What would happen to your house, savings, or family farm if a lawsuit, medical crisis, or creditor came knocking tomorrow? Solid planning gives you control, yet many Illinois residents wait until trouble hits.
At Woods & Bates, P.C., we have spent decades guiding families through estate planning, trust administration, and real estate matters in both rural and suburban communities. In this guide, we walk you through the process of building a trust that safeguards your assets, keeps your loved ones secure, and meets the requirements of Illinois law.
Revocable vs. Irrevocable Trusts: Which is Right for Asset Protection in Illinois?
Before selecting an asset protection strategy, you must choose between the two most common trust formats. Each carries different levels of control and insulation from claims.
Revocable Trusts (Living Trusts)
A revocable trust lets you hold the reins. You can move assets in or out, change beneficiaries, or close the trust while alive. Because you still control the property, Illinois law usually treats those assets as yours if creditors sue. Probate may be avoided, but real shielding from claims is thin.
Irrevocable Trusts
An irrevocable trust requires you to relinquish direct ownership of the assets. Once the property is transferred, the trust, not you, becomes the legal owner. Creditors generally cannot reach inside unless a court finds the transfer to be fraudulent or the look-back window for Medicaid was not adequately addressed. In return for giving up control, you gain a far sturdier barrier against lawsuits and long-term care costs.
Types of Asset Protection Trusts Available in Illinois
Illinois residents often hear about high-profile trust ideas online. Below are the most common choices, with notes on what our state allows.
Domestic Asset Protection Trusts (DAPTs)
Illinois statutes do not permit the formation of a DAPT within the state’s borders. People sometimes place a DAPT in states such as Nevada or South Dakota, but that route can be risky if a home-state judge decides the transfer offends Illinois public policy. Talk with a trusted attorney before sending property across borders.
Medicaid Asset Protection Trusts (MAPTs)
A MAPT can hold a primary home, farmland, or brokerage account while trying to preserve Medicaid eligibility for nursing-home costs. Illinois applies a five-year look-back on transfers, and any move within that period may trigger penalties. Planning at least five years early gives a MAPT the best chance to work.
Special Needs Trusts (SNTs)
An SNT provides supplemental care for a person with a disability without affecting their SSI or Medicaid benefits. Illinois follows federal 42 U.S.C. § 1396p(d) but also requires annual accountings to the local Medicaid agency. Parents or grandparents often fund the trust while naming a corporate or trusted individual as trustee.
Irrevocable Life Insurance Trusts (ILITs)
An ILIT owns life insurance policies, removing the death benefit from your taxable estate and protecting proceeds from creditors. Illinois residents should note that our state estate tax exemption is lower than the federal figure. Placing a large policy in an ILIT may save heirs from state estate tax and guard cash from future lawsuits.
Steps to Setting Up a Trust for Asset Protection in Illinois
Building the right trust is a process. Follow each step in order, and you will create layers of protection that stand up under court review.
1. Determine Your Goals and Objectives
Start by listing what you want to shield. Are you worried about professional liability, long-term care costs, or your child’s future divorce? Write down the assets involved and the threats you see.
2. Choose the Right Type of Trust
Match the threat list to the trust types above. For example:
- Home and farm, concerned about Medicaid → consider a MAPT.
- Large life policy, worried about estate tax → ILIT.
- A child with autism needs benefit eligibility → SNT.
Remember, Illinois residents cannot form an in-state DAPT; therefore, consider using tried-and-true irrevocable formats instead.
3. Select a Trustee
The trustee carries legal responsibility to follow the written terms, invest prudently, and keep records. Pick someone organized, honest, and able to say “no” when beneficiaries push for money that the trust cannot release. Many families pair a relative with a bank or law firm as co-trustees to blend personal insight with professional oversight.
4. Draft the Trust Document
Illinois adopted the Uniform Trust Code (760 ILCS 3/) in 2020; therefore, your document must comply with its notice, accounting, and modification rules. Work with counsel familiar with both elder-law issues and the new statute. Clear distribution provisions and trustee powers help avoid later fights and challenges.
5. Fund the Trust
Signing papers without moving assets is like buying a safe and leaving cash on the kitchen table. You must:
- Retitle real estate with a new deed to the trust.
- Update bank and investment accounts to the trust’s name.
- Assign personal property, such as farm equipment or collectibles, via a bill of sale.
Keep copies of each transfer. Consult a tax advisor about gift-tax filings and stepped-up basis issues.
Comparison Table: Control vs. Protection
| Feature | Revocable Trust | Irrevocable Trust |
| Who owns the assets? | Grantor during life | Trust |
| Changeable after signing? | Yes, at any time | Rarely, and only through strict methods |
| Protection from the grantor’s creditors | Minimal | High, absent fraudulent transfer |
| Probate avoidance | Yes | Yes |
| Medicaid asset count | Included | Excluded after the look-back |
Commonly Asked Questions About Illinois Asset Protection Trusts
Below are answers to questions we hear most often during consultations. They can help you decide the next move.
What Assets Can Be Placed in a Trust?
Real estate, brokerage accounts, private company shares, farm machinery, and even mineral rights can move into a trust. Retirement plans usually stay outside, but you can name the trust as the beneficiary when appropriate.
How Much Does it Cost to Set Up a Trust in Illinois?
Legal fees for a straightforward irrevocable trust often start at $3,000. More layers, multiple deeds, or business interests raise the figure. Trustee and tax-preparation fees will be incurred once the trust is funded.
Can a Trust Be Challenged in Illinois?
Yes. A disgruntled heir might allege lack of capacity, undue influence, or fraud. To lower that risk, obtain a physician’s letter at signing, videotape the meeting, and avoid giving one child more control than others unless it makes clear sense.
What is the Illinois Uniform Trust Code?
The Code, found at 760 ILCS 3/, sets default rules on notice, duties, and modification. Any trust formed after January 1, 2020, must comply, though many provisions can be altered within the document. Your attorney should craft language that fits both the Code and your family’s needs.
Protect Your Future: Contact Woods & Bates, P.C. Today
Proper planning enables families to maintain what they have worked a lifetime to build. If you’re ready to discuss an asset protection trust or update an older plan, call us at 217.735.1234 or visit our Contact Us page. We offer both virtual and in-person meetings to fit your schedule. Let’s put a solid shield around your hard-earned assets so you can focus on living, not worrying.