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How Does the Illinois Trust Code Affect Trustees and Beneficiaries?

Web Admin - Wednesday, September 25, 2019
Long Grove estate planning lawyer Illinois Trust CodeMany people utilize trusts to protect and manage their assets and ensure that these assets are properly distributed to their beneficiaries either before or after their death. However, the laws regarding trusts are changing. Effective January 1st, 2020, the Illinois Trust Code (ITC) will be replacing the current Illinois Trusts and Trustees Act. The ITC is linked in certain ways to the Uniform Trust Code (UTC), which is an arrangement of laws designed to establish consistent trust laws between different states. Before the ITC is implemented, trust makers and trustees may need to review their current trusts and determine how the changes to the law may affect them. 

New Default and Mandatory Rules


When a person creates a trust, they place their assets in the control of a trustee, who will oversee the process of managing these assets and distributing them to the beneficiaries according to the terms defined in the trust. The ITC specifies a number of rules that must be followed regarding trusts. While a trust may provide a trustee and beneficiaries with certain rights, powers, duties, limitations, and immunities, the ITC states that:

- A trustee must act in good faith.
- The trust must be lawful and cannot violate public policy.
- A trust may nominate one or more people to serve as the designated representative of a qualified beneficiary, and this representative must act in good faith in the best interests of the beneficiary.
- A trust may not be enforced for more than 21 years.
- The court is granted the power to modify or terminate a trust.
- Spendthrift provisions can be authorized by the court.
- A person who is acting as an agent in a power of attorney must have express authorization in order to act on behalf of a trust settlor. 
- The court may adjust the compensation provided to a trustee if it is deemed to be too high or low.
- A trustee must notify each qualified beneficiary of the trust’s existence, the beneficiaries’ right to a copy of the trust, and whether the beneficiary can receive or request trust accountings. 
- A trustee must send an annual trust accounting to the current beneficiaries.
- A trustee must send a trust accounting to all of the beneficiaries upon the termination of a trust.
- If a trust contains terms waiving a trustee’s liability for breaching the terms of the trust, these terms may be unenforceable.

Contact a Schaumburg Estate Planning Lawyer


The ITC may have significant implications for currently-established trusts, as well as for trusts that are created in the future. Before the ITC is enacted, discussing your questions and concerns with an experienced Arlington Heights trusts attorney could help ensure that your rights as a trustee or beneficiary are protected. At Drost, Gilbert, Andrew & Apicella, LLC, we can help you address any legal issues related to trusts, or we can help you create a trust to protect your assets and distribute them to your beneficiaries. To further discuss your specific situation, contact our office today at 847-934-6000 for a free initial consultation.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Sources:
http://www.ilga.gov/legislation/ilcs/ilcs5.asp?ActID=4001&ChapterID=61

Importance of Funding Your Living Trust

Web Admin - Friday, September 25, 2015

funding your living trust, Illinois estate planning attorney

The creation of living trusts in order to transfer property to beneficiaries is becoming increasingly popular. One of the major benefits of using a living trust is the avoidance of probate. However, if the maker of the trust (called the grantor) does not actually fund the trust with property or other assets, the grantor’s estate will likely have to go through probate. 

Living Trusts 

A revocable living trust is a form of estate planning that allows a grantor to determine who gets his or her property upon their death. A trust that is revocable can be altered, changed, or revoked during the life of the grantor. Upon the grantor’s death, the trust becomes irrevocable. After the trust becomes irrevocable, it cannot be changed and the trustee must follow the distribution plan made by the grantor. Alternatively, an irrevocable living trust is one that cannot be revoked once it is finalized. Both of these forms of trusts are called “living” trusts because they are formed during the life of the grantor. 

Living trusts provide the benefit of the avoidance of probate, which is a court process in which a determination is made as to how property is distributed upon the death of an individual. Probate, which is governed under Illinois law by the Probate Act of 1975, is often expensive and time-consuming. Additionally, it often means that property is not divided in accordance with how the deceased individual would have desired. 

In order to avoid probate, the grantor must correctly form the trust and fund the trust. A trust is formed through the creation of a written trust document that is signed by the creator of the trust and a notary public. The trust document must include a list of the property that is covered by the trust, name a trustee, and name the beneficiaries of the property included in the trust. 

