Howard Z. Gopman & Associates, Ltd.

Attorneys and Counsellors at Law

847.965.8910

Preparing for your Family's Financial Security

Whether you own one home or several, have an elaborate financial portfolio or a simple savings plan, one thing is certain: You’ve worked hard for what you have. Along with asset ownership comes responsibility. Assets must be managed properly and maintained in such a way that in the event you die or become disabled, your family will derive benefits with few administrative burdens and minimal court involvement.

Nonetheless, many people neglect to plan for this eventuality. Those who work diligently to create financial security for themselves and their families should recognize that an unplanned death might threaten a family’s financial security and interfere with desired property distribution. A well reasoned estate plan developed with the advice of your attorney could help prepare for your family’s financial security in the event of your death and ensure that your property is distributed according to your wishes. A common estate planning tool is the revocable living trust. The following narrative is a brief discussion about this method of property management and distribution.

The Revocable Living Trust

A trust is created when the owner of property, (the settlor/grantor) conveys that property to an entity or individual as trustee to hold pursuant to a trust agreement for the benefit of a beneficiary-often the grantor or grantor’s family members. Trusts may be used to accomplish a variety of objectives, such as facilitating business transactions; supplementing an estate plan; and conveying property with flexibility. Although there are several types of trusts, only a revocable living trust will be discussed here. Please consult our office to learn more about trusts and how they can benefit you. As part of your estate plan, you may wish to consider establishing a revocable living trust. A revocable living trust typically has the following six characteristics:

  • Creation during the grantor’s lifetime
  • Appointment of a trustee to receive and hold legal title to property and, thereafter, administer the assets of the trust
  • Designation of beneficiaries
  • Designation of the grantor as either trustee, beneficiary, or both
  • Retention by the grantor of the power to amend or terminate the trust
  • Revocability during one’s lifetime but irrevocable upon death

The purpose of a living trust is to administer your assets during your lifetime and distribute those assets at death. The living trust constitutes the estate plan and can be used as a substitute for a will. However, a simple "pour over" will may still be needed to direct that those assets of the grantor that were acquired after the creation of the trust and not transferred into the trust should be conveyed into the trust. In addition, individuals with minor children may wish to execute a will to designate a guardian for their children. It is important to remember that a revocable living trust can be a tax avoidance vehicle. Transferring assets into this type of trust can reduce your federal estate taxes. A revocable living trust will not dispose of assets held in joint tenancy or to distribute third-party beneficiary contracts such as life insurance policies, IRA accounts, or pension and profit plans. Therefore, we recommend that joint tenancy property be re-titled in the name of one of the settlor's. Moreover, if the grantor’s estate does not exceed the $100,000 statutory minimum (Illinois) for a small estate and does not include solely owned real estate, the benefits of a revocable living trust may be minimal. Some primary reasons for creating a revocable living trust are as follows:

  • Probate Avoidance - Assets held in a living trust on the grantor’s death are not subject to probate administration. Probate avoidance may be convenient and can save the cost of administrator/executor’s fees and attorneys’ fees. A living trust, however, is not without its own costs, particularly those associated with transferring property to the trustee.
  • Privacy - The use of a living trust creates privacy. A will is a public document that must be filed with the circuit clerk upon the death and can be read by anyone. A living trust is not required to be filed in the public record.
  • Asset Management without Court Adjudication of Incompetency - If you become disabled due to mental or physical deterioration, a living trust may eliminate the need to seek a court adjudication of incompetency and the appointment of a guardian for your estate. The trust agreement may contain a provision that deals with this contingency.
  • Avoiding Will Contests - The validity of a living trust may be more difficult to contest than a decedent’s will. The living trust, thereby, helps ensure disposition of a decedent’s assets as intended.