Asset Management for the Incapacitated

This is Dial Law on with information on asset management for the incapacitated which describes how you may plan ahead to ensure that your property will be appropriately managed if you are incapacitated by accident or illness. All of this information applies to Illinois law only. If you are not a resident of Illinois, we suggest you contact your local county bar association.

Guardianships, powers of attorney, and specially drafted trusts are ways to help care for the financial and personal needs of persons who are unable to take care of themselves. It is important to choose the best method for your own particular situation.

If you have substantial assets that may be a management burden to you or your family, you may want to consider setting up a trust. While today you can handle the management of your property yourself, you are concerned that an accident or illness may make it difficult for you to continue to manage your affairs. At that time, you would like to turn over possession and management of your assets to another person, bank or other financial institution.

A declaration of trust is one way to deal with this contingency. Such a trust is simply a document by which you declare yourself the trustee of all your assets and name a successor trustee, either an individual or a bank or other financial institution, to act as trustee if you cannot. Remember, you can add to or withdraw assets from the trust at any time.

With this type of trust, you transfer your assets from yourself as owner to yourself as trustee. If you become injured or ill and are unable to handle the management of those assets, the successor trustee you have selected and named in the trust will assume control and manage the assets for your benefit. When you die, your successor trustee will follow the terms of the trust in making designated income and principal payments and distribution to your family members or other named beneficiaries. The trustee may also attend to the filing of death tax reutrns and payment of taxes and other liabilities as specified in the trust.

Moving to another state will not invalidate your trust. The successor trustee will act for the beneficiaries regardless of your residence at death.

Many people do not want to be the trustee of their own assets, either because they lack the skill to supervise their own investments or because they do not want to be burdened with the management. A trust agreement naming another individual or bank to act right away is one way to solve this problem. Under this kind of trust agreement, the trustee may take title and possession of your assets at the time of the execution of the agreement and manage them on your behalf, in accordance with your instructions. Such a trust becomes effective as soon as it is created. In creating such a trust, you may wish to keep the power to alter, amend or revoke the trust at any time--such a trust is commonly called a revocable trust. Alternatively, you may wish to transfer assets to an irrevocable trust. Such a trust cannot be changed, however, an irrevocable trust may reduce taxes.