The grantor must transfer the property that is to be covered by the trust into the trust. For most property, a trust is funded simply by including a list of covered property in the trust document. However, real estate must be retitled in the name of the trust in order to be correctly transferred. A trust that has not had assets properly transferred to it is called an unfunded living trust. 

Unfortunately, it is not uncommon for grantors to fail to fund their trust. This may occur when a grantor plans to get around to it in the future but never actually does it. Alternatively, a grantor may incorrectly believe that the creation of the trust document was sufficient. For example, in the case of real estate, the creation of the trust document is not enough due to the retitling rule. If a trust is not properly funded, the goals of the estate plan will not be achieved and the estate will have to go through probate. 

Help with Estate Planning 

Planning for what will happen to your property and assets is important for you and your loved ones. If you would like more information or help in forming a living trust, contact an experienced Illinois estate planning attorney today. Our firm proudly serves the communities of Inverness, Palatine, Schaumburg, Arlington Heights, Long Grove, Kenilworth, Riverwoods, Barrington, South Barrington, and Mount Prospect.

About the Author:

Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


Source:

http://www.ilga.gov/legislation/ilcs/ilcs5.asp?ActID=2104&ChapterID=60


Capital Gains Tax and Trusts

Web Admin - Thursday, June 25, 2015

capital gains tax, Illinois estate planning lawyerToday, increasing numbers of individuals are turning to trusts as opposed to wills for their estate planning. Trusts are often advantageous over wills because they allow for greater flexibility and control over assets. It is important to know the impact of capital gains tax on the assets that fund a trust.

Step-up in Basis

Capital assets include items like a house, stocks or bonds, and machinery. When one of these items is sold, the difference in the sale price and the original purchase price is considered a capital gain or loss. If an item is sold and a profit is realized, the capital gain is taxed.

If an individual forms a grantor-type trust, all appreciated assets that are transferred into the trust (items like real estate or a stock portfolio) are eligible to receive a step-up in basis upon the death of the grantor. Basis is the cost of the property or asset. A step-up in basis is a readjustment of the value of an asset to its current value for tax purposes upon inheritance of the asset. This is important because it minimizes the beneficiary’s capital gains taxes going forward.

For example, let’s say a grantor purchased an asset for $50 and transferred it to a trust. The grantor’s basis is $50, meaning if the asset were to be sold, the difference between $50 and the sale price would be the amount subject to the capital gains tax. Now, let’s say that at the time of the grantor’s death, the value of the asset is $100. The beneficiary receives a step-up in basis, meaning his or her basis is $100, not the $50 that the grantor originally paid. This is important because if the beneficiary decides to immediately sell the asset for $100, she will not be subject to any tax. Further, any sale in the future after the asset increases in value will be subject to tax on the difference between the sale price and $100, as opposed to $50 if a step-up in basis was not available.

An important consideration is when the step-up in basis is applied. For example, how is the step-up in basis determined if a married couple each owns half of an asset through the use of separate trusts and they die at different points in time? If the deceased spouse’s share is transferred to the surviving spouse, the surviving spouse will receive a step-up in basis. When the surviving spouse dies and the trust is inherited by the beneficiaries, they will also receive a step-up in basis.

Finally, it is important to be aware of the Medicare tax on “unearned” net investment income. This imposes a 3.8 percent tax on the net investment income, which includes capital gains, of joint filers who have a modified adjusted gross income of greater than $250,000 or single filers with an adjusted gross income of greater than $200,000.

Help Forming Your Trust

If you would like more information about forming a trust, you should reach out to an experienced Illinois estate planning attorney today. Our firm proudly represents individuals throughout the northwest suburbs, including areas such as Crystal Lake, Inverness, Schaumburg, Kenilworth, Long Grove, Palatine, and Barrington.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

Homestead Rights in Illinois

Web Admin - Thursday, October 23, 2014

homestead rights in Illinois, Palatine estate planning lawyerWhile there are many well known government programs and policies designed to provide relief during difficult economic times, there are other laws people can take advantage of that are less commonly talked about. One of these laws is known as “homestead rights.” Homestead rights are a protection provided by Illinois law that provide certain immunities from debt collection efforts by creditors. However, these immunities are not absolute, so it is important for people exercising their homestead rights to understand the exact limitations of those rights.

