Estate planning can come with many complicated choices. One of them might be whether you should set up a trust. If you do set up a trust, one of the key questions to resolve will be the difference between a revocable and irrevocable trust.
Both revocable and irrevocable trusts are legal constructs made to hold title to your assets. The grantor (you) are the creator or starter of the trust. The purpose of both types of trusts are to benefit the beneficiaries (the people you choose, like your children or your spouse). Someone called a trustee (who you choose) oversees the management of the trust. A qualified estate attorney can help guide you in the creation of both. Let us look at the differentiators between these two types of trusts.
Revocable trusts are also called “revocable living trusts,” fittingly, because they are set up by the grantor while the grantor is still living and because these trusts are changeable. In a living trust, changes, such as adding beneficiaries, or moving property into or out of the trust, are easily possible. This flexibility allows you the opportunity to manage your property while you are alive. Should you become unable to manage the property, your trust can name a trustee to manage your assets. While revocable trusts shine in flexibility, they lack in asset protection because upon your death, estate taxes and creditors can seek monetary relief from those trust assets. For asset protection, irrevocable trusts have the advantage.
Irrevocable trusts are more ironclad than revocable trusts. Once created, they are set in stone, with changes only permitted with permission from the beneficiaries.
You would transfer all the assets you wished into this type of trust, relinquishing ownership of them entirely. Now, why would anyone do that, you ask? Since these assets are no longer yours, estate tax and potential lawsuits no longer can pose a risk to these assets, and the irrevocability may also allow you to qualify for government benefits.
Trusts you can trust
Remember, trusts are legal entities created for you and your family’s unique goals. They are customizable and framed with your unique circumstances in mind, to protect you, your property and beneficiaries. An experienced probate attorney can help you in the creation of either a revocable or irrevocable trust.