While each will and trust expresses the unique wishes of the people who create them, they also contain standardized provisions that help the documents serve their intended purpose and comply with legal requirements.
Wills and trusts can accomplish the same purpose and may contain similar clauses, but they operate differently, and each has distinctive provisions not typically found in the other.
The Chicago estate planning attorney at Plan Forward Legal has learned that a general understanding of estate planning documents and how they work helps clients appreciate the benefits of planning ahead. This blog discusses the common clauses that are included in wills and trusts, why they are important, and what they are intended to accomplish.
Common Clauses Found in Wills
The primary function of a will is to transfer property at death. A will does not become effective until its creator dies. A court must declare the will valid and typically oversees its administration.
Wills created in Illinois usually contain the following provisions:
Appointment of Personal Representative
The personal representative (executor) is the person or persons you appoint to administer your will. An executor is typically a trusted friend or family member willing to inventory your property, settle your final debts, and distribute the remainder as directed by your will.
Guardianship Clause
A guardianship clause allows you to appoint the person or persons you would like to care for your minor children in the event of your untimely death. While not a guarantee, your guardianship appointment serves as a strong recommendation to the court, which would otherwise be left to make a best guess without knowing your preferences.
Specific Gifts of Property
This is the section where gifts of specific property are made to specific people, like $10,000 to Sally or my 1965 Ford Mustang to Johnny. Property descriptions need to be specific enough so that the gift can be readily identified and there can be no doubt about your intentions. Specific gifts of unique items are usually the last to be abated if an estate lacks sufficient assets to pay all beneficiaries.
Residuary Clause
A residuary clause distributes all the remaining property after specific gifts are made and debts and other expenses paid. A residuary clause acts as a catch-all for property that may not have otherwise been accounted for and makes sure it will go to the people you select. Beneficiaries named to receive the residuary typically take in equal shares unless a more specific proportionate distribution is indicated.
No Contest Clause
No contest clauses disinherit a beneficiary who challenges the validity of the will. They are included to discourage conflict during the administration of the will. In Illinois, the clauses are generally enforceable only if the beneficiary’s challenge is unsuccessful. Effective no contest clauses must be stated clearly. Courts don’t like disinheriting people and will side with the beneficiary if the clause is ambiguous.
Attestation Clause
In Illinois, a will needs to be signed by the creator (testator) and two witnesses to be valid. An attestation clause is a statement by the witnesses that the testator signed or acknowledged signing the will, and the testator appeared to be of sound mind at that time.
Attestation clauses allow courts to admit wills as valid without the need to locate witnesses and obtain live testimony. A will need not be notarized in addition to containing an attestation clause.
Common Clauses Found in Trusts
Trusts can be set up and operate during the lifetime of the creator (grantor) or may come into existence only after the grantor dies. Though they may have different purposes, all trusts must contain specific common provisions.
Appointment of Trustee
A trustee is the person or institution appointed to manage the property held in trust. When a revocable living trust is created, the trustee is typically the grantor during the grantor’s lifetime. A successor trustee is appointed to manage the trust and distribute trust property after the grantor dies.
When trusts are created to preserve wealth or achieve tax benefits, appointment of the trustee must comply with legal requirements to fulfill the purposes of the trust.
Amendment or Revocation
An amendment clause specifies which parts of the trust may be changed and the circumstances that authorize changes. A revocation clause addresses whether and under what circumstances the trust itself may be revoked or terminated.
Trust revocability is an important consideration when creating an estate plan. Revocable trusts are not considered the owners of trust property and do not provide asset protection or tax benefits. Irrevocable trusts create a separation of ownership and can be used to minimize taxes and protect wealth.
Trustee Powers and Duties
The standard duties and powers of a trustee are outlined in Article 8 of the Illinois Trust Code. A trustee’s power and duties clause provides a trustee with more specific direction, particularly for managing the trust property or meeting the beneficiaries’ needs.
Third parties dealing with a trustee can more easily rely on clear proof of authority contained in the trust document, thereby facilitating efficient trust management and avoiding unnecessary delays.
Spendthrift Clause
Spendthrift clauses protect a beneficiary’s interest in trust property from outside third-party claims before the beneficiary takes control of the property. As long as they prohibit both voluntary (like pledging a future interest) and involuntary transfers (like creditor claims) of a beneficiary’s interest, spendthrift clauses will be enforced under Illinois law.
Indicating that a beneficiary’s interest is held subject to a “spendthrift trust” is sufficient to invoke the statutory protection. However, the protection lasts only until the trust property is distributed or the beneficiary has the right to receive it.
Distribution Clause
Distribution clauses direct the trustee on when and how to distribute trust property. Distribution clauses may require mandatory distributions on a regular or annual basis. A trustee may be given discretion to make distributions. Distributions may be guided by a standard, such as for the health, education, maintenance, and support of a beneficiary.
Determining when and how distributions are made depends on the granter’s goals and the beneficiaries’ needs.
Whether it’s Time to Create or Update, Chicago’s Plan Forward Legal Can Handle All Your Estate Planning Needs
After reviewing the common clauses, you should have a better grasp of the standard elements that make up a will or trust. There are numerous ways to modify a basic will or trust to fit particular circumstances and objectives. Precise drafting is essential to ensure your estate planning documents achieve the desired results.
At Plan Forward Legal, we take the time to understand what our estate planning clients want to accomplish so we can recommend the tools and strategies that will best meet their needs. Call Plan Forward Legal for comprehensive estate planning services in the Chicago area.