What Homestead Rights Are

Homestead rights are a statutory protection against creditors designed to help people avoid becoming homeless because of changing economic circumstances. The rights allow the debtor to exempt $15,000 worth of real estate from the collection efforts of creditors or their agents. Additionally, if a married couple owns the home, then they can pool their homestead rights together to protect the same house. This gives them an exemption of $30,000. This exemption also survives the death or desertion of a spouse. The exemption can also be passed down to the children of the married couple, at least until the youngest child turns 18.

Illinois' homestead laws are also slightly different than the laws in some other states. Many states choose to restrict the amount of acreage that a person can use the homestead exemption on in addition to capping the total value of the property. Illinois has no such acreage cap. This means that the size of the property is irrelevant to the homestead rights, and that it is purely an issue of how much the land is worth.

What Homestead Rights Do Not Protect

Notably, homestead rights do not provide absolute protection against every type of creditor. For instance, the state legislature wrote an exception into the protection for the purposes of state taxes, so if the creditor is the state of Illinois then the exemption does not apply. Similarly, homestead rights are created by state law, which federal law can supersede, so they provide no protection against the federal government's collecting taxes either. The rights also do not function in many circumstances where the money owed is related to the property itself. A person who uses the house as collateral for a mortgage does not get protection if their home is being foreclosed. Additionally, if the person owes money to contractors for doing work on the home, then the homestead rights do not apply to those debts. Further, the homestead rights can be signed away in writing, which would also remove their protection.

If you have questions about your homestead rights or some other property interest, talk to an experienced Palatine, Illinois estate planning attorney today. Our firm helps clients in many northwest suburban towns including Barrington, Long Grove, and Arlington Heights.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

The Duties and Responsibilities Associated with a Power of Attorney

Web Admin - Thursday, October 16, 2014

power of attorney rights and responsibilitiesIllness, injury, or age can often render a person unable to take proper care of their finances and their property. As a solution to this issue, Illinois law allows people to set up a power of attorney for property. This is a legal document that lets a person, the principal, designate a trusted agent to handle the principal's property with the principal's best interests in mind. This document gives the agent a variety of legal powers over the principal's money and property, but it also comes with legal duties that the principal must fulfill. Agents need to be aware of both of these things to properly complete their jobs without bringing liability onto themselves.

The Powers Granted

The powers granted to an agent under a power of attorney vary depending on the principal's wishes, but in 2011 Illinois created a general form with 15 default powers that a principal can bestow upon an agent. These powers include:

-The authority to buy or sell real estate on behalf of the principal;

-The authority to deal with banks and safe deposit boxes for the principal;

-The authority to represent the principal in insurance transactions; and

-The authority to buy and sell stocks and bonds for the principal.

The form also includes extra sections to place limitations on these powers or to add extras. For instance, the principal can allow the agent to buy and sell stocks and bonds, but also forbid them from selling a particular stock. Similarly, the power to give gifts on the principal's behalf is not included in the default form, but a principal could add it if they so chose.

The Duties of the Agent

Importantly, by taking on these powers, the agent enters into a “fiduciary” relationship with the principal, meaning that they have a duty to act in the principal's best interests. In addition to that general duty, the law also imposes other, more specific duties on the agent. For instance, the agent is required to act in accordance with any estate plans that the principal has put in place to the extent possible. Agents also have a duty to keep good financial records of any “receipts, disbursements, and significant actions conducted for the principal.” The law also forbids agents from taking certain actions. These forbidden actions include commingling the principal's funds with their own, taking loans from the principal, and exceeding the authority granted by the power of attorney.

Powers of attorney are complex legal documents, and managing them incorrectly can open the agent up to legal liability. If you are considering a power of attorney, contact an Arlington Heights estate planning attorney serving the northwest suburbs to better understand your duties as well as other potential estate planning options. We assist clients throughout Inverness, Palatine, Schaumburg, Long Grove, Kenilworth, Riverwoods, and the rest of the Chicagoland area.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/ commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

What Happens to an Unfunded Trust?

