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5 Things to Consider When You Create a Trust
Estate planning is full of choices. Completing the process can give you control over how your property will be distributed after you are gone, as well as control over some of your own end-of-life decisions. Once you have decided to use a trust rather than a will as your primary testamentary tool, you still have quite a few decisions to make. Trusts can be revocable or irrevocable, and there are even more subcategories. You also get to set most of the terms of your own trust - these are highly customizable legal instruments.
Your best bet is to talk with an estate planning attorney who is highly knowledgeable about the different types of trusts and how they can be written. After you explain your goals and give some information about your beneficiaries, your lawyer will be able to guide your decision from there.
Factors to Consider in Choosing a Type of Trust
You have quite a few things to consider when you go to create a trust. Be prepared for your lawyer to ask a lot of questions, some of which can be a bit personal. However, it is important that you answer openly so that your attorney knows what concerns to factor in when designing a trust for you. Things to think about include:
Which Debts Cannot Be Discharged in Bankruptcy?
Bankruptcy can provide a way out for many Illinois families and individuals who have become buried in insurmountable debt. Both Chapter 7 and Chapter 13 bankruptcy filings can give you an opportunity to ultimately discharge most debts through different means. If you are considering bankruptcy as a solution to your debt, it is important to understand which debts can and cannot be discharged through the bankruptcy process. Before you file, it is a good idea to consult a qualified attorney who can help you make sure that bankruptcy will help you achieve your goal of becoming debt-free.
What Types of Debt Are Not Discharged During Bankruptcy Proceedings?
It may not seem fair that some debts can be discharged through bankruptcy, and you are stuck with others. Unfortunately, this is the reality. Whether bankruptcy would be helpful for you depends heavily on what type of debt you are struggling with. Even in bankruptcy, you will generally not be able to discharge:
4 Grounds for Eviction in Kane County
You probably do not want to have to evict a tenant. The eviction process is rarely quick or simple. Generally, formal eviction proceedings are a last resort when a problem tenant refuses to leave on their own. As a landlord, you may face situations where you have little choice but to evict a tenant who is refusing to pay, destroying your property, or engaging in criminal activity. When these situations arise, it can be tremendously helpful to have an attorney who is experienced with eviction proceedings representing you. Renters have a lot of legal protections in Illinois, but there are still valid reasons for evicting a tenant that the courts will typically honor.
What Are Some Legal Reasons for Evicting a Tenant?
The most common reason people get evicted is for nonpayment. However, there are good legal reasons to evict even a tenant who is up to date on rent. Grounds for eviction in Illinois include:
Chargeable vs. Dischargeable debts: What you need to know
Contrary to popular belief, filing for Chapter 7 bankruptcy does not mean that all your debts are wiped. The possibility of discharging a debt depends on its nature.
Dischargeable debts are those that you are not legally responsible for after filing for bankruptcy. They include most consumer debt such as medical bills or credit card debt.
Non-dischargeable debts are those you have to continue paying even after declaring bankruptcy. These include child support or alimony, debts that you did not disclose when filing for bankruptcy, student loans, fines, or penalties owed to government entities, among others.
When discharge may be denied
In some cases, a creditor can dispute their debt's status and have it declared non-dischargeable. For instance, if you lied in your bankruptcy application or hid some assets to defraud creditors, the judge may deny discharging you from such debt. Additionally, if you file for bankruptcy too frequently, it may be considered an abuse of the system and lead to a denial of discharge.
Should I go into bankruptcy during retirement?
If you are going into retirement, something that you might be considering is eliminating any of your outstanding debts. Part of the issue that people run into during retirement is that they may not have as much income as they had in the past. As a result, paying the debts that accrued earlier in life may not be as easy as it was before.
If you find that you've fallen behind, then one option may be to file for bankruptcy to get a fresh start. If you can pass the Chapter 7 bankruptcy means test, then you may be able to have your unsecured debts discharged after going through the liquidation process.
Should you worry about losing your assets in bankruptcy?
You shouldn't necessarily worry about your assets, because many will be protected with exemptions. Some assets are completely exempt from bankruptcy liquidation, such as:
- 401(k) plans
If you pass away with debt, do your heirs have to pay?
If you start looking into your estate planning, you know that it begins with dividing assets, but you may quickly realize that you have a lot of debt, as well. You plan to pay this off before you die or to declare bankruptcy or take care of it in some other fashion, but there's no guarantee.
