There are many different paths you can take while estate planning. One path you may choose to take is creating a trust, a type of legal arrangement where the ownership of certain assets are transferred to an appointed trustee.
You have a number of options to choose from but the two most common types of trusts are a revocable trust or an irrevocable trust. Both types of trusts have their benefits but one may be better suited than the other for your unique needs.
What is a Revocable Trust?
A revocable trust, also called a living trust, is the most common type of trust. A revocable trust is created while you are living and details how your assets will be handled. This trust can also allow you, the settlor, to remain in control of the trust and the assets until you pass away or in the event you become incapacitated.
One primary advantage of a revocable trust is the flexibility, the settlor has the ability to change the terms at any time. This could include removing or adding beneficiaries, or modifying how the assets in the trust are managed. Also, depending on the state, the size, and simplicity of the estate, a revocable trust can also help avoid the probate process. While this type of trust allows you to maintain control, it does not provide the same level of asset protection from estate taxes, like an irrevocable trust would.
What is an Irrevocable Trust?
Just like the revocable trust, an irrevocable trust is created to determine how your assets will be handled after you pass or in the event you become incapacitated. But unlike a revocable trust, once the trust is established, it is a difficult, and sometimes lengthy, process to modify the terms and the settlor does not have any control.
While an irrevocable trust may not be as flexible as a revocable trust, it still has its benefits. If you are worried about taxes, you may choose an irrevocable trust since the assets may avoid certain estate taxes. Another benefit is that in the event of a lawsuit, an irrevocable trust can prevent creditors from coming after the assets.
Which Trust Is Right for You?
Determining whether a revocable or irrevocable trust is the right fit for you should be considered carefully after a number of different factors. Understanding the differences of each option allows you to make choices that best align with your goals and provide security for your loved ones.
You may want to consider a revocable trust if you:
- Want the flexibility to change the terms of your trust at any time.
- Want the ability to be in control of your assets while you are able to.
- Want the possibility of avoiding probate.
You may want to consider a irrevocable trust if you:
- Want your trust to be harder to modify without the beneficiary’s permission or by court order.
- Want to avoid estate taxes on the assets in your trust.
- Want to have asset protection in the case of any potential lawsuits.
Contact Centonzio Law Today to Go Over Your Estate Plan
If you are considering establishing a trust, knowing the differences between revocable trusts and irrevocable trust is important. It is essential to consult with a qualified estate planning attorney to help you navigate the complexities of trusts. If you would like to further discuss these trust options or go over other estate planning options, call us at 816-710-9455 or contact us online to schedule a consultation with Centonzio Law PLLC.