Web Admin - Wednesday, June 11, 2014

illinois unfunded trust lawyerPreparing estate planning documents is a key step in ensuring that a person’s final wishes are respected throughout the probate process, and a recent survey shows that the majority of Americans understand this fact. However, when setting up a trust, preparing the documents does not finish the process. If the person who sets up the trust fails to properly transfer their assets into it, it can become an underfunded or unfunded trust. This lack of proper funding can lead to a failure of a person’s estate plan, and also increases the potential for disputes throughout the process of probating the estate.

What an Unfunded Trust Is

A trust is a legal construction that involves a settlor, a trustee, and a beneficiary. The settlor creates the trust and transfers assets into it. The trustee manages the assets in the trust and they do so with the best interests of the beneficiary in mind. The drafting of the trust instrument is a key part of this process. That document will outline many of the legal rights and responsibilities of the trustee and the beneficiary, and it can provide instructions for the trustee to follow.

Many people think that once they draft the trust document, the process is complete and the trustee will be able to carry out their desires. This is not the case. The person will also need to legally transfer the assets to the trust. Without doing so, the trustee may not actually be able to control the assets and distribute them in accordance with the settlor’s instructions.

The Consequences of Improper Trust Funding

Improper trust funding can lead to disputes between heirs throughout the probate process. This is because if the settlor does not properly fund the trust the trustee has no legal authority to carry out the wishes of the settlor. Instead, the assets would pass through any will that the settlor left behind, or they may pass through right of survivorship, the default way that courts distribute assets. This means that the beneficiaries of the trust may end up in a legal battle with the heirs listed in the will over their rights to the assets.

Additionally, even if the settlor did not leave a will and there are no disputes, the assets will still need to go through the state probate process to be distributed. This can lengthen the amount of time it takes to wind down a person’s affairs and tends to be a less convenient process than if the trust had been properly funded.

If you are thinking about how best to carry out your final wishes, seek out an Illinois estate planning attorney for help. Our skilled team of lawyers helps clients in northwest suburban towns like Mount Prospect, Arlington Heights, and Schaumburg understand their estate planning options and create the best plan for themselves.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

Do Not Resuscitate Orders: What You Need to Know

Web Admin - Thursday, May 29, 2014

illinois dnr estate planning attorneyAdvances in medical science and technology have made it possible to revive patients after their heart or lungs have stopped working, often known as heroic measures. One of the most common ways of doing this is via simple mouth to mouth resuscitation or chest compressions. Doctors may also use an electric shock to restart the heart, or they may insert a breathing tube down a person’s throat to open the airway. Additionally, drugs like epinephrine may help restart a person’s heart in the event that it stops. The availability of technologies like these though has led to the proliferation of Do Not Resuscitate orders (“DNR”).

What Is a DNR?

A DNR is a type of “advance healthcare directive.” These are documents that people fill out prior to serious illness or injury that affect the type of care a person will receive. The DNR is a specific advance directive that instructs doctors not to perform heroic measures to resuscitate the person.

DNRs apply only to the narrow issue of resuscitation, so it is important not to confuse it with the two other common types of advance directives: living wills and healthcare powers of attorney. Living wills are a different type of advance directive that have broader applications. Living wills allow a person to record their feelings on a variety of life sustaining treatments like the use of feeding tubes and respirators.

Healthcare powers of attorney transfer the authority to make healthcare decisions to another person in the event that they are unable to make healthcare decisions for themselves. Ordinarily, this document will matter most in situations where a person’s condition is not serious enough to implicate the instructions in a living will, but when they are unable to speak.  

DNR orders are important medical documents that can have profound consequences on a person’s quality of life. Therefore, people should understand the different considerations that can affect whether to institute a DNR.

Elements to Consider

There are two important elements someone should consider when thinking about implementing a DNR: their current quality of life and the effectiveness of resuscitation. With regard to quality of life, resuscitation is often necessary because of ongoing medical problems that may or may not ever improve. These health issues can have a serious effect on a person’s quality of life and may even remove the desire to be resuscitated in the event of death. In fact, a survey of doctors revealed that, knowing the quality of life many resuscitated patients have, 88.3 percent would choose to implement a DNR. Part of that is likely because of the second concern, the effectiveness of resuscitation.

