The decision to plan a trust can be an overwhelming one. Most people do not know where to begin. Researching the topic may prove unhelpful if they cannot decipher unfamiliar legal terms.
One of the most basic distinctions among trusts is whether the trust is revocable or irrevocable.
What is the Difference Between a Revocable Trust vs. an Irrevocable Trust?
A revocable trust is one that can be amended or terminated by the person who created it. An irrevocable trust cannot be changed or terminated.
The Benefits of Revocable Trusts
Revocable trusts are also known as living trusts because they can be altered or revoked while you are alive but become irrevocable after death. These trusts allow you to use the assets for your benefit during your life and distribute them after your death.
Revocable trusts allow your beneficiaries to take title to your assets after you die without having to go through probate court for permission.
This is a faster way to transfer assets than a will. It also preserves your financial privacy since, unlike wills, trusts are not public documents.
While the trust creator is alive, a revocable trust can be amended to name different beneficiaries and include different terms. They can also add and remove assets.
For those with enough assets to worry about estate taxes, a revocable trust may not be the best option. Assets in a revocable trust are part of the taxable estate and can increase the total estate tax due.
A revocable trust becomes irrevocable when the trust creator dies and, absent special circumstances, the trust terms can no longer be changed.
Irrevocable and Unchangeable Trusts
If you are eager to minimize your taxable estate and protect assets from creditors, an irrevocable trust may be a better option.
An irrevocable trust generally cannot be altered after it is created.
Irrevocable trusts can be drafted in a way that ensures that assets transferred to the trust are not included as part of the trust creator’s estate but doing so requires that trust creator give up much of his ability to control and benefit from those assets. For that reason, irrevocable trusts are commonly used to hold and protect assets, insurance policies, and funds that the trust creator intends to pass to the beneficiaries after their death.
If you are involved in any type of estate dispute, the experienced legal team at Gaslowitz Frankel can help. We have more than 30 years of experience litigating complex will, trust and estate disputes. Contact us today for a consultation.
