Wills and living trusts are not mutually exclusive, nor does one override the other – if they are created to work together.
If you’ve spent your life working hard, you want assurance that your family members will enjoy that legacy by inheriting your estate. Making that happen is the job of an estate planning attorney.
Living trusts and wills are end-of-life documents that spell out who benefits from your estate and how you want your assets to be divided when you die. These legal documents are governed by specific state laws. Attorneys specializing in estate law can tailor them to your wishes and make them legally binding.
Making Wills and Trusts Work Together
Does a will take priority over a trust, or does a trust override a will in Illinois? Many people have both documents, created to complement each other.
People with significant assets, such as real estate, investment accounts, and valuable collectibles like artwork or jewelry, often have both a living trust (revocable or irrevocable) and a will. It’s the same for those who have children under 18, or who care for a disabled family member.
Revocable trusts can be managed by the owner, who can add or subtract assets at will. Irrevocable trusts are designed to be out of reach, not allowing anyone to manipulate assets until the owner’s death and the distribution to heirs. Everyone who has trusts needs some funds outside of the trust to cover day-to-day expenses. A will directs the distribution of those day-to-day accounts and any other items that are not part of the trust.
Estate planning attorneys can create comprehensive estate plans with living trusts to include healthcare directives, asset protection planning, powers of attorney, and tax planning. They can integrate wills and trusts so your heirs receive the maximum benefit of your estate.
Why Wills and Living Trusts Are Important
Wills and living trusts are legally enforceable documents that must meet the standard of state law. Generally, those with modest assets create wills, and those with substantial assets pass them to heirs through trusts. Both are executed after the owner’s death by third parties designated as trustees or executors.
Wills and living trusts are the best ways to ensure that your named heirs will receive portions of your estate. In the absence of these documents, a probate judge decides the fate of your estate according to state law.
Living trusts allow heirs to avoid some inheritance taxes, and to keep the contents of the estate private. That privacy contrasts with wills, which are sent to probate court to be settled, making the contents public record.
Wills may be eligible for an expedited process if the estate is valued at $100,000 or less and does not include property. The probate process can cost $5,000 to $15,000 or more, depending upon the value of the estate.
How Revocable and Irrevocable Trusts Work
A trust is an account that contains investments and deeds/ownership documents for properties (real estate, high value artwork, vehicles, etc.). It is created through a legal process that names one or more trustees as administrators. Creating a living trust saves the heirs a the lengthy and expensive probate process, allowing the contents to be distributed or transferred quickly.
A living trust can be revocable or irrevocable, according to the owner’s intention. That means:
- Assets in a revocable trust can be removed from the trust by the owner, but funds can be drained by long-term care, a legal judgement, or medical bills because they are considered personal assets.
- An irrevocable trust generally cannot be changed or liquidated by creditors, the owner, or the trustee until the owner is deceased. Illinois requires a five-year “look back” period for Medicaid eligibility, meaning the irrevocable trust must be five years old before the assets are considered out of reach of long-term care creditors.
- Upon the death of the estate holder, the administrator(s) of a trust, called trustees, distribute its assets to beneficiaries.
Is Having a Will Enough?
If your estate is modest, valued at $100,000 or less, and not complicated by property ownership, a will may be all you need. To make it legally enforceable, your signature on the will must be witnessed by two adults who do not have any interest in its outcome (not heirs). You must be aged 18 or above, and of sound mind.
In your will, you should:
- List your assets.
- Name your beneficiaries.
- Name guardians for any children under 18.
- Describe ongoing care of any pets.
- Name an executor.
Understand Your Estate Planning Options in Illinois
Professional advice on estate planning is critical to making the right decision for your family. Schedule a consultation with an experienced will and trust attorney at Legacy & Life Law Firm LLC to understand all of the estate planning options available in Illinois.