ESTATE PLANNING POINTERS – Trusts & Insurance

A common practice in Illinois estate planning makes use of a trust that is established while a person is alive. An “inter-vivos” trust owns and manages the assets placed into the trust through a trustee (usually the grantor initially), often for the sole benefit of the one creating the trust (“grantor”). The practical aspect is that, upon the grantor’s death, the trust continues to own and manage the trust assets – through a successor trustee – but for new beneficiaries. In this manner, assets held in a trust are not required to go through the probate process – whether that includes actual case filing and court proceedings or, if appropriate, transfers via affidavit.

However, another common practice is that once a trust is established, people sometimes forget its purpose and either fail to fund the trust (transfer assets into the trust name) or fail to add to the trust in future years upon purchase of other new assets that should be managed in the trust also. A well-designed trust, without proper transfer of assets, remains an empty vessel.

There are other points to review when using an inter-vivos trust that has been properly funded (including but not limited to the following):
– are all of the assets you want in the trust actually now owned by the trust?
– once the assets have been transferred to the trust, are there any changes needed to insurance policies to guaranty existing coverage continues? You don’t want to file a claim for damage and be told “we don’t insure a trust”. This could apply to both real and personal property (vehicles, boats, collections, household assets). BE SURE your insurance agent covers these issues with you – including whether you and the trust are covered for liability claims.
– for real estate, you may want to review any title insurance policy you may have received at purchase to ensure it includes coverage for a transfer to an inter-vivos trust (and if not, consider whether an updated policy is appropriate).

One final procedural point – and one that can be used to minimize issues now that could arise later without proper planning – is worth noting. The attorney-client privilege continues beyond the death of the client – meaning that an attorney cannot share privileged information, even when that may make sense, without either client consent (pre-death) or court intervention (post-death). A prudent step to take would be to discuss circumstances in which a client would or would not want information disclosed. Some may approve of a blanket “you may give copies of my documents to any beneficiary requesting the same upon my death/incompetency”, while others may authorize no disclosure – or other alternatives with which you would be comfortable.

Remember, many areas that become grounds for misunderstanding or questions after death can be minimized or eliminated with proper planning before death. In nearly all circumstances, a judge who has to make decisions in squabbles between heirs or legatees (or trust beneficiaries) has no prior knowledge of the decedent from which to deduce actual intent…. and, ethically, a judge that DOES have prior knowledge probably should not be involved in the case! We can help you navigate through actions taken now, while you are able to do so, to develop the best method to avoid these issues later when you are unable to provide insight to your decisions or intents.