Posted by: The Life and Legacy Planning Group
Trusts allow you to avoid probate, minimize taxes, provide organization, maintain control, and provide for yourself and your heirs. In its simplest terms, a trust is a book of instructions wherein you tell your people what to do, and when.
While there are many types of trusts, the major distinction between trusts is whether they are revocable or irrevocable. Let’s take a look at both so you’ll have the information you need:
Revocable Trusts. Revocable trusts are also known as “Living Trusts” because they benefit you during your lifetime and you can alter, change, modify, or revoke them if your circumstances or goals change. They are generally used for estate planning purposes, as Will substitutes, because they accomplish estate planning goals and objectives that Wills can’t.
- You stay in control of your revocable trust. You, as the “settlor” (the person who creates the trust) can transfer assets into a trust and take assets out, serve as the initial trustee, and be the beneficiary. You are in control.
- You select successor trustees to manage the trust if you become incapacitated, thus avoiding the necessity of guardianship proceedings.
- You select successor trustees to manage the trust and distribute your estate after your death.
- Your trust assets avoid probate. This makes it difficult for creditors to access assets since they must petition a court for an order to enable the creditor to get to the assets held in the trust. Most of our clients want to protect their beneficiaries’ inheritances.
Irrevocable Trusts: When irrevocable trusts are used, assets are transferred out of the settlor’s estate into the name of the trust. Even though you are the settlor, you cannot alter, change, modify, or revoke this trust after execution. It’s irrevocable and you generally can’t be in control. These trusts are not generally used as Will substitutes, but rather to accomplish other objectives, such as tax reduction, protecting retirement assets for the next generation, protecting lifetime gifts to children or grandchildren, creative uses of life insurance proceeds, managing business assets, etc.
- Irrevocable trust assets have increased asset protection and are kept out of the reach of creditors.
- Taxes are often reduced because irrevocable trust assets generally are no longer a part of your estate.
- If you choose, Trust Protectors can be included and given the power to modify your trust if the goals of the trust are frustrated.
As experienced estate planning attorneys, we can help you figure out whether a revocable or irrevocable trust is a good fit for you and your loved ones. Call us today to set up a meeting.