As

the name implies, a revocable living trust is one that can be revoked, modified,

or terminated at any time and for any reason by the Maker. An irrevocable trust,

on the other hand, cannot be revoked or modified by the Maker once the trust

takes effect. There are situations in which a court can approve a modification, or

even termination, of an irrevocable trust; however, as the Maker of an

Illinois Trust Agreements – Why You Should Consider One for Your Estate Plan www.nashbeanford.com 5

irrevocable trust you should always assume that not changes may be made once

the trust becomes active.

HOW DOES A TRUST WORK?

Without realizing it you have likely entered into numerous simple trust

agreements over the course of your lifetime. At its most basic, a trust agreement

requires the Maker to designate assets that are to be managed and invested by

the Trustee for the benefit of a third party (usually) beneficiary. If you stop and

consider, you have likely played all three roles at some point in your life. For

example, have you ever asked a neighbor to hold onto your house key and then

Illinois Trust Agreements – Why You Should Consider One for Your Estate Plan www.nashbeanford.com 6

give it to your child when he/she got home? If so, you were the Maker of a

simple trust wherein the neighbor was the Trustee and your child the beneficiary.

Has your mother/father asked you to hold onto a family heirloom intended for

your child until he/she is old enough to have the heirloom? If so, you are the

Trustee of a simple trust wherein your mother is the Maker and your child the

beneficiary. As you can see, the concept of a trust agreement is really an

everyday concept that has been adapted and formalized into a legal agreement.

THE BENEFITS OF INCORPORATING A TRUST AGREEMENT

INTO YOUR ESTATE PLAN

Trusts have grown in popularity over the last several decades due, in large part,

to the numerous and varied benefits a trust agreement can offer to an estate

Illinois Trust Agreements – Why You Should Consider One for Your Estate Plan www.nashbeanford.com 7

plan. Estate planning is, of course, highly personal. One of the reasons trust

agreements fit so well into an estate plan is because trusts are very flexible and

can be personalized to fit the needs of the Maker. A trust agreement may:

Help decrease your estate’s exposure to federal gift and estate

taxes. Assets transferred into the right type of trust agreement are no

longer owned by you

at the time of death

and are, therefore,

not included in gift

and estate tax

calculations.

Remove assets

from probate.

Probate can be

lengthy and costly.

The more non-probate assets your estate has the better.

Protect assets from creditors and spendthrift beneficiaries. A

properly drafted trust agreement can remove assets from the reach of

creditors as well as keep a spendthrift beneficiary from squandering them.

Provide the cornerstone for an incapacity plan. A revocable living

trust can be used to hold all major assets of yours. Naming a

spouse/parent/adult child as the successor Trustee results in an immediate

Illinois Trust Agreements – Why You Should Consider One for Your Estate Plan www.nashbeanford.com 8

shift of control of those assets without the need for a court’s intervention in

the event of your incapacity.

Allow you to continue to support a special needs loved one. A

supplemental needs trust allows you to supplement the assistance provided

by federal and state assistance programs such as Medicaid and SSI to a

special needs loved one without jeopardizing eligibility for those programs.

Support charitable gifting now and after your death. A trust can be

used to provide for a non-charitable beneficiary now and a charitable

beneficiary in the future or vice versa.

If you believe a trust agreement could be a valuable addition to your estate plan

take the time to discuss the possibility with your Illinois estate planning attorney.

American Bar Association, Trusts

U.S. Trust, Trust Basics

Living Trust Network, Types of Trusts

Vanguard, Living Trusts:Learn the Basics

Illinois Trust Agreements – Why You Should Consider One for Your Estate Plan www.nashbeanford.com 9

About the Author

Robert N. Nash

Robert N. Nash is a partner in the law firm of Nash Nash Bean & Ford, LLP. The law firm has

offices in Geneseo and Moline, Illinois and conference facilities available throughout

Northwestern Illinois. Mr. Nash chose the estate and business planning arena because he

believes it provides a positive force in his clients’ lives. He practices preventative, rather

than remedial law. Robert Nash focuses on all aspects of estate planning, including estate,

gift and income taxes, trust and probate administration, real estate, and business.

Nash Nash Bean & Ford, LLP www.nashbeanford.com

Geneseo

445 US Highway 6 East Geneseo, IL 61254

Phone: (309) 944-2188 Fax: (309) 944-3960

Moline

5030 38th Avenue, Suite 2 Moline, IL 61265

Phone: (309) 762-9368 Fax: (309) 944-3960