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A guide to living trustsLiving Trusts in Illinois

Wang Law Firm, LLC · David Wang, Managing Attorney · Attorney-reviewed · Updated October 2026

Read this first: ① A trust controls only the property that has actually been transferred into it; if you sign the trust documents but never move your real estate and accounts into the trust, your family may still have to go through probate. ② In Illinois, the trust document must expressly state that the trust is revocable for the settlor to have the power to revoke it (760 ILCS 3/602). ③ A revocable trust by itself generally does not save income tax and does not remove property from your taxable estate. ④ Choosing a relative who lives in China or another country as trustee may make the trust a "foreign trust" under U.S. tax law, which should be evaluated in advance. ⑤ A trust needs supporting documents such as a pour-over will, a power of attorney for property and a power of attorney for health care.

A trust is a property arrangement: the person who creates the trust (the settlor or grantor) transfers property to a trustee, who holds and manages it for the benefit of the beneficiaries according to the terms of the trust document. A "living trust" (or inter vivos trust) is a trust created and effective during the settlor's lifetime, as opposed to a "testamentary trust," which is created by a will and only comes into existence after death.

In the United States, living trusts are often used to let your family avoid or reduce probate after your death, protect family privacy, manage property over the long term for minor children or children with special needs, and allow a successor trustee to take over management if you become incapacitated. Trusts are a matter of state law, and this page focuses on Illinois. Illinois trust law is found mainly in the Illinois Trust Code (760 ILCS 3), enacted by P.A. 101-48 and in effect since January 1, 2020, replacing the former Trusts and Trustees Act.

Revocable vs. irrevocable trusts

Item	Revocable living trust	Irrevocable trust
Can it be amended or revoked?	The settlor can amend or revoke it during life	As a rule, the settlor cannot amend or revoke it unilaterally; exceptions must be based on the law or the trust terms
Who controls the property	Usually the settlor serves as trustee, and daily life changes little	The trustee manages it under the trust terms; the settlor gives up control
Avoiding probate	Yes (limited to property transferred into the trust)	Yes (limited to property transferred into the trust)
Income tax	Generally treated as the settlor's own property (grantor trust); the settlor continues to report the income	Depends on the trust design; the trust may pay its own tax, or the income may still be attributed to the settlor
Estate tax	The property is still included in the settlor's taxable estate	With proper design, transferred property may no longer be included in the settlor's estate, but gift tax may be involved
Common uses	Avoiding probate, privacy, management during incapacity, arrangements for children's property	Estate tax planning, life insurance trusts, trusts for children with special needs, and more

Illinois: the trust document must state that it is "revocable"

Under 760 ILCS 3/602, in Illinois a settlor may revoke a trust only if the trust document expressly provides that it is revocable or gives the settlor an unrestricted power to amend; a power to amend likewise must be expressly provided. This differs from some states that follow the Uniform Trust Code's default rule that a trust is revocable. So if you intend to create a revocable trust, the document must say so clearly. Revocation or amendment should follow the method set out in the trust document; if the document does not specify a method (or the specified method is not made exclusive), the trust may be revoked or amended by a separately signed written instrument (other than a will) that expressly refers to the trust.

The same section also provides that the settlor's agent may revoke or amend the trust only if the power of attorney expressly authorizes it and the trust document does not prohibit it; a guardian needs a court order. Keep this in mind when designing the accompanying power of attorney for property.

Why use a trust: avoiding probate and protecting privacy

Property that passes by will must go through the court's probate process (see A guide to wills), and during that process your family often cannot freely use the property. Property held in a trust is managed and distributed directly by the successor trustee under the trust terms after the settlor's death, usually without step-by-step court approval.

Time and procedure: some steps of probate are eliminated, and your family can deal with the property sooner;
Privacy: a will generally becomes a public record once filed with the court, while a trust document usually does not need to be filed, so the property and how it is distributed are not made public (though the trustee still has duties to inform and report to the beneficiaries);
Real estate in multiple states: if you also own real estate in a state other than Illinois, transferring it into the trust can often avoid a second, ancillary probate in that state;
Incapacity: if the settlor loses the ability to manage their affairs because of illness, the successor trustee can take over management of the trust property under the trust terms, reducing the need for an adult guardianship.

