Trusts are established to ensure that one’s assets are managed and distributed accordingly. Laws regarding the restrictions and allowances of trusts vary by state. If you are a Westchester County resident, we have experts readily available to assist you with information on wills, trusts, and estates. This article provides helpful information regarding the differences between revocable and irrevocable trusts.
Revocable Trust
A revocable trust (also defined as a “living trust) is a written document that outlines how one’s assets will be handled following their death. Assets include real estate, valuable possessions, bank accounts, etc.
With a revocable trust, one can change or modify provisions regarding designated beneficiaries at any point in time.
Pros:
- Avoids timely probate in the process
- Grantor keeps control and ownership over their property
- More flexibility since provisions can be made
Cons:
- Does not offer protection from creditors
- Bars Medicare planning
- More responsibility on the grantor
There are three roles under a revocable living trust:
- The person who makes the trust. They might be called the settlor, grantor, or trustor.
- The person who makes decisions about the money or property in the revocable living trust. They are called the trustee. A trustee can be an individual or a financial institution. If there is more than one, they are co-trustees. A successor trustee may also be named and acts only if a trustee can no longer fulfill that role. The person who makes the revocable living trust can name herself as trustee and you as co-trustee immediately, or you may be a successor trustee who can act when she can no longer make decisions. As a trustee, you are a fiduciary.
- A person or people who receive money or property from the revocable living trust. They are called beneficiaries. The person who makes the revocable living trust may be the only beneficiary while she is alive, or she may name co-beneficiaries who receive some money or property from the revocable living trust before she dies. The people who receive money or benefits from the revocable living trust after the person dies are called residuary beneficiaries.
Irrevocable Trust
An irrevocable trust is similar to a revocable trust, with one significant difference being that nothing on the document can be modified or revoked once it is written down.
The grantor loses all ownership rights to their assets, which are transferred to the beneficiary.
Pros:
- Provides protection from creditors
- Tax deductions
- Offers Medicare planning
Cons:
- Lose control of assets
- Limited flexibility
Contact us today to schedule a free consultation and learn more about estate planning or revocable and irrevocable trusts.
