Revocable trusts are similar to irrevocable trusts with one key exception—revocable trusts are, as the name suggests, revocable. This means that the trust can be terminated or changed by the grantor of the trust as he or she sees fit. Depending on your circumstances, there are both advantages and disadvantages to having the control afforded by a revocable trust. We have outlined a few of the most important below.
Keep in mind, this blog is not intended as legal advice for your specific situation. When it comes to creating and navigating a trust, you should always consult with a skilled estate planning attorney like Christine Matus of The Matus Law Group. Give us a call today to learn more.
1) Flexible to grantor’s needs
The biggest biggest benefit to revocable trusts are their flexibility. Revocable trusts—also known as “living” trusts—can be terminated or updated at any time during your life. Revocable trusts are also more flexible than wills in many circumstances. Wills require stringent policies to be revoked or even amended. It is generally much easier to amend a revocable trust. What this means is, as your circumstances change during your life, you can update your revocable trust to better suit your needs. Conversely, an irrevocable trust cannot be changed or terminated after you create the trust.
2) May bypass probate
Probate applies mostly to wills and any property which was not properly planned for in a will or with some other vehicle. Revocable trusts are somewhat similar to wills in that they can each be revoked during the life of the grantor. Upon death, both become irrevocable. However, the property held in revocable trusts usually does not need to undergo potentially lengthy and costly probate proceedings. Revocable trusts can provide a much more efficient and flexible vehicle to allow you to distribute your property to your heirs.
Assets in a revocable trust are usually subject to creditors or legal judgments against you, such as in a personal injury lawsuit. The same ownership over the property that you maintain during life that allows you to change or revoke the trust also means the property remains accessible with regard to the satisfaction of debts. During your lifetime, creditors can petition the court to reach into your trust to satisfy any outstanding debts, and you will have little or no protection against such actions.
2) No tax benefits
While an irrevocable trust may serve to help you avoid or minimize estate taxes, since the assets will not be counted towards your estate, assets held in a revocable trust can and will likely be includable in your estate since you maintained full control over the assets during your lifetime.
If you are considering setting up any type of trust, whether revocable or irrevocable, it is essential that you consult with a knowledgeable estate planning attorney who will take the time to understand your unique circumstances and advise you on the best course of action based on your needs and goals. Contact The Matus Law Group today to learn how we can help!