First of all, Illinois does not require a Declaration of Homestead. The homestead exemption (against bankruptcy and lawsuits) is automatic by statute:
If you read the statute you will note that the exemption applies to a home owned by an individual. Since your wife transferred ownership into the living trust, then it is not owned by an individual and not eligible for the statutory exemption against lawsuits and bankruptcy.
However, since the purpose of a trust is to shield assets from creditors, the lack of homestead exemption is not a big deal.
For more information on that, consult the attorney who created the trust.
If you are referring to the type of homestead exemption that is available for property tax reduction, that's a different story and you'll have to find out from the taxing authority if the home is eligible for the tax reduction while in the trust.