Revocable vs Irrevocable: Which Living Trust Is Right For You?
A living trust is a legal document in estate planning indicating which assets are to be used for your benefit while you are still living and to whom these benefits would transfer with your passing. Living trusts are used by those desiring to avoid the administrative hassle and possible publicity involved in the probate process.
To take the most advantage of a trust, you should make sure everything you own is held in trust form. It is important to occasionally revisit your trust provisions to ensure all of your assets are included as no assets become a part of the trust without explicit inclusion.
A revocable living trust enables the grantor to later change his mind about the property placed into it or even the existence of the trust itself. Benefits of a revocable living trust include avoidance of probate, resulting in faster distribution of assets to beneficiaries, potential money savings, privacy, and the ability to manage your affairs without court involvement should you become incapacitated.1
An irrevocable living trust is one that cannot be changed once it is signed by the grantor. With certain limited exceptions regarding transfers occurring within three years of death, only property owned at the time of death is subject to estate taxes.2 One big potential benefit of an irrevocable living trust is the avoidance of probate and estate taxes because ownership of property transfers to the trust while the grantor is still alive. Properties that fall under the federal estate tax exemption are not subject to these taxes.
The most important thing to consider when deciding between the two types of living trusts is any potential tax consequences. Talk to an estate planning attorney to obtain further guidance on creating a living trust and ensure your assets are used exactly as you wish during and after your lifetime.
