Call Us Now
Email Us Now
How Trusts Can Help You Protect Generational Wealth
Estate planning provides peace of mind in knowing that your loved ones will know exactly what your wishes are and have instructions to follow after you pass. Used strategically, an estate plan can also help you protect your assets, reduce tax burdens, and maintain generational wealth. One tool that is specifically valuable in this endeavor is a trust. A well-structured trust can help your assets avoid probate and ensure that your beneficiaries get their inheritances without having to wait for months or endure complicated legal proceedings.
Avoid Lengthy Probate Cases
If an estate is valued at more than $100,000, it’s required to pass through probate in the state of Illinois. During the probate process, the executor of the estate — who is named in the will — will inventory the assets and debts, ensure all property and holdings are accurately valued, and settle the estate. Once the estate’s debts have been paid, the remaining balance is distributed to the beneficiaries according to the terms of the will. While this may seem like a simple process, it can take months and sometimes even years to complete. And while the probate case is open, any assets subject to probate aren’t able to be transferred to the beneficiaries.
However, assets in a trust aren’t subject to probate. Upon the grantor’s death, they are able to pass immediately to the named beneficiary according to the terms of the trust. For example, if the trust states that a beneficiary should get $10,000 per year, the trustee will disburse this. Assets in trusts are also protected from an estate’s debts, which can help you retain more wealth to pass down to the next generation.
Protect Your Privacy
Probate cases are part of the public record in Illinois, which means that anyone is able to access that information from the courthouse. This can grant public access to your financial holdings when you died and who your beneficiaries were. Many people want to avoid having their private financial affairs made public, and a trust helps you do just that. Trusts are not part of the public record, so any assets and the associated transfers will not be listed. This allows you to retain your privacy even after you’re gone and can reduce the chances of family conflict if someone disagrees with how you handled your estate.
Enjoy Ultimate Flexibility in Terms of Asset Distribution
Trusts are one of the most flexible estate planning tools. When you create a revocable living trust, you are able to change anything about it whenever you want. This means that you can change the trustee or the beneficiary at any point. You can also move assets into or out of the trust as your estate or needs change. For example, if you want to ensure that your child has a college fund, you could put that money in a trust with instructions that it only be used for college tuition and related expenses. But if your child gets full-ride scholarships, you could take this money back out since it was no longer needed.
Trusts also allow you to set very specific instructions for how the assets should be distributed to the beneficiary. You can say that the funds can only be used to pay specific expenses or that distributions are only made at specific milestones, such as graduating college, getting married, or having a child. An estate planning attorney can help you set up a trust to reflect your exact needs and facilitate any changes as needed.
Reduce Tax Burdens
Estate taxes and inheritance taxes can be significant if you have a high-value estate, but strategic estate planning can help you minimize the tax burden and ensure more of your wealth is preserved for the next generation. Estate planning with taxes in mind requires the assistance and knowledge of an experienced attorney. They can help you understand how much the taxes may be for different estate planning scenarios and create an estate plan that reduces that burden.
Take Advantage of Specific Trust Structures
There are specific trusts that are used to help protect and pass on generational wealth that you may want to use as part of your estate plan, such as:
- Dynasty trust: A dynasty trust allows assets to be passed down without having to pay estate or gift taxes. Dynasty trusts are capped, but it’s very high, coming in at $13.61 million, as of 2024. However, dynasty trusts are irrevocable, which means you aren’t able to change them if necessary or desired later on.
- Spendthrift trust: A spendthrift trust is set up to provide more regulation for the beneficiary. These trusts do not allow the beneficiary to directly inherit the assets. Instead, they receive disbursements over time. Aptly named, the spendthrift trust is used to ensure that a beneficiary can’t spend through all the assets quickly.
Other trusts, such as an asset protection trust, can also be beneficial as part of a larger estate plan. Talk with an attorney to find out which option best fits your needs.
Get Help From an Experienced Estate Planning Attorney
The best estate plans are those that are tailored to the individual’s needs and goals for transferring generational wealth. In most cases, it’s not enough to draw up a will and simply list beneficiaries. You need the help of an experienced attorney who can explain the pros and cons of each option and help you put together a customized estate plan that ensures your family is taken care of for many generations.
Get help with your estate plan by calling 773-582-7000 to schedule an appointment with the team at Nery Richardson & Konewko LLC.
