Tag: Trustee

What Is a Spendthrift Trust in Illinois?

If you have a relative who is bad with money but needs support, you may want to form a spendthrift trust. Many people have someone close to them who cannot manage their own money. A relative may have a gambling problem, have a mental impairment, have a lot of debt, or just need help handling finances. You might be surprised to learn that estate planning could allow you to provide for and protect a family member who is like this.

The Perils of Supporting a Family Member Who Is Bad with Money

You may think that giving money outright to a relative is the best option, even if he or she is bad with money. Or you might want to put money in an ordinary trust for the relative’s benefit. Neither of these methods are usually your best option for a few reasons:

  • Your relative may spend all the money right away
  • Creditors could access the money (even if in a trust) to satisfy debts
  • You may owe gift taxes depending on the size of your gift
  • You lose any control over how the relative spends the money

Instead, consider starting a spendthrift trust to both provide for and protect your relative.

What Is a Spendthrift Trust?

A spendthrift trust is a special type of trust that give the trustee full authority to decide how to spend trust distributions for the beneficiary’s benefit. The trust’s language explains how often the trustee needs to make distributions and may specify the amount to be spent. In addition, the trust language must include a special “spendthrift clause” explaining the settlor’s intent that the trust be a spendthrift one.

Because the beneficiary of a spendthrift trust has no authority to spend or receive trust distributions as he wishes, most creditors cannot access those distributions to satisfy debts. The typical exceptions are debts like child support, alimony, and payment for “necessaries” like food and shelter.

It is very important that your spendthrift trust include the necessary language and have an appropriate trustee. If the trust is not set up right, creditors could go after the distributions and your trust would not have the effect you expected. Talk to a lawyer about how to set up a spendthrift trust to benefit a relative.

Want to create a spendthrift trust or another type of trust? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.

What Are Discretionary and Mandatory Trust Distributions?

If you are a trustee or trust beneficiary, you may want to know more about discretionary and mandatory trust distributions. You might have questions about how often the trustee needs to make distributions and in what amounts. It is important to get answers to these questions so that the trust functions properly, as the settlor intended.

What Are Trust Distributions?

To help the trust beneficiary, the trust’s settlor permits the trustee to make periodic distributions from the trust. The settlor decides on which language to include in the trust document regarding distributions. For example, the settlor could choose to allow distributions on a regular schedule, distributions if certain events happen, or discretionary distributions at the trustee’s option. Read the trust document to determine which kinds of distributions apply for a particular trust.

What Are Mandatory Trust Distributions?

Some trusts require trustees to make mandatory distributions. These distributions might take place every month or every year. Often, a trust requires distribution of a percentage of the interest earned on trust assets during the year. Or the trust might list a specific amount of money or property to be distributed. Sometimes, mandatory distributions must happen after certain triggering events. These could include a significant birthday (turning 18 or 21, for example) or marriage.

Trustees must make mandatory distributions described in the trust document. If they do not, they could face legal liability for breaching their fiduciary duties to the beneficiaries.

What Are Discretionary Trust Distributions?

In contrast, trustees do not have to make discretionary trust distributions. They get to decide when it is appropriate to distribute money from the trust (interest or principal) to the beneficiaries. Maybe the trust assets do not earn much interest in a particular year, so the trustee decides not to make a distribution. Or a beneficiary runs into hard times and the trustee decides that a distribution would help him out. Trustees need to be careful, however, not to favor any one beneficiary over the others. They also need to carefully track distributions over time. Finally, trustees or beneficiaries with questions about distributions should seek legal advice.

Need help with a trust or will? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.

Can a Trust Creator Ever Act as the Trustee, and Why?

Sometimes, the creator of a trust also acts as its trustee. This situation most often happens when someone creates a trust intended to benefit relatives after the creator passes away.

Why Would the Trust Creator Act as the Trustee?

Often, someone placing his or her property in trust (a “settlor”) wants to maintain some control over the property. He or she might create a trust that appoints himself or herself as the trustee, at least for now. The property can get transferred into the trust, but the settlor still gets to make the management decisions. The settlor might even be one of the beneficiaries too (but cannot be the only beneficiary).

As long as the settlor is alive, he or she can manage trust property and add more property to the trust. Placing property in trust during your lifetime has many advantages, including privacy, asset protection, and sometimes tax benefits.

