Revocable Living Trusts in Illinois

What you need

A trust only works when the paperwork and the property line up. Here are the documents involved.

• The trust agreement. It names you as the person who creates the trust, the trustee who runs it, the people who benefit, and a successor trustee who steps in when you cannot serve.
• A deed for each piece of real estate you want in the trust, signed and recorded so the trustee holds title.
• Account paperwork from each bank or brokerage that retitles accounts in the name of the trustee.
• A pour-over will. It catches anything you forgot to move into the trust.
• A power of attorney for property and a power of attorney for health care. A trust handles only the property inside it.
• A list of your assets and the people you want as successor trustee and as beneficiaries.

What the Illinois Trust Code requires

The Illinois Trust Code is found at 760 ILCS 3. Section 401 lists the ways to create a trust. Two common ones are transferring property to another person as trustee, and declaring that you hold your own property as trustee. Under the second method you can name yourself as trustee and keep control of your property while you are alive.

Section 402 sets the requirements. The person creating the trust needs capacity and must show intent to create the trust. The trust needs a definite beneficiary, the trustee needs duties, and the same person cannot be the only trustee and the only beneficiary.

Section 602 says you can revoke a trust only if the trust document expressly says it is revocable, or gives you an unrestricted power to amend. That is why the word "revocable" belongs in the document itself. While a trust is revocable, section 603 says the trustee owes duties to you, and the rights of the other beneficiaries are subject to your control.

How a trust avoids probate

Probate is the court process that transfers property that is in a dead person's name. Property already titled in the trust has a different owner, the trustee, so there is no title to transfer through court. The successor trustee takes over and follows the trust agreement.

The Trust Code gives the successor trustee a timeline. Under section 604, nine months after the death of the person who made a revocable trust, the trustee may distribute trust property under the document. The trustee carries no liability for doing so unless the trustee knows of a pending court case contesting the trust, or a possible contestant sent notice and filed a case within 60 days.

Section 604 also sets a time limit on challenging a trust that was revocable at death. A challenge must start within the earlier of two years after the death or a second deadline. If the settlor's will leaves a gift to the trust and is admitted to probate, the second deadline is the will contest period. Otherwise it is six months after the trustee sends a person a copy of the trust and a notice.

The step people skip: funding the trust

A signed trust with nothing in it does not avoid probate. Assets that stay in your own name at death still go through the court, even if you have a trust. Funding means changing title: a new deed for the house, and new account titles for the bank and brokerage accounts. Your deed work is a real part of the job.

Jeff also looks at the beneficiary forms on your retirement accounts and life insurance, so they match the rest of your plan.

What a revocable trust does not do

It does not hide your property from your creditors while you are alive. Section 505 says that during your lifetime the property of a revocable trust is subject to claims of your creditors, to the extent that property would not be exempt if you owned it directly.

It does not remove your need for the other documents. If you become ill, the trust covers only what is in it. A power of attorney covers the rest of your financial life, and a health care power of attorney covers medical decisions.

Divorce affects a trust as well. Section 605 revokes provisions in a revocable trust that benefit your former spouse or name your former spouse as a trustee or other fiduciary, when the trust was created by a nontestamentary instrument signed after January 1, 1982. You still want to review the trust right away after a divorce.

Who tends to ask about a trust

People often come in after buying a home, getting married, having a child, or inheriting property. Others own real estate in more than one state, or want a successor trustee ready to handle their affairs if they lose capacity. A trust also lets you set terms, such as when a young beneficiary receives money. For a short comparison with a will, see will versus trust. The Do I Need a Trust tool can help you decide what to ask Jeff.

Reviewed by Jeff McCarthy, Attorney, Inspired Law Group, 136 E 9th St, Lockport, IL 60441.