While CPR and other measures can often bring people back to life, it is not a perfect tool. Many CPR attempts result in broken ribs, and often, even though the person survives, the experience leaves them with neurological damage. While many people choose to forego DNRs, it is a very personal decision that should only be made after understanding all of the facts involved.

If you are considering implementing a DNR or another advance directive, seek the advice of an Illinois estate planning lawyer today. Our skilled attorneys help clients make these difficult decisions in towns across the northwest suburbs including Inverness, Long Grove, and South Barrington.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

Estate Planning in the Digital Age

Web Admin - Wednesday, May 21, 2014

digital assets estate planningFrom bankbooks to Facebook, more and more activities, both business and pleasure, are being conducted over the internet every day. A study from McAfee reports that in 2011 the average American had almost $55,000 in digital assets. These assets can present unique challenges during the estate planning process. They need to be passed on or wound up just like physical assets, but each online service has its own rules on handling accounts after death.  

What Digital Assets Are

Digital assets can be many different things, and it is important to have a clear understanding of the different types since they can require very different treatment after death. Digital assets include:

  • - Files on your home computer like pictures, word documents, and spreadsheets;
  • - Digital books and music like iTunes and Kindle books;
  • - Social networking accounts like Facebook and Twitter;
  • - Online gaming accounts and valuable in-game assets;
  • - Websites or domain names you own; and
  • - eCommerce information like bank accounts, Paypal, and eBay.

Choosing how to handle each of these assets can require some careful thought because they will each likely need a different form of treatment. For instance, Paypal accounts can probably simply be closed out after withdrawing the funds, but some people would prefer to see their Facebook page memorialized rather than simply closed.

Handling Digital Assets

From a legal standpoint, handling digital assets may be a challenge because the problem is somewhat new. This means that the law has yet to catch up to the technology in many ways. Instead, much of the legal landscape is determined by the individual service itself based on the “Terms of Service” that they have each user agree to. However, there are still precautions that you can take in order to better empower your loved ones to carry out your wishes.

The first thing to do is to create a digital inventory. This is a list of all your digital assets, where to find them, and the usernames and passwords necessary to access them. This inventory should also include instructions to the executor of your estate detailing what you would like them to do with each of the assets.

Then you should make sure that your legal documents include provisions for the management of your digital assets. This means designating an executor to handle your digital estate. This can be the same person as the executor for the rest of your will, but it does not have to be. If the executor for most of your estate lacks computer skills it could be prudent to name someone else to deal with digital assets. While this executor may still have trouble carrying out all your wishes if the website’s Terms of Service will not allow it, arming them with a digital inventory and a legal document can certainly improve their chances.

If you would like to make an estate plan or if you want to update your plan to account for digital assets, contact an Illinois estate planning attorney today. Our skilled team assists clients across the northwest suburbs, including in Inverness, Kenilworth, and Riverwoods.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

5 Benefits to Using an Institutional Trustee

Web Admin - Tuesday, April 08, 2014

illinois trusts and estate planning attorneyTrusts are versatile, useful legal instruments that allow the grantor (the person who sets up the trust) to set aside certain money or other assets for the use of another person (the beneficiary). However, the beneficiary does not have direct access to the assets. Instead, the trust is managed by a trustee whose job it is to control the assets and use them in the beneficiary’s best interest. This makes choosing the trustee one of the most important parts of setting up a trust.

Although most individuals can serve as a trustee, Illinois law also allows for the use of an “institutional trustee.” Institutional trustees are companies, often banks, who professionally manage the trust’s assets. These companies usually do charge a fee for the services, but the companies come with several benefits:

  • - They are skilled at managing trusts;
  • - They have the ability to handle complex paperwork and recordkeeping;
  • - They provide continuity to the management of the trust;
  • - They operate free of bias; and
  • - They are regulated to prevent fraud.

Reasons to Use an Institutional Trustee

  1. 1. Experienced Administrators: Institutional trustees have experience managing trusts. This allows them to easily navigate the legal requirements for trustees. Furthermore, many trustees are responsible for investing the trust’s assets. Banks and other institutional trustees are often professional investors who will be able to handle the task better than friends or family.

