Oct 20, 2013
By Attorney Rick Law of Law Elder Law in Western Chicagoland
The income and asset control trust is – as we describe it in our office – an open box.
The assets you put or “fund” into this trust, along with all income produced from those assets, are completely available to the person or persons who make the trust (the trustmaker).
The trustmaker (owner of the assets placed into the trust) is generally also the trustee (manager of those assets). The trust is for the trustmaker’s use for his or her health, education, maintenance and support while he or she is living. The trust document includes instructions for such things as who will manage the trust if the trustmaker becomes disabled, how the trust should be managed at that time; who should manage the trust when the trustmaker dies, and what will happen to all remaining assets in the trust.
It can be as simple as this: John Smith, Trustmaker, creates an Income and Asset Control Trust (IACT). During his lifetime, John has full access to the assets in the trust and any income the assets produce. When John opens an account in the name of the trust, he uses his own Social Security number and the account owned by“The John Smith Trust Dated [whatever date the trust was signed], John Smith, Trustee.”
There is no need to do a separate return for the trust because John reports any interest or gain that the assets in the IACT accrue on his personal income tax return.
When John dies, his successor trustee (in this case his daughter Mary Smith) reads the instructions in the trust document, which say: 40% to Mary; 40% to Tom (John’s son); and 20% to be divided equally among the four grandchildren. Mary, as the successor trustee, must follow those instructions. Because John used our firm, Law Elder Law, all of his assets are properly titled in the trust, including his bank accounts, investment account, stock and residence.
Mary proceeds to liquidate everything and put the money into the checking account, which has been titled in John’s IACT, and then she can write checks to the beneficiaries of the trust, following John’s instructions in the trust. No probate, no court costs, no attorney fees (unless Mary wants some help with the trust administration), and no lengthy waiting period to distribute assets.
So let’s change this story a bit…..if John had not died but rather become ill, it would be important for John’s trust to state how he wanted Mary to proceed during his long-term care. Did he want everything used for his care? Maybe he really wanted to stay at home, if at all possible. Did he want Mary to seek the counsel of an elder law attorney to pursue some protection planning? Because John’s IACT was prepared by Law Elder Law, John has given Mary instructions and the ability to do such planning in the trust.
And if John becomes so ill that he cannot make decisions, it will be a very good thing that John has power of attorney for property prepared by Law Elder Law that built in the necessary planning powers – not just one of those statutory form you can get online or buy at the office supply store.
If you’re ready to start getting your estate in order and secure your assets for the “worst-case” scenario, please give our office a call at 630-585-5200 or 800-310-3100. Your first consultation is absolutely free. We’ll let you know what steps you need to take, right now, to protect yourself and your family. Call now.
Rick L. Law, Attorney, Estate Planner for Retirees
Rick was named the #1 Illinois elder law estate planning attorney by Leading Lawyer Magazine. He has been quoted in the Wall Street Journal, AARP Magazine, TheStreet.com, and numerous newspapers and articles. Rick is the lead attorney for Law Elder Law, LLP, focusing in Estate Planning, Guardianship, and Nursing Home Solutions. His goal is to give retirees an informed edge when it comes to dealing with an uncertain future. Get flexible retirement strategies that work during good times and bad, plus information on how you can save your home and assets from being used to pay for long term care. Conveniently located off I-88 across from the Aurora Premium Outlet Mall. Call 630-585-5200 or 800-310-3100 for your free consultation now!
“Everyone in the office was absolutely wonderful to work with whether on the initial set-up of the trust, adjustment to such following my father’s passing, or processing of his home sale and proceeds.
They genuinely care for your family’s well-being and walk you through each step of the process. They are also exceptionally responsive even when parties involved live in different locations.
This is a definitely a team you can trust and one I highly recommend.”
W.W., Client of Law Hesselbaum