Types of Trusts in Illinois: Which One Is Best for You?

Planning how to pass on your hard-earned property is an important step in protecting your legacy.

While many rely on a simple will, additional tools such as trusts can offer greater flexibility. In Illinois, trusts are an effective way to safeguard assets, simplify the probate process, and ensure your wishes are carried out.

This overview explains the types of trusts that may benefit you, helping you take the next step with confidence and peace of mind.

What is a Trust?

A trust is a legal tool where a grantor transfers assets to a trustee to manage for the benefit of named beneficiaries. The grantor sets the rules for how and when the assets are used, and the trustee is required to follow them. Beneficiaries receive the benefits, which may include income, future ownership, or both.

The key roles include the grantor, the trustee who manages the trust, and the beneficiaries who receive its benefits. Trusts can help avoid probate, protect assets from claims or misuse, and allow for controlled distribution over time.

Types of Trusts in Illinois

Because people face different goals and circumstances, Illinois residents can choose from several trust options. Below is a quick overview of mainstream trusts that you might see mentioned when putting together an estate plan.

Revocable Living Trusts

A revocable living trust is one you can alter, update, or end during your lifetime as long as you remain able to make legal decisions. This level of control appeals to many folks since they can adjust it to reflect changes in life or finances.

One of the big pluses is that your loved ones can avoid probate expenses and frustration when you pass away. However, because the trust remains within your reach, it provides limited asset protection from lawsuits or creditor actions.

Irrevocable Trusts

An irrevocable trust typically cannot be undone after formation, except in limited cases. This loss of direct control can feel daunting, but these trusts offer stronger safeguards. By removing certain assets from your name, an irrevocable trust can help keep them out of the scope of creditors and possibly lower estate taxes.

Irrevocable trusts also serve as a strategy for long-range planning, especially if you want to protect a family property or business interest.

Testamentary Trusts

A testamentary trust originates from a will and only goes into effect once the grantor dies. This option is helpful for parents of minors or individuals who need ongoing management of assets. Using the provisions, you can direct that a trustee hold and handle assets for beneficiaries until they come of age or reach some milestone. On the other hand, because this trust type is contained in a will, it must pass through probate.

Charitable Trusts

Charitable trusts are named specifically for donations or philanthropic aims. If supporting a particular charity or cause matters to you, these can help shift assets in that direction while possibly providing tax benefits.

To qualify, the trust must name a recognized charitable group as beneficiary. Depending on the arrangement, your family might receive a portion of the trust’s income or the remainder after a specified period.

Spendthrift Trusts

A spendthrift trust prevents a beneficiary from squandering the trust principal by limiting direct control over the assets.

The trustee releases funds on a schedule or based on certain conditions, so that a beneficiary who might mismanage a large sum has extra oversight. As a side effect, creditors also have a limited ability to seize these trust funds, which can be helpful if debt or lawsuits are a concern.

Medicaid Asset Protection Trusts (MAPTs)

Medicaid Asset Protection Trusts are a type of irrevocable trust often used when long-term care costs might be on the horizon.

The general idea is that assets placed into the trust are not yours for Medicaid-qualification calculations, assuming certain wait periods are met. In turn, you may qualify for needed benefits while keeping property under the trust for your family. However, strict limits apply regarding access to these trust assets, so thoughtful planning is essential.

Special Needs Trusts (Supplemental Needs Trusts)

A special needs trust preserves a beneficiary’s eligibility for government programs if that person has a disability. While setting aside funds for the beneficiary’s expenses, you avoid disqualifying them from essential support. Like other irrevocable trusts, an SNT must follow detailed rules. Another route—an ABLE account—can also play a role, but the trust is typically the more robust structure for holding larger sums without affecting government assistance.

Below is a brief reference chart highlighting some of the trust varieties discussed:

Trust TypeGrantor ControlAsset ProtectionProbate Avoidance
Revocable Living TrustHigh (Can revoke/amend)LimitedYes
Irrevocable TrustLow (Cannot easily change)HigherYes
Testamentary TrustN/A (Activated after death)VariesNo (Requires probate)
Spendthrift TrustDepends on structureLimits the beneficiary’s accessYes, if set up during life
Special Needs TrustLow (Irrevocable in most cases)Protects assets for a disabled beneficiaryYes

Advanced Trust Planning

Once the basics are in place, some people turn to advanced trust strategies to accomplish bigger financial goals. For large estates or those wanting to pass wealth through generations, certain structures can be quite appealing.

Dynasty Trusts

A dynasty trust is built to last for many generations, well beyond the grantor’s immediate children. By locking assets in the trust and planning distributions across multiple decades, you can help descendants benefit. This structure might also sidestep repeated estate taxes with each passing generation, though it demands thorough drafting and compliance with local rules.

Grantor-Retained Annuity Trusts (GRATs)

A grantor-retained annuity trust is designed so you, as the grantor, transfer certain assets in return for annual annuity payments over a set period. If the assets earn more appreciation than the IRS’s assumed rate, the excess can pass to beneficiaries without added estate tax. These trusts generally suit bigger estates holding assets likely to grow in value quickly.

Qualified Terminable Interest Property (QTIP) Trusts

QTIP trusts address a common estate planning concern: supporting a surviving spouse while protecting the ultimate inheritance for children from a prior relationship.

The spouse usually gets income from the trust for life, but the assets in the trust later go to the grantor’s chosen heirs. This ensures each side’s interests are balanced.

Plan Your Secure Future with Woods & Bates, P.C.

Woods & Bates, P.C., understands how important it is for you to feel at peace about tomorrow. Our firm stays dedicated to offering guidance on trusts, real estate matters, and broader estate-related questions. We welcome your concerns and will work closely with you to design a plan suited to your goals.

If you would like to arrange a chat, please call us at 217-735-1234 or visit our website to send us a note. We want to help you with your questions and take the time needed to shape a fitting approach for you.

This step can feel reassuring because it sets your affairs in order, leaving you free to focus on the present.