  1. 2. Strong Recordkeeping: Trusts also have fairly extensive recordkeeping requirements to prevent fraud on the part of the trustee. Institutional trustees have the infrastructure in place to make sure that important documents, like tax returns, are filed on time and do not get misplaced. Furthermore, the use of an institutional trustee prevents this complex work from being pushed onto a friend or family member.

  1. 3. Management Continuity: The corporate nature of institutional trustees also allows for continuity in the trust’s management. Trusts can last for decades and decades. An individual trustee may not be physically or mentally capable of managing a trust for its entire duration. Conversely, institutional trustees have the ability to smoothly transfer trust administration from one employee to the next, allowing for steady management of the assets.

  1. 4. Unbiased Distribution: Additionally, institutional trustees can eliminate the possibility of bias that might exist with trustees who are friends or family. The company would not have any prior history with particular beneficiaries that might interfere with the fair and evenhanded use of the trust’s assets.

  1. 5. Fraud Protection: Finally, institutional trustees have fraud prevention mechanisms in place. Although everyone would like to think that their friends or family members are above reproach, cases of theft on the part of the trustee do happen. Many institutional trustees are subject to government regulation and auditing requirements that can reduce the risk of fraud on their parts.

If you are interested in setting up a trust, consult with an Illinois estate planning lawyer to tailor one to your specific situation. Our attorneys lend their experience to clients across the northwest suburban area, including in Long Grove, Riverwoods, and Kenilworth.

About the Author: Attorney Jay Andrew is a founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.

The Dynasty Trust: A New Method of Creating an Inheritance

Web Admin - Thursday, March 20, 2014

illinois trusts estate planning attorneyDynasty trusts are a new type of trust that can be used to minimize the burden of certain taxes that the government levies on inheritance by holding the inheritance in a trust for many generations. These trusts have become more popular in recent years as states have begun to relax or abolish a legal doctrine known as the rule against perpetuities. The rule is a complex legal doctrine that limited the length of trusts and other legal instruments to only lasting a certain period of time, usually about two or three generations, depending on a variety of factors. Now that the rule is being relaxed, it has made dynasty trusts a more viable option.

What is a Dynasty Trust?

Simply put, a dynasty trust is a trust that holds assets from which future generations will benefit. This has important tax consequences because assets placed into a dynasty trust are subject to the federal estate/gift tax only once. This means that the assets can flow down to further generations without future estate taxes. For instance, if a person left $10,000,000 to their child without using a trust, this would exceed the gift/estate tax exemption, so it would be subject to the tax. Then, if that inheritance appreciated in value and the child passed it on to a grandchild, it would be subject to another round of taxes. If, instead of simply passing the money down in the first place, the person had placed it into a dynasty trust, then the original $10,000,000 would be taxed at that point, but it the appreciated amount would not be subject to another estate tax when it went to the grandchild.

Another benefit of the dynasty trust is that it can help reduce the effects of the generation skipping transfer tax (GST). The GST exists because people used to leave money directly to their grandchildren in an effort to avoid the double estate tax of the previous example. The GST can take as much as 55 percent of the money passed down to grandchildren in excess of $1,000,000. If the dynasty trust is created using that $1,000,000 dollar exemption, then it can sizably reduce the burden of transfer taxes on future generations.

This means that the dynasty trust can be a very useful estate planning tool for people with large families, or those who have enough assets that the estate tax and GST are serious concerns. Additionally, dynasty trusts are also useful for people who would like to have some say as to how their money is spent after their deaths because dynasty trusts can sometimes be used to control such things.

If you believe that your estate planning could benefit from the use of a dynasty trust, contact a Long Grove estate planning attorney today. Our firm helps handle tax planning issues for clients across the northwest suburbs, including towns like Riverwoods, Barrington, and Kenilworth.

About the Author: Attorney Jay Andrew is founding partner of Drost, Gilbert, Andrew & Apicella, LLC. He is a graduate of the University of Dayton School of Law and has been practicing in estate planning, probate, trust administration, real estate law, residential/commercial leasing, contracts, and civil litigation. Since 2005, Jay has been a Chair of the Mock Trial Committee for the Annual Northwest Suburban Bar Association High School Mock Trial Invitation which serves over 240 local Illinois students each year.


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