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It’s a common question and one that many people really don’t know the answer to. What are the benefits of putting a house into a trust? Are there any restrictions once it’s in there? How does a trust work?

In Illinois, if a person dies with or without a Last Will and Testament (“Will”), and the total value of his or her estate is greater than $100,000.00, the estate will have to be probated. Probate is a public court process and is the first step in legally administering the estate of a deceased person. The probate process includes resolving all claims and distributing the deceased person’s assets/property per the terms of his/her Will or per the intestate laws of the State of Illinois if the individual did not have a Will. The probate court appoints the executor (or personal representative), generally named in the Will, as having legal power to dispose of the deceased person’s assets in the manner specified in the Will.

On average, our experience has shown that probate takes on the following characteristics:

  • Duration: 8-12 months
  • Expense: 2-5% of the value of the probated estate
  • Other: Plenty of aggravation for the family members/beneficiaries (think back to the last time you were in court for a simple traffic ticket and multiply that several times…at the very least)

A Revocable Living Trust (“trust”) can help alleviate if not eliminate these headaches. A Trust is a legal document, which offers various protections/benefits for the trustmaker/grantor and the beneficiaries, or those named individuals who benefit from the Trust.

One benefit to placing your house in a Trust is avoiding probate. Upon the death of the grantor(s), if the Trust terms specify that all assets are to go to the surviving spouse, children, charity, religious organization, etc. that happens automatically without any probate court costs or delays. The distribution of assets from a Trust to the named beneficiaries is a private process, which does not require court supervision. To avoid the hassle and expense of the probate process, the assets need to be owned by (titled in the name of) the Trust at the time the last grantor dies.

After an individual creates a Trust, he or she needs to “fund” it. Funding a tTust is the process of transferring title of one’s major assets, including but not limited to real estate, investment portfolios, stocks, and bonds, to the Trust, which then in turn holds the title to those assets. In other words, one can continue buying, selling, holding and managing their assets just as before they transferred title to their Trust.

The Trust can be amended, modified, or revoked at any time by the grantor(s) as long as they have capacity and are competent (as those terms are defined in the Trust itself).

The person(s) or entity that is able to manage the assets of the Trust for the benefit of the beneficiaries is called the “trustee.” Typically, the initial trustee(s) will be the same person(s) as the trustmakers/grantors. If the initial trustee is unable to manage the Trust assets due to incapacity, incompetency, or death, the successor trustee (such as an adult child, trusted friend/professional, bank trust department, or trust company) takes over management of the Trust assets.

Transferring one’s home into a Trust does not affect real estate taxes even in states where title transfers trigger reassessments (Illinois is not one of these states). However, when refinancing a mortgage, some lenders still require that title be taken out of the Trust so the new mortgage can be recorded in the owners’ names individually before putting title back in the Trust. On the other hand, some lenders are beginning to realize that the grantor, beneficiary, and trustee are the same person and that according to the terms of the trust, this person(s) can bind or encumber the trust assets.

Matthew Margolis is a founding partner at Margolis Weldon LLC.

Matt simply enjoys helping people. When he fell into the practice areas of Estate Planning and Elder Law in March of 2011, he truly found his calling. Thinking he would miss the hustle and bustle of being in the loop, wearing a suit every day, and “fighting” in court, he soon realized that there was more to the practice of law.