What Is the Difference Between a Revocable Trust and an Irrevocable Trust?
Of all estate planning instruments, trusts are perhaps the most versatile due to the variety of goals that you can accomplish with them. For example, you can use a single trust for your own support during your lifetime and to pass assets to your heirs outside of the probate system upon your death. You can also use trusts to provide for charity, to hold the proceeds of life insurance policies, and to preserve your eligibility for certain government benefits, among many others. All trusts, however, can be split into: irrevocable trusts and revocable trusts. Both types of trusts will keep your assets out of probate, but there are a few key differences between them, and the type of trust that will work best for you will depend upon your unique circumstances.
The hallmark feature of anis that, generally, it cannot be modified after it is created without the consent of the beneficiaries or a court order. Once a settlor transfers assets into an irrevocable trust, they are no longer considered part of the settlor’s estate and he or she loses the rights of access and ownership in them. The primary benefit of an irrevocable trust is that it is an effective means of minimizing the settlor’s estate tax burden — because the settlor no longer owns the assets he or she transfers to it, those assets are no longer part of the settlor’s estate and cannot be taxed. An irrevocable trust can also be used as a form of asset protection, since the settlor’s creditors cannot reach the assets in it, nor can the trust be attached to satisfy legal judgments.
A, also known as a “living trust,” is one that the settlor may modify at any time prior to his or her death. The settlor retains rights of access and ownership in the trust assets, and any income earned by the trust is distributed to the settlor during his or her lifetime. The trust’s assets pass to the beneficiaries only upon the settlor’s death. While a revocable trust offers the settlor a great deal of flexibility in determining how to manage his or her assets, this flexibility comes at a price. The assets in a revocable trust are considered part of the settlor’s estate; therefore, it does not offer any tax benefits, and the assets in it are accessible to the settlor’s creditors. The primary advantage of a revocable trust is that it can provide a solution for settlors who become disabled or incapacitated. If the settlor reaches a point at which he can no longer manage his affairs, the designated trustee can step in and manage the estate on behalf of the settlor with minimal disruption.
Still Have Questions? Contact a Boca Raton Irrevocable Trust Attorney
If you are considering establishing a trust, you should seek the counsel of an experienced attorney who can help you decide which type will be best for you. For more information about all types of trusts, as well as what you can accomplish with them, contact a Boca Raton irrevocable trust attorney at the Ellis Law Group by or calling 561-910-7500.