A trust is an estate planning tool that a person sets up during their lifetime, which allows them a way to distribute their assets upon their death, while maintaining privacy for themselves and their heirs. A trust can avoid probate court and have tax advantages. There are several different kinds of trusts, but they fall into two main categories: revocable and irrevocable.
The main difference between revocable and irrevocable trusts: The former may typically be revoked, amended or altered at any time while the Settlor (the person making the trust) is living and of sound mind. The latter cannot be modified after it is created, absent extraordinary circumstances and most notably without the consent of the beneficiaries. With an irrevocable trust, all rights of ownership to the assets for the most part are transferred away from the Settlor. The main benefits to an irrevocable trust are reducing tax liability and protecting assets- namely from creditors. This sounds like the best option, right? This is not necessarily the case! A revocable trust, while not most advantageous for asset protection, may make better sense in situations where maintaining control over the assets in the trust is of the utmost importance. If your estate is such that tax advantages and asset protection are of principal importance and maintaining control of assets is not as critical, an irrevocable trust may be the answer. There are several factors that come into play.
Estate planning is not one-size-fits-all. Your estate plan is like your fingerprint- it is unique to you. Making the right choices on the appropriate tools for you should be done after consultation with an experienced attorney. Contact GLLG today to assist you!