A trust is not a cure-all: creating and maintaining a trust involves some cost and paperwork, and a trust does not eliminate debts. Under 760 ILCS 3/505, property in a revocable trust is subject to the claims of the settlor's creditors during the settlor's lifetime, and after the settlor's death it may also be used to pay debts and expenses when the probate estate is insufficient. For people with modest assets and a simple family structure, a will plus beneficiary designations, a TODI and similar arrangements may be enough. Whether you need a trust should be decided in light of your overall family situation.

Funding the trust: the most commonly overlooked step

Signing the trust document is only the first step. A trust affects only property that "has been transferred into the trust's name." How common assets are usually handled:

Asset	Usual approach	Points to note
Illinois real estate	Sign and record a new deed transferring title to the trustee	If there is a mortgage, review the loan terms first; check whether title insurance, homeowner's insurance and the homestead exemption are affected
Real estate in other states	Transfer by deed under that state's law	Requires help from a lawyer licensed in that state or a title company
Bank and brokerage accounts	Retitle the account in the trustee's name, or open a trust account	You can also name the trust as beneficiary through a POD/TOD designation; each approach has pros and cons
401(k)s, IRAs and other retirement accounts	Generally not retitled; handled through beneficiary designations	Naming a trust as beneficiary raises tax issues; confirm with a tax advisor
Life insurance	Handled through beneficiary designations	For large policies, consider an irrevocable life insurance trust (ILIT), which requires professional design
Corporate shares, LLC interests	Transfer according to the articles, bylaws or operating agreement	First check for transfer restrictions or whether other owners must consent
Property in China or other countries	Must be handled under local law	Foreign institutions may not recognize a U.S. trust; consult a locally licensed lawyer

Property not transferred into the trust is usually swept into the trust by the accompanying "pour-over will," but that property still has to go through probate. So after creating a trust, make a list of your assets and transfer them one by one, and remember to take title to newly acquired assets in the trust's name.

The trustee: duties and choosing the right person

A trustee owes the beneficiaries a legal fiduciary duty, which mainly includes the duty of loyalty (acting in the beneficiaries' interest, not the trustee's own), the duty of prudent management and investment, impartiality among beneficiaries, and keeping proper records and reporting to the beneficiaries. A trustee who breaches these duties may be liable for damages.

In a revocable living trust, the settlor usually serves as the initial trustee (spouses can serve jointly) and names one or more successor trustees. When choosing a successor trustee, consider:

Whether the person is trustworthy, has basic financial and administrative skills, and is willing to take on the job;
Whether the person lives in the United States: the trustee will need to deal with U.S. banks, tax authorities and beneficiaries, and living abroad long-term makes this harder;
The "foreign trust" risk under tax law: if a non-U.S. person (for example, a relative in China) controls substantial decisions of the trust, the trust may be treated as a foreign trust under U.S. tax law, with much more complex reporting and tax consequences. International families should check with a tax advisor before choosing a trustee;
Consider having a family member serve together with a professional trustee (a bank trust department or trust company), or setting up mechanisms such as a trust protector.

Trusts for minor children and children with special needs

Minor children

Minors cannot manage significant property themselves. Without a trust, property left to a minor child often requires the court to set up a guardianship of the estate, supervised by the court, and the child gains full control once reaching adulthood. With a trust, you can:

Name who will manage the child's property, separately from the guardian who cares for the child day to day;
Specify that funds may be used for education, medical care and living expenses;
Distribute in stages, for example part at one age and the rest at a later age;
Set up a common trust for several children (a pot trust) that is allocated according to actual needs, and divided equally once the youngest child reaches adulthood.

Children with special needs

A child with a disability who needs long-term care may, by inheriting property directly, exceed asset limits and lose means-tested public benefits such as Supplemental Security Income (SSI) and Medicaid. A common approach is to create a supplemental needs trust (also called a special needs trust): the trustee pays supplemental expenses for the child beyond what public benefits cover, rather than giving the money to the child directly.

A supplemental needs trust funded by a third party such as a parent is subject to different rules from a trust funded with the disabled person's own assets; the latter usually must repay the Medicaid costs paid during the beneficiary's lifetime after the beneficiary's death. The terms and use of funds of such trusts require professional design and should be reviewed periodically as benefit rules change.

