One primary reason many individuals in Illinois use a revocable living trust is to avoid the court process known as probate. Why do people want to avoid probate here?
Well, probate is:
- Time consuming, requiring at least 7 months, typically 13 – 14 months, and sometimes longer to complete;
- Costly, at least $2,500 if there is no litigation, i.e., a claim made against the estate; and
- Public and so anyone in the public domain can view for himself or herself what a cheapskate the testator was or who got disinherited.
However, even if your beneficiaries can wait a year, no claims will be lodged, $2500 is un morceau de gateaux, and no one gets disinherited, a few additional reasons make trusts more attractive than wills, especially with respect to gifting:
- You want to ensure your children or grandchildren have an opportunity to attend all 4 years of college and a good graduate program without financial aid angst. Trusts provisions known as “staggered mentoring” provisions and a separate educational subtrust help in this situation.
- If you and your spouse want to leave the family residence to your children, but you still want to maintain control of the residence during your lifetime, a QPRT (“qualified personal residence trust”) may do the trick.
- If you live in a state that does not match the federal estate tax regime, such as Illinois, and you want to leave more to the children by minimizing the amount of estate taxes your beneficiaries will have to pay both Uncles – Sam and Quinn, instead of the normal two-pot trust, a three-pot trust may work.
As with most estate planning vehicles, trusts also have disadvantages in gifting, such as trust fees and administrative costs if the estate is very large. Additionally, unless the gift is given completely away, or you opt for an asset protection trust, it will be more difficult to use federal and state lifetime estate tax exemptions.
Still, the advantages of having a trust, for many Illinois families, outweigh the disadvantages irrespective of the income bracket because every family is unique and minimizing taxes isn’t the only type of protection afforded by trusts.
Disclaimer Woman Caveat: The materials provided in this blog, The Shark Free Zone, and throughout the website for The Law Offices of Max Elliott, Ltd. are for educational purposes only. By reading these materials, no attorney client relationship has been established. Additionally, because of the very complex nature of estate planning, one should not attempt to create or draft a trust on your own but seek the counsel of an estate planner. Finally, IRS Circular 230 Notice: “To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code of 1986, as amended, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.”