Tips for choosing between revocable and irrevocable trusts
On behalf of Scaringi Law posted in Estate Planning on Saturday, December 20, 2014.
For individuals who are not quite ready to allow a third person to manage assets on behalf of beneficiaries, a revocable trust can be a stepping stone in the path of comprehensive estate planning.
With a revocable trust, the creator of the trust, or the trustor, can serve as the trustee during his or her lifetime. That way, the trustor can revise at will the titling of assets in the trust and the terms by which beneficiaries will receive assets or payments from the trust.
That freedom comes with a price: Since the trustor retains control over the trust assets, he or she usually won’t receive a tax benefit. Upon the trustor’s passing, however, a person named as the successor trustee can assume control of the trust, at which point it becomes an irrevocable trust.
However, sometimes having a tax benefit is desired during the trustor’s lifetime. With an irrevocable trust, the trust assets are managed by the trustee and no longer within the trustor’s control. As a result, those assets may be protected from various life circumstances, such as lawsuits, bankruptcy, creditors, remarriage or divorce.
In both types of trusts, the trustee generally does not have to file anything with the probate court, which means a greater degree of privacy than the public record of a probate proceeding. Assets in a trust can usually transferred more quickly, as well. In probate, the executor of the estate, or the person appointed to carry out the instructions in a will, must file certain paperwork with the court and send notices to creditors. Transfers in probate are often accomplished only after the estate has paid its debts and resolved creditor claims. Check out our firm’s estate planning page to learn more about trusts and probate.
Source: USA Today, “What's your retirement IQ? For most, it's lousy,” Rodney Brooks, Dec. 3, 2014