A Living Trust is created by a trust document and designates one or more individuals or corporations to act as trustee. The trust document directs the trustee to accept title to, or ownership of, real and personal property as trustee for the benefit of the trust’s beneficiaries. The trust documents sets out in detail how the trust is to be administered. It contains the directions of the person who sets up the trust to guide the trustee.
A Living Trust avoids the requirement of probate as your property is conveyed to the trust during your life time. Most of the time, you, as Grantor, would be the trustee and the trust would provide that you can utilize everything in the trust for your needs during your lifetime. Upon death, a Living Trust typically provides for a successor trustee and directs how the property in the trust will be used for the benefit of the remaining beneficiaries. A living trust can also be used to derive tax advantages in larger estate cases.
Illinois, by statute, allows you to designate, by a written power of attorney (POA), who you wish to have power of attorney over your affairs. There are two types of power of attorneys in Illinois: POA for property and POA for health care.
Power of Attorney for Property
The POA for property allows you to designate a person to make decisions regarding your property and finances. Unless specifically restricted, the person you nominate can pay bills, access bank accounts, sell real estate, apply for you to receive benefits, etc.
Power of Attorney for Health Care
The POA for health care allows you to designate a person to make decisions regarding your medical treatment. Certain restrictions or instructions can be included. Typically you would elect your preference regarding life prolonging medical treatment for the event you are unable to survive without it.
A power of attorney usually is triggered upon the happening of a specific event, such as a person losing their capacity to make their own decisions. You can also elect to have a power of attorney go into effect immediately, or upon the occurrence of a certain date. This is common for the POA for property, which enables your designee to sign on your behalf at a real estate closing or other such financial transactions that you are unavailable or unable to attend. You can revoke a POA at any time and it automatically terminates upon your death.
What is a Will?
A Will is a common instrument used to enable a person to designate the beneficiaries of their estate. Wills allow you to make specific bequests. For instance, if you want your daughter to receive your diamond necklace, your friend to receive your sports memorabilia, or a certain amount of your estate to go to a charity, a Will enables you to make the specific designation.
Wills also enable you to choose whom you wish to be the executor or administrator of your estate. Furthermore, they can be used to state preferences for whom you wish to be guardian of your minor children.
Since Wills do not go into effect until death, deeds to real estate, title to property and names on financial institution accounts can be held in the name of the person, unlike living trusts, which require those items to be titled in the name of the trust. There is no such thing as a “Living Will.” This is a misnomer for granting someone a power of attorney.