Supporting documents: a trust is not a single document

Document	Purpose	Illinois basis and key points
Pour-over will	Transfers property not yet in the trust at death into the trust after probate; can also name a guardian for minor children	755 ILCS 5/4-4 allows a will to leave property to the trustee of an existing written trust; even if the trust is later amended, the gift is administered under the amended terms (unless the will provides otherwise)
Power of attorney for property	If you become incapacitated, your agent handles financial matters outside the trust	Illinois Power of Attorney Act (755 ILCS 45); the statutory short form must be notarized and also have at least one witness, and unless otherwise provided it remains effective after you become incapacitated
Power of attorney for health care	Names a health care agent to make medical decisions when you cannot communicate	Article IV of 755 ILCS 45; requires one witness aged 18 or older, and the statutory form itself does not require notarization; your attending physician and certain others cannot serve as witness
Living will	States whether you want life-sustaining treatment in a terminal condition	Illinois Living Will Act (755 ILCS 35)
HIPAA authorization	Allows designated people to obtain your medical information	Makes it easier for family to communicate with hospitals

There are restrictions on who may witness a power of attorney; for example, the agent and the agent's relatives cannot serve. The power of attorney provisions have been amended in recent years, so check the current statute when signing. A power of attorney for use in China or another country often also needs a locally accepted format and notarization and authentication.

Trusts and taxes: principles only

A revocable trust does not save income tax: during the settlor's lifetime, a revocable trust is generally treated as the settlor's own property, and the income is reported by the settlor as usual;
A revocable trust does not reduce your estate: at the settlor's death, the trust property is included in the taxable estate;
Irrevocable trusts: can be used as an estate tax planning tool, but transferring property may require a gift tax return, and the settlor essentially gives up control, so proceed with care;
Illinois estate tax: Illinois has its own state estate tax, with an exemption far lower than the federal one, and unused exemption cannot be transferred between spouses. Trusts for married couples often need specific design to address the state estate tax;
Non-citizen spouses and foreign trusts: when a spouse is not a U.S. citizen, the unlimited marital deduction for federal estate tax is limited, and a qualified domestic trust (QDOT) may be needed; where a foreign trustee or foreign beneficiary is involved, there are additional reporting requirements. See Estate planning for cross-border families.

Tax rules are complex and change, and our firm does not provide case-specific tax advice. When creating a trust, we recommend working with your accountant or tax advisor.

How we can help

Evaluate whether you need a trust, or whether a will plus beneficiary designations is enough;
Draft a revocable living trust that complies with the Illinois Trust Code, together with a pour-over will, power of attorney for property, power of attorney for health care and other supporting documents;
Design property-management provisions for minor children and children with special needs;
Help prepare deeds transferring Illinois real estate into the trust, and provide a checklist for transferring other assets;
Where a non-citizen spouse, foreign trustee or overseas assets are involved, coordinate with tax advisors and local counsel.

Frequently asked questions

If I have a trust, do I still need a will?

Yes. You will usually have a pour-over will to sweep any property not yet transferred into the trust, and to name a guardian for minor children in the will. Only the property that passes through the pour-over will still has to go through probate.

Can I still sell my house after putting it in a trust? What about the mortgage?

When you serve as trustee of your own revocable trust, you can still sell or refinance in your capacity as trustee. Before the transfer, check the lender's and title insurer's requirements, and confirm whether the property tax exemption or similar benefits need to be reapplied for.

Can a trust help me avoid taxes?

A revocable trust generally neither saves income tax nor reduces your taxable estate. An irrevocable trust can be used for estate tax planning in certain situations, but you give up control of the property, and whether it saves tax depends on the specific case; evaluate it together with a tax advisor.

Can a trust protect my property from creditors?

Property in a revocable trust generally cannot be shielded from the settlor's own creditors. Some irrevocable trusts can give beneficiaries a degree of protection, but transfers made to evade existing debts may be set aside. Do not use a trust as a way to avoid paying debts.

Can I put my real estate in China into a U.S. trust?

Whether a U.S. trust can hold real estate in China, and what procedures are required, depends on Chinese law and the requirements of the registration authorities; our firm does not advise on Chinese law, so please consult a lawyer licensed in China. In practice, a common approach is to arrange property in China separately under Chinese procedures and coordinate it with the U.S. trust and will.

My parents live in China. Can I name them as trustees?

The law does not prohibit it, but in practice there are many difficulties: dealing with U.S. banks and tax authorities is inconvenient, and having non-U.S. persons control substantial decisions of the trust may make it a foreign trust for tax purposes, with complex reporting and tax consequences. More commonly, someone living in the United States serves as trustee, or serves together with a professional trustee.

Is my Illinois trust still valid after I move to another state?

Generally yes, but the new state's law may differ on trustee duties, taxes, real estate and other matters. After a move, it is best to have a local lawyer review the trust and amend it if necessary.