If you pass away and still have debt, does that have to become part of your estate plan? Do your heirs need to pay your debt, and will they inherit it just like they would inherit your assets?
Your estate will be responsible for any remaining debt
Your heirs don't have to deal with your debt, at least not in the sense that they have to pay the creditors back on your behalf. Instead, the money will be taken from your estate. The executor of that estate may have to pay the debt directly with the financial assets you have, or they may even have to sell your physical assets and then take the earnings to pay back as much of that as possible.
Understanding beneficiary controlled trusts
If you have a substantial amount of money to leave your family in your estate plan, it's often wise not to leave it to them in a lump sum. This can have significant tax implications for them. If you have more than one child, they may each benefit from having a different type of trust, so it's a good idea to learn about the various types.
So-called “spendthrift trusts” are often used for people who need some supervision when it comes to money. A spendthrift trust is managed by a trustee who disburses money based on your instructions or (if you designate) at their own discretion. This kind of trust also protects a beneficiary's inheritance from being taken by creditors, plaintiffs in a lawsuit or a spouse in a divorce. That's because they don't legally have any control over the money.
A beneficiary controlled trust offers flexibility
What if you have a child or other family member who doesn't have these issues – at least for now? You can set up a beneficiary-controlled trust. That's essentially what it sounds like. The beneficiary is the trustee and has control over how the assets in the trust are invested as well as how much they withdraw from it and when.
What are the benefits of an irrevocable trust?
A trust is a legal arrangement whereby you give another party the power to control and manage your assets on behalf of a third party, usually your beneficiaries. For a revocable trust or living trust, the property you grant the trust remains within your control, and you may amend or revoke the terms any time you wish to do so. However, there are drawbacks associated with your control of the assets since the ownership remains under your name.
With an irrevocable trust, property under it transfers ownership from you to the trust. In addition, the terms cannot be easily modified or revoked once the trust is established. Depending on the size of your estate, it may be a beneficial form of estate transfer. There are benefits an irrevocable trust offers that a revocable trust does not. They include:
Protecting your assets
Since you do not legally own the property in an irrevocable trust, creditors cannot attach the said property to recover the debt. The same applies to the beneficiaries' creditors. As such, your estate is safe from repossession in case you default on debt. In addition, if the beneficiary gets a divorce, the property under a trust cannot be obtained from them to their ex-spouse.
Your Wisconsin vacation home and ancillary probate
As you start your estate planning, you likely already know that one of your goals should be helping your estate avoid probate – or at least a long, complicated one that will put your loved ones through the added expense and stress at an already difficult time.
If there's anything worse than one probate process, it's two. That may be necessary if you own property in another state when you pass away. Property that's subject to probate has to be dealt with in a court in that state. That's called “ancillary probate.” (Probate in your home state is “domiciliary probate.”)
The good news is that state probate courts are typically amenable to cooperating with each other on ancillary probate proceedings. That can make things easier for your executor, who will need to initiate all probate. However, it's still important to make sure your executor knows about this out-of-state property. They may have to travel there to deal with it. Going up to Wisconsin is one thing, but if you also have a condo in South Florida you're planning to retire to, that can mean a lot of extra time and travel.
Is your estate plan fit for the digital age?
If you have always been ahead of the crowd in adopting new technology, you need to make sure your estate plan is as up-to-date as you are.
When cryptocurrency launched, it touted two main advantages — security and tax avoidance. While the first bitcoin came out in 2009, it took a while for governments to realize cryptocurrency was here to stay. Therefore, they are still playing catch up to regulate it.
Keeping things secret is not good for your heirs
The security advantages that cryptocurrency promises can be its downfall if you do not allow for access in your estate plan.
Holding money somewhere that is harder to break into than Fort Knox is great when you are alive and remember how to get in. Yet, if you do not leave the entry details to someone, your family will not be able to get in once you die, and your investments will go to waste.
Estate planning laws now include standard ways to ensure your family gets access to all your digital assets, not just the ones with financial value.
From our office in Geneva, Illinois, we serve clients throughout the region, including the communities of St. Charles, Batavia, Aurora, Elgin, Elburn, Sugar Grove, North Aurora, South Elgin, West Chicago, Fox Valley, Winfield, Wayne, Big Rock, Naperville, Wheaton, and Downers Grove, as well as other municipalities in Kane County and DuPage County.
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