Revocable and irrevocable trusts – What’s the difference?
A revocable trust allows the grantor to make changes or revoke the trust at any time, while an irrevocable trust cannot be changed or revoked once it is created.
When to use a revocable trust
A revocable trust offers flexibility in estate planning. The grantor retains the right to modify or revoke the trust at any time. This allows for adjustments to the trust’s contents and beneficiaries as circumstances evolve. Additionally, a designated successor trustee can manage the trust’s assets if the grantor becomes incapacitated.
When an irrevocable trust is the better choice
Irrevocable trusts, in contrast, are permanent. Once established, assets cannot be readily removed. However, irrevocable trusts provide distinct advantages in that they can shield assets from estate taxes, potentially reducing the overall taxable estate. In addition, irrevocable trusts may also qualify the grantor for certain government benefits and can protect assets from creditors or legal judgments.
Considerations for your decision
The selection of an appropriate trust hinges on the grantor’s specific goals. Revocable trusts are suitable for those seeking ongoing control and the ability to modify the trust. Irrevocable trusts are better suited for individuals prioritizing asset protection or tax reduction strategies.
Seeking professional advice
Estate planning can be complex. Consulting with a financial advisor and an estate planning attorney is recommended to determine the most suitable trust type for individual circumstances. These professionals can also assist with broader estate planning tasks, such as will preparation.
The path to a secure future starts with a solid estate plan, and understanding the distinct roles trusts can play empowers you and your advisor to make informed decisions. Whether you prioritize flexibility or protection, there’s a trust option that aligns with your goals. Don’t wait to take control – explore your trust options today and ensure your legacy is well-protected.
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