People in Illinois who think about estate planning might automatically think about a will or a trust. However, they may not be aware of how a trust works or that there are many different types of trusts. A person’s assets and wishes can help direct them to select the right trust for their situation.
Before evaluating some specific types of trusts, people should learn about the basic elements of all trusts. As The Street explains, there are three key parties to every trust. The first party is the beneficiary. This is the person who is slated to receive assets or income from the trust. The second party is the trustor. This is the person who grants property or other assets to the trust. The third party is the trustee. This is the person who has the fiduciary responsibility of managing the trust and dispersing assets per the instructions.
According to Fidelity Investments, a trust may be a good vehicle for people to leave assets to someone other than their spouse. For example, if a person wishes to leave money to a grandson or granddaughter, a generation-skipping trust can allow this to happen without the grandchild having to pay generation-skipping tax on the amount.
A credit shelter trust is another option for leaving assets to a child or other party instead of to the surviving spouse. This type of trust may provide important tax benefits as well. An irrevocable life insurance trust allows a person to receive life insurance benefits without going through probate.