What is the Difference Between a Revocable Trust and an Irrevocable Trust?
A trust is a separate legal entity a person sets up to manage her assets. Trusts are created to assure that assets are used in a way the owner deems appropriate after their passing. It is common for some to use a trust instead of a will for estate planning. Trusts help families reduce tax burdens and lengthy probate processes.
A revocable living trust is also referred to as a living trust. The owner of a revocable living trust may modify the terms of the trust at any point throughout their lifetime. Some individuals may change beneficiaries or modify conditions in which assets are to be managed within the trust. Another bonus of having a revocable trust is that it doesn’t go through probate court. This type of trust can save your family valuable time and money. Overall owners retain control over a revocable trust, but that does not mean it’s protected from lawsuits or creditors. In the event an owner is sued, the trust can be ordered liquidated by a judgment. Additionally, the assets in the trust are subject to state and federal estate taxes when the owner of the trust dies.
An irrevocable trust generally cannot be altered once the agreement is signed. Only under rare circumstances approved by the court can an irrevocable trust be changed. The primary reason one may opt for an irrevocable trust is for tax purposes. Assets in this type of trust are not subject to estate tax upon death. The benefactor is relieved from paying estate tax on any income generated by the assets following the original owner’s death.
Consult about Trusts with Estate Planning Lawyers at Carlson & Work
The type of trust you need depends on your current situation and future financial goals. This decision requires serious consideration. Find the right trust and estate attorney to help you protect your assets and establish an estate planning strategy.