In this article, we will explain irrevocable trusts and their application to Illinois estate planning.
A trust is a legal entity that can own property separate from its creator, known as the grantor. The trustee named in the trust is responsible for managing the assets owned by the trust for the benefit of the beneficiaries named in the trust. The trustee is obligated to manage and distribute the assets owned by a trust according to the terms laid out in the trust by the grantor. To learn more about trusts generally, check out our article: Illinois Trusts Explained.
Trusts come in two general flavors: revocable living trusts and irrevocable trusts. Revocable trusts can be modified or revoked by the grantor at any time. The grantor of a revocable trust typically retains full control over the assets in the trust. The benefits of a revocable living trust typically occur after the grantor passes. These include providing for management and distribution of assets to beneficiaries and ensuring that a probate case is not necessary for the distribution of a grantor’s assets.
When a grantor creates and transfers assets to an irrevocable trust, on the other hand, he or she permanently gives up at least some control over the asset. The trust cannot be revoked or modified once it is created. Assets transferred to an irrevocable trust are no longer considered to be owned by the grantor, but are owned by the trust for the benefit of the beneficiaries.
For more on this, check out our article: What is the Difference Between Revocable Living Trusts and Irrevocable Trusts?
Because irrevocable trusts take away at least some of the grantor’s rights in the property owned by the trust and grant property rights in the trust’s beneficiaries, they can be used for the following purposes that revocable trusts cannot accomplish:
To learn more about estate tax planning generally, check out our article: How to Avoid Estate Tax.
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