Irrevocable Trusts
A revocable living trust, also called a revocable trust or a living trust, is a type of trust that can be changed at any time. The terms of the trust can be modified through a trust amendment, and you can also retain the option to revoke the entire agreement or change the contents of the agreement through an amendment or restatement. The advantages to having a revocable trust is mainly economic. Having a revocable trust will allow the trust property to be passed down to the beneficiaries, upon the grantor’s death, without having to go through the probate process. The probate process can be one of economic inconvenience as it requires you to pay court and legal fees. In addition to that, it could be a time-consuming process, ranging anywhere from a few months to a few years. Having property transferred through a revocable trust can help to avoid the whole process. Revocable trusts are also used because they maintain the privacy of the trust agreement. Unlike a will, which becomes a part of the public record, accessible by anyone, every aspect of the revocable trust remains private so that the estate, fiduciary, and beneficiaries of the trust can all be kept within private family matters. The disadvantage to a revocable trust is that all the property trust remains in the name of the grantor. Therefore, this offers no protection from creditors and the value of the estate will be taxed upon the grantor’s death. If the grantor has a debt remaining upon his death, creditors are free to go after the estate to satisfy remaining debts. If the grantor is sued during his lifetime, creditors are also free to go after the trust property, as everything remains under his name.
An irrevocable trust is a trust that can’t be changed after the agreement is singed. Irrevocable trusts also includes revocable trusts that, by design, becomes irrevocable after the Trustmaker dies. Irrevocable trusts are commonly used for estate planning goals. An irrevocable trust can be used to remove property from a person’s estate, so that the estate will not be subject to state and federal taxes upon death. This is accomplished by having the estate automatically transferred over to trustees and beneficiaries upon their death. If the property is no longer under his name, it no longer belongs to the deceased. Irrevocable trusts are also used to hide assets from creditors. Because they no longer have complete control over the estate, it is no longer available for creditors to reach. However, the beneficiaries and trustee can be within the family so that they can still benefit financially from the trust property. An irrevocable trust is also used to protect the surviving spouse and other beneficiaries upon the death of the trustmaker, as the nature of the irrevocable trust will provide them with asset protection. An irrevocable trust can also be used for charitable estate planning. If the trust maker transfer the assets into a charitable trust while they are still alive, they will receive income tax deductions for that year. If the assets are transferred after death, the trust maker’s estate will receive a charitable estate tax deduction.