What Happens If the Settlor Passes Away?

If the settlor passes away, a successor trustee should take over trust management. This trustee is either named in the trust document or appointed by the court. The successor trustee picks up where the settlor-trustee left off, managing assets for the benefit of the beneficiaries.

Often, settlors structure their trusts so that assets in their estate “pour over” into their trust once they pass away. This may avoid the need for probate of the estate. It also may allow the settlor to more readily pass on assets to the trust beneficiaries over time.

If a settlor does not have a “pour over” will and trust, then assets not placed in trust before the settlor’s death must get distributed according to the will. Unfortunately, some settlors intend to transfer ownership of assets to their trust but never get around to completing the formalities. This can result in a complicated estate distribution and beneficiaries not receiving the benefits that the settlor intended. If you plan to be settlor and trustee, ensure that you complete all transfers of ownership as soon as possible.

Want to start planning your estate? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.

Information a Trustee Should Gather After the Trust Settlor Dies

After a trust settlor dies, the trustee often needs to gather important information about the trust. The settlor’s death triggers the need to inventory the trust assets and perform administrative tasks. A trustee in this situation must first locate documents relating to the trust, then notify beneficiaries.

Why Does the Trustee Need to Act After the Settlor Dies?

When the sole settlor of a revocable trust dies, the trust becomes irrevocable. No one can change the terms of the trust or add property to it. Moreover, the trust settlor is no longer the trustee – instead, a successor trustee takes over.

The successor trustee needs to notify the beneficiaries that the trust settlor has died and that the successor trustee is now in charge of the trust. In addition, the successor trustee needs to figure out which assets are part of the trust. Then the trustee must go about managing those assets and making distributions as required by the trust document.

Which Documents Does the Trustee Need?

The successor trustee must gather many different types of documents related to the trust. Most importantly, the trustee needs the trust document and any amendments. Further, the trustee probably needs documents relating to the settlor’s and the trust’s assets. For example, the trustee may need copies of the settlor’s will to determine if the settlor left any assets to the trust. In addition, the trustee might need:

  • The settlor’s bank statements
  • Statements for brokerage or investment accounts
  • The settlor’s death certificate
  • Title for vehicles that were left to the trust
  • Property deeds for any properties that were left to the trust
  • Life insurance beneficiary designations
  • Tax returns, including any filed on the trust’s behalf

Depending on which kinds of assets the settlor had or the trust now holds, the trustee may need even more documents. The trustee is tasked with transferring property ownership and assuring that trust assets are protected – even while the rest of the settlor’s estate goes through probate. To do so, the trustee needs these important documents.

Want to start planning your estate? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.

Do Trust Beneficiaries Have Legal Rights in Illinois?

Trust beneficiaries have legal rights in Illinois to receive information related to the trust and to receive distributions from it. If you are a trust beneficiary, you may want to know more about your rights to ensure that the trustee is acting appropriately.

Trustee Fiduciary Duties

First, you should know that trustees have legal fiduciary duties to beneficiaries. These duties include:

  • The duty of loyalty to trust beneficiaries
  • The duty to act impartially, not favoring one beneficiary over another
  • The duty to exercise reasonable care, investing assets prudently
  • The duty to preserve property held in trust
  • The duty to account, keeping records for the trust
  • The duty to manage legal claims on behalf of or against the trust

Many of these duties translate into rights that beneficiaries have in relation to the trust. The two main rights that beneficiaries have are the right to information and the right to distributions.

The Right to Information

Beneficiaries have the right to receive certain information about the trust. The trustee needs to provide beneficiaries with an annual accounting describing payments and income of the trust. This requirement is waived only if the trust document says so or if the beneficiary declines to receive the accounting. Even so, the trustee might have to provide an accounting to the court later on.

In addition, the beneficiaries can request a copy of the trust document from the trustee. Trust documents are generally private and not filed with the court. To learn about how the trust works, the beneficiaries need to be able to receive a copy of the document.

The Right to Distributions

Beneficiaries have the right to receive distributions from the trust according to its terms. A trust may require distributions on a regular basis or may leave the distribution schedule up to the trustee’s discretion. If you believe that the trustee is wrongfully withholding distributions from you, you may have recourse in court.

Want to start planning your estate? Local attorney Andrew Szocka, Esq. provides thorough and speedy estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.

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