What is a Lifetime Trust?
Estate planning can be complex. Many people think they only need a will, and their assets will be protected. In fact, there are many more options for protecting the welfare of your family and ensuring that your assets are distributed according to your wishes. Events may arise in your life that can derail your expectations and cause you to lose your assets well before you pass away. You can protect your assets during your lifetime and ensure they are distributed appropriately upon your passing with one or more trusts, depending on your needs and circumstances. Below, we discuss lifetime trusts. If you are looking to plan for your financial future in the Chicago area, or if you have any questions about trust administration or probate, call our experienced Illinois trust and estate planning attorneys.
How a Lifetime Trust Works
A lifetime trust, also called a lifetime asset protection trust (LAPT) is a special type of trust designed to protect your loved ones and their inheritance from ruinous decision-making and the actions of creditors. Rather than having your estate go to your beneficiaries directly, an LAPT operates by setting up a trust for those assets to be distributed to your children. The assets in the LAPT, however, will not be owned by your children. Instead, they will be owned by the trustee of the trust.
Benefits of a Lifetime Asset Protection Trust
An LAPT may be useful where an heir has significant debt, is going through or is likely to go through a bad divorce, or is known to make poor decisions when managing money. LAPTs offer a variety of benefits, including:
- Protection from divorce. Inheritance is not considered marital property in Illinois. An LAPT very clearly separates the assets that constitute inheritance, so they will not get commingled with marital property and wind up subject to division in a divorce.
- Protection from creditors. LAPTs can include a “spendthrift provision” which limits the beneficiary’s control over the trust assets. Through such a provision, the assets within the trust are protected from attachment by the creditors of the beneficiary.
- Protection in case of incapacitation. An LAPT is managed by a trustee, not by the beneficiary. If the beneficiary becomes ill or otherwise incapacitated, the trust will continue to operate.
- Control over the final distribution of the assets. An LAPT lasts for the lifetime of the beneficiary. When you establish the trust, you can dictate what will happen to any remaining assets at the end of the beneficiary’s life. You can also give the beneficiary the power to decide upon the final distribution of the trust assets upon their death.
Many of these advantages continue to apply even if the beneficiary of the trust is also named as sole trustee. Talk to a seasoned estate planning attorney to discuss your options for trusts and whether a lifetime trust is appropriate in your circumstances.
Trusted Advice for Planning Your Estate in Illinois
If you need assistance protecting your finances and your family in Illinois, get educated and effective legal help by contacting the Chicago estate planning lawyers at Pluymert, MacDonald, Hargrove & Lee in Hoffman Estates at 847-310-0025 and in Des Plaines at 847-298-5030.