When a loved one passes away, his or her estate often goes through a court-managed process called probate — or estate administration — where the assets of the deceased are managed and distributed. If your loved one owned his or her assets through a properly drafted and funded Living Trust, it is likely that no court-managed administration is necessary, though the successor trustee still needs to administer the distribution of assets to beneficiaries.

The length of time needed to complete probate depends on the size and complexity of the estate as well as the rules and schedule of the local probate court. In Illinois, probate is handled through the circuit court in the county where the decedent lived — for most of our clients, that is the DeKalb County Circuit Court.

Every probate estate is unique, but most involve the following steps:

• Filing of a petition with the proper probate court
• Notice to heirs under the will or to statutory heirs (if no will exists)
• Petition to appoint Executor (in the case of a will) or Administrator for the estate
• Inventory and appraisal of estate assets by Executor/Administrator
• Payment of estate debts to rightful creditors
• Sale of estate assets, if necessary
• Payment of estate taxes, if applicable
• Final distribution of assets to heirs

Beyond the time and cost, probate is also a public process — court filings are a matter of public record. A properly funded Living Trust avoids probate entirely, keeping the distribution of your estate private.

A properly drafted Revocable Living Trust (RLT) is a powerful estate planning tool that allows you to remain in control of your assets during your lifetime, have them managed during incapacity, and efficiently and privately transfer them to your loved ones at death according to your wishes.

Sometimes referred to simply as a Living Trust, an RLT holds legal title to your assets and provides a mechanism to manage them. You serve as the trustee and beneficiary of your trust during your lifetime. You also designate successor trustee(s) to carry out your instructions for how you want your assets managed and distributed in case of death or incapacity.

In order for the Living Trust to function properly, you need to transfer many of your assets into the trust during your lifetime — a process called “funding” the trust. Because it is “revocable,” you can make changes to it or even terminate it at any time while you are mentally competent.

Like a will, a Living Trust is a legal document that provides for the management and distribution of your assets after you pass away. However, a Living Trust has significant advantages when compared to a will:

• Avoids probate — Assets held in a properly funded Living Trust pass directly to beneficiaries without going through the court-supervised probate process.
• Private — Unlike a will, which becomes a public court record when admitted to probate, a Living Trust is a private document. The distribution of your estate remains confidential.
• Effective during incapacity — A Living Trust allows your successor trustee to manage your affairs if you become incapacitated, without the need for a court-appointed guardianship or conservatorship.
• Immediate transfer at death — Assets in a Living Trust can be distributed to beneficiaries immediately after death, without waiting for probate court proceedings to conclude.
• Flexible — Because it is revocable, you can modify or revoke the trust at any time during your lifetime.

In short, a well-thought-out estate plan using a Living Trust can provide your loved ones with the ability to administer your estate privately, with more flexibility and in an efficient and low-cost manner.

Both a Living Trust and a Last Will & Testament allow you to direct how your assets are distributed after your death — but they work very differently. A will only takes effect at your death and must be admitted to probate court before your assets can be distributed. A Living Trust takes effect immediately upon signing, allows you to manage your assets during your lifetime, and — when properly funded — transfers assets to your beneficiaries at death without any court involvement.

A will is also a public document once admitted to probate; a Living Trust is private. And while a will has no effect if you become incapacitated during your lifetime, a Living Trust provides a mechanism for your successor trustee to manage your assets on your behalf without court intervention.

That said, even if you have a Living Trust, you typically still need a will — specifically a “pour-over will” — to capture any assets that were not transferred into the trust during your lifetime and to nominate a guardian for minor children. Our attorneys can help you determine which combination of documents is right for your situation.

Creating a Revocable Living Trust and transferring your assets into the trust will generally not affect your ability to control those assets. During your lifetime, when you are mentally competent, you have complete control over all of your assets. As the trustee of your own trust, you may engage in any transaction you could before you had a Living Trust.

There are no changes to your income taxes. If you filed a Form 1040 before you had a trust, you continue to file a Form 1040 after creating a Living Trust — no new tax identification number is required. Because the trust is revocable, it can be modified at any time or completely revoked if you choose.

Upon your incapacity, the individuals you designate as successor trustees will be able to manage your assets on your behalf according to the instructions in the trust. Upon your passing, the trust can no longer be modified, and your successor trustee(s) will proceed to implement your wishes as directed.

No — not all assets need to be transferred to your Living Trust. Assets with beneficiary designations, such as life insurance policies or annuities payable directly to a named beneficiary, generally do not need to be titled in the trust. Similarly, retirement accounts — including IRAs, Keoghs, and 401(k) accounts — transfer automatically to named beneficiaries outside of probate and are typically not placed in the trust. Bank accounts set up as payable-on-death (POD) or “in trust for” (Totten Trust) accounts with a named beneficiary also pass directly to that beneficiary without going through the trust.

However, most other assets — particularly real estate and financial accounts without beneficiary designations — should be transferred into the trust for it to function properly. It is important to work with an experienced estate planning attorney who can advise you on which assets should be retitled and assist with the transfer process.

“Funding” a Living Trust means transferring ownership of your assets from your individual name into the name of the trust. This is a critical step — a Living Trust that is never funded provides little benefit, because assets that remain titled in your individual name at death may still have to go through probate.

Funding typically involves retitling real estate by recording a new deed, changing the ownership on bank and investment accounts, and updating beneficiary designations where appropriate. Our attorneys assist clients with the funding process to make sure the trust is properly set up to do what it is designed to do.

Federal law prohibits financial institutions from calling or accelerating your loan when you transfer property to your living trust, as long as you continue to live in the home. This protection was enacted as part of the Garn-St. Germain Depository Institutions Act of 1982. The one exception is that this federal protection does not apply to residential real estate with more than five dwelling units.

Not necessarily — a Living Trust is an excellent planning tool for many people, but it is not the right choice for everyone. Whether a Living Trust makes sense for you depends on factors including the types and value of assets you own, your family situation, your privacy concerns, and your goals for how your estate is managed during your lifetime and distributed at death.

For Illinois residents who own real estate, have minor children, are concerned about privacy, or want to plan for incapacity without court involvement, a Living Trust is often the preferred approach. For those with simpler estates and fewer assets, a well-drafted will combined with proper beneficiary designations may accomplish similar goals at lower cost.

The best way to determine what is right for your situation is to consult with an experienced estate planning attorney. Our DeKalb, Illinois attorneys at Krupp & Krupp LLP can review your circumstances and help you decide whether a Living Trust, a will, or a combination of both best serves your needs.