How to Use a Revocable vs Irrevocable Trust for Estate Planning

Posted by smith clea on February 19th, 2020

Often times people create a revocable or irrevocable trust for the following reasons:

• You want to pass on assets without your family going through probate. Unlike wills, revocable living trusts avoid the need for probate which can save you a lot of money, time, and stress in the long run.
• You want to create a plan for managing personal or business assets if you become incapacitated.
• You want to keep aside assets to care for a dependent who has special needs.
• You want to establish rules or requirements beneficiaries must meet to receive their inheritance.
• You want to keep assets for the care of minor children in the event that you pass away or become incapacitated.
• You want to reduce possible estate and gift taxes.

The terms "will" and "trust" are often confused and used interchangeably. But they're different and have different meanings. It's important to make a clear distinction between the different types of trusts that are available. The estate plan that suits you best often comes down to your specific need and unique situation.

Revocable living trusts

Revocable living trust are some of the most popular types of trusts in estate planning because of their combination of protection and flexibility. The individual who creates the trust, also known as the grantor, places their assets in the name of the trust and manages it as the trustee while they are still living.

When the grantor dies or becomes incapacitated, the person they named as successor trustee steps in to manage the day-to-day of the trust and distribute the assets to the beneficiaries according to the grantors wishes. It can also be changed at anytime by the grantor prior to their death. This is what makes these types of trusts so flexible.

One of the biggest benefits of a revocable living trust over a will is that it avoids probate court. Probate court is a public process that can be expensive and cause a lot of stress for your family. It is also a public process. Because a living trust avoids probate court, all of your assets will remain private and they will be transferred to your beneficiaries privately.

Irrevocable trusts

Irrevocable trusts can’t be changed after they’ve been created. When you fund an irrevocable living trust and transfer your property into it, you place that property into the care and control of someone else you've named as trustee. You can't move out of it and typically it is very hard to "undo" the trust.

Irrevocable trusts have some benefits and unique tax implications that can make them suitable for individuals seeking certain tax or credit shelters. Irrevocable trusts are also used in certain cases to take care of special needs family members.

Read more : Revocable vs irrevocable living trust explained by a professional attorney.

Conclusion

Before choosing whether a revocable vs irrevocable trust is best for you, it is best to set up an initial consultation with a trust attorney. A trust attorney focuses their practice in estate planning and helps clients set up the right type of trust based on their unique estate planning goals.

A trust can be a very useful tool to protect your family and your assets, but it is best to consult with a professional due to the complexity of trust law.

consult Rochester law center