Trust creation is an integral part of financial planning. It allows individuals to secure their assets, plan for their future, and ensure their legacy is preserved. One particular state that stands out with respect to trust laws is Illinois. A financial advisor may wonder: Why should we recommend trust creation for our Illinois-based clients? This blog post will address the reasons behind Illinois' advantageous trust laws and why they should be considered.

Illinois offers some of the most robust, forward-thinking trust laws in the country. Its legislation embraces a progressive approach to trusts, allowing for flexibility, asset protection, and tax efficiency.

Flexibility: The Directed Trust

In Illinois, the Directed Trusts law allows the settlor (the person creating the trust) to designate different roles to different parties - an administrative trustee, investment trustee, and a distribution trustee. This level of role specificity offers unprecedented control and flexibility. It provides the settlor with the liberty to select trustees based on their unique skill sets, which can lead to optimal trust management.

Self-Settled Asset Protection Trusts

Illinois is one of only a few states in the U.S. that permit self-settled asset protection trusts (APTs). An APT allows a settlor to establish a trust for their own benefit while shielding assets from creditors. The creation of an APT can serve as a preemptive measure against potential financial threats. This protection ensures that the wealth accumulated over a lifetime stays within the settlor's control and can be passed on to the next generation securely.

Tax Efficiency

On the tax front, Illinois has a distinct advantage. While the federal estate tax exemption in 2023 is $11.7 million per individual, many states impose their estate taxes at much lower thresholds. Illinois, however, has set a generous state-level estate tax threshold at $4 million per individual, making it one of the most tax-friendly states for trust creation. This higher threshold allows for more assets to pass down without being subject to hefty estate taxes.

Trust Modernization

Illinois also allows for trust "decanting," a process where assets are moved from an old trust into a new one with more favorable terms. This is particularly useful in cases where original trust provisions have become obsolete or no longer serve the beneficiaries' best interests.

Moreover, Illinois has adopted legislation permitting "quiet trusts". These are trusts where, under specific circumstances, the trustee is not required to disclose certain information to the beneficiaries. This can provide the settlor with a degree of privacy and control that isn't available in many states.

Longevity

Illinois has abolished the common law Rule Against Perpetuities, which imposed a legal limit on how long a trust could last. Now, a trust in Illinois can theoretically last forever. This change provides a remarkable tool for wealth transfer, as it allows families to establish a lasting legacy for future generations.

Conclusion

Financial advisors should seriously consider recommending the creation of a trust for their Illinois clients. Not only does the state provide unique benefits, but having a trust also provides peace of mind to clients. They can rest easy knowing that their assets will be managed in line with their wishes, and their future generations will be well-provided for.

Given the favorable trust climate in Illinois, advisors can showcase their expertise and provide valuable advice by guiding their clients through the process of trust creation. This not only benefits the clients but also strengthens the advisor-client relationship, enhancing trust and satisfaction.

To sum up, Illinois offers a progressive, flexible, and protective trust environment. Its laws are geared towards securing and preserving wealth in the most effective way. In a world fraught with financial uncertainties, it is these kinds of advantages that can make a significant difference in securing our clients' financial futures. It's an opportunity that financial advisors, and their Illinois clients, simply cannot afford to miss. And with GoGo Estate, your clients in Illinois can receive the benefit of a comprehensive trust at a price they can afford, all with the added benefit of built-in attorney support!