Irrevocable Vs Revocable Trust

Irrevocable Vs Revocable TrustPlacing your estate under a trust is a great way of protecting the estate, both for yourself and for your dependents. A trust is an imperative estate planning tool whose importance cannot be overemphasized. However, the bigger question at hand is- which kind of trust should you choose to go with?

First off, it should be noted that there are two main types of trusts: revocable trusts and irrevocable trusts. These two are similar in most aspects and that is why a majority of Americans tend to believe that they are the same. When creating either of them, you must start off by first creating what is known as an inter-vivos trust. This is a general trust that can then later be modified into either a revocable trust or an irrevocable trust.

The main difference between the two types of trusts is that an irrevocable trust, as the name suggests, cannot be changed or terminated. Once created, it remains in place until you die. On the other hand, a revocable trust can be changed at any time provided you are not incapacitated and are still mentally sound at the time of revocation.

Below are three more areas in which the two types of trust differ from one another:

Property ownership- under an irrevocable trust, the property changes ownership and no longer belongs to the guarantor. It now belongs to the trust. On the other hand, things are quite different with a revocable trust. Under the provisions of the latter, all property included in the trust still belongs to the guarantor and will be treated as such for all intents and purposes.

Estate taxes- property placed under a revocable trust is not included among probate property since it no longer belongs to the guarantor. Basically, this means that the guarantor no longer has any tax obligations on the said property although he or she can still use the property. Even upon the death of the guarantor, no death taxes will be imposed when the property gets transferred to the relevant beneficiaries. Property placed under a revocable trust, however, remains part of the guarantor’s estate. This means that he or she will still have to pay all the regular taxes that come with the said property. Upon the death of the testator, the property goes under probate and is also subjected to probate taxes.

Asset protection- creating an irrevocable trust is usually one of the best ways to protect your assets from interested third parties. Whether it is a disowned child or a divorced spouse, no one has any claim to your property if you place it under an irrevocable trust. This, again, is simply because the said property no longer belongs to you. Even your creditors will not be able to lay a finger on property under such a trust for the same reasons. Property placed in a revocable trust, on the other hand, remains part of your estate and can be treated and distributed according to legal procedures within your state.

Free Consultation —

Discuss Your Case With An Attorney Today

To learn more about your rights and options, contact us at 561-557-4546. We return all phone calls promptly. If you cannot travel to our office, we will come to your home or the hospital. We speak Spanish — Hablamos español.

There are no legal fees if we do not obtain a recovery.