You have probably heard of a trust before, but did you know there are two kinds of trusts – Revocable and Irrevocable? Many people are unclear on the function of each type of trust, which can make estate planning somewhat confusing.
But don’t worry if this sounds like your situation. Here are some similarities and differences between revocable and irrevocable trusts.
What is a revocable trust?
A revocable trust is also known as a living trust because it allows you to remain in control of your assets during your life. If you become incapacitated or pass away, the assets in a revocable trust transfer to your designated trustee, avoiding probate. However, because a revocable trust remains in your possession, you will not receive tax benefits or protection from creditors.
What is an irrevocable trust?
An irrevocable trust is an estate planning vehicle that transfers select assets to a trustee. Once you place assets in an irrevocable trust, they no longer legally belong to you, and you cannot make changes. Because an irrevocable trust is in someone else’s name, it provides you with some tax benefits, protects the wealth within it from creditors and allows your heirs to avoid probate. Like a revocable trust, an irrevocable trust also takes effect if you become incapacitated.
Revocable and irrevocable trusts share some similarities and vary in a couple of ways, but both forms can serve a purpose in Estate Planning. Regardless of what kind of trust you have, you must fund them after they are created in order to accomplish your goals.
To get more information about this important legal issue, CONTACT US. We will be happy to help you with this Estate Planning matter.
Written by Marie Corliss, an experienced New York Elder Law and Medicaid Planning Attorney and the founder of Corliss Law Group in Cortlandt, New York. Attorney Corliss is a Member of the National ElderCare Matters Alliance, and she and her law firm have a Featured Listing on ElderCareMatters.com – America’s National Directory of Elder Care / Senior Care Resources to help families plan for and deal with the Issues of Aging.
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