What should adults know about revocable and irrevocable trusts?

Adults should have an estate plan that clearly conveys their wishes for when they pass away. Part of the estate planning process involves providing instructions for who will receive which assets. This can be done in a will, but that’s not the best option in every situation.

Another option for passing down assets is trusts. There are many different types of trusts. Each are distinguished by who will receive the assets, how they will be passed down and how they’re managed. Any who’s considering a trust should ensure they know the difference between a revocable and an irrevocable trust before committing to a plan of action.

What do revocable and irrevocable trusts have in common?

Revocable and irrevocable trusts both hold assets until the creator passes away. Once that happens, the trustee distributes the assets in accordance with the instructions for the trust. Placing assets in a trust can help the beneficiaries to receive their inheritance faster because trusts don’t have to go through the probate process. By bypassing probate, beneficiaries can also benefit from privacy since the terms of the trust aren’t public record.

How do these trusts differ?

The creator of a trust maintains control of the assets in a revocable trust, but they hand over control of the assets to the trustee in an irrevocable trust scenario. Revocable trusts can be changed or cancelled, but irrevocable trusts can’t unless the creator gets the approval of either the beneficiaries or the court.

Assets that are placed in an irrevocable trust aren’t considered part of the estate, so this type of trust can reduce the value of the estate and lower estate taxes. This type of trust also has protection from creditors and legal judgements because the creator doesn’t have control over the assets.

Comprehensive estate planning involves several components. Even if a trust is in place, an individual still needs to have a will and powers of attorney. Legal assistance is beneficial in these situations so that an estate plan creator can better ensure that their wishes are clearly conveyed in a way that can be upheld in court, if necessary. Contact us online or call today for a free consultation with Pennington Law, PLLC.