If a wedding is in your immediate future, chances are estate planning isn’t on your list of things to do. But if you have significant assets, children to whom you plan to leave them to, or planning to have or adopt children, estate planning becomes important for both your intended spouse and any children. But why set one up before marriage?
The Living Trust
Also known as a “revocable trust,” this legal entity allows you to put some or all of your property into a place that will lead to the property being distributed to the beneficiaries without probate. It will also allow you to avoid paying some taxes on your assets, especially if they are significant. The biggest feature of this trust is that it can be canceled at any time by the grantor.
Unlike a will, the process to pass on the property is quick and is not subject to being contested in court. It’s also helpful if you are suddenly incapacitated or unable to handle your affairs due to illness or injury.
Ideally, you would name one or more trustees, such as your spouse and children or other beneficiaries. If you were to die suddenly, the trust would then become irrevocable, and the property would be distributed accordingly, and the will would have little effect on it. A will, on the other hand, would have to go through a probate process. This could take as long as two years, and be substantially more expensive for your beneficiaries, especially if an estranged or ex-spouse decides to contest the will.
Pre-Marital Living Trust
Setting up a trust before you sign a marriage license may be a good idea if you’re concerned about the possibility of a divorce down the road. Your assets can be protected for your children or other beneficiaries. This is particularly useful if you have a child or children from a previous marriage and want to ensure that their interests and properties are protected. This is also helpful if you die suddenly before completing your will or in the process of a divorce.
Like other types of property, a trust acquired before marriage won’t be considered marital property unless funds are distributed and commingled with marital property, i.e, deposited into a joint bank account.
Trusts aren’t automatically revoked when a divorce is filed, they will have to be revoked by the grantor. But if the trust was created with marital assets, the trust will have to be revoked in order to divide the property for the divorce. The trust’s value will also be included in the calculation of child support and/or spousal maintenance.
You may have heard the term “community property” in the discussion of divorce. Many states are community property, in which the marital property is divided 50/50. However, Illinois uses the principle of “equitable division,” which may or may not be a 50/50 split.
Marital property means any assets and debts accumulated during the time period of the marriage, with the exceptions of inherited and/or gifted property made to one spouse. Marital property can include:
- Houses and other forms of real estate
- Businesses and other corporate interests
- Savings and other types of investment accounts (regardless of the name or names on the accounts)
- Deferred compensation, stock options and the like
- Any retirement benefits earned during the period of the marriage
- Debts from credit cards
These will be divided according to input, such as a car bought with 75% input from one spouse and 25% input from the other.
Monies, property and other assets added to a living trust before marriage will be treated as separate property as long as it stays separate.
Your Chicago Estate Planning Attorney
James C. Provenza is a leading Illinois estate planning attorney with years of experience helping clients with estate planning to make sure their wishes are carried out. Call our firm today at (847) 729-3939, or use our online contact form.