Estate planning is complex as there are many choices to make sure your loved ones receive your assets. One of those choices is whether to use a trust and, if so, which one is best for your circumstances. This is where an experienced estate planning attorney comes in – after listening and studying your circumstances, she can make recommendations as to whether you should choose a revocable trust or an irrevocable trust.
What is a Revocable Trust?
You might have heard the term “living trust.” That is the same as a revocable trust. This type of trust is very flexible – you can change or revoke the trust any time you want. They are great for managing your assets while you are living. For example, if you get into a car accident and can’t handle your finances for several months, the trust allows someone else to manage your assets. It also helps simplify estate administration and saves your loved one’s time.
A revocable trust that is properly set up can also help avoid probate. Even with probate attorneys helping, the process in Florida is time-consuming. It can also be costly. When you place assets into a revocable trust, most usually bypass probate, which means your loved ones can access their inheritance more quickly.
Another benefit of a revocable trust is that it keeps your assets private. If you list them in a will, once that will is filed with the probate court, it becomes a matter of public record. Revocable trusts remain confidential.
Finally, the best benefit of a revocable trust is that you can change it at will. Got married? You can change the trust. Sold a house listed under the trust? Amend the trust to remove it. Buy a new house? Amend the trust to include the house. Whether it is the birth of a child, a new marriage, divorce, or other changes, you can make the changes you need with a revocable trust.
What is an Irrevocable Trust?
If a trust is irrevocable, you cannot make any changes to it without the consent of the beneficiaries. However, they have more advantages than revocable trusts – for some. When you create an irrevocable trust, you are the grantor, and you transfer ownership of your assets to a trustee for the benefit of your beneficiaries. However, once you create an irrevocable trust, it’s very difficult to revoke or change it.
While the loss of control over your assets may seem daunting, it is what protects assets from creditors and minimizes estate taxes. Irrevocable trusts also ensure no one interferes with your wishes. Estate probate attorneys can help you draft an irrevocable trust with these and other benefits.
One of the most common reasons people choose irrevocable trusts is for asset protection. Because the grantor transfers assets out of your name and into the trust’s name, those assets are not vulnerable to most of your creditors, judgments, and legal claims. Irrevocable trusts are common for people in high-risk professions or those who want to preserve family wealth.
An irrevocable trust is also a powerful estate planning tool for estate taxes. Most assets transferred to an irrevocable trust are no longer taxable to the grantor upon his or her death. You can also use an irrevocable trust as part of a gifting strategy – when you gift assets, you are limited to the amount by the annual gift tax limits. You can transfer some of your wealth to an irrevocable trust to reduce your overall tax liability. However, the tax laws change every year – always discuss this strategy with asset protection attorneys to ensure this is the best option for you.
You can also use an irrevocable trust to help with Medicaid eligibility. If you use a certain type of trust, those assets may be exempt from the Medicaid eligibility calculations.
Contact a Wills and Estate Lawyer
Regardless of your age, creating an estate plan can only benefit you. As long as you have assets, you should have an estate plan since you never know whether an accident or sudden illness will render you incapacitated or take your life. Contact France Law Firm today for an estate planning consultation.