Revocable Trust vs. Irrevocable Trust: Which Is Best for You?
There are many benefits to a properly funded trust. It allows you to avoid probate and minimize taxes. It provides organization, maintains control and provides for yourself and your heirs. In its most simple terms, a trust is a book of instructions wherein you tell your trusted 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. Our Modesto estate planning lawyers explain a revocable trust vs. irrevocable trust, so you will have the information you need:
A revocable trust is also known as a “living trust.” This is because it can benefit you during your lifetime. You can change it or cancel it if your circumstances or goals change. Benefits of a revocable trust include:
- You stay in control of your revocable trust. You have full control with a revocable trust. Most clients like that feature. You can transfer ownership of property into the trust and take it out. You can also serve as the trustee (the individual in charge of managing the accounts and property owned by the trust) and be the beneficiary.
- You select the back-up trustees to manage the trust if you become unable to do so and when you die. You, not the courts, select who is in charge when you need help.
- The accounts and pieces of property owned by the trust avoid probate. This is because although you may die, a trust never will. The trust will continue to be the owner of the accounts and property until the trustee has been instructed by the trust document to transfer those accounts and property to the intended recipients. By avoiding probate, you are saving your loved ones time and money, as well as keeping the details of your estate plan private.
- You determine how your beneficiaries will receive their inheritance. If your beneficiary is young, going through a divorce, bad at managing money, or has a possibility of being sued, a properly drafted trust can protect the money and property you leave the beneficiary.
Similar to a revocable trust, when you use an irrevocable trust, money and property are transferred out of the trustmaker’s individual name and into the name of the trust. However, with an irrevocable trust, you, as the trustmaker, cannot alter, change or cancel the trust after it has been signed. Additionally, to maximize the benefits of an irrevocable trust, you usually cannot control what happens to the money and property once it is in the trust.
Benefits of irrevocable trusts include:
- Accounts and property owned by an irrevocable trust have increased protections from creditors and lawsuits.
- Your personal tax liability is often reduced. This is because, in most cases, the accounts and property owned by the irrevocable trust are no longer part of your estate.
- In some cases, a trust protector can modify your irrevocable trust if there is a change in circumstances and your initial goals for the trust become frustrated.
Our Modesto Estate Planning Attorneys Can Help You With Your Estate Plan
As experienced estate planning attorneys, we can help you figure out whether a revocable trust vs. irrevocable trust is a good fit for you and your loved ones. Call us today at (209) 522-2211 to set up a virtual or in-person meeting. You can also contact us online.