A trust is an underrated estate planning component. An experienced estate planning attorney will always advice you to create a trust. A trust boast of several benefits. It makes the transfer of assets easier, it helps prevent the difficult probate process, and it helps lessen tax burdens. Before we dive deeper, let us take a look at both trusts- a revocable trust and an irrevocable trust.
What is a Revocable Trust?
Basically, a revocable trust, which is also regarded as a living trust, is a document that ascertains how your assets will be shared after your demise. This document is used to hold some of your assets for future purposes. Your assets can be anything ranging from your investments, real estate, personal possessions, etc.
A revocable trust is to be created while alive. It is important that you contact an estate planning attorney or a trust attorney when creating a trust. They can guide you through the process. After creating a trust, you are to transfer or assign ownership of your assets to the trust. Assets contained in the trust are then distributed to chosen beneficiaries after your demise. What makes a revocable trust unique is that, anytime you wish, you can decide to terminate the provision. That is why it is termed “revocable.” However, it is very important you note that when the grantor (creator of the trust and owner of the estate) dies, the revocable trust becomes irrevocable because the grantor isn’t alive to make changes. Irrevocable trust, on the other hand, is the opposite or a revocable trust.
What is an Irrevocable trust?
An irrevocable trust is a trust that cannot be altered without the knowledge of the beneficiaries designated by the grantor. If as a grantor, you decide to terminate or alter the terms in an irrevocable trust, you will have to get the go-ahead of the beneficiaries you selected before doing so. This is because having assigned ownership of your assets to the trust, you can no longer claim ownership of the assets present in the trust even if it was put there by you. It is safe to say that an irrevocable trust is a risky type of trust.
The irrevocable trust is the opposite of the revocable trust where it is possible to alter the trust. However, the grantor is stripped off benefits like creditor protection in the process.
As risky as this type of trust may seem, it has some benefits. An irrevocable trust can prevent the payment of taxes on assets placed in the trust. This is because the assets present in the trust are no longer a part of the benefactor’s taxable estate. It simply denotes that, the assets aren’t taxable after the death of the grantor. Preparing an irrevocable trust can be difficult, for this reason you need to hire a competent estate planning attorney.
Which is better for you, a revocable trust of an irrevocable trust?
Trusts are majorly used to escape huge estate taxes. When I say “huge” we are talking about several million dollars in estate taxes. So unless you are a billionaire, it is best you consider a will.
A trust can be very expensive to create. A will, on the other hand, is cheaper to create compared to a trust. So choose wisely.
Contact an Attorney to prepare your Revocable or Irrevocable Trust
A revocable trust and an irrevocable trust are two complex legal documents. You will need the help of a professional when creating these documents.
Remember, a trust isn’t a will that can easily be created with the help of an online tool. You will need someone with experience if you wish to create a trust that conforms to your wishes regarding your assets and your estate in general.
An estate planning attorney is your go-to professional when in need of estate planning advice and when you also need to create a trust (revocable or irrevocable). They boast of the experience and knowledge to assist you. They can also offer you valuable advice when needed. Contact us and we’ll provide you with the best estate planning attorney for your trust.