Revocable vs. Irrevocable Living Trust
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When establishing your estate plan and considering your asset protection options there are a lot of things so consider before we can establish which trust is best for you. Phelps Law understands and works with all kinds of trusts, including revocable and irrevocable trusts for estate planning. It may be confusing or hard to decide what life will look like for your loved ones after you pass. We are here to help you determine the best options available to you and your loved ones.
Revocable Living Trusts
These are the most common types of trusts created for individuals. A revocable living trust is a tool that helps you decide who will receive your property once you die. There are some key simple aspects to this type of trust including:
- It is called a living trust, because the trust is created while the trustor is alive and mentally well.
- As life transitions, years go by since your first meeting to produce a revocable living trust, you may want to change certain parts of it. There may have been situations that arise to make your assets shift, or with your trustee who would take it over may have had circumstances change. In these cases, it is good to have a revocable living trust because you are able to change the details of your trust as circumstances arise.
- The trust itself does not need to have a taxpayer identification number as the person who creates the trust and the trust have the same social security number. Taxes on the trust are filed through the trustors form as though the person continued to have personal ownership of the assets.
- The trust becomes automatically irrevocable when the trustmaker dies because they themselves can no longer make changes to the trust.
There are various other aspects of the revocable living trust, but this is usually the most commonly used trust.
Irrevocable Living Trust
This trust is less common, but can be confused with the revocable living trust. This type of trust is more of a gifting trust. Some common aspects of the irrevocable living trust include:
- Assets in the trust are no longer the trustors, but will be essentially give aways.
- Part of a more complex estate planning plan to increase tax strategies
- Your estate will not be taxable then when the trustor dies.
- Protects a person from lawsuits, as their assets would then be protected due to the assets no longer belonging to the trustor.
- Changes cannot be made to this type of trust.
With the various types of trusts, it may be best to make an appointment with Phelps Law to help you determine the best documents for your needs.
Images used under creative commons license – commercial use (7/3/2017) Kat Grigg (Flickr)