One of the best ways to avoid an estate dispute and hiring a fiduciary litigation firm like Gaslowitz Frankel is to have your affairs in order. If you are considering your financial future and working without a trust or estate attorney, you may want to read on to discover ins and outs of revocable and irrevocable trusts.
What Is a Revocable Living Trust?
A revocable living trust is a flexible estate planning tool that allows the grantor to maintain control over their assets during their lifetime. In other words, if you are the one who establishes the trust, you are free to revoke or change the trust at any point (as long as you remain competent). . This flexibility makes it a great option for anyone who thinks they may want to add or remove trust beneficiaries, or remove property from the trust in the future.
With revocable trusts, it’s common for grantors to name themselves as trustee, which gives them the ability to have full use and control of their property while they’re alive.
Once a grantor passes away, their revocable trust will automatically become irrevocable, meaning that it cannot be revoked or changed from that point forward. This gives grantors full control of their trust during their lives, after which, their wishes for the distribution of any remaining trust assets to their beneficiaries can be fulfilled. There are a couple of downsides, however. First, assets in a revocable trust are considered part of the grantor’s taxable estate, meaning that the assets remaining in the trust at the grantor’s death will be subject to estate taxes. Additionally, the trust assets will be subject to creditor claims – leaving your legacy at risk of falling apart before it has a chance to help your loved ones.
Related Article: When You Need a Trust Litigation Attorney in Georgia
What Is an Irrevocable Living Trust?
In contrast, an irrevocable trust represents a more permanent commitment. Once established, its terms can only be changed under specific circumstances. A good estate planning attorney can help you create an irrevocable trust that makes up for its lack of flexibility by providing increased asset protection and better tax planning.
Irrevocable trusts provide creditor protection, meaning that the trust assets cannot be subject to the grantor’s debts or legal claims. That’s because assets in an irrevocable trust are deemed to belong to the trust, not the grantor. This means that if the grantor passes away with major debt, the trust assets cannot be claimed in payment of those debts.
This same concept affords an advantage to irrevocable trusts that revocable trusts cannot provide. . Because irrevocable trust assets are not considered part of the grantor’s estate, they are not subject to estate tax. This makes irrevocable trusts a popular choice for individuals whose estate value is over the federal tax exemption. Irrevocable trusts can potentially minimize your estate taxes and maximize the inheritance received by your beneficiaries as a result.
How to Choose Between a Revocable and an Irrevocable Living Trust
The choice between a revocable and an irrevocable trust depends on each person’s unique situation. Ultimately, your choice will likely hinge on three main factors:
Flexibility vs. Structure:
If the ability to make changes to your trust throughout your lifetime is important to you, a revocable living trust is likely your best option. But if you are looking for a trust structured to remain constant over many years, , an irrevocable trust may be the better choice.
Asset Protection:
Asset protection can mean different things for different people. If you don’t have much debt or legal exposure, you may be suited to use a revocable trust. However, if you are concerned that the inheritance you set aside for your loved ones may be claimed by your creditors, an irrevocable trust may be the preferred choice..
Estate Tax Considerations:
Depending on your estate’s size, an irrevocable trust might be more attractive since it can significantly reduce estate taxes. And if your estate exceeds the federal tax exemption, a revocable trust could be the better choice, as it’ll give you more freedom in the short term. Consulting with an estate planning attorney can help you decide what option will best meet your needs.
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Connect With A Trust Litigation Attorney
Here at Gaslowitz Frankel, our goal is always to advocate for the best outcome for our clients. The key to a successful litigation outcome is connecting with a trust litigation attorney from the very beginning.
If you are seeking help finding a resolution for a will and trust dispute, we’re here to help. Contact us by filling out our contact form for a free consultation about your case.
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