You may already be aware of the benefits of having a trust. You can avoid probate, minimize taxes, and provide for your heirs. Trusts also give you organization and control over what happens to your estate when you die.
A living trust means that it is created while you are still alive. The person who creates the trust is known as the grantor. Trusts can be drawn up in a number of ways.
Read on to learn how to decide between a revocable living trust and an irrevocable living trust.
What Is a Revocable Living Trust?
A revocable living trust allows you to make changes, or “revoke” the trust. You maintain control over your assets and avoid probate. You also determine when and how your beneficiaries receive their inheritance.
You may have a situation where you want to change the person who manages your trust’s assets upon your death, also known as the trustee. Or you may want to change your beneficiaries in the future.
With a revocable trust, you can also plan for incapacity or mental disability. This allows a successor trustee to manage the trust’s assets. You can provide specific instructions for how to administer the trust’s assets according to your wishes.
What Is an Irrevocable Living Trust?
Like a revocable trust, an irrevocable trust will also avoid probate and help with incapacity. However, you give up control of the assets when the document is signed. An irrevocable trust is considered a completed gift to the beneficiaries.
Assets placed in an irrevocable trust are no longer considered under the control of the owner. They are instead considered to be an asset of the trust and not included in the value of an estate.
Which One to Choose?
There are advantages to both revocable and irrevocable trusts. The one that you choose depends on your goals for the trust.
Probate: Either a revocable or irrevocable trust will avoid probate.
Trustee and Beneficiaries: A revocable trust will allow you to change your trustee or beneficiaries and will give you more flexibility.
Protecting Your Assets: If your profession has a high likelihood of a lawsuit, you can place your assets in an irrevocable trust to protect the assets.
Government Limits for Programs: If you are above the asset or income limitations for Medicaid or Social Security Disability, you can place your assets in an irrevocable trust.
Estate Taxes: If your estate exceeds the estate and gift tax exemption, you can place your assets in an irrevocable trust to reduce the tax liability of your estate.
Estate Planning For Your Needs
No matter which route you choose, creating a trust gives you a degree of privacy over your plans for your estate. The terms of your irrevocable or revocable living trust are between you and your estate planning lawyer. Your estate planning should begin with an experienced attorney who can help you meet your goals.