Irrevocable Trusts
In the normal course of
estate planning, revocable trusts are usually recommended for individuals who
are seeking to eliminate probate requirements and retain control over the trust
property during their lifetime. Not so with an irrevocable trust. The
irrevocable trust does not allow for a change in directives once the trust is
created. This is the main difference between a revocable trust and an
irrevocable trust.
Revocable
trusts often revert to irrevocable trusts upon the death of the grantor, the
person who sets up and contributes to the trust. This ensures that your
successor trustee won’t make changes to your directives after you die. You can
also set up an irrevocable trust during your lifetime that allows you to
contribute deposits to the trust, while eliminating your ability to cancel or
change the trust.
Both
revocable and irrevocable trusts offer certain benefits for the grantors and
beneficiaries, such as eliminating the probate requirement for your will and
resolving possible areas of conflict between your beneficiaries. The main
difference between a revocable trust and an irrevocable trust is the
possibility of making changes to the directives. A revocable trust allows you to
keep your options open and restructure your designations as you like. An
irrevocable trust does not allow your beneficiary to change the provisions of
the trust after your death.
Placing
your assets into an irrevocable trust while you are living will eliminate your
options of changing your plans if you have a change of heart. Most importantly, because the trust is irrevocable, any
assets transferred into it are no longer considered to be your property. The
net result is that not only are they protected from legal adversaries and
creditors, but they're also exempt from federal and state estate taxes.
The key to deciding if the irrevocable trust is right for you is whether
or not you think you will need to restructure the trust during your lifetime.
If you are totally sure you will not need to restructure your designation, the
irrevocable trust will work for you. If this is not the case, you may want to
consider